- Which Investments Have the Least Liquidity?
Liquidity refers to how quickly and easily an asset can be converted into cash without significantly affecting its market price. While some investments, like stocks and bonds, are known for their high liquidity, others are not as easily tradable. Understanding which investments have the least liquidity is essential for making informed financial decisions, especially for… read more…
- Covered Bonds: What They Are and How to Invest
Covered bonds are a type of debt security issued by financial institutions and backed by a pool of high-quality assets, such as mortgages or public-sector loans. This means that investors are safeguarded by both the issuing bank and the underlying asset pool. This additional layer of security, known as a dual recourse structure, makes them… read more…
- How Deep in the Money Call Options Work
One common way to help increase investment returns is to use deep in the money call options. These options have strike prices much lower than the current market price of the asset, giving them high intrinsic value. This makes them less affected by market volatility, offering a more stable investment option when compared with at-the-money… read more…
- Downside Risk: What It Is and How to Calculate It
Downside risk refers to the potential for an investment to decrease in value. Unlike general risk, which considers both upward and downward price movements, downside risk focuses solely on the negative. This more targeted view of potential financial pitfalls can be helpful to investors who are particularly concerned about capital preservation. Common approaches to quantifying… read more…
- What Is Call Protection and How Does It Work?
Call protection is a bond feature that prevents the issuer from buying back the bond for a certain period. This guarantees that investors receive steady interest payments during this time, regardless of changes in market conditions or interest rates. The duration and specific terms of call protection are specified in the bond’s agreement and vary… read more…
- How Bearer Bonds Work and How to Invest in Them
Bearer bonds are a type of unregistered fixed-income securities that provide ownership rights to whoever physically holds them. Unlike traditional bonds, bearer bonds do not require the holder to be listed in any records, making them transferable through simple possession. These bonds were popular in the past because they provided anonymity. Nowadays, they are rare… read more…
- What Is an Open-End Fund?
An open-end fund is a type of mutual fund that allows investors to buy and sell shares on demand. This makes open-end funds highly accessible and flexible for investors seeking to diversify their portfolios. Commonly managed by professional fund managers, open-end funds pool money from multiple investors and can serve a range of investment goals.… read more…
- What Is a Bullet Bond?
A bullet bond is a type of debt security that does not make any principal payments until its maturity date. This means that, unlike other bonds that may offer periodic principal repayments, a bullet bond pays the entire principal amount back to the investor in one lump sum at the end of its term. This… read more…
- How Investors Can Calculate Year-Over-Year (YOY) Growth
Year-over-year (YOY) growth is a performance indicator often used by investors to measure financial progress and compare results from one period to another. The measurement, which looks at change across two comparable periods of time, can provide valuable information about trends, risks and opportunities. Investors can then use this information to evaluate the performance and… read more…
- How ETF Discounts Work
Exchange traded funds (ETFs) are portfolio-based assets typically organized around a specific investment goal. Investors invest in ETFs by purchasing shares of the portfolio on public exchanges. When the listed share price of an ETF dips significantly below the portfolio’s net asset value (NAV), the fund is at a “discount.” This is generally a good… read more…
- How and Where to Invest Your Cash
If you’re starting to invest or refining your strategies, there are many options available based on your financial goals, risk tolerance and investment timeline. Common investments could range from safe, traditional savings accounts and CDs to riskier stocks, bonds and mutual funds. Each investment carries specific benefits and drawbacks. So diversifying your portfolio across these… read more…
- What Are Revenue Bonds, and How Do They Work?
Revenue bonds are municipal bond issued to finance specific projects like utilities, airports, or toll roads. These bonds differ from general obligation bonds because they are repaid solely from the income produced by the project, such as tolls or fees, rather than tax revenue. Investors favor them for their connection to tangible assets and a… read more…
- How to Calculate Overhead Ratio
The overhead ratio measures how much of a company’s total revenue is spent on indirect costs. This metric is useful for identifying areas where costs can be reduced to improve profitability. Analyzing the overhead ratio helps businesses make better decisions about budgeting, resource use and planning. For investors, it provides insight into whether a company… read more…
- Why Overcapitalization Is Important for Investors
For investors, grasping the implications of overcapitalization can be the difference between a profitable venture and a financial misstep. Overcapitalization occurs when a company raises more capital than it can efficiently use, leading to diminished returns on investment and potentially inflated stock prices. This situation can signal underlying inefficiencies within a company, such as poor… read more…
- Investing Strategies for a Volatile Market
Market volatility refers to rapid and significant price changes, which can cause anxiety for investors but also create opportunities for growth. Learning how to manage volatility and adjusting your investment approach during uncertain times can help protect your portfolio and position you to take advantage of price swings. A financial advisor could also work with… read more…
- Pros and Cons of Active Trading vs. Buy-and-Hold Investing
Active trading and buy-and-hold strategies suit different investors based on their goals, risk tolerance and time commitment. Active trading focuses on short-term gains with higher risk, while buy-and-hold investing takes a long-term approach with lower costs and less frequent trading. Here are the pros and cons for each strategy. A financial advisor can help you… read more…
- How to Calculate the Value of Preferred Stock
Preferred stock combines features of both equity and debt. Unlike common stock, preferred shares often offer fixed dividends and priority in asset distribution, making them attractive for income-focused investors. Calculating the value of preferred stock involves using a formula that factors in the fixed dividend payments and required rate of return. Knowing how to make… read more…
- How to Calculate the Liquidation Value of a Company
The liquidation value of a company represents the total value of its assets if the company were to go out of business and liquidate its assets to pay off debts. For investors, understanding a company’s liquidation value can provide insights into its financial health and potential risk level. In certain cases, companies with a stock… read more…
- What Are Profit Booking Strategies for Long-Term Investing?
A profit booking strategy can play a key role in helping long-term investors maximize gains while managing risk. Although long-term investing often involves holding assets through market fluctuations, there may be times when booking profits, or selling part of an investment to lock in gains, can align with an investor’s goals. Effective profit booking strategies… read more…
- When Should I Cash Out and Sell My I Bonds?
The timing for selling I Bonds depends on a variety of factors, including your financial goals, interest rates and current inflation conditions. I Bonds earn interest through a combination of a fixed rate and an inflation rate, and their value tends to fluctuate depending on economic conditions. Some people choose to cash out their I… read more…
- Are I Bonds a Good Investment? Pros and Cons
I Bonds, or Series I savings bonds, are government-backed securities designed to help protect your money from inflation. These bonds combine a fixed interest rate with an inflation-adjusted rate, making them attractive during periods of rising prices. While they offer a safe way to earn interest and preserve purchasing power, I Bonds come with limitations,… read more…
- 4 Futures Trading Strategies for Investors to Consider
Futures trading strategies offer ways for investors to profit from market trends and price movements. Traders can speculate on price directions, manage risk, or hedge investments. Common strategies include going long for rising prices, going short for falling prices, spread trading for price differences, and arbitrage for market inefficiencies. Each strategy carries risks, so investors… read more…
- Are Healthcare Stocks Recession-Proof?
During economic uncertainty, investors often seek recession-resistant assets for stability. Healthcare stocks are seen as resilient since healthcare needs persist regardless of financial conditions. Unlike cyclical industries, healthcare is a non-discretionary sector where demand for medication, treatment and services remains steady. However, while healthcare stocks typically perform better during recessions, they are not entirely immune… read more…
- Pros and Cons of Buying on Margin
Margin trading allows investors to borrow money from a brokerage to increase buying power. While it offers the potential for larger returns, it also increases the risk of losses that can exceed the initial investment. Risks like margin calls may require additional funds to cover losses, making it a strategy best suited for experienced investors.… read more…
- Pros and Cons of Trading Futures
Futures trading allows investors to speculate on asset prices through contracts that commit them to buy or sell at a set future date and price. This approach allows for leverage, enabling traders to control large positions with relatively small amounts of capital. Futures trading can offer high returns and diversification, but it also carries significant… read more…