Financial Concepts: Conclusion
We hope that this has given you some insight into the market and your investment strategies. Let's recap what we've learned in this tutorial:
- The risk/return tradeoff is the balance between the desire for the lowest possible risk and the highest possible return.
- Higher risk equals greater possible return.
- Diversification lowers the risk of your portfolio.
- Dollar cost averaging is a technique by which, regardless of the share price, a fixed dollar amount is invested on a regular schedule.
- Asset allocation divides assets among major categories in order to create diversification and balance the risk.
- Random walk theory says that stocks take a random and unpredictable path.
- Efficient Market Hypothesis (EMH) says it is impossible to beat the market because prices already incorporate and reflect all relevant information.
- The concept of the optimal portfolio attempts to show how rational investors will maximize their returns for the level of risk that is acceptable to them.
- Capital asset pricing model (CAPM) describes the relationship between risk and expected return and serves as a model for the pricing of risky securities.
A method used to calculate loss reserves that uses weights proportional ...
A ratio of an insurance company’s unearned premiums to its policyholders’ ...
A trade on the short side with an overwhelmingly large number ...
A method of valuation to estimate the value of a firm.
The output of a credit-strength test that gauges a publicly traded ...
The maximum loss from a peak to a trough of a portfolio, before ...
Find out more about derivative securities, what an underlying asset is and what the underlying assets refer to in stock options ...
Read about contingent claim derivatives, such as options contracts, whereby the payout of the transaction is dependent on ...
Learn about the differences between the cost of capital and the discount rate as they relate to estimating a required return ...
Learn how investors profit from declines in the real estate sector by engaging in speculation methods such as short selling, ...