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 ...
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Find out more about real estate investment trusts and which ones have dividend yields greater than 15% for the year 2015.
Find out more about derivative securities and what it indicates when traders or investors establish a long or short position ...
Learn about the value at risk statistical measure and how examining the VaR for their investments can help investors maximize ...