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Investing Investing theory

The risks of investing in financial assets

You know that investing comes along with certain risks. But you may have not thought those through. What are the main risks of investing in financial assets? And what are possible mitigation measures? In this entry we’ll cover the main risks you should look out for. Setting the scene What are financial assets? Financial assets…Continue readingThe risks of investing in financial assets

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Investing Investing theory

The PE ratio and stock market valuations

The ‘price’ of things is a crucial consideration for any investor. Every asset class can be cheap or expensive. Equities are no exception. What does it mean for equities to be ‘cheap’ or ‘expensive’? In this entry, we’ll review the PE ratio, a key metric on the relative value of equities. From valuations to the…Continue readingThe PE ratio and stock market valuations

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Investing Investing theory

How bonds work (2/2)

Both stocks and bonds are cores pieces of an investment portfolio. However, understanding how bonds work isn’t easy. It often remains a mystery for many investors. In this continuation entry, we’ll review the impact of interest rates in bonds. We’ll also explore risks associated with bonds and how bonds trade. Bonds and holding period You…Continue readingHow bonds work (2/2)

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Investing Investing theory

How bonds work (1/2)

Both stocks and bonds are cores pieces of an investment portfolio. However, understanding how bonds work isn’t easy. It often remains a mystery for many investors. In this entry, we’ll review how bonds work, how they’re valued, and why the ‘yield to maturity’ is so important. In a second part, we’ll explore the relationship between…Continue readingHow bonds work (1/2)

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Investing Investing theory

Exchanges, liquidity and order types

You’ve probably heard of a stock exchange before. After all, it’s your supermarket for stocks and ETFs. But do you know how exchanges work? In this entry, you’ll learn how markets clear, what’s the bid and the ask price, what’s liquidity, and what type of order you should use when. From financial markets to exchanges…Continue readingExchanges, liquidity and order types

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Investing Investing theory

Time value of money and the compounding effect

The time value of money is a critical concept in finance. It affects the value of every financial asset. From stocks & bonds to mortgages. Yet the meaning of ‘time value of money’ often remains cryptic. What exactly is the time value of money? And how does it affect you? The intuition behind time value…Continue readingTime value of money and the compounding effect

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Investing Investing theory

Why is it so difficult not to time the market?

We shouldn’t time the market, yet we do In the entry market timing and perspectives on why to avoid it we saw evidence that market timing is a bad idea. Yet many of us still find it difficult to refrain from it. At least implicitly. It almost feels like it’s human nature to try time…Continue readingWhy is it so difficult not to time the market?

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Investing Investing theory

Investing 101 (2/2)

This entry builds on the first part of investing 101. If you haven’t already, make sure you check out that one first! Choosing your asset classes How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case. Robert G. Allen An asset class is a grouping of…Continue readingInvesting 101 (2/2)

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Investing Investing theory

Investing 101 (1/2)

Investing means to allocate money in the expectation of a future benefit. It’s a core pillar of your personal finance. But before you invest in any financial product, you should invest in your own financial literacy. This entry level guide will provide you with the essential background knowledge that you need before you start your…Continue readingInvesting 101 (1/2)

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Investing Investing theory

Market timing and perspectives on why to avoid it

Timing the market is a typical beginners mistake. You’ve probably done it already. What does it mean to time the market? And why should you avoid market timing? Let’s find out. What is market timing? “There will be a correction in the next 3-6 months”. “Better to wait until prices drop further”. “We’ve seen the…Continue readingMarket timing and perspectives on why to avoid it