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The stock market offers investors the potential for significant returns, but it also comes with substantial risk. Historically, stocks have provided compelling gains by outperforming many other asset classes. However, they have also fallen into harsh bear markets and suffered notable losses. But what exactly is the stock market and how does it work? Let's explore these topics and others in this article. History Of Strong Returns Stocks are known…
Stock investing can be a great way to generate strong returns and achieve one's investment objectives. However, it can also be a way for an investor to lose all their money. With all the resources out there, it can prove helpful to have good, basic information on the subject. This article will lay out some straightforward points that anyone can follow. Assess Your Investment Objectives What are you goals? What…
What Is Return On Equity? The return on equity (ROE) is a measure of corporate profitability. It measures how much profit a company generates from shareholders equity, which is the company's total assets minus its total liabilities. ROE is expressed as a percentage, and it can be measured by a fairly simple equation: ROE = net income divided by shareholders equity. For example, if a company had US$1 million of…
What Is Passive Investing? Passive investing is an investment strategy that seeks to track the performance of a market index, such as the stock market indices S&P 500 or the Dow Jones Industrial Average. Passive investing differs from active management, in which professional portfolio managers seek to outperform a specific benchmark by buying and selling specific securities and other strategies. Two of the more popular avenues of this style of…
What Are Blue Chip Stocks? In the stock market, blue chip stocks are shares in large multinational companies with well-known names and long track records of growth and dividend payments. They got their name from poker, where blue chips are often the most valuable chips on the table. Oliver Gingold, an employee of Dow Jones—the publisher of the Wall Street Journal and the creator of the Dow Jones Industrial Average…
What Is Return On Assets (ROA)? Return on assets (ROA) is an important measurement of a company's profitability. Usually stated as a percentage, ROA measures net income divided by the company's total assets. Derived from the company's balance sheet, assets include cash and cash-equivalent items, receivables, inventories, land, and buildings and equipment. They also include intangible assets such as intellectual property, copyrights and patents, the estimated value of brand and…
What Are Real Estate Investment Trusts (REITs)? Real estate investment trusts, or REITs (pronounced "reetz"), are funds that own, develop and manage income-producing properties in a range of real estate sectors, including shopping malls, offices and commercial buildings, residential apartments and health care facilities. Some of these trusts also invest in mortgages and other property loans. Basically, REITs collect rent from the tenants of these properties and distribute the income…
What Is A Cash Flow Statement? A cash flow statement, also known as a statement of cash flow, is one of the main financial statements, along with the income statement and the balance sheet, that companies are required by securities regulators to prepare to demonstrate their financial condition. The cash flow statement is important because it shows investors and creditors how well a company manages its cash and that it…
What Is Value Investing? Value investing is an investment strategy in which the investor seeks to profit by buying stocks they believe are underpriced or undervalued by the market at large. The investor looks to buy stocks when they believe they are "on sale," just as they would buy a box of cereal at the supermarket when it's on sale rather than paying full price. The idea of value investing…
What Is Secured Overnight Financing Rate (SOFR)? The Secured Overnight Financing Rate (SOFR) is an interest rate benchmark chosen by the Alternative Reference Rates Committee (ARRC) in 2017 as an alternative and eventual replacement for the London Interbank Offered Rate, more commonly known as Libor, which is slated to be phased out by 2021. ARRC is a committee set up by the U.S. Federal Reserve Board and the Federal Reserve…
What Are Systemically Important Financial Institutions (SIFIs)? Systemically Important Financial Institutions, or SIFIs, are a group of 29 large international banks that are required to hold extra equity capital against losses because of their size, complexity and importance to the international financial system. These institutions are generally regarded as "too big to fail," meaning they would require being bailed out by taxpayers if they were threatened with failure during a…
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