The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets. Interest rates are typically noted on an annual basis, known as the annual percentage rate (APR). The assets borrowed could include, cash, consumer goods, large assets, such as a vehicle…

Chasing performance This is by far the biggest mistake investors make. According to research, there is over an 80% correlation that last year’s best performing investments will be the most popular investments. If chasing performance is your key strategy to selecting investments consider these facts: Everything goes in cycles (interest…

Despite what get-rich-quick schemes may claim, there is no single investment strategy that will bring instant success. While this means you will need to do a lot more research, it also brings ample opportunity to tailor that strategy according to your personal preferences. With so many options, you may wish…

A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations. The three main asset classes are equities (stocks), fixed-income (bonds) and cash equivalents (money market instruments). It should be noted that in addition to the three main asset…

Value investing is the strategy of selecting stocks that trade for less than their intrinsic values. Value investors actively seek stocks of companies that they believe the market has undervalued. They believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond with…

The best way to understand hedging is to think of it as insurance. When people decide to hedge, they are insuring themselves against a negative event. This doesn’t prevent a negative event from happening, but if it does happen and you’re properly hedged, the impact of the event is reduced.

Rebalancing is the process of buying and selling portions of your portfolio in order to set the weight of each asset class back to its original state. In addition, if an investor’s investment strategy or tolerance for risk has changed, he or she can use rebalancing to readjust the weightings…

The technique of buying a fixed price amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares are bought when prices are high. Eventually, the average cost per share of the security will become smaller…

The average individual investor is saving for retirement, a house, travel money, or some other goal. They want some certainty that the money they put back now will be there when they need it. Because of this, it is important not only to analyze the opportunity an investment represents, but…

Systematic risk, also known as “market risk” or “un-diversifiable risk”, is the uncertainty inherent to the entire market or entire market segment. Also referred to as volatility, systematic risk consists of the day-to-day fluctuations in a stock’s price. Volatility is a measure of risk because it refers to the behavior,…