Fund of Funds (FOFs)

Fund of Funds (FOFs)

Fund of Funds (FOFs)

Fund of Funds is a type of pooled investment fund that invests in other funds. Its investment strategy is holding a portfolio filled with other funds instead of directly investing in stocks, bonds, and other securities. It is also known as multi-manager investment. They generally invest in other mutual funds or hedge funds. (more…)
Modern portfolio theory

Modern portfolio theory

Modern Portfolio Theory

Modern portfolio theory is an investment theory. It allows the investor to assemble an asset portfolio that will maximize the return for a particular level of risk. The theory assumes investors will prefer less risky portfolios. Modern portfolio theory (MPT) can also be used to construct a portfolio that will minimize ↓ risk for a given level of expected return. Due to the abundance of market data, market risk has attracted significant interest since the 1950s. (more…)
Alternative Investments

Alternative Investments

Alternative Investments

Investing is owning an asset or item with the intention of generating some income or appreciation in the value of the asset. An investment is any means to generate an income in the future including bonds, stocks, real estate, etc. Alternative investments are unconventional investments or investments other than stocks, bonds, and cash. Generally, these types of investments are done by large institutions, high net worth individuals, etc due to their complexity, riskiness, and lack of regulation.

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Efficient Frontier

Efficient Frontier

Efficient Frontier

Efficient frontier or Portfolio frontier, a part of modern portfolio theory comprises efficient parts of the risk-return spectrum. It occupies investment portfolios that offer the highest expected return for a specific risk level. It is a set of optimal portfolios that are expected to give higher returns for a minimum level of return. (more…)
Hedging in Financial Markets

Hedging in Financial Markets

Hedging in Financial Markets

Hedging normally happens everywhere. For example, when you’re buying homeowner's insurance, you are hedging or protecting yourself against a variety of unforeseen disasters like fires, robbery, etc. To reduce the risk while investing, all individual investors, portfolio managers, and corporations use hedging techniques. However, hedging in financial markets is not as straightforward as paying an insurance company an annual fee. (more…)
Large-Cap Stocks

Large-Cap Stocks

Large-Cap Stocks

Large capital stocks are also known as big caps. Large-cap stocks are basically shares that trade for corporations that have a market capitalization of $10 million or more. Large-cap is a shortened version of “large market capitalization”. (more…)
Expected Return

Expected Return

Expected Return

The expected return on financial investment is the expected value of its return. It is a measure of the center of the distribution of the random variable that is the return. (more…)
Standard Error vs. Standard Deviation

Standard Error vs. Standard Deviation

Standard Error vs. Standard Deviation

Standard Error & Standard Deviation are two important concepts of statistics, which are widely used in the field of research. The Standard Error is a mathematical tool used in statistics to measure variability. It measures how precisely a sampling distribution represents a population. It is the approximate standard deviation of a statical sample population. A sample mean deviates from the actual mean of a population this deviation is the standard error of the mean. It can be applied in statistics, economics and is especially useful in the field of econometrics where researchers use it in performing regression analyses and hypothesis testing. This article highlights the concept of Standard Error vs. Standard Deviation. (more…)
Asset Management company

Asset Management company

Asset Management Company

An Asset Management company is a company that pools funds from its clients and invests them in stocks, real estate, bonds, etc. Asset Management companies manage many hedge funds, pension plans as well as high net worth individual portfolios. They are also called money managers or money management firms. (more…)
Investment Policy Statement

Investment Policy Statement

Investment Policy Statement

An investment policy statement (IPS) is a document drafted between a portfolio manager and a client. It outlines the rules and guidelines that the portfolio manager should abide by when considering asset allocation in the client’s portfolio. In other words, an investment policy statement states how a portfolio manager should try to manage the client’s money. A few examples of issues that are addressed in an IPS are asset allocation decisions, client risk tolerance, leverage, liquidity requirements, and foreign security investment restraints. (more…)