Financial Systems and Economic Development
Financial institutions and markets are together called the financial system. This financial system is the backbone of the national economy. This is because the efficiency with which the financial system works plays a very important role in the economic development of a nation. The role of the financial system may not be apparent since we […]
Will The Fiat Money System Collapse?
In 1971, Richard Nixon single-handedly took the world off the gold standard. Ever since, many commentators have been of the opinion that the monetary system of the world will face a complete collapse. These fears get exaggerated every time there is a crisis. For instance, during the 2008 crisis, many people felt that the dollar […]
Risks Faced By Banks
It is often said that profit is a reward for risk bearing. Nowhere is this truer than in the case of banking industry. Banks are literally exposed to many different types of risks. A successful banker is one that can mitigate these risks and create significant returns for the shareholders on a consistent basis. Mitigation […]
The Merger Modeling
The Three statement financial models and discounted cash flow models are considered to be basic from a financial modeling point of view. On the other hand, financial modeling for mergers and acquisitions is said to require a lot of skill. Merger modeling is extremely complex. This is also the reason why investment banks across the […]
Financial Ratios in the Retail Industry
The retail industry has become highly competitive. However, at the same time, the retail industry has also become quite data intensive. There is a wide variety of data which is available to the average retailer. For some retailers, this can lead to an analysis paralysis situation wherein they become obsessed with data and are not […]
Assets with some financial value are called securities.
The analysis of various tradable financial instruments is called security analysis. Security analysis helps a financial expert or a security analyst to determine the value of assets in a portfolio.
Security analysis is a method which helps to calculate the value of various assets and also find out the effect of various market fluctuations on the value of tradable financial instruments (also called securities).
Security Analysis is broadly classified into three categories:
Fundamental Analysis refers to the evaluation of securities with the help of certain fundamental business factors such as financial statements, current interest rates as well as competitor’s products and financial market.
Financial statements are nothing but proofs or written records of various financial transactions of an investor or company.
Financial statements are used by financial experts to study and analyze the profits, liabilities, assets of an organization or an individual.
Technical analysis refers to the analysis of securities and helps the finance professionals to forecast the price trends through past price trends and market data.
Quantitative analysis refers to the analysis of securities using quantitative data.
Fundamental analysis is done with the help of financial statements, competitor’s market, market data and other relevant facts and figures whereas technical analysis is more to do with the price trends of securities.
The stream which deals with managing various securities and creating an investment objective for individuals is called portfolio management. Portfoilo management refers to the art of selecting the best investment plans for an individual concerned which guarantees maximum returns with minimum risks involved.
Portfolio management is generally done with the help of portfolio managers who after understanding the client’s requirements and his ability to undertake risks design a portfolio with a mix of financial instruments with maximum returns for a secure future.
Portfolio theory was proposed by Harry M. Markowitz of University of Chicago. According to Markowitz’s portfolio theory, portfolio managers should carefully select and combine financial products on behalf of their clients for guaranteed maximum returns with minimum risks.
Portfolio theory helps portfolio managers to calculate the amount of return as well as risk for any investment portfolio.
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