Advantages of Non-Interest Income
Over the years, corporate banking has become a very important part of the overall banking system. This is because of the fact that banks derive a bulk of their profits from their commercial or corporate banking divisions. Now, the reason that banks derive a larger than usual percentage of their revenue from their commercial banking […]
Free Cash Flow to the Firm vs. Free Cash Flow to Equity
Free cash flow models can be further categorized into two types. There are certain kinds of models which pertain to free cash flow that the firm as a whole will generate whereas there are others that pertain solely to the perspective of equity shareholders. These models are quite different from each other. It is therefore […]
The Optimal Size of a Sports League
There are a large number of sporting leagues around the world. However, when we study all the leagues, we find that each of them has around 10-20 members who are playing in the top professional class of leagues. There are very few events such as the FIFA World Cup soccer where 50+ teams participate in […]
Bretton Woods Agreement and Smithsonian Agreement
The transition of the world monetary system from gold standard to the modern Forex markets was anything but smooth. Governments from all over the world collaborated to make two pacts which would form the basis of the modern monetary system. However, both the arrangements failed. In this article, we will have a closer look at […]
Tulip Mania of the 17th Century
Asset bubbles have always been a testimony to the bizarre things that humans can accomplish when they abandon their own rational thinking and a herd mentality sets in. However, the case in point of the first asset bubble in recorded history i.e. the tulip mania brings this to light. The sheer absurdity of the situation […]
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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