Archive for September 2009
I just launched the alpha version of a new site – www.investmentforbeginners.com . This site is meant to be a resource for those new to the world of investing. Most of the articles published on this blog are available on the new site. The site has plenty of articles on the basics of investing in [...]
“Expect the best, plan for the worst, and prepare to be surprised.”- Denis Waitley
Why is planning important?
Planning is an essential part of investing. Planning not only brings in an element of discipline into the investing process but also helps investors better understand their own objectives, needs, unique constraints and risk tolerance.Most High Net Worth Individuals [...]
What are commodities?
Commodities are goods which have no differentiation between them and which are identical no matter who produces them. For example, 24 carat gold is the same whether it is mined in South Africa, India or China. It is impossible to tell the difference between two barrels of Brent crude. Therefore, at any given [...]
What are options?
An option is a legally binding contract that gives the buyer the right but not the obligation to buy(or sell) a pre-determined asset at a pre-determined price on a pre-determined date. For example, a call option on 1 Google share with strike price of $500 expiring on 22nd June, 2009 gives the buyer [...]
What are futures?
Futures are legally binding contracts that give the buyer the right and the obligation to buy a pre-determined asset at a pre-determined price at a pre-determined time. Conversely, the seller has the right and the obligation to deliver that pre-determined asset at that pre-determined price at that pre-determined time.The underlying assets can [...]
What are debt instruments?
Debt instruments such as bonds, bills and commercial paper are loans that governments or corporations take from investors. The difference between ordinary loans and most debt instruments is that these instruments can be traded on the secondary market, i.e. between any two entities without the explicit consent of the issuer (entity [...]
What are cash equivalents?
Cash equivalents are highly liquid securities that mature typically within three months. Cash equivalents include money market securities, short term Treasury bills, short term Government bonds etc. Money in savings accounts and checking accounts too would be considered equivalent to cash as long as the funds can readily be accessed. In most [...]
What are Exchange Traded Funds?
Exchange traded funds (ETFs) are mutual funds whose shares trade on stock exchanges just likes any other stock. Investors can buy shares of ETFs just as they buy shares of any other company, through stock brokers.
Unique features
ETFs tend to trade at prices very close to their Net Asset Values (NAVs). This [...]
What is a mutual fund?
Simply put, a mutual fund is a basket of assets, typically stocks. An entity, usually a corporation, comes up with a plan to invest in certain assets, typically stocks and raises capital through the issue of shares to investors in a process called a New Fund Offer (NFO). This corporation is [...]
