The World's Best Book Summaries
What is autopilot investing? Why is it the best investment method, according to Burton Malkiel? Autopilot investing involves buying broad index mutual funds or exchange-traded funds, rather than buying active individual stocks. This is Burton Malkiel’s preferred method of investing, as he advises building a portfolio around index funds. Learn about autopilot investing below.
What are some examples of historical stock market returns? What can you learn from these examples? The best way to understand returns at work is to examine examples of historical stock market returns. Looking at examples of historical stock market returns will show you how prevailing market conditions affected stock market returns. Keep reading for a guide to historical stock market returns.
How are resources allocated in a market economy? What is the advantage of price-based resource allocation? In a free-market economy, resources are allocated by prices. In this way, a market economy is self-regulating, allowing real-time coordination across millions of goods and services, without any central authority knowing and setting all the prices. In this article, you’ll learn how prices allocate resources and how supply and demand respond to prices.
What is the Efficient Market Hypothesis? Is it possible to beat the market? What are the three forms of the Efficient Market Hypothesis? According to the Efficient Market Hypothesis, all share prices reflect all available information. As a result, it’s not possible for anyone (without inside information) to determine whether a stock is valued correctly. There are three forms of the Efficient Market Hypothesis, with each coming to a different conclusion about the efficiency of the market. Learn more about this hypothesis below.
What are the six different types of bonds in finance? What tips can help you buy the right ones? According to economist Burton Malkiel, bonds are worth including as part of a well-diversified portfolio. There are six main types of bonds in finance you should be aware of, and understanding the difference will help you to buy the right ones for you. Keep reading for an overview of the different types of bonds in finance.
What are the benefits of diversification in a portfolio? Why does this minimize your risk? A diversified portfolio is one that features holdings in a variety of industries, countries, and asset classes. The idea is that when your holdings in one industry, country, or asset suffer, your holdings in other industries, countries, and assets will offset your losses. Find out the main benefits of diversification and how you can create a diversified portfolio below.
What purpose do banks serve? How do banks contribute to the greater good of economic agents (firms and consumers)? Banks serve a number of important roles in an economy. First, banks guard money and provide businesses with credits for large investments which allow businesses to operate on a large scale, driving down costs and standards of living. Of course, banks also lend to individual consumers to finance their purchases, which fuels the demand for goods and services. In this article, we’ll discuss the role of banks in the economy and how they are regulated.
Do you want to know how to find the rate of return on investments? What effective formula can help you predict the rate of return efficiently? Market projections in the short run—a month, or even a year, from the present—are generally a fool’s errand, but, by knowing which variables to examine, it is possible to make relatively accurate projections of long-term return on investment. Understanding how to find the rate of return will help you to make wiser choices when investing. Keep reading to find out how to find the rate of return on investments.
What is Markowitz’s theory about investment portfolios? How can diversification of stocks reduce risk? Harry Markowitz’s theory (Modern Portfolio Theory) suggests that the diversification of a stock portfolio can reduce risk. It asserts that a diversified portfolio—one that features holdings in a variety of industries and countries—is more likely to be profitable than a homogenous one. Find out more about Markowitz’s theory below.
What is the best method for predicting the movement of stock prices? Does technical analysis work? Technical analysis uses the past movements of stock prices to predict future prices. For example, if a stock has risen over the course of a day or several days, a technical analysis will show confidence in the stock. Technical analysts argue that stock prices tend to follow trends, meaning they can sometimes be susceptible to the irrational optimism of other investors. Does technical analysis work? Find out below.