Finance Explained

Of course we have to start this article with all manner of disclaimers about doing your own research, but let's try to answer it as best we can... A good investment strategy for private investors will vary depending on the individual's financial goals, risk tolerance, and other factors. However, there are a few general principles that can help investors develop a successful investment strategy. One important principle is to diversify your investments. This means not putting all of your money into one type of investment, or into one specific company or sector. Diversification can help to reduce the risks associated with any individual investment, and it can also help to smooth out the ups and downs of the overall market. By spreading your money across different types of investments, you can increase the chances that at least some of your investments will perform well, even if others don't. Another important principle is to invest for the long term. This means looking beyond ...

EPS - Earnings Per Share - explained EPS is an acronym that stands for Earnings Per Share . It is a financial metric that is commonly used by analysts and investors to evaluate the profitability of a company. EPS is calculated by dividing a company's net income by the number of shares outstanding, and it is expressed as a dollar amount per share. EPS is an important metric for investors in stocks because it provides a measure of a company's profitability on a per-share basis . This allows investors to compare the profitability of different companies, and to evaluate the potential return on their investment in a stock. EPS is also an important metric for analysts and investors because it is used in the calculation of several other financial ratios, including the price-to-earnings (P/E) ratio and the price-to-earnings growth (PEG) ratio. The P/E ratio is calculated by dividing a company's stock price by its EPS, and it is a commonly used measure of a company's valuation....

You may have seen the term GAAP in relation to a company's accounts, but what does it stand for and what does it mean? GAAP is an acronym that stands for Generally Accepted Accounting Principles .  It is a set of accounting standards and guidelines that provide a consistent framework for companies to follow when preparing their financial statements. GAAP is intended to ensure that companies present their financial information in a transparent and consistent manner, so that investors and other stakeholders can accurately compare the financial performance of different companies. GAAP is issued by the Financial Accounting Standards Board (FASB) and is followed by most publicly-traded companies in the United States. It is also widely adopted by private companies, and it is often used as a benchmark for international accounting standards. In the UK, 'Generally Accepted Accounting Practice in the UK' (UK GAAP) is the body of accounting standards published by the UK’s Financial R...

You may have heard of the 'Sage of Omaha', the legendary investor Warren Buffet, but what is his investment strategy? Let's start with who he is and try to summarise his approach. Warren Buffett is a famous American investor and the CEO of Berkshire Hathaway, a multinational conglomerate holding company. He is widely regarded as one of the most successful investors in history, and his investment philosophy has been studied and followed by many people around the world. One of the key principles of Buffett's investment strategy is his focus on long-term value investing. This means that he looks for companies that have strong, sustainable competitive advantages, and that are trading at a price that is lower than their intrinsic value. He believes that these companies are likely to generate strong returns over the long term, and he is willing to hold onto them for many years in order to reap the benefits of their growth. Another important aspect of Buffett's investment ...

Cryptocurrency has had a very mixed press recently with a series of falls and scandals, but should you consider it as part of your investment portfolio? It is definitely not for everyone and has a very high risk profile. It's difficult to give a definitive answer on whether or not you should invest in crypto because it ultimately depends on your personal financial situation and investment goals. Investing in crypto, like any other investment, carries risks and potential rewards, and it's important to carefully consider these factors before making a decision. One potential benefit of investing in crypto is that it has the potential for high returns. Many cryptocurrencies have seen significant price increases in recent years, and some investors have made substantial profits by investing in them. However, it's important to keep in mind that the value of cryptocurrencies can also fluctuate dramatically, and there is no guarantee that you will make a profit by investing in them....

You may have noticed a stock's 'yield' when looking at its financial data, but what exactly does this mean? A yield is a measure of the income that an investor can expect to receive from a stock, expressed as a percentage of the stock's price. For example, if a stock has a yield of 2%, and its price is £100 per share, an investor can expect to receive £2 in annual income from that stock. The yield of a stock is determined by the amount of income that the stock generates, divided by its price. For example, if a stock pays out $1 in dividends per year and its price is £100, its yield would be 1%. If the price of the stock increases to £200, its yield would drop to 0.5% because the same amount of income is now being divided by a higher price. The yield of a stock is an important factor for investors to consider when evaluating the potential return on their investment. In general, stocks with higher yields are considered to be more attractive to income-oriented investors, w...

You may have heard the term EBITDA, but what does it stand for and what does it mean? EBITDA is a financial acronym that stands for Earnings Before Interest, Taxes, Depreciation, and Amortization . It is a measure of a company's profitability that is calculated by adding back these non-cash expenses to net income. This provides a more accurate picture of a company's underlying performance and financial health, because it excludes the effects of certain non-operating expenses and accounting decisions. The purpose of EBITDA is to provide a more accurate and consistent measure of a company's profitability. This is because net income can be affected by a wide range of factors, including interest expenses, taxes, and non-cash expenses like depreciation and amortization. By adding these expenses back to net income, EBITDA provides a more consistent and comparable measure of a company's profitability over time. EBITDA is often used by analysts and investors to compare the fin...

You may have heard the term 'hedge fund', but what are they and how do they work? A hedge fund is a type of investment vehicle that is typically used by wealthy individuals and institutional investors to invest in a diverse range of assets, including stocks, bonds, currencies, commodities, and real estate. Hedge funds are typically managed by professional money managers who employ a variety of investment strategies in an attempt to generate high returns for their investors, while also attempting to minimize risk. One of the key features of hedge funds is their use of leverage, which refers to the practice of using borrowed money to increase the potential return on an investment. This means that hedge funds can potentially generate higher returns than traditional investment vehicles, but it also means that they can be more risky. Another important feature of hedge funds is their lack of regulation compared to other investment vehicles. Unlike mutual funds, which are subject to s...

You may have heard of tracker funds as a relatively low risk way to invest, but what are they exactly? A tracker fund is a type of investment fund that aims to track the performance of a specific market index, such as the S&P 500 or the FTSE 100 . Tracker funds are also known as index funds or passive funds. Tracker funds are managed by investment professionals who use algorithms and other tools to mimic the performance of the underlying index. Unlike actively-managed funds, which are managed by professional stock pickers who try to outperform the market, tracker funds do not attempt to beat the market. Instead, they aim to match the performance of the index they are tracking as closely as possible. Tracker funds offer investors several advantages. Because they are passively-managed, they typically have lower fees than actively-managed funds. This means that investors can keep more of their investment returns. Tracker funds are also considered to be more diversified than actively-...

Like the S&P 500 , the FTSE 100 is a common element of tracker funds, but what is it exactly? The FTSE 100 is an index that represents the performance of the 100 largest companies by market capitalization that are listed on the London Stock Exchange. These companies are chosen based on their market size, liquidity, and industry group. The index is widely regarded as a good indicator of the overall performance of the UK stock market. The index is calculated by FTSE Group, which is a subsidiary of the London Stock Exchange Group. The index is updated every 15 seconds during trading hours, and the value of the index is calculated using the prices of the individual stocks that make up the index. The FTSE 100 was first launched in 1984 with a base value of 1,000. Since then, it has grown to become one of the most widely-followed stock market indices in the world. The index is seen as a bellwether for the UK economy, and many investors use it as a benchmark for their own investment portf...

The S&P 500 is a common component of many investor's portfolios, particularly as part of tracker funds, but what exactly is it? The S&P 500 is a stock market index that tracks the performance of 500 large publicly traded companies in the United States. The companies in the index are selected by Standard & Poor's, a financial services company, based on various criteria such as market capitalization, liquidity, and sector representation.  The index is calculated based on the market capitalization of the companies in the index and the performance of their stocks. This means that the larger and more valuable a company is, the more influence it has on the index. The S&P 500 is considered to be a good measure of the overall health of the U.S. stock market, as it represents a diverse range of companies from different sectors of the economy. It is one of the most widely followed stock market indexes in the world, and many investors use it as a benchmark for their invest...