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finance

A collection of 116 issues

Understanding Forward Contracts: Definition, Benefits, and Risks

Introduction to Forward Contract A Forward Contract is a customized agreement between two parties to buy or sell an underlying asset at a specified price on a predetermined future date. Unlike standardized futures, a Forward Contract is traded over the counter (OTC), giving participants flexibility to tailor terms such as

Floating Rate Note: Definition, Benefits, and Risks

What Is a Floating Rate Note? A Floating Rate Note (FRN) is a debt instrument whose coupon payments adjust periodically to a reference rate such as SOFR, LIBOR, or a Treasury bill yield. Because the interest resets, FRNs help investors hedge against rising rates while still earning predictable, schedule-based income.

What Is a Fiduciary? Meaning, Duties & How to Choose One

Understanding the Term Fiduciary When you entrust money, property, or personal affairs to someone else, you want assurance that your interests come first. That obligation is captured by the legal concept of a fiduciary, an individual or organization bound to act with utmost good faith, loyalty, and care toward those

Understanding Event Risk: Definition, Examples, and Management Strategies

What Is Event Risk? Event risk refers to the possibility that a specific, unforeseen occurrence will drastically alter the value of an investment, portfolio, or company. Unlike broad market volatility, event risk is triggered by singular happenings such as corporate scandals, regulatory shifts, or natural disasters, making its impact sudden,

Understanding Expected Return: A Guide for Smart Investors

What Is Expected Return? Expected return is a forward-looking estimate of the average profit or loss an investment may generate over a specific period. It combines potential outcomes with their respective probabilities, producing a single metric that helps investors compare assets, strategies, and portfolios. Because it translates uncertain future cash

Understanding the Expense Ratio: A Key Metric for Smart Investing

Introduction When you compare mutual funds or exchange-traded funds (ETFs), one term appears repeatedly: expense ratio. This small-sounding percentage directly influences your long-term returns, yet many investors overlook it. Understanding how an expense ratio works is essential for building a cost-efficient, performance-oriented portfolio. What Is the Expense Ratio? The expense

What Is an ETF? A Beginners Guide to Exchange-Traded Funds

Introduction An ETF (Exchange-Traded Fund) is a basket of securities that trades on a stock exchange just like an individual stock. Because ETFs can track indexes, sectors, commodities, or bonds, they give everyday investors an easy and low-cost way to achieve broad diversification. How ETFs Work When you purchase shares

Escrow Explained: The Secure Way to Buy, Sell, and Invest

What Is Escrow? Escrow is a neutral financial arrangement in which a trusted third party temporarily holds money, property, or documents for two transacting parties until predefined conditions are met. Whether you are purchasing real estate, domain names, or high-value collectibles, an escrow account safeguards both buyer and seller, ensuring

Understanding Enterprise Value (EV): A Comprehensive Guide for Investors

What Is Enterprise Value? Enterprise Value (EV) is a holistic measure of a company’s total worth, often described as the theoretical takeover price. Unlike market capitalization, which only reflects the value of equity, EV incorporates debt, preferred stock, minority interest, and subtracts cash and cash equivalents. Because it considers

Understanding the Efficient-Market Hypothesis (EMH): What Investors Need to Know

What Is the Efficient-Market Hypothesis? First articulated by economist Eugene Fama in the 1960s, the Efficient-Market Hypothesis (EMH) states that financial markets incorporate all available information into asset prices instantly. According to EMH, neither fundamental nor technical analysis can consistently deliver returns that exceed overall market performance, because mispriced securities