Definition The Price to Sales Ratio (P/S Ratio) is a financial metric that compares a company’s stock price to its revenue per share. It is calculated by dividing the market capitalization of a company by its total sales or revenue. This ratio is particularly useful for evaluating companies that do not have positive earnings, making it a valuable tool for investors looking to assess the relative value of stocks.
Definition The Price/Earnings to Growth (PEG) Ratio is a financial metric that provides insight into a company’s valuation by comparing its price-to-earnings (P/E) ratio to its expected earnings growth rate. It is a popular tool among investors and analysts to evaluate whether a stock is overvalued or undervalued based on its growth potential. Components of PEG Ratio The PEG Ratio is calculated using the following components: Price per Share: This is the current market price of a single share of the company’s stock.
Definition A put option is a type of financial derivative that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price, known as the strike price, before or at the expiration date of the option. Investors typically use put options to hedge against potential declines in the price of an asset or to speculate on downward price movements.
Definition Speculation in finance is the act of buying, holding or selling assets, often in the short term, with the expectation that their price will change favorably. Unlike traditional investing, which typically focuses on long-term value appreciation, speculation is more about taking calculated risks to profit from market fluctuations. Speculators operate on the premise that they can predict future price movements based on various indicators, trends and market sentiments.
Definition Swaps are fascinating financial instruments that enable two parties to exchange cash flows or liabilities based on specified terms. Essentially, they allow participants to manage their financial risks by trading different types of financial exposures. By engaging in swaps, individuals and institutions can optimize their investment strategies and hedge against market volatility. Types of Swaps There are several types of swaps, each catering to different financial needs. Here are the most common ones:
Definition Wealth preservation refers to the strategies and practices aimed at protecting and maintaining an individual’s or family’s wealth over time. It encompasses a variety of approaches designed to minimize risks, reduce tax liabilities and ensure that assets are safeguarded against economic fluctuations, inflation and other unforeseen events. The ultimate goal is to ensure that wealth is not only preserved but can also be passed on to future generations.
Definition A balanced portfolio strategy is an investment approach that aims to maximize returns while minimizing risk through diversification across various asset classes. The primary goal is to achieve a balance between risk and reward, making it a popular choice among investors seeking steady growth and lower volatility. Key Components Investors typically include the following components in a balanced portfolio: Stocks: Represent ownership in companies and provide growth potential but come with higher risks.
Definition A Capital Preservation Strategy is a conservative investment approach aimed at protecting the principal amount of an investment. The primary goal is to minimize the risk of loss while ensuring that the investment retains its value over time. In a world of economic uncertainties and volatile markets, this strategy has gained traction among risk-averse investors who prioritize the safety of their capital over potentially higher returns. Key Components Risk Assessment
Definition Contrarian investing is a strategy that entails going against prevailing market trends. Essentially, contrarian investors believe that when most people are overly optimistic or pessimistic about a particular asset, it may be time to take a different stance. This approach is grounded in the belief that market sentiment often leads to mispricing of assets, creating opportunities for those willing to think differently. Key Components of Contrarian Investing Market Sentiment: Understanding the collective mood of investors is crucial.
Definition Core satellite investing is a hybrid investment strategy that aims to balance stability and growth by combining a foundation of core investments with a selection of satellite investments. The core typically consists of low-cost, diversified index funds or bonds that provide steady returns, while the satellites may include actively managed funds, individual stocks or other alternative assets aimed at capturing higher returns. Components of Core Satellite Investing Core Portfolio: This is the backbone of the investment strategy, usually composed of index funds or ETFs that track the overall market.