Understanding Risk and Reward in Investing: Key Components and Actors, Lecture notes of Economics

Download Understanding Risk and Reward in Investing: Key Components and Actors and more Lecture notes Economics in PDF only on Docsity! RISK AND REWARD REWARD AND RISK GO TOGETHER REWARD IS SIMPLE TO UNDERSTAND (% RETURN) RISK IS LESS CLEAR, BUT FOR HISTORICAL ANALYSIS IS EQUATED TO VOLATILITY – MUCH MORE SUBJECTIVE FOR FORWARD LOOKS THINK OF YOUR OWN RISK ACCEPTANCE/AVERSION CONSIDER YOUR TIME HORIZON ARE INVESTING FOR YOURSELF, YOUR EMPLOYER, YOUR CLIENT? FOR PERSONAL INVESTMENTS TAKE A LIFE-TIME VIEW INVESTMENT TOOLS • BANKS, MONEY MARKETS • BONDS • SHARES • PROPERTY • COMMODITIES • ART • DERIVATIVES (INCLUDING CDOs, OPTIONS) • ARE YOU TRADING OR TAKING A LONG-TERM POSITION? KEY QUANTITATIVE CONCEPTS • RATE OF RETURN AND HOW TO CALCULATE IT • DIVIDEND, COUPON, YIELD • TAXATION, INCLUDING DOUBLE TAXATION AND WITHHOLDING TAX • INFLATION • YIELD CURVES • EXCHANGE RATES KEY INVESTMENT MEASURES • PAR VALUE • PRICE EARNINGS RATIO • EARNING PER SHARE • QUICK AND CURRENT RATIOS • DIVIDEND PAYOUT RATIO AND DIVIDEND YIELD • LEVERAGE OR GEARING • FREE CASH FLOW MACRO-ECONOMIC CONCEPTS • BALANCE OF TRADE • CURRENT ACCOUNT (bad example is the current situation of the USA current account, that little by little have become worse) • CAPITAL ACCOUNT • RESERVE AND TRADING CURRENCIES, RESERVES (Currently China is handling a tremendous amount of US Dollars, could that be possible to create an Asian reserve currency?) • GOVERNMENT FINANCING • ASSET INFLATION • INCOME SUPPORTED SAVINGS