Nivine Richie, Ph.D., CFA is an Associate Professor of Finance at the University of North Carolina Wilmington. She teaches courses in corporate financial management, derivatives, fixed income, and commercial bank management. Her research interests include cost of capital, banking, and derivatives. She has published studies in the Journal of Economics and Finance, Journal of Futures Markets, Review of Futures Markets, and Journal of Trading, among others.
"If 30-year-olds knew just how young they’d feel in their 50s and how much life is left to live, they’d take much better care of their finances."
~ Nancy L. Anderson, CFP
According to this Forbes article, there are several financial decisions you make in your 30s that may greatly impact your life in your 50s. These financial decisions including:
Dominoes changed it's formula in 2009. Since then, the company has outperformed the market and has proven to be a great investment.
You will find more statistics at Statista
So what makes a good investment, anyway? How would you choose the firm that you should entrust with your money?
If you think about investing like you would if you were buying a business, then you probably have a sense of what you might look for:
Question: What can you add to this list?
"That's the thing about mathematics. You never know where it's going to go."
~Jim Simons, The mathematician who cracked Wall Street
Turns out a lot of student loans are spent on non-educational expenses, perhaps even frivolous expenses. The infographic below shows some detail about how student loans are spent.
The reason for poor financial decisions, like the decision to spend student loans on spring break and pizza, may come down to lack of financial literacy. So before you take out your next student loan (or any loan), ask yourself:
1. Do I need the money?
2. Can I repay the loan?
3. When will I repay the loan?
As this video explains, representatives from the Federal Reserve visit the community to see what is actually going on. The Fed needs to know the true condition of the economy, and there's no better way than to ask those with boots on the ground.
How do you think the data gathered by going directly into the community is used by the Fed?
What is the role of the Fed in the economy?
How is the Fed working to better manage the US economy?
It it's too good to be true, it probably is. That adage is especially true in financial markets when it comes to pyramid schemes or "Ponzi" schemes.
From the SEC:
In the classic "pyramid" scheme, participants attempt to make money solely by recruiting new participants into the program. The hallmark of these schemes is the promise of sky-high returns in a short period of time for doing nothing other than handing over your money and getting others to do the same.
The fraudsters behind a pyramid scheme may go to great lengths to make the program look like a legitimate multi-level marketing program. But despite their claims to have legitimate products or services to sell, these fraudsters simply use money coming in from new recruits to pay off early stage investors. But eventually the pyramid will collapse. At some point the schemes get too big, the promoter cannot raise enough money from new investors to pay earlier investors, and many people lose their money.
This Investopedia video explains what a pyramid scheme is and how it is used to pay existing investors by bringing in new investors.
Your credit score is affected by many factors, but three factors are most important:
1. Payment history
2. Amounts owed
3. Length of credit history
Why does your credit score matter? What areas of your life are affected by your credit score?
This infographic shows that St. Patrick's day is a big day for positive cash flow. The planned spending has increased over the years, and Guinness has been the big winner in the number of pints consumed on this holiday.
This video from the Atlanta Fed explains why the U.S. central bank system of 12 regional Federal Reserve banks is useful and how they all work together.
This infographics describes the struggles faced by many Americans when it comes to remaining "financially fit." Did you know that many Americans find it more difficult to maintain financial discipline than to remain physically healthy?
Based on the findings presented here, what advice would you offer your loved ones about managing their personal finances?
source: AICPA infographic
This video describes an experiment from the 1980s to determine whether successful traders are born or trained--that is, nature versus nurture. The strategies that they followed are called "technical analysis" which is the investment method that relies on price and volume history to determine whether you should buy or sell stocks. Technical analysis does not rely on financial statements or evaluation of the future growth prospects of the firm. In other words, technicians (or chartists) do not try to evaluate the intrinsic value of the firm. Instead, they rely on trading rules and historical charts to identify the supply and demand for a stock that is likely to push the stock price higher or lower.
1. What is the difference between fundamental and technical analysis?
2. If you believe that financial markets are inefficient in the weak form, which type of analysis might you try to use? What if you believe that markets are inefficient in the semi-strong form?
3. Do you believe that charts can give you enough information to make investing decisions with your own money?
Fundamental analysis is the process of examining a company's financial statements and future prospects to determine whether you should own a stock. Analysts use fundamental analysis to identify the "intrinsic value" of an asset, and then make a decision about whether the current market price is above or below the value.
Aswath Damodaran from NYU, the leading expert in valuation, defines intrinsic value this way:
It is the value that you would attach to an asset, based upon its fundamentals: cash flows, expected growth and risk.
...Only assets that are expected to generate cash flows can have intrinsic values. Thus, a bond (coupons), a stock (dividends), a business (operating cash flows) or commercial real estate (net rental income) all have intrinsic values, though computing those values can be easier for some assets than others. At the other extreme, fine art and baseball cards do not have intrinsic value, since they generate no cash flows (though they may generate a more amorphous utility for their owners) and value, in a sense, is in entirely in the eye of the beholder. Residential real estate is closer to the latter than the former and estimating the intrinsic value of your house is an exercise in futility. So, how do people value assets where intrinsic value cannot be estimated? They look at what other people are paying for similar or comparable assets: i.e., they use relative valuation.
This video does a good job of describing fundamental analysis and the tools used in fundamental analysis.
Snap Inc. shares were priced at $17/share in its widely anticipated IPO, raising $3.4 billion for the original owners. Almost immediately after issue, the shares were up 40 percent. [read more here]
The question is why this huge run up in the price of an unproven stock immediately after it comes to market? Did the investment banker that brought the deal to market make a mistake and leave money on the table? Or is this just a sign that demand is health (some might say out of control, even)? Classic IPO underpricing is described by academics as an indirect cost of going public that is borne by the issuer. Whether that is true with Snap is hard to tell