Category: Educational in Portfolio Management

Creating a balanced portfolio is analogous to constructing a robust house: each component plays a crucial role in ensuring its stability and resilience. In the world of finance, portfolio diversification stands as the cornerstone of prudent investment strategy; at its essence, diversification involves spreading investments across various asset classes to mitigate risk and maximize returns. This practice not only safeguards against market volatility but also enhances the potential for long-term growth. Diversification offers several benefits, the most important among them being risk management. By allocating investments across different assets, investors can reduce the impact of adverse events on their overall portfolio performance. Furthermore, it allows for exposure to a wide array of opportunities, thereby capturing potential gains from multiple sources. A balanced portfolio typically comprises a mix of stocks, bonds,…

After doing a master’s degree in Finance, there are many career opportunities one can access. However, the choice for the most competitive candidates, who attend the best schools, usually boil down to either Investment Banking or Private Equity. Today we will take a look at these options in order to understand what a career in the highest chambers of finance might look like.  Investment Banking:  Investment Banking is an expression used to refer to the activity of connecting SSU’s, operators with more money than they need, with DSU’s, the ones with less money than what is necessary in order for them to undertake specific investment projects.  Investment banks (JP Morgan Chase, Goldman Sachs, Morgan Stanley, HSBC, BNP Paribas, ecc.) are the entities that play a key role in ensuring this…

Introduction Today we will analyze one of the most contemporary and dynamic subjects - sustainable investments. Green investing or Sustainable investing (sometimes known as ethical investing, socially responsible investing or impact investing), is multidimensional but still focuses on financial performance. Incorporating the environmental, social and governance (ESG) standards into the investment process implies the implementation of numerous activities, including consideration of socio-environmental consequences and financial goals recognition, for achieving positive results for society and environment. The constant rise of importance of this concept in recent years is one of the main features that can be noticed thanks to a few factors. One is that people are starting to be aware of the looming global crisis in the environmental, and social spheres. Sustainability-related topics including climate change, resource depletion, class struggles…

An ETF (exchange-traded fund) is a passive investment fund that trades on stock exchanges that replicates a stock index, a bond index, a sector, commodities or other assets such as cryptos. ETFs are one of the best instruments to diversify and reduce the investment risk. As said before, ETFs are exchanged in the stock market and for this reason they work as stocks do: in fact they can be purchased and sold when the market is open and their price changes in real time, even if ETFs experience lower volatility as they are lower-risk instruments than stocks, and their underlying assets are highly diversified. The fact that ETFs are traded on a stock exchange is one of the differences that they have with mutual funds, which trade just once a…

Risk is one of the main features that characterizes the entire financial world, and it heavily influences the type of security that investors will invest into as well as the particular kind of strategy they will follow while doing it. With respect to this last concept, it is important to know that risk is strongly correlated with the return on an investment. In fact, the potential return on a particular investment increases as the risk that affects that operation grows. This also means that, in the worst case scenario, the potential loss will be considerably higher. The standard deviation is the main measure of risk used when examining a particular type of instrument. When the standard deviation value for the security is very high, the corresponding volatility level of the…

Stocks’ prices are affected by many factors that cannot be controlled all at once, mainly we can think about the most influential ones as a group of how investors feel about that certain stock. Earnings reports must be published by publicly traded companies in the U.S on a quarterly and on an annual basis. These reports are official financial documents issued by the company itself that shows expenses, earnings and overall profit in a certain period. They provide a periodic update of a company’s financial statement along with an income statement, cash flow statement and balance sheet. Investors can use a company’s earnings report as an indicator of performance and financial position of the company, however the report usually gives an overly positive idea of the financial situation and therefore…

WHAT IS A STOCK? A stock (or share) is a share in the ownership of a company, which means that every shareholder has ownership of the company in proportion to his share.  If the company is a listed company, its shares are sold in the stock market. The stock market is the place where shares of public companies are bought and sold by retail and institutional investors. If you have shares of a corporation, you can participate to shareholders meetings and vote, receive dividends (if the company distributes them), and you can sell the shares to somebody else. Stocks change their value over time, and this is caused not only by the company’s performance, but also from other factors such as global market trends, central bank decisions on interest rates,…

As our second educational article, the portfolio management division decided to introduce the topic of value analysis. There are many ways to analyze the value of a company; some serve the purpose of obtaining a figure representing the total value of a firm, whilst others are purely for the use of traders and retail investors, like us. Today, we will look into three different types of analysis: discounted cash flow modeling (a.k.a. DCF), comparative analysis and then fundamental analysis.  Discounted Cash Flow Modelling: Discounted Cash Flow models are used to value companies based on how much cash they will generate in the foreseeable future. The basic assumption of this model is that a dollar today is worth more than a dollar tomorrow, meaning that the forecasted cash flows (a.k.a. FCF)…