Money Archives

The Benefits of Diversification: Optimize Your Portfolio

What are the benefits of diversification in a portfolio? Why does this minimize your risk? A diversified portfolio is one that features holdings in a variety of industries, countries, and asset classes. The idea is that when your holdings in one industry, country, or asset suffer, your holdings in other industries, countries, and assets will offset your losses. Find out the main benefits of diversification and how you can create a diversified portfolio below.

The Role of Banks in the Economy: Explained

How to be Rich and Successful: 3 Steps to Follow

What purpose do banks serve? How do banks contribute to the greater good of economic agents (firms and consumers)? Banks serve a number of important roles in an economy. First, banks guard money and provide businesses with credits for large investments which allow businesses to operate on a large scale, driving down costs and standards of living. Of course, banks also lend to individual consumers to finance their purchases, which fuels the demand for goods and services. In this article, we’ll discuss the role of banks in the economy and how they are regulated.

How to Find the Rate of Return on Investments

Do you want to know how to find the rate of return on investments? What effective formula can help you predict the rate of return efficiently? Market projections in the short run—a month, or even a year, from the present—are generally a fool’s errand, but, by knowing which variables to examine, it is possible to make relatively accurate projections of long-term return on investment. Understanding how to find the rate of return will help you to make wiser choices when investing. Keep reading to find out how to find the rate of return on investments.

Markowitz’s Theory Explained (Modern Portfolio Theory)

What is Markowitz’s theory about investment portfolios? How can diversification of stocks reduce risk? Harry Markowitz’s theory (Modern Portfolio Theory) suggests that the diversification of a stock portfolio can reduce risk. It asserts that a diversified portfolio—one that features holdings in a variety of industries and countries—is more likely to be profitable than a homogenous one. Find out more about Markowitz’s theory below.

Does Technical Analysis Work? Here’s Why It Doesn’t

What is the best method for predicting the movement of stock prices? Does technical analysis work? Technical analysis uses the past movements of stock prices to predict future prices. For example, if a stock has risen over the course of a day or several days, a technical analysis will show confidence in the stock. Technical analysts argue that stock prices tend to follow trends, meaning they can sometimes be susceptible to the irrational optimism of other investors. Does technical analysis work? Find out below.

The Factors That Cause Salary Inequality

Why do some people earn more than others? What factors determine a person’s pay? Labor—people’s time, energy, knowledge, and skills—is a scarce resource. Just like any other resource, pricing labor allocates scarce resources that have alternative uses. For example, paying engineers higher salaries than artists shifts people’s time toward engineering, where their output to society may be larger. In this article, we’ll discuss what determines a person’s pay and why salary inequality is the case.

Is Government Intervention Good for an Economy?

Why do governments intervene in markets? Is government intervention good for an economy? When there is a market failure of some sort, governments often intervene to restore the economic system. However, if the government sets too many rules, or gets too involved in managing economic operations, it can destroy an economy. In this article, we’ll discuss three possible downsides of government intervention: 1) misallocation of resources, 2) rising costs due to regulations, 3) stifled growth, and 4) distorted incentives due to taxes.

Jordan Belfort: The 4 Steps for Straight Line Selling

What is the Straight Line selling method? How does it compare to the traditional, seven-step methodology? In his book Way of the Wolf, Jordan Belfort teaches the fours steps for Straight Line selling: 1) take control in the first four seconds, 2) build rapport, 3) gather information, and 4) presenting. Belfort recommends looping the conversation to determine what factors are holding the prospect back, then presenting again while addressing those concerns. Continue reading for full instructions on Belfort’s four steps for Straight Line selling.

Wealth Transfer: How Do Countries Exchange Wealth?

How does wealth get transferred between countries? What are the implications of international wealth transfers for the participating economies? Transfers of wealth between countries take many forms. The primary wealth transfer channels include international investments (direct investment in stocks and bonds), putting money in a country’s banks, remittances from outside workers back to family, imperialists transferring wealth from nations they conquered (now more obsolete), and foreign aid. In this article, we’ll take a look at the economics behind the primary channels of international wealth transfer.

Can You Get Rich Quick From Stocks?

Can you get rich quick from stocks? How do investors determine which stocks are going to pay off big? The stock market has a reputation for allowing people to “get rich quick” by betting big on a stock that pays unexpectedly large returns. Unfortunately, this reputation is misleading. Although it certainly can happen occasionally—just as gambling in Las Vegas can occasionally make a person wealthy—the unremarkable truth is that get-rich-quick schemes usually fail because they hit two realities: 1) all information is public, and 2) people don’t typically undervalue their own stocks. Here is why getting rich quick off stocks