Investing for Beginners .EU, investing Wealth is the slave of a wise man. The master of a fool.

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Stocks Riskier than Bonds?
  It is so common that stocks are riskier investments than bonds; nobody is even considering this question. Would I doubt it? Of course not, stocks are stocks and bonds are bonds. But I would like to look at it fro

European Dividend Stocks
  Before getting to the exact stocks, at first, please let me explain why I have chosen European dividend stocks as a topic. For the beginning, lets solve the question why dividend stocks. The true is that many inv

(Are you looking for investment definition?)   Investments are instruments that allow us to receive a higher amount of money than was spent. If someone spends 10 euros or dollars and he knows that he will receive

Investment in Bonds
Debt (fixed income) securities Bonds are fixed income securities and the principle of them is simple - the issuer of the bonds attracts the money from the investors and commits to pay back for the investors until end of

Terminal Value
  Terminal value is a value of the business (or other asset) used in discounted cash flow (DCF) method that is added after the discontinuing of the cash flow forecasting.   DCF valuation is based on the sum

Direct Investment
Investment in Tangible Assets   Direct investment are very wide issue to study, but it‘s not so close to traditional investing. Direct investments are more related with business development and would depend

Net Debt
  Definition   'Net debt' is used quite often in finance and it is equal to financial liabilities of the company that are reduced by the cash amount (and cash equivalents) that are held by the company.

Dividend Payout Ratio
Payout ratio is a percentage that shows a portion of company’s income distributed as dividends.    Formula Dividend payout ratio = common shares dividends / net income   *For the sam

Investment Tactics
  Investment tactics are the rules for investment actions that help to react on market conditions and achieve more efficient results. Investment tactics deal with lower scale questions than investment strategy, whi

Stock Exchange
  A stock exchange is an operator/company that takes bids from the sellers and buyers and executes transactions if conditions allow it. Usually stock exchanges offer trading not only for stocks but also for other f

Investment Management Fees
  Investment management fees (fees that are paid straight to investment manager) basically are one of these types:   Performance based fee. Performance based fee is calculated according to increase of inve

Total Expense Ratio
  ‘Total expense ratio shows all expenses of investment fund. It is a good measure that shows you how much of different fees you are really paying when investing in some fund. Total expense ratio is a percent

Treynor Ratio
  Treynor ratio is another popular ratio that is used to measure the performance of investment portfolio. This ratio compares the excess return (above risk free return) of a portfolio to beta of that portfolio. Whi

Jensen’s Alpha
  Jensen’s alpha is used to measure the performance of an investment portfolio. The higher ratio means better performance of portfolio manager. Basically, this Jensen’s ratio shows the above market port

Sharpe Ratio
  Sharpe ratio measures the above risk free performance of investment portfolio in relation to its risk. This ratio was developed by William F. Sharpe which introduced the ratio in 1966. Now Sharpe ratio is the mos

Return on Investment
  Return on investment (ROI) is a percentage that shows profitability of an investment or investment portfolio. Return on investment calculation:   CALCULATION:   Return on investment = net in

PEG Ratio
Price-to-Earnings to Growth Ratio   PEG ratio is quiet popular among retail investors, however professionals do not use it often because of this ratio subjectivity. PEG ratio shows how expensive is stock compared

P/NAV Ratio
Price to Net Asset Value    P/NAV ratio shows how expensive share is compared to its NAV (net asset value). This ratio is very similar to P/B ratio but in this case market values (not book values) are used. M

Cost of Equity
  Cost of equity is the rate of return that is required by equity owners from their investment. Of course, requirements of the shareholders have to be real and meet market conditions as well. Basically cost of equi

DCF Valuation
Discounted Cash Flow Analysis   DCF valuation might be applied to any asset that generates positive free cash flow or is expected to generate that cash flow in the future. DCF valuation might be directly applied t

Power of Compounding
  Power of compounding (compound interest) is a known description for fast increase in value when investment brings steady interests and interests are reinvested. The principle of the growth is the geometric progre

Inventory Turnover Ratio
  Inventory turnover ratio shows how quickly company’s inventory is changing compared to its sales or cost of goods sold. This ratio shows how effectively inventory is managed in company’s production/di

  ROE (Return on Equity) shows profitability of company’s book value. Company’s book value (equity) is equal to company’s assets less liabilities, and ROE is usually higher if company ha

Outstanding Share Number
  Outstanding share number is an important characteristic for the stock value of every stock company. This number represents all the issued shares in the company except the shares that are held by the company itsel

High Return Investments
  High-return investments (or high-yield investments) are investments that can provide the higher return than average investments, and of course such investments are riskier. The reality is that people have differe

Passive Income
  Passive income is an earnings that person receives consistently for a long term from some stable sources. One and most probable source of passive income may be income from investment.    For example,

Financial Statements
  Financial statements are periodically by the companies issued reports that provide the most important financial information about company’s financial condition and success of activity.    There

Debt Coverage Ratio
  Debt coverage ratio (debt service coverage ratio) is a ratio that measures solvency risk and mostly is applied for property projects. There are many debt coverage ratios that are used in financial practice on thi

Debt to Equity
  Debt to equity ratio (also known as D/E ratio, Debt/Equity) measures how big is company’s debt compared to its book capital (equity). The higher is the debt to equity ratio the higher is the insolvency risk

Debt to Asset Ratio
  Debt to asset ratio (also called as D/A ratio, Debt/Asset) measures how big is company’s debt compared to its assets. Debt to asset ratio is very similar to debt to equity (D/E) ratio but normally is lower

Cash Coverage Ratio
  Cash coverage ratio measures company’s ability to repay its debts. It compares EBITDA (type of earnings) of the company and interest that is paid for company’s debts annually. EBITDA is not exactly eq

Free Cash Flow
  Free cash flow of the company shows how much of cash business has earned in the reality over the period. There are many ways to determine the free cash flow of the company, and most often this indicator is provid

Asset Performance
  Asset performance is a return of an asset over some period. Usually performance is measured on annual basis. But basically performance of any asset depends on its riskiness and the period (most of the stocks and

Cost of Capital
  Capital of every company consists of two parts: equity capital and debt capital (only if company has no financial debts it has only equity capital). Both these capital sources have their costs and this is cost of

  What is volatility? Volatility definition can be short: volatility is the size of the amplitude in investment’s value changes over time. In simple words, it describes the riskiness of the security because

annual Report
  annual report is a report on company’s activity issued each year. Not every company issues an annual report and mostly such reports are issued by public companies or those that are preparing going public.&n

Rate of Return
  A rate of return is a percentage that shows what is the profit or loss gained on some investment on annual basis. There are many ways to calculate the rate of return including internal rate of return, arithmetica

Accounts Payable Turnover
  Accounts payable turnover ratio shows how quickly company is paying to its suppliers for services or goods and materials. If payables turnover is very low, it may signify different reasons behind it: Company i

Receivables Turnover
  Receivables turnover ratio (also called as accounts receivable turnover) is a financial ratio that measures how efficiently company collects its receivables. If receivables turnover is very low, it means company

Average Collection Period
  Average collection period is a financial ratio that is used to measure how fast company collects its receivables. ‘Average collection period’ shows what is the average time period till company gets ca

Return on Capital Employed
  Return on capital employed ratio (ROCE) measures company’s return compared to its employed capital. Return in this case is some kind of profit (mostly EBIT or NOPAT) and the capital employed means equity ca

Days Payable Outstanding
  ‘Days payable outstanding’ ratio shows how long it takes the company to pay its liabilities to the suppliers. The longer period means that company is not in a hurry to settle up its debts to the suppl

Days Inventory Outstanding
  ‘Days inventory outstanding’ measures how efficiently company manages its inventory. Inventory often is the main part of working capital and it is very important to managed inventory efficiently. Ther

CAGR Formula
  CAGR formula is used to calculate 'compound annual growth rate':   CAGR = (Value at the end / Value at the beginning) ^ (1 / Years) - 1 * Can be multiplied by 100%. Where: Value at t

  CAGR is used to measure return and means compound annual growth rate. This type of return measurement is very popular in investment finance because interest also earns interest and power of compounding cannot be

Market Risk Premium
(Equity Risk Premium)   Every investment carries some level of risk and some level of potential return. Those two measures are closely related in investment finance and are used in CAPM which calculates cost of eq

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