Investing for Beginners .EU, investing Focusing your life solely on making a buck shows a poverty of ambition. It asks too little of yourself. And it will leave you unfulfilled.
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Investing in Russia
  Investing in Russia has gotten really widely promoted for the last period. I can remember the talks that stocks in Russia are the cheapest over the world for not less than year. The fact, that those stocks are st

Investing in Land - Agricultural REITs
  Investing in land I have noticed an increased interest in agricultural land investments during the last period. And I can it understand completely. When stocks are so volatile and bonds may offer such low return

US Debt Relief
  Let me give you few facts at first that we would now what are we talking about: The General government gross debt in percent of GDP in the United States was reported at 83.21 percent of GDP in 2009 (90% of GDP

Where Are the Investment Markets Moving Now?
  Some of the market participants call the current situation a “crisis” others are starting to be convinced that we are in a bear market. While others just don’t know how to call it. Well, I call

Foundation of the Europe’s Financial Market
  The key question in Europe now is how European Union will look after few years from now. This question is the most important at these days for all the Europe and may have affect to the entire world.

Bond Investment: Government Bonds and Corporate Bonds
  Corporate Bonds and Government Bonds   Today I want to discuss another untraditional topic. However, this topic concerns the most traditional investments – bonds. Bonds been used for very long time a

How ECB Is Affecting Investment Markets?
  Today was announced very interesting news. The news is about the fact that ECB (European Central Banks) lends 489 billion of Euros to the banks. It is a really huge amount of capital that flows from ECB to the fi

Baltic Investment
  Baltic Stock Exchange   Baltic stock exchange now belongs to the world gigantic stock exchange NASDAQ OMX, and now is called NASDAQ OMX Baltic. Historically Lithuania, Latvia and Estonia had their own nati

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

What means long term in investing?
When I talk to non-professional investors, I often get surprised on their interpretation of ‘long-term investment’. Of course, everyone wants to enjoy their lives and to do it fast, while not many are ready t

interest Coverage Ratio
  interest coverage ratio shows company’s ability to pay interests for its financial debts. interest coverage ratio is a ratio between operating profit (EBIT to be more exact) and expenses for interests. The

Sortino Ratio
  Sortino ratio is a financial ratio that is used to measure the performance of investment portfolio and is very similar to a Sharpe ratio. The main difference between Sortino ratio and Sharpe ratio is that Sharpe

Investing for Beginner
Many people are prepared to invest, and understand that investing would help to achieve many important goals of life.However, most of those people do not even start to invest, because do not know exactly how to do that,

Investing Top 10
  INVESTING 10 things that you should try to do:     Always have an investment strategy and follow it strictly. Set up an investment strategy (investing rules) even before beginning of investing: t

Investing for Retirement
Investing for retirement may be one of the most reasonable investment objectives. Sometimes, people invest so they can afford expensive things that they otherwise could not afford without investing. For example

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

Investment in Cash
Bank (saving) Accounts, Deposits, Deposit Certificates, Treasure Bills, Money Market Funds When we are talking about investment, cash is not only the real paper (or metal) money that are held in the wallet or under the

Investment in Options
  Options are very known derivatives and especially popular among investing speculators. Options has some attraction: every successful prediction can grow up invested amount a lot of times very quickly and potentia

Investment in Swaps
  Swaps - an investment tool used rarely at investing process. Typically, these contracts are used by financial institutions or other big companies in order to exchange cash flows in different currencies. In fact,

Investing Benefits For Beginners
Is the investment really worth it? Many investing beginners ask a question: why to invest?  There can be different answers. Some might even say that is not worth to invest. Why let your money into uncertainty if yo

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.

Investment Book:
  Investing for Beginners Exposed: Or What Investment Consultants Hide from You   Rokas Lukosius (Author of the book and this website)   No matter whether you are a seasoned inv

Investments in Ultra ETF
  Ultra ETF by most characteristics is similar to normal ETF but there is one main difference: if Ultra ETF follows the same index as normal ETF does, it makes it twice. For example, if normal ETF follows index tha

  Speculation is an investment action made under intentions to earn large profits in short term. Usually such actions are very risky and lays somewhere between investing and gambling. It is hard to say where exactl

Buying on Margin
  Buying on Margin Costs of Buying Stocks on Margin Margin Call The Pros and Cons Psychology: Is it worth?     Buying on margin gets popularity during every strong bull market. Unfortunately, it be

  Derivatives are securities (financial instruments) that are created by financial intermediaries synthetically, and are based on price or value of some primer assets or indicator. Usually such underlying assets ar

Business Valuation
  The goal of business valuation is to determine the correct market value of a business. Usually business valuation is performed by professional valuators / assessors who have required qualifications for the job.&n

Credit Union
  A credit union is a financial intermediary institution controlled by its members, who brings deposits to the union and become a creditors of the institution. The principal services of the credit union are th

Commercial Bank
  A commercial bank also commonly called just a bank is financial institution that has a license to provide financial services.    The principal services provided by banks: Taking the deposits

Insurance Company
  An insurance company may provide insurance services of two different directions: life insurance and non-life insurance. Non-life insurance is not very closely related (if to mention own insurance company’s

Primary Markets
  Primary markets are the markets, in which new capital investments are raised. The perfect example of primary market is an IPO, but even if it is not the first issue of securities for the company, it still counts

Risk-Free interest Rate
  A risk-free interest rate  is rate of interests that would be paid by fixed income securities that contains no risk at all.    For a very long time short-term US Treasury securities was used to d

Real Risk-Free interest Rate
  A real risk-free interest rate is very similar to (nominal) risk free rate. The only difference is that real risk free rate is under condition if no inflation expected. Real risk free rate is deducted from nomina

Junk Bonds
  Junk bonds are bonds that have a speculative-grade credit rating, which is BB or lower.    Junk bonds are riskier but they have higher yields. The spread between junk bond yield and safe bond yield (c

Enterprise Value
  Enterprise value (EV) is a financial measure that is used to reflect the magnitude of the business. If market capitalization shows only the value of shareholders equity, enterprise value includes both: equity val

Net Present Value (NPV)
  Net present value (NPV) is a value calculated by discounting all future net cash flows (net cash flow is calculated taking all the forecasted future income and subtracting from them forecasted expenses in every p

Investment Growth
  An investment growth may have two different meanings: Most probable it refers to growth investing. It is an investment strategy or part of it, which concentrates on investments in stocks that grow faster than

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

Foreign Direct Investment
  Foreign direct investment (FDI) traditionally was understood as investment that is made by foreign country in direct assets, for example factory, including land, building and machinery. When financial markets evo

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

  Repo (repurchase agreement) is a contract between the investor, who borrows money, and the lender who lends money and takes (buys and resells) securities for collateral, in case if the investor will default to re

Margin Trading
  Margin trading is trading in securities when part of the investment portfolio is financed by borrowed money (the other part by your own capital). For example, you have investment portfolio of value $20k, end you

  Deflation is a process opposite to inflation and occurs when inflation is negative. Deflation means that prices of goods and services are decreasing. Such situation when prices are decreasing is not very common i

Inflation Linked Bonds
  Inflation linked bonds (or inflation indexed bonds) are bonds that have their principal linked to inflation, which means the value of the bond principal increases together with inflation. Such bonds are offering

P/E Ratio
  P/E ratio is the most popular valuation multiple that is used for stock analysis. This ratio shows the price of the stock compared to its earnings. The multiple is so popular because of its simplicity and im

P/B Ratio
P/B (P/Bv or price-to-book) ratio shows how expensive stock is compared to its books value. Company’s book value (also called equity, capital, shareholders funds etc.) is equal to company’s total assets les

EV/S Ratio
Enterprise Value to Sales Ratio   EV/S ratio shows how expensive firm is compared to its sales. This multiple is important when company is unprofitable or profits margins are very low and turnaround is expected in

EBITDA Multiple   EV/EBITDA ratio shows how expensive firm is compared to its EBITDA (Earnings Before interest, Taxes, Depreciation and Amortization). EV to EBITDA multiple is mostly used by professionals because

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

Discounted Cash Flow
  Discounted cash flow (DCF) is forecasted net cash flow of the company or other asset that is recalculated (discounted) to its current value. Discounted cash flow is important for investment assessing and mostly i

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

  WACC (Weighted Average Capital Cost) shows cost of capital when capital is consisted of both equity and debt capital. So WACC simply calculates the weighted average between equity cost and debt cost.

  CAPM (Capital Asset Pricing Model) is method widely used for equity cost calculation. Equity cost should show the return that investor should expect/seek from an investment that contains specific level of risk.&n

Conflict of interest
  A conflict of interest is very sensitive problem at financial intermediaries when interests of different groups (owners, investors, employees or other) cross each other. All employees in investment market should

Days Sales Outstanding
  Days sales outstanding (DSO) shows how quickly company collect its money from sales. Usually company doesn’t get paid immediately; depending on business and distributors network such period may be from seve

EBITDA Coverage Ratio
  EBITDA coverage ratio (also called EBITDA to interest Coverage Ratio) shows company’s capability to deal with its financial leverage. If this ratio is too low, that may show company is in trouble and may ha

  EBITDA margin is a profitability margin that shows how much of EBITDA earns company’s revenue relatively. The EBITDA margin is the best for profitability comparison of the companies if you want to measure e

  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

  ROA (Return on Assets) shows what profits are earned by company’s assets. Of course, assets alone usually do not earn the profit, because most of the times profit is the result of know-how and hard work of

Margin Call
  Buying on Margin Costs of Buying Stocks on Margin Margin Call The Pros and Cons Psychology: Is it worth?     Margin call is a fabulous term which carries some mysticism. However, there is nothing

Costs of Buying Stocks on Margin
  Buying on Margin Costs of Buying Stocks on Margin Margin Call The Pros and Cons Psychology: Is it worth?     We won’t talk about the possible losses in here. The goal of this paragraph is t

  An acquisition is a takeover of one corporation by another when shares are bought and control of management is overtaken. Acquisition is an M&A deal and as targets for acquisition usually become some competin

  An underwriter is a company (normally an investment bank) that organizes the selling of new security issues for the corporations. It is a financial intermediary that buys new issues of securities (shares or bonds

Leveraged Buyout
  A leveraged buyout (LBO) is a takeover of a company when debt capital is the main financing source for the acquisition and the acquired assets are used as collateral to receive the needed debt. The LBO may be exe

Management Buyout
  A management buyout (MBO) is an acquisition of a company when company’s management gets the control interest in the company. Management buyout can be placed on if existing shareholders agree to sell their s

Employee Buyout
  An employee buyout is a takeover of the company’s control interest by its employees (usually employee stock ownership plan). Compared to a management buyout, employee buyout involves much more employees, an

Par Value
  Par value also is called face value or nominal value, and is a nominal amount of money that shows how much of money is related to the security nominally. Par value is used most commonly for two types of securitie

Risk Averse
  Risk averse is a characteristic of an investor who is avoiding risk. The more investor is avoiding the risk the more is he risk averse. Almost all the investors (as people are too) are more or less risk averse an

Day Trader
  A day trader is a speculator that trades in stocks, currencies or some other securities within a very short period. Most of the trades are made by the trading in one day period. Day trader is a pure speculator, e

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,

Safe Investments
  Safe investments are investments that contain low risk and considered to be safe. Safe investments do not necessary have to be 100% safe because there is no 100% safe investments in this world as this world isn&r

Undervalued Stocks
  Undervalued stocks are called those stocks that are believed to have higher target price than their stock price on the exchange. The higher is the difference the more stock is undervalued. If stock price in the m

Income Statement
  Income statement (also called statement of operations, profit and loss statement, P&L or other) is one of three main financial statements reported by the companies periodically. Income statement exposes compa

Balance Sheet
  Balance sheet is one of the three main financial statements (others are income statement and cash flow statement). Balance sheet also might be called a statement of financial position because this statement expla

  Earnings are calculated gains of the company and should represent the profit of that business. There are several types of earnings:   Retained earnings are equal to net profit less dividends. Net earnin

Operating Margin
  Operating margin is a profitability percentage that shows what company’s profit margin is before it pays interests and taxes. Operating margin simply ignores capital structure (because ignores financial act

  EBIT (also called Earnings Before interest and Taxes) is a financial indicator of the company that provides information about company’s profitability while ignoring the impact of capital structure and corpo

  Return analysis is different from profitability analysis because usually return is measured as a profitability of the assets, investments, capital or other similar asset group but not as a profitability of the re

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

Times interest Earned Ratio
  ‘Times interest earned ratio' compares ‘earnings before interest and taxes’ of the company to its interest expenses. Low ratio means that company may be in dangerous situation and its interest e

  Solvency analysis takes an important part in financial analysis and mostly is used by creditors. Creditors of the business (bondholders, banks that provide loans) don’t care much if company’s profit w

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

Debt to EBITDA
  Debt to EBITDA (also known as D/EBITDA or Debt/EBITDA) is widely used ratio that measures how big company’s debt is compared to its EBITDA (earnings before interest taxes depreciation and amortization). EBI

Cash Debt Coverage Ratio
  ‘Cash debt coverage ratio’ (also known as ‘current cash debt coverage ratio’) measures company’s ability to repay its debts. Basically, it compares cash flow that is received from op

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

Cash Flow Coverage Ratio
  Cash flow coverage ratio measures company’s ability to repay its debt. This ratio compares operating cash flow of the company to its debts.  If ratio is low (lower than 0.2), it may indicate potential

Strategic Financial Planning
  Strategic financial planning is a bit different from standard financial planning because standard financial planning focuses on a budget which is detailed estimation of financial statements when strategic financi

Stocks and Commodities
  You may ask how stocks and commodities related are. And the answer is simple: everything is related and especially in financial markets. Normally, if some of the main asset class (as stocks) looses or gains

Cost of Debt
  Cost of debt shows what the capital cost of the company for its debt capital is. Basically company’s capital consists of two parts: debt capital and equity capital. (A mixed capital like mezzanine financing

Cost of Debt Formula
  Cost of debt formula    Theoretical cost of debt formula:   Before tax cost of debt = Risk free rate + Credit risk premium  After tax cost of debt = (Risk free rate + Credit risk premiu

Before Tax Cost of Debt
  Before tax cost of debt (or pretax cost of debt) usually is a standard cost of debt. When you determine the interest rate paid by the company for its debt, it is equal to debt cost before tax. However, interest e

After Tax Cost of Debt
  There are two types of the debt cost: ‘before tax cost of debt’ and after tax cost of debt. The only difference between those is that the first one is equal to the interest rate paid by company while

  Opex (operating expense) are expenses of the business and are related to the operational activity of the company.  Basically, every company has few types of expenses: COGS (cost of sales) include costs t

Cost of Debt Calculation
  The cost of debt is easy to calculate if they are required data. Actually, there are few methods to get the cost of debt, but some of those are more accurate some less. If you want that your result would be more

Price to Free Cash Flow
  Price to free cash flow (P/FCF) or EV/FCF ratio are ratios that compare company's price to its free cash flow. The main difference between those two ratios is that EV/FCF also includes the eff

Price to Cash Flow Ratio
  Price to cash flow ratio (P/CF) and EV/CF ratio are similar but there are some differences. The main difference is that EV/CF also includes the effect of company’s financial debt which says a different

Free Cash Flow Yield
  Free cash flow yield (FCF yield) show how much of cash that may be distributed to shareholders the business earns compared to its price on the stock exchange (including both: equity value and debt value or just e

Minority interest
  Minority interest (non-controlling interest) is a part of net income or of an equity that does not belong to the shareholders of the main group. Basically there are two types of the minority interest:

  EBITA (earnings before interest, taxes and amortization) is a financial indicator that shows company’s earnings which are equal to pretax profit plus corporate tax and amortization.    EBITA is

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

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

Return on Invested Capital
  Return on invested capital (ROIC) or also called return on capital is a financial ratio employed to measure nominal company’s return that is earned by capital invested in operating asset. Basically return o

Financial Ratios
  Financial ratios are ratios that are used in financial analysis or in other words that are using financial data of a company. Such financial data usually is found in financial statements (income statement, balanc

Technical Analysis of Stocks
  Technical analysis of stocks is widely known type of stock analysis. Technical analysis is completely opposite to fundamental analysis. While fundamental analysis relies on company’s ability to generate cas

Coverage Ratios
  Coverage ratios are financial ratios that measure the ability of the company to repay its financial liabilities. Such ratios compare company’s operating income (or other type of income) or operating cash fl

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

Capital Employed
  Capital employed is a value of capital investments in a company. Basically, the capital of each company can be classified in these types of capital: Equity capital  Debt capital Working capital

Cash Ratio
  Cash ratio is a financial ratio that measures company’s financial liquidity over short term. It compares company’s cash reserves to short-term liabilities. If ‘cash ratio’ is high, it may

Net interest Income
  Net interest income is an indicator that measures lending business performance of a financial institution. Basically, it is equal to interest income from loans and other assets less interest expenses for deposits

interest Rate Spread
  ‘interest rate spread’ is a very important measure for banks and other financial institutions. As money lending is the core business for most of the banks, it is very important that this operational s

Net interest Margin
Net interest margin shows the profitability of the lending business for a bank or other financial institution. Lending business is the core business for most of the banks, and the profitability of this operational segmen

Loan to Deposit Ratio
Loan to deposit ratio is financial ratio used for banks or other financial institutions. This ratio compares bank’s loan portfolio to deposit portfolio and measures financial liquidity of the institution.  &n

Loans to Assets Ratio
  ‘Loans to assets ratio’ is a financial ratio that usually is applied for banks (or credit unions) to measure the relation of the bank’s loan portfolio to the total assets.   Providing loa

Asset to Equity Ratio
  Asset to equity ratio compares company’s assets to the book value and measures the riskiness of the company. This ratio cannot be lower than 1.0, and if it is equal to 1, it means that assets are equal to e

Gross Debt
  (1) Gross debt in corporate finance is often used as synonym for ‘total debt’, however there might be some differences depending on the version of the total debt. Technically, ‘gross debt’

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

Leverage definition In finance leverage means usage of debt capital in addition to the equity capital in order to increase the profit. Increase in leverage is understood as increase in riskiness and volatility.

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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