What Is a Maximum Drawdown (MDD)? A maximum drawdown (MDD) is the maximum observed loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum drawdown is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an…
What Are Risk Measures? Risk measures are statistical measures that are historical predictors of investment risk and volatilityand they are also major components in modern portfolio theory (MPT). MPT is a standard financial and academic methodology for assessing the performance of a stock or a stock fund as compared to its benchmark index. There are…
What Is a Catastrophe Bond (CAT)? A catastrophe bond (CAT) is a high-yield debt instrument that is designed to raise money for companies in the insurance industry in the event of a natural disaster. A CAT bond allows the issuer to receive funding from the bond only if specific conditions, such as an earthquake or…
The forward price to earnings (P/E) is a valuation metric for measuring and comparing a company’s earnings–using expected earnings per share–to the current stock price. Companies forecast their earnings for each quarter using earnings per share (EPS)which is a company’s profit divided by the number of outstanding common stock shares. If a company’s EPS is…
What Is a Zero-Beta Portfolio? A zero-beta portfolio is a portfolio constructed to have zero systematic risk, or in other words, a beta of zero. A zero-beta portfolio would have the same expected return as the risk-free rate. Such a portfolio would have zero correlation with market movements, given that its expected return equals the…
Berkshire Hathaway Inc. (BRK.A, BRK.B) released its annual report on Feb. 22, 2020. As usual, Chair Warren Buffett‘s letter is of interest to Berkshire’s shareholders and other investors alike who look to the investing sage for pearls of wisdom. Here are five key takeaways from this year’s letter: Warren Buffett’s 2019 Annual Letter: Five Takeaways…
In the United States, credit unions are divided into two categories: state-chartered and federally chartered. Though they share many characteristics, requirements, and purposes, the difference in charters impacts the regulation and titling of a given credit union. State-chartered credit unions fall under the regulatory authority of their respective state’s division of financial services. Federally chartered…
Working capital is the money used to cover all of a company’s short-term expenses, including inventory, payments on short-term debt, and day-to-day expenses—called operating expenses. Working capital is critical since it is used to keep a business operating smoothly and meet all its financial obligations within the coming year. Key Takeaways Working capital is the…
What Is GoHenry? GoHenry is an online app and debit card designed to help children from age six to 18 manage their allowances through intuitive budgeting and responsible spending. Launched in 2012, the United Kingdom-based company offers unique parental controls, letting moms and dads individually monitor the debit card transactions for each of their children….