Understanding the World of Financial Markets

Evaluate two approaches to investing in the stock market: stock picking, which can verge on high-risk gambling as in the notorious GameStop "short squeeze" in 2021, and the safer strategy of buying and holding a diversified portfolio of index funds. Learn how the efficient market hypothesis sheds light on investor behavior by modeling the flow of information about individual companies.

Brand names, patents, secret formulas, logos-these and other entities are known as intangible assets, and they can add to a company's value. This not only applies to prestige brands, but also to firms such as Walmart that are exceptionally well-run, which counts as an intangible asset. Keep this all-important concept in mind whenever you are gauging the strengths and weaknesses of a company.

The age-old strategy of holding bonds as a hedge against declining stock prices appeared to go haywire in the decade and a half following the 2008 Financial Crisis. What went wrong and why? Investigate the function of bonds and their link to fiscal policy. Look at alternatives to the traditional bond market that combine relatively low risk with returns that are greater than the rate of inflation.

CEO compensation can be shocking, but the millions paid to a top-notch chief executive can generate billions to the economy, not to mention a tidy return to stockholders. That's why understanding a company's CEO is as important as mastering its balance sheet. Study the starters and nonstarters among CEOs-and look at CEO types.

The futures market has a practical function of allowing a company to lock in a price for a vital commodity or asset to be used later, for example, natural gas. It also has a speculative side, enabling investors to hedge their portfolios against market downturns or to simply gamble on price fluctuations. Learn when it makes sense for an individual investor to venture into this risky market.