Private equity is specifically a kind of stock ownership in a company that is not publicly traded on a stock exchange. In recent times though it has been what people call private funds that use capital to takeover companies (many times through leveraged buyouts) with the goal to rebuild the company’s business model to create […]
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Warren Buffett thought the management fees that hedge funds charged investors was ridiculous based on their historical returns in comparison to the markets. So Mr. Buffett set up a challenge for the hedge fund industry in 2008. One fund accepted his challenge, Protégé Partners LLC, and they made a million-dollar bet on who could produce
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Stocks are an asset class of investments where you buy a share of ownership in a publicly traded company. Stocks are equity in a company. Shares trade on stock exchanges through market makers and executed for investors through a stock broker. How do you invest in stocks? Decide you want to own stocks. Understand the
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In 2001 during a Fortune Magazine interview Warren Buffett said that the stock market capitalization to GDP ratio as a long-term valuation indicator is probably the best single measure of where valuations stand at any given moment. The stock market capitalization to GDP ratio is used to measure if a market is undervalued or overvalued in
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The company that Warren Buffett built along with his business partner Charlie Munger is Berkshire Hathaway Inc. Berkshire is a multinational conglomerate holding company that has been run out of its headquarters located on one floor of the Kiewit Plaza building for over 50 years in Omaha, Nebraska in the U.S. Berkshire Hathaway Inc. is a publicly
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A debt-to-equity ratio (Or D/E) is the ratio in finance that shows the relation of the size of a company’s outstanding debt in relation to a company’s market cap versus what the business owes after financing the purchase of assets, research and development, and product launches. The debt to equity ratio is similar to leverage.
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The Sortino ratio is a way to measure the risk adjusted return of an asset, investment portfolio, or trading strategy. The Sortino ratio is an adjustment to the Sharpe Ratio that filters volatility from upside moves from downside moves. The Sortino ratio only measures downside moves that are below a specified volatility target or return
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Simple interest is only calculated on the original amount of capital inside a set time period. It does not include the compounding effect of returns on new money accrued. Simple interest can be used over any time period but annual returns is the one that is most commonly used. Simple interest is calculated on original principle alone. Compound interest includes the additional
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The rule of 72 is a process for quickly projecting how long it will take for a rate of investment return to make capital double. The number 72 is used in figuring out the answer by dividing the rate of return percentage per period to get an approximation of the number of years in most
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The Sharpe Ratio was developed it in 1966 by William F. Sharpe as a way to quantify potential risk in an individual investment or an investing method or trading strategy. The Sharpe Ratio is the defined difference of the returns between an investment and the potential risk free return that is then divided by the standard deviation/volatility of the
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