Blog Posts

Sector rotation is a strategy used in financial markets, where traders/investors allocate their investments across various economic sectors at different times, aligning with the business cycle. This approach is predicated on the observation that different sectors of the economy perform differently during various phases of the business cycle.   The Business Cycle and Sector Performance […]

Dynamic Asset Allocation (DAA) is a strategy that involves frequent adjustments to the mix of asset classes within an investment portfolio. This approach contrasts with static asset allocation, which maintains a fixed allocation of assets over time. The dynamic strategy is used to capitalize on market inefficiencies or economic changes, with the goal of optimizing […]

Core & Satellite Investment Management is a portfolio approach blending passive and active investment styles. This method diversifies risk while aiming for higher returns than traditional passive management.   Key Takeaways – Core & Satellite Investment Management Core & satellite investment management balances stability and growth: a “core” of low-risk, long-term investments complemented by “satellites” […]

Covenants in finance refer to legally binding terms set within a financial contract, typically in loan agreements or bond indentures. They are designed to protect the interests of both lenders and borrowers by stipulating certain conditions or actions that the borrower must adhere to during the term of the financial arrangement. Covenants can be classified […]

In corporate finance, debt is structured in a hierarchy, fundamentally categorized as senior and subordinated debt (aka junior debt or “sub debt”). This hierarchy determines the priority of claims in the event of a company’s bankruptcy or liquidation.   Key Takeaways – Senior vs. Subordinated Debt Priority in Claims and Risk Profile Senior debt has […]

Secured debt uses assets (e.g., car, house) as repayment insurance, offering lower rates.  Unsecured debt trusts your promise alone. This means higher rates but no collateral risk. Key Takeaways – Secured vs. Unsecured Debt Collateral Yes? (e.g., car, house) = Secured, lower rate. No? = Unsecured, higher rate. Secured = Higher chance of being approved […]

Factoring receivables is a financial transaction where businesses sell their accounts receivable (invoices) to a third party (the factor) at a discount. This practice allows businesses to obtain immediate cash, which is beneficial for companies needing to manage their cash flow more effectively.   Key Takeaways – Factoring Receivables Cash now, pay later – Sell […]

In the context of inventory optimization, supply chain management (SCM) refers to the oversight of materials, information, and finances as they move from supplier to manufacturer to wholesaler to retailer and finally to the consumer. Effective SCM directly correlates with inventory optimization. It allows for reduced costs and improved efficiency. This is important for traders […]

Real options are a concept in finance that extends the framework of financial options to investments and projects. This methodology evaluates the flexibility and choices available to management in investment projects. It’s a strategic tool for decision-making under uncertainty.   Key Takeaways – Real Options Real options provide a framework for valuing investment opportunities using […]

The Fisher Separation Theorem, formulated by Irving Fisher, is a fundamental principle in economics and finance. It delineates the relationship between investment decisions and consumption preferences, irrespective of market conditions and personal bias.   Key Takeaways – Fisher Separation Theorem Separates investment decisions from consumption preferences. Asserts that investment choices are driven by profit maximization. […]