Investors can manage their overall portfolio risk by allocating their funds across a diversified range of asset classes. Usually, investors can mitigate most of these risks through planning. Sometimes, however, some risks may occur which are beyond prediction. These risks may cause severe implications for investors and adversely affect their …

The term embedded option refers to an option included in financial instruments that provides the issuer or holder with a right to perform some actions at a future time. However, this right does not obligate the issuer or holder to do so.  Embedded options can be a part of financial …

Smart beta and factor investing are two terms often used interchangeably. These are both investing strategies that investors may use. However, there are various factors that differentiate both these investing strategies. Before understanding how they differ, it is critical to look at what each of these is. What is Smart …

A swap is a financial derivative that allows two parties to exchange their financial instruments or cash flows. These are highly crucial for investors, particularly for hedging. There are various types of swaps that investors can acquire. One of these includes total return swaps. Before understanding what these are, it …

There has been an increased demand for businesses to conduct their operations in a socially responsible way. This demand comes due to an increased drive towards sustainability and considering the needs of society as a whole. The idea of socially responsible operations has also translated into the investing world through …

An exchange-traded fund (ETF) is a type of investment that provides investors with a diversified investment. ETFs track a specific index, industry, or other assets. Like other investments, investors can invest in these funds in the market. Usually, ETFs include a variety of underlying investments, such as stocks, bonds, commodities, …

Leverage represents the use of borrowed capital to fund activities. For investors, it involves using loans or other borrowed funds to invest in securities. These borrowed funds come with some charges, usually in the form of interest payments. For investors, the returns they get from their investments must exceed these …

A loan is a transaction between two parties, a lender and a borrower. The lender is the party offering a resource in exchange for an incentive. This transaction may also include collateral, which provides the lender with higher security. Usually, loan transactions involve paying a monetary amount. However, investors also …

Futures contracts are agreements that allow investors to deal in specific commodity assets or securities. With these contracts, investors can fix their future prices for a particular time in the future. Futures contracts allow investors to hedge against various risks associated with price changes. With these contracts, investors undertake an …

Hedging is a technique that investors use to mitigate any specific risks that they face with investments. Usually, it includes investing in derivatives to counterbalance the adverse impacts of any risks. There are many types of hedge instruments that investors may use for that purpose. For example, investors can use …