Napkins – Investing – Napkin Finance

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Risk Tolerance

Appetite for Destruction

Risk tolerance describes how much risk you can (or should) be taking on with your investments. Investing...

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Cash Alternatives

Cash In

Cash alternatives are investment types that you can consider as alternatives to simply holding money in your...

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Active vs. Index Investing

Pick Sides

Active and index investing are two different ways of choosing individual investments. With active investing, investors try...

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Growth vs. Value Investing

Moves Like Buffett

Growth and value investing are two different approaches to investing in stocks. Growth investors aim to invest...

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P/E Ratio

At Any Price

The price-to-earnings ratio (or P/E ratio) is a way to evaluate whether a company’s stock is cheap,...

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Quantitative Easing

Easy Money

Quantitative easing is when the Fed (or another country’s central bank) buys up large amounts of bonds....

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Technical Analysis

Off the Charts

Technical analysis means using stock price charts to try to predict future stock price movements. It involves...

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ESG Investing

Do the Right Thing

ESG investing means investing in companies that do good (or at least don’t actively do harm). With...

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Venture Capital

Nothing Ventured, Nothing Gained

Venture capital (or “VC” for short) is a type of financing for startup companies. Venture capitalists invest...

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Target-Date Funds

Bullseye on Retirement

A target-date fund is an investment fund that’s based on your expected retirement date. These mutual funds...

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Market Capitalization

Size it Up

Market capitalization (or just “market cap”) is a measure of a company’s total value. If you ever...

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Rocky Road

Volatility describes how much an investment bounces around in price. More volatile investments zigzag in price more...

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Valuing a Company

What’s it Worth?

A company’s value is the dollar figure that it might sell for if a person or another...

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Looking Ahead

A futures contract is an agreement to buy a specific investment at an agreed-upon price on an...

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Hard Currency

The foreign exchange, or forex, markets are where investors go to buy and sell currencies. Unlike the...

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(Not So) Real World

An NFT, or non-fungible token, is a code that says you own a unique digital item.

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Asset Classes

Building Blocks

An asset class is a group of similar kinds of investments. It’s a generalization, not a detailed...

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Financial Advisors

Get Some Help

Financial advisors are experts who can provide financial advice and help you manage your money. Some people...

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Asset Allocation

Divide and Conquer

“Asset allocation” is a way of describing what you own in percentage terms. If you’ve got $1,000...

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What Is an ICO?

The Wild West of Finance

An ICO, or Initial Coin Offering, is a way for startups to raise money by inventing and...

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Bank on It

Banks are institutions that take deposits, cash checks, and make loans. They are essentially home bases for...

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Spread Your Bets

Diversification is the practice of dividing your money among lots of different types of investments. It’s the...

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Tales of the Crypto

Cryptocurrency is digital money that can be sent electronically anywhere in the world.

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Move Your Assets

Know how self-help gurus are always talking about “finding the balance” in your personal life? That same...

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The Big Apple

Apple was the first business in history to be valued at $1 trillion—the largest value ever recorded...

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Not So Silky Road

Bitcoin is the world’s first type of digital money, or cryptocurrency. Unlike traditional paper money, Bitcoin only...

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Bull or Bear Market

Into the Wild

Wall Street may be a bit of a rodeo, but there are no literal bulls or bears....

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Compound Interest

Make Bank

  The most powerful force in the universe is compound interest. — Albert Einstein

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Pay Up

Interest is the cost of borrowing money. For a borrower, interest is the price of taking on...

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Break-Even Point

Point Break

A company is at its break-even point when its revenue equals its expenses. It is neither making...

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Crunch the Numbers

The internal rate of return, or IRR, is a measure of an investment’s or a project’s profitability....

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Private Equity

Members Only

Private equity is money invested directly into a private company. Private equity funds pool money from many...

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Financial Statements

State of Affairs

Financial statements are reports a company puts together to measure how it’s doing. Companies create their financial...

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A robo-advisor is an investment management company that uses a computer program instead of a live human...

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Make Coin

Yield is the earnings generated by an investment over a specific period of time, expressed as a...

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Municipal Bonds

One for the Road

A municipal bond, or muni bond, is a type of bond issued by a state or local...

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Profit and Loss (P&L)

The Bottom Line

A profit and loss statement, or income statement, shows the money a company earned and what it...

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Tax Loss Harvesting

Cut Your Losses

Tax loss harvesting is a trading strategy investors can use to try to reduce their taxes. It’s...

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Capital Gains Tax

The Taxman Cometh

If something you own goes up in value and you sell it, then you’ve made a profit....

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Carried Interest

In the Interest Of

Carried interest is a share of a private equity or hedge fund’s profits that is paid to...

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Chain Gang

Blockchain is the recordkeeping technology that serves as the foundation for Bitcoin and some other types of...

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Another Day, Another Dollar

An annual percentage rate (APR) represents the annual cost of borrowing money, including fees. Because the APR...

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The S&P

Make the Market

The Standard & Poor’s 500 Index—also known as the S&P 500, or just the S&P—is an index...

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Lose Your Shirt

Bankruptcy is the legal process for consumers or businesses to get help with their debt. Bankruptcy starts...

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Show Me the Money

A dividend is a portion of a company’s profits that is paid to its shareholders in the...

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Coming Attractions

An option is the right, but not obligation, to buy or sell an investment at a specific...

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Bang for the Buck

Earnings per share (EPS) is a financial metric that helps investors evaluate a company’s profitability. It’s calculated...

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Index Funds

Copy That

An index fund is a professionally managed collection of stocks, bonds, or other investments that tries to...

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Fixed vs. Variable Costs

At All Costs

Fixed and variable costs are types of expenses that businesses pay in order to operate.

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Convertible Note

Take Note

A convertible note is a type of short-term loan for a business. However, instead of being repaid...

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Own It

Equity is ownership. You can have equity—or an ownership stake—in any asset, meaning anything of value.

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Cashing Out

Liquidity refers to how easily you can sell an investment or asset at a fair price.

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Many Happy Returns

Return on investment, or ROI, is a ratio for measuring the profitability of an investment. It puts...

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Opening Bell

An IPO, or initial public offering, is when a company’s shares start trading on a stock exchange...

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Mutual Funds

Join Forces

A mutual fund is a professionally managed fund that pools lots of investors’ money in order to...

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Interest Rate

At Any Rate

Interest is what a lender charges you to borrow money. It is usually expressed as a percentage...

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Balance Sheet

Cook the Books

A balance sheet is a snapshot of financial health, showing what a company or person owns and...

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Risk vs. Reward

Double Down

All investments come with risk. With financial investments, risk is usually tied to reward. That means investments...

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Bonds, James Bonds

Bonds are essentially IOUs. When you buy a bond, you become a lender to whatever entity issued...

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Rule of 72

Crunch the Numbers

The rule of 72 is an easy, back-of-the-napkin way to figure out how long it will take...

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Back to Basics

Commodities are raw materials. They are the inputs, or ingredients, that are used to make most of...

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Hedge Funds

Hedge Your Bets

Hedge funds are investment funds that pool many investors’ money and then hire one or more professional...

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How You Slice It

EBITDA (pronounced “ee-bit-tah”) stands for “earnings before interest, taxes, depreciation, and amortization.” It’s one measure of a...

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Profit Margin

Margin of Error

A company’s profit margin measures the portion of its total sales that it gets to keep as...

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Investing in Gold

Worth its Weight

Gold is a precious metal that’s used in everything from jewelry and artwork to industrial goods and...

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The Stock Market

Greed Is Good

The stock market is the collection of physical and electronic markets where buyers and sellers come together...

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On Principal

Certificates of Deposit, or CDs, are low-risk investments that pay interest. You can think of them as...

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Nest Egg

An annuity is a series of regular payments made over a set period of time. Annuities can...

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Take Stock

A real estate investment trust, or REIT, is a company that owns, manages, or finances real estate....

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Short Selling

The Big Short

Short selling is a way to bet that a stock will fall in price. Normally, an investor...

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The Fed

Making a Federal Case

The Fed is the central bank of the U.S. Its overarching role is to make sure that...

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Piece of the Pie

Investing is putting your money to work in the hopes of earning a return. You probably already...

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Exchange-traded funds (ETFs) are investment vehicles similar to mutual funds. Like mutual funds, ETFs are professionally managed...

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Buy Buy Buy

Stocks are pieces of ownership in companies. If you bought one stock of, say, Amazon, and Amazon...

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Wear and Tear

Depreciation is a physical asset’s loss of value over time. Just as your once new car is...

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Market Maker

“Securities” is the term used to describe stocks, bonds, mutual funds, and other types of financial investments....

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Real Estate

Location, Location, Location

Buying real estate—whether on your own or by pooling your resources with other investors—is one possible way...

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