Concepts of Finance 🧠

Concepts of Finance provides simplified explanations of financial concepts like private equity, credit scores, stock buybacks, mutual funds, and derivatives. It covers investment strategies and tools, highlighting their functions, risks, and benefits. The Substack emphasizes practical understanding, aiding readers in making informed financial decisions across various asset types and economic indicators.

Private Equity Credit Scores Stock Buybacks Investment Strategies Mutual Funds Precious Metals Financial Metrics Dividends Alternative Assets Venture Capital Derivatives Real Estate Investment Economic Indicators Stock Market Commodities Net Worth Hedge Funds Personal Finance Exchange-Traded Funds (ETFs) Inflation Financial Leverage

The hottest Substack posts of Concepts of Finance 🧠

And their main takeaways

Investment Portfolio Strategies - A Beginner's Guide (Part 1)

379 implied HN points • 26 Sep 24
💰 Finance Investment Strategies Risk management Portfolio Management Financial planning Market Analysis
  1. Having an investment strategy is important because it helps you reach your financial goals. It guides your decisions based on your goals, how much risk you're comfortable with, and your future needs.
  2. Different investment strategies exist, like the 60/40 portfolio which mixes stocks and bonds, or the All Weather portfolio which is built for various economic conditions. Each has its pros and cons depending on your investment style.
  3. Before investing, ask yourself key questions about your savings, future expenses, and how much risk you can handle. This will help you create a strategy that fits your personal financial situation.

Credit Scores Explained

419 implied HN points • 30 May 24
💰 Finance Credit Scores Debt Management Financial tools
  1. Your credit score is a quick way for companies to see how likely you are to pay back a loan. Better scores mean you’re seen as a lower risk.
  2. Paying off loans can sometimes lower your credit score because it can reduce your credit mix. But over time, responsible spending will help your score go back up.
  3. There are many myths about credit scores, like thinking you only have one or that you must carry a balance to improve your score. In reality, it's better to pay off debt completely.

Market Cap vs. Equal Weighted Index Funds - Explained

239 implied HN points • 20 Jun 24
💰 Finance Investing Index funds Market Analysis Risk management Portfolio strategy
  1. Market-cap weighted index funds invest more in larger companies, which can mean more stability but also more risk if those big companies do poorly.
  2. Equal-weighted index funds treat all companies the same, offering more diversification and potential for growth, but they can be more volatile and expensive to manage.
  3. Choosing between these two types of funds depends on your comfort with risk, your investment goals, and how you think the market will perform in the future.

Stock Buybacks Explained

399 implied HN points • 04 Apr 24
💰 Finance Investing Market Trends Corporate Finance Economic Policy Stock Analysis
  1. Stock buybacks happen when a company uses its extra cash to buy back its own shares. This can make the remaining shares more valuable by increasing earnings per share.
  2. Buybacks can be good for investors, as they might boost stock prices without having to pay taxes on dividends right away. However, critics say companies should focus on growth and investment instead.
  3. There are downsides to buybacks too. Sometimes, management might use them to inflate their bonuses, or they might buy back shares at the wrong time, leading to poor long-term results.

Precious metals investing - a beginner's guide

319 implied HN points • 11 Apr 24
💰 Finance Investing Commodities Market Trends Wealth Management
  1. Precious metals like gold and silver are valuable because they can hold their worth over time. People often invest in them as a safe way to protect against things like inflation and market changes.
  2. There are several easy ways to invest in precious metals, including buying physical bullion, using storage services, or buying shares in metal-focused ETFs and companies.
  3. There's a debate about whether gold or Bitcoin is a better store of value. Gold is physical and trusted by central banks, while Bitcoin is a digital asset with the potential for growth.
Get a weekly roundup of the best Substack posts, by hacker news affinity:

What Is A Stock Split and What Causes It?

239 implied HN points • 02 May 24
💰 Finance Investing Stock Markets Financial Education Market Trends
  1. A stock split means one expensive share is split into multiple cheaper shares, which keeps the total value the same. It makes shares more affordable for buyers, but existing shareholders get more shares automatically.
  2. Companies often do stock splits to appeal to smaller investors when prices get too high. Lower prices can boost demand because people see it as a better deal, even though the company's overall value doesn't change.
  3. A reverse stock split combines shares to increase their price and can be seen negatively by investors. It often suggests a company is struggling, as they might be trying to inflate prices without real improvements.

What is a Derivative?

279 implied HN points • 11 Feb 24
💰 Finance Investing Risk management Market Analysis Financial Instruments Trading Strategies
  1. Derivatives are financial tools that get their value from something else, like stocks or commodities. They don't have value on their own; their worth depends on the performance of the underlying asset.
  2. Derivatives exist to help with risk management, leverage potential gains, and allow speculation on price movements. They can protect investments or amplify losses based on how they're used.
  3. There are different types of derivatives, including futures, options, and swaps. Each has its own way of working, but all can increase financial risk if not used carefully.

What does a Commodity Trader do?

199 implied HN points • 07 Mar 24
💰 Finance Trading Commodities Market Analysis Risk management Investment Strategies
  1. Commodity traders buy and sell things like oil, gold, and wheat. They try to predict price changes based on global events to make profits.
  2. Their work impacts everyday prices for many products we use, helping producers manage risks and securing stable prices for the future.
  3. Traders pay attention to weather, politics, and market feelings to make informed decisions, using tools like futures contracts and diversification to manage risks.

Private Equity Explained

939 implied HN points • 13 Apr 23
💰 Finance Investments Private Equity Funds Capital Markets Economic Impact
  1. Private equity firms invest in existing businesses to help them grow and become more profitable, sharing in the profits as a result. It's like giving your friend's business a boost with your investment.
  2. These firms raise money from wealthy individuals, pension funds, charities, and banks to create a fund for their investments. This means they pool money from different sources to make bigger investments.
  3. Private equity can create jobs and drive economic growth, but it also has a reputation for being tough on company management and workers during operational changes. Understanding its impact helps you see how it can touch everyone's life.

What is a Real Estate Investment Trust (REIT)?

279 implied HN points • 28 Nov 23
💰 Finance Investing Real Estate Dividends Market Analysis Portfolio Management
  1. A Real Estate Investment Trust (REIT) lets you invest in real estate without actually owning properties. You buy shares in a company that owns and manages real estate, earning money from the profits.
  2. REITs generally pay high dividends because they are required by law to return 90% of their taxable income to shareholders. This makes them appealing for income-focused investors.
  3. Investing in REITs gives you access to commercial real estate, offers liquidity like stocks, and can diversify your investment portfolio without the hassle of property management.

What is a dividend?

279 implied HN points • 20 Oct 23
💰 Finance Investing Dividends Returns Stock Market
  1. Dividends are payments companies make to shareholders from their profits. If you own shares in a company that pays dividends, you can earn money regularly just for holding those shares.
  2. Companies pay dividends for various reasons, such as rewarding shareholders, attracting long-term investors, and boosting their stock value. A steady dividend can show that a company is financially healthy.
  3. Investing in dividends can provide income, but the returns can be limited unless you own a lot of stock. It's important to choose companies wisely and consider whether you prioritizing dividends or stock performance.

What is “GDP” and why is it such an important economic indicator?

259 implied HN points • 07 Sep 23
💰 Finance Economic Indicators Investment Analysis
  1. GDP stands for Gross Domestic Product, and it adds up the value of everything produced in a country over a specific time, usually a year. A higher GDP means a country produces more goods and services.
  2. There are three main ways to calculate GDP: by production, income, or expenditure. The most common method is the expenditure approach, which measures total spending on goods and services.
  3. GDP has limitations since it doesn’t account for unpaid work or environmental factors. It also only measures cash transactions, so important activities that don't involve money are excluded.

What Exactly Is Venture Capital?

279 implied HN points • 15 Aug 23
💰 Finance Investment Startups Private Equity Risk management Economic Trends
  1. Venture capital is a type of funding provided to early-stage companies that have high growth potential. It's different from private equity, which usually invests in more mature companies.
  2. Many startups need venture capital to expand, but it's not the main way new businesses get funding. A lot of startups rely on personal savings or small loans instead.
  3. There are common myths about venture capitalists, such as their wealth or ability to innovate. In reality, not all VCs are rich and many investments don't yield huge returns.

Index funds: everything you need to know

199 implied HN points • 27 Oct 23
💰 Finance Investing Market Analysis Portfolio Management Financial Education Economics
  1. Index funds are a way to invest in a group of stocks without having to pick individual ones. They are designed to follow a certain market index, making them a good choice for beginners.
  2. Investing in index funds usually costs less than actively managed funds, and they are less volatile over time. This means they can offer a safer investment option with decent returns.
  3. Index funds can be bought easily through brokerage accounts, and they often have low barriers to entry. This makes them accessible for everyday investors looking to grow their money.

What is a Mutual Fund?

339 implied HN points • 03 May 23
💰 Finance Investing Mutual Funds Portfolio Management Financial Education Economic Trends
  1. A mutual fund combines money from many people to invest in things like stocks and bonds. This way, even if one investment doesn't do well, everyone shares the impact, reducing risk.
  2. There are different types of mutual funds, like equity funds for stocks and bond funds for fixed income. Each type focuses on different investments to suit various goals.
  3. People like mutual funds because they simplify investing. Instead of picking individual stocks, investors can buy a piece of many investments at once and still have the potential for good returns.

Alternative Assets Explained

279 implied HN points • 22 Jun 23
💰 Finance Investing Assets Financial Education Market Trends Wealth Management
  1. Alternative assets are investments that aren't traditional stocks or bonds. They can include things like real estate, collectibles, and even parking lots, giving you many options to consider.
  2. Many people think only the rich can invest in alternative assets, but that's not true. There are plenty of investment opportunities available for regular investors too.
  3. Investing in alternative assets can be risky, but it also offers a chance to diversify and potentially earn good returns. It's important to research and understand what you're getting into.

How to Analyze an Income Statement

219 implied HN points • 06 Jul 23
💰 Finance Accounting Investing Corporate Finance Financial Analysis
  1. An income statement shows how well a company is doing by detailing its revenue, expenses, and net income over a period. It's important because it helps you understand if a company is making a profit or losing money.
  2. Gross profit margin is a key metric to analyze. It reveals whether the company is profitable on the products it sells, and a stable or rising margin is a good sign.
  3. When reading an income statement, look for trends over time, check revenue directions, and ensure expense categories make sense. This can highlight the company's overall health and performance.

IPOs Explained

239 implied HN points • 08 Jun 23
💰 Finance Investing Market Trends Company Valuation Stock Options Economic Impact
  1. An IPO lets a private company sell shares to the public for the first time, raising capital to grow or pay off debt.
  2. Companies go public for reasons like gaining more visibility, providing liquidity for existing shareholders, and offering stock options to employees.
  3. IPOs can fail if investor interest is low, market conditions are bad, or the company's performance declines after going public.

What is EBITDA?

299 implied HN points • 16 Mar 23
💰 Finance Corporate Finance Investment Analysis Financial Metrics Cash Flow
  1. EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation. It's a way to see how much cash a company makes from its regular activities, without debt and accounting effects.
  2. To calculate EBITDA, you add net income, taxes, interest, depreciation, and amortisation. This helps give a clearer picture of a company's financial health.
  3. Companies like EBITDA because it shows how well they're doing without the impact of financing and other expenses. It's a key metric when looking at profits or selling the business.

Disinflation vs Deflation Explained

159 implied HN points • 01 Aug 23
💰 Finance Economic Policy Inflation Deflation Interest Rates Investment Strategies
  1. Disinflation means prices are still going up, but not as fast as before. It's a slowdown in inflation, which can be seen as a good sign for the economy.
  2. Deflation is when prices actually fall, which can seem good for prices but often leads to negative effects like less spending and economic slowdown.
  3. A balanced approach is crucial. Some inflation is often healthy for the economy because it encourages people to spend and invest, avoiding the risks linked to both disinflation and deflation.

Hedge Funds - A Beginner's Guide

199 implied HN points • 01 Jun 23
💰 Finance Investing Wealth Management Financial Markets Economic strategy Market Analysis
  1. Hedge funds are private investment funds managed by professionals who use different strategies to earn high returns for wealthy investors. They're not open to everyone, and there's less regulation.
  2. Hedge funds can use strategies like long and short selling to profit from market changes. Long selling means buying with the hope the price will go up, while short selling means selling borrowed assets to profit if prices drop.
  3. Many people dislike hedge fund managers due to a lack of transparency and the perception that they profit during tough times for others. Plus, it's tough for regular folks to invest in hedge funds as they often have high minimum requirements.

Depreciation explained

219 implied HN points • 30 Mar 23
💰 Finance Personal Finance Financial Education Investment Strategies Asset management
  1. Depreciation is when things lose their value over time, like cars and electronics. This impacts how much you could sell them for later.
  2. For businesses, depreciation helps account for the decrease in value of their assets, matching costs with how much money those assets help make over time.
  3. Knowing how quickly something depreciates can guide your buying decisions. Some items, like luxury goods, hold their value better than others.

Your payslip - explained

179 implied HN points • 24 May 23
💰 Finance Personal Finance Income Taxes Payroll Financial Education
  1. Many people struggle to understand their payslip, which is a common document. Knowing how to read it can reduce anxiety about money matters.
  2. A payslip contains important information like your gross pay, deductions, and net pay. Gross pay is what you earn before deductions, and net pay is what you take home.
  3. Payslips often include abbreviation codes for pay and deductions. It's helpful to know these terms to fully understand your earnings and any deductions from your pay.

What is a bond?

219 implied HN points • 23 Mar 23
💰 Finance Bonds Investments Market Analysis Financial Education Risk Assessment
  1. A bond is like an IOU. When you buy one, you're lending money to a government or company for interest over time.
  2. There are different types of bonds, like government bonds for public projects and corporate bonds for business funding.
  3. Bonds have important terms like issuer, coupon rate, and maturity date, which help determine how they work and what investors earn.

What is an ETF?

179 implied HN points • 18 May 23
💰 Finance Investments Markets ETFs Mutual Funds Investment Strategies
  1. An ETF is a collection of different investments that you can buy as one package. This lets you invest in many assets like stocks and bonds without picking each one separately.
  2. ETFs are traded throughout the day like stocks, while mutual funds are only traded at the end of the day. This makes ETFs more flexible for buying and selling.
  3. ETFs usually have lower costs than mutual funds because they are passively managed. They also show their holdings daily, making it easier to know what you're investing in.

What is financial leverage?

139 implied HN points • 13 Jul 23
💰 Finance Investing Credit Debt Risk management Market Analysis
  1. Financial leverage is when you borrow money to invest, potentially increasing both your profits and risks. It's like using a loan to buy a house, where you hope the value rises higher than what you owe.
  2. Different people and companies use leverage for various reasons, like individuals buying homes, companies expanding operations, or investors trying to make bigger profits in the stock market. But with the chance of higher gains comes the risk of bigger losses.
  3. The financial leverage ratio helps assess how much debt a company uses compared to its own money. A high ratio can mean a company is at risk if it can't pay back its debts, while a low ratio might suggest it's in a safer position.

What is a stock option?

219 implied HN points • 23 Feb 23
💰 Finance Investing Markets Economics Stock Trading Personal Finance
  1. A stock option is a contract that lets you buy or sell a company's shares at a set price for a certain time. It's like having the choice to buy a piece of the company later, not right away.
  2. Vesting means you have to wait for a certain period before you can use your stock options. It helps make sure employees stay with the company and earn their reward over time.
  3. There are different terms for stock options like 'strike price' (the purchase price) and 'expiration date' (when you have to use the option by), which can seem confusing but are important to understand.

Net worth: what is it and how to calculate it

199 implied HN points • 09 Mar 23
💰 Finance Personal Finance Wealth Management Financial planning Investment Strategies
  1. Net worth is the total value of what you own minus what you owe. It's like seeing how much money you have if you sold everything and paid off your bills.
  2. Calculating your net worth helps you understand your financial situation. It can show if you're actually doing well or if debt is holding you back.
  3. Regularly checking your net worth can help you track your financial progress. You want it to grow over time as you save and earn more money.

Alternative Investments #4 - Farmland

99 implied HN points • 09 Aug 23
💰 Finance Investing Assets Markets Wealth Economics
  1. Investing in farmland can be done in many ways, not just by owning a farm. There are various options available for those who want to invest in this stable asset.
  2. Farmland offers a unique opportunity because it has the potential for solid returns and can be less volatile compared to other investments.
  3. While investing in farmland has its benefits, there are also risks involved that investors should be aware of before getting started.

Inflation - what's it all about?

159 implied HN points • 10 Feb 23
💰 Finance Economics Investments Monetary Policy Financial Literacy
  1. Inflation means prices are going up, which affects how much you can buy with your money. This can make it harder to afford everyday things like food and housing.
  2. The consumer price index (CPI) is used to measure inflation by looking at the average cost of common items. Experts track how these prices change over time to understand inflation rates.
  3. Sometimes inflation can be good for the economy because it shows increased demand for goods. However, if wages don't keep up with rising prices, it can create financial strain for many people.

Alternative Investment Guide #1 - Art

99 implied HN points • 25 Jun 23
💰 Finance Investing Assets Market Analysis Risk management Valuation
  1. Art investing can be a lucrative opportunity, with some estimates showing returns of around 9% to 14%.
  2. The art market is large and valued at over $1.5 trillion, but it can be tricky for newcomers due to its complexity and the influence of wealthy insiders.
  3. There are more ways than ever to start investing in art, including art funds and fractional ownership, making it accessible for beginners.

Alternative Asset Guide #2 - Ecommerce Businesses

79 implied HN points • 05 Jul 23
💼 Business Ecommerce Investing Finance Market Trends Entrepreneurship
  1. Ecommerce is a growing investment opportunity with lower costs than traditional stores. It's becoming popular because it can be more profitable and easier to manage.
  2. Buying an existing ecommerce business can be a smart move for investors. Some stories show people making huge profits with minimal work after buying established sites.
  3. When looking to invest in ecommerce, be cautious and aware of potential red flags. Research is important to find a good deal while avoiding pitfalls.

Capital Gains Tax Explained

119 implied HN points • 02 Mar 23
💰 Finance Taxes Investments Real Estate Stock Market Financial planning
  1. Capital gains tax is what you pay when you sell an asset, like stocks or property, for more than you bought it. If you make a profit, that profit is subject to tax.
  2. There is an annual allowance for capital gains tax, meaning you can earn a certain amount from selling assets before you have to pay any tax on it. This allowance can vary by country and type of asset.
  3. There are different tax rates for short-term and long-term capital gains. Long-term gains are usually taxed at lower rates if you've held the asset for more than a year.

How to read a stock chart

119 implied HN points • 14 Feb 23
💰 Finance Investing Stock Market Financial Analysis Market Trends Equities
  1. Stock charts show how a company's stock performs over time. You can see if the price is going up, down, or staying the same.
  2. Important parts of a stock chart are the price, high/low for the day, and market cap. These help you understand how the stock is doing right now and in the past.
  3. You can set different timeframes to see how a stock has performed over days or even a year. This helps you get a better picture of its trends.

Fundamentals: compound interest explained

119 implied HN points • 13 Feb 23
💰 Finance Investing Savings Banking Personal Finance
  1. Compound interest lets you earn interest on both your original savings and the interest you've already earned. It's like a snowball getting bigger as it rolls down a hill.
  2. The longer you keep money in a compound interest account, the more you'll earn. This means that starting early can lead to much bigger savings over time.
  3. You can find compound interest rates from banks, credit unions, or online calculators. Knowing these rates can help you make better decisions about saving and investing.

💬 Dom Wells: Lessons on how to acquire a digital business

59 implied HN points • 26 Jul 23
💼 Business Business Models Investing Entrepreneurship Finance Digital marketing
  1. When buying a digital business, you need to be careful of scammers. Always verify financial information and ensure the business is truly what it claims to be.
  2. Focus on finding good businesses rather than thinking you can easily flip a struggling one. It's better to invest in a solid company with growth potential.
  3. Successful digital business owners are curious, adaptable, and able to learn on the job. It's important to be able to delegate tasks and stay committed to the process.

Alternative Investment Guide #3 - Equity Crowdfunding

59 implied HN points • 25 Jul 23
💰 Finance Investing Crowdfunding Equity Risk management Startups
  1. Equity crowdfunding lets everyday people invest in startups by buying shares. This means you can own a small part of a new company, hoping it grows in value over time.
  2. Investors can make money through equity ownership, dividends, or selling their shares later if the company does well. However, there's always a risk of losing your investment since many startups fail.
  3. Before investing, it's important to research the company and its team, as well as understand the risks involved. Doing your homework can help you find promising investments.

How to Assess a Job Offer with Equity

1 HN point • 12 Nov 23
💰 Finance Equity Stock Options Negotiation Investment
  1. Check the company's stage and investors to gauge equity value. Knowing if it's early stage or established can help you understand what your equity might really be worth.
  2. Understand the type of equity you're being offered, whether it’s stock options or RSUs. Each type has different rules and tax implications, so it's important to know what you're getting.
  3. Don't hesitate to negotiate your offer. Many people accept the first offer they get, but it's usually possible to get a better deal, especially for equity.