Enhance Your Financial Knowledge with Fundamentals of Finance and Wealth Management

As new financial concepts enter our society, it is crucial to understand their worth. For example, is Bitcoin a fad or a genuine contender for legal currency? 

Peer-to-peer or social lending sounds like a friendly way to borrow money or for the consumer to lend to others. However, what are the risks of this new form of financing? The entry of Social Lending introduces readers to this popular new finance platform. As the new sharing economy explodes, this type of collaborative borrowing and lending will continue to expand. 

Finance can be broadly classified into: 

• Investing and Retirement
• Debit and Credit
• Legal
• Economics
• Real Estate
• Consumer related
• Banking
• Insurance

Investing and Retirement                                    
Investing and retirement are intertwined. Young people who start to invest early gain a leg up on retirement. To further clarify and learn about these topics, there are entries on various investment and retirement accounts. 

Basic investing principles are examined in the Asset Allocation, Behavioral Finance, Bonds, Compound Interest/Return, Dividend Income, Inflation-Protected Investments, Stock Market, and Investing entries. Retirement topics dovetail with the investment entries as a sound investing practice leads to a more financially secure retirement. 

The retirement topics address Annuity, Estate Planning, Pension Plans, and Wills and Trusts. There are 77 courses on careervira.com that can teach the A-Z of investing by Datacamp, Udacity, CFI, Elearnmarkets, and QuantInsti. Click here 

Annuity
An annuity is an insurance contract that pays the owner a stream of payments for a fixed term or lifetime in return for an up-front payment or payments. Before a person can receive annuity payments, the annuity must be funded. The money for the annuity may be paid to the insurance or investment company in a lump sum, through regular salary transfers, or in several lump sums. 

The insurer structures the payments so that ultimately, the insurance company pays out less in benefits than it earns in aggregate. The basic types of annuities are immediate and deferred.

• The immediate annuity is the simplest type of annuity. Investors pay a lump sum and receive guaranteed monthly payments for life or a predetermined period
• A deferred annuity has two phases, accumulation, and distribution. Accumulation is the period during which the annuity is funded, frequently through salary transfers

Asset Allocation
Asset allocation is widely considered the first step in investment portfolio management. Investing is a money management strategy to increase the investor’s long-term financial wealth. 

Investors are assumed to want the largest financial return on their funds for the least risk. Asset allocation is designed to smooth out the volatility or risk while maximizing investors’ returns. 

Banking
Banking is the financial activity of protecting and storing capital for individuals and institutions. The bank lends that capital to others for a profit. Depositors earn interest on their deposits, and the banks use the depositors’ funds to make loans to borrowers, who use the funds to buy homes, expand businesses, or for various personal uses. 

Banks profit from the difference between the interest paid on deposits and the interest payments received from borrowers, called the “interest rate spread.” 

Learn about 53+ banking courses by CFI Link or pursue a Full-time programme to understand banking finance from NMIMS facilitated by Imarticus Learning Link. 

Bonds
Bonds are financial instruments issued by a company, municipality, or government to raise capital for their financing needs. Bonds can be seen as loans owed by an issuing entity (bond issuer) to the lenders (bondholders) with a set payment schedule. Bonds can be classified based on maturity, nature of interest payments, issuing entity, and credit characteristics.

Types of Bonds: 

• Treasury bonds
• Municipal bonds
• Corporate bonds

Budget 
A budget is a document that categorizes income received into spending, saving, and investing categories. Individuals, organizations, governments, and corporations use budgets to monitor their income and expenses. The budget creation process is similar for all entities and involves several discrete stages.

Creating a budget or spending plan may be the consumer’s most important money management activity. A budget is the spending plan that integrates the consumer’s income and expenses and earmarks funds for the important spending, saving, and investing categories.

Capital Gains and Losses
Capital gains and capital losses refer to an increase or decrease in the value of a capital asset when compared with its purchase price. A capital asset refers to an investment in a financial asset such as a stock, bond, mutual fund, or other investment vehicles. Real estate is also considered a capital asset.

Cash
Cash is legal tender or an official payment method, which is used to purchase goods and services. Cash frequently includes short-term debt instruments, which can be converted easily and quickly into cash. These include bank certificates of deposit, money market accounts, bank checking and savings accounts, and short-term commercial paper (debt). Paper and electronic checks are other forms of cash.

Certificate of Deposit
A certificate of deposit is a safe investment for the consumer to gain a higher interest payment than from the traditional savings account. These investments are great for targeted expenses. 

Commodities
Investment requires that the excess funds be used to generate more resources or cash flows in the future. Commodities cannot generate any additional value or cash flows in the future; hence, it cannot be considered a true definition of investment. 
Participation in commodities markets is also hazardous. 

The risk comes from two sources: leverage and ease of market manipulations. More and more mutual funds and exchange-traded funds are specialized in the commodity markets.

Consumer Credit/Debit
Consumer debt is defined as borrowing money now to purchase goods or services. The consumer debt is incurred using a credit card or a store payment 105 plan. 

An individual can buy anything with a credit card, such as clothes, electronics, or a dinner out, and incur consumer debt until the balance due on the credit card is repaid. If the charges incurred during the month are not paid in full at the end of the month, the consumer must pay a portion of the total amount due, called a minimum payment.

Insurance 
In business accounting and personal instances, liability means a financial obligation. In insurance terms, liability refers to risk. Usually, liability insurance protects individuals from financial and legal risks. 

A liability insurance policy protects the individual or business from the risk of suit arising from malpractice, injury, or negligence claims. In most cases, this insurance pays for legal costs and financial payouts for which the policyholder is legally responsible.

Accounting and Finance
In business and accounting, margin refers to profit as a percentage of sales generated by a corporation is called profit margin and shows how much of the money is left over after subtracting costs. A larger margin is better and means more significant profit in this situation. 

To be a subject matter expert in Finance, it is essential to give time to the subject and learn practically about all its real-time applications, including newly introduced metrics and the IFRS system. 

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