Financing Your Investments
Finance is a broad term covering several things about the study, generation, and management of funds and other financial assets. All things being equal, individuals who are good at managing money will be better equipped to deal with their finances than those who are not so adept. Finance can also be a bit confusing, but if you learn the basics and apply them correctly, you’ll have no trouble getting a handle on your personal finances. So what exactly does finance do?
Theories of finance are used all the time in the stock market, in the real estate industry, and any other market that involve lending and borrowing money. The field is wide open because there are just too many possible theories out there. Some of the more popular ones include; balance of risk, capital budgeting, cost of capital, entrepreneurism, ownership, portfolio diversification, financial institutions, consumer credit, financial markets, monetary policy, Pigouvian theories, and the theory of rent seeking. All of these theories can be traced back to at least one famous thinker, though none of them can actually be proven right or wrong. They are all theories that can help people come up with better ways of handling their money.
Finance can be broken down into two major areas: private and public finance. Private finance deals with investments that a person makes for his/her self. A common example of this would be your own home. Public finance refers to governmental organizations, banks, corporations, or other large financial groups creating loans for the purposes of investing in different investments and sectors.
Public finance is just one part of the entire subject of economics, but it is an incredibly important aspect of modern day business and financial services. Public finance deals with the flow of resources in and out of businesses and financial institutions. Banks for instance, are required by law to lend to businesses. However, not all banks are created equal. A bank that fails to lend its loans to businesses is guilty of practicing public finance. This is why it is extremely important for you as the consumer or business owner to understand all of the specifics of how any given bank determines which loans they will make or which ones they will lend.
Other popular theories in finance are those which deal with the stock market and its fluctuations. As strange as it may sound, there is actually a science to predicting market fluctuations and trends. These are called economic theories and these theories are used by financial investors and business professionals to make good money by trading in the stock market. There are hundreds of different stock market theories, ranging from technical analysis to the “buy and hold” theory.
If you want to learn more about finance, then you should definitely look into some of the more advanced concepts such as asset valuation, financial engineering, portfolio theory, and of course theory of bank lending. All of these theories and more are readily available to those who are willing to take the time to learn. They are concepts that will help you understand your investments and your money much better. When it comes to finance and investing, there are a lot of different theories out there to learn about. No matter what you decide to do with your money, there will always be a new theory or concept to try out.
