We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is Finance Theory?

Jessica Ellis
By
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Finance theory is a broad field of both speculation and mathematical measurements used to determine investing strategies and monetary value estimates. Theories of finance are also used to create fundraising and capital creation plans and manage financial risk. Each area of finance may have dozens of associated concepts of finance theory; understanding all of them could take a lifetime of study.

Some types of finance theory help determine concrete items such as how much money will be paid over time for a mortgage or car loan. These theories measure the initial investment, the amount of payments, and the impact of interest to help determine the actual value of a loan. Some finance theories take this analysis a step farther, factoring in issues such as probable inflation through the use of algorithms and economic forecasting. Measuring the value of money over time can be quite important to investors, as it allows a long-term perspective on a decision made in the present.

Most of finance theory, however, does not deal in absolutes. Some financial experts will freely admit that investing theories and market patterns may have a large component of luck and chance that all of the theorizing in the world cannot remove completely. Just as with gambling, strategies, practice and theories may help maximize chances of profit, but cannot guarantee a win. For that reason, financial experts often encourage investors to keep educating themselves in new finance theories and concepts.

Some finance theory revolves around the management of a business. Factors that go into creating a finance theory or strategy for a company might include their current profit margin, debt-to-asset ratio, market forecast, and the possibility of incorporation. Looking at all of these factors can help a business owner or financial manager create a feasible plan for the future by balancing the possibility of risk against the possibility of returns.

Personal finance theory usually revolves around creating viable investing strategies. One of the most popular finance theories is known as modern portfolio theory, or MPT, and suggests that one of the most successful ways to achieve reliable returns is by diversifying investments. By spreading out stocks and shares across multiple markets, an investor may lower the risk of a serious loss due to a crash in one particular market.

Comprehending many finance theories takes grounding in both mathematics and the financial market. There are many books and websites that help explain the basics of particular finance theory, or give an overview of the most popular theories in a field of finance. Finance theory is often a popular topic for seminars or community college courses, which can provide an excellent starting place for new investors.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Jessica Ellis
By Jessica Ellis
With a B.A. in theater from UCLA and a graduate degree in screenwriting from the American Film Institute, Jessica Ellis brings a unique perspective to her work as a writer for SmartCapitalMind. While passionate about drama and film, Jessica enjoys learning and writing about a wide range of topics, creating content that is both informative and engaging for readers.
Discussion Comments
By anon946627 — On Apr 21, 2014

This is why finance people are idiots. This stuff isn't considered theory at all. A real theory is an idea that has been validated through testing, not ideas that have failed testing over and over again.

Jessica Ellis
Jessica Ellis
With a B.A. in theater from UCLA and a graduate degree in screenwriting from the American Film Institute, Jessica Ellis...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.