Investments II: Lessons and Applications for Investors from Coursera

In this course, you will start by reviewing the fundamentals of investments, including the trading off of return and risk when forming a portfolio, asset pricing models such as the Capital Asset Pricing Model (CAPM) and the 3-Factor Model, and the efficient market hypothesis. You will be introduced to the two components of stock returns – dividends and capital gains – and will learn how each are taxed and the incentives provided to investors from a realization-based capital gains tax. You will examine the investment decisions (and behavioral biases) of participants in defined-contribution (DC) pension plans like 401(k) plans in the U.S. and will learn about the evidence regarding the performance of individual investors in their stock portfolios. The course concludes by discussing the evidence regarding the performance of actively-managed mutual funds. You will learn about the fees charged to investors by mutual funds and the evidence regarding the relation between fees charged and fund performance. Segments of the portfolios of mutual funds that may be more likely to outperform and examples of strategies designed to “earn alpha” will also be introduced.

Learners are welcome to take this course even if they have not completed "Investments I: Fundamentals of Performance Evaluation," as the first module contain a review of investment fundamentals and regression analysis to get everyone up to speed. Also, the course contains several innovative features, including creative out-of-the-studio introductions followed by quick-hitting "Module in 60" countdowns that highlight what will be covered in each module, four "Faculty Focus" interview episodes with leading professors in finance, and a summary of each module done with the help of animations!

The over-arching goals of this course are to provide a review of the fundamentals of investments and then assess the historical performance of several groups of investors, with an emphasis on research findings with clear real-world applications. Specifically, upon successful completion of this course, you will be able to:

• Interpret and use the CAPM and the 3-Factor Model to evaluate the performance of investments

• Compare returns in the form of dividends and capital gains and their tax consequences

• Describe evidence regarding the performance of individuals’ stock investments

• Understand key behavioral biases of investors and their effects on financial decisions

• Describe evidence regarding the performance of actively-managed mutual funds

• Evaluate strategies designed to “earn alpha”

This course is part of the iMBA offered by the University of Illinois, a flexible, fully-accredited online MBA at an incredibly competitive price. For more information, please see the Resource page in this course and onlinemba.illinois.edu.

What's inside

Syllabus

Course Orientation

You will become familiar with the course, your classmates, and our learning environment.

Module 1: Fundamentals and Composition of Returns

In Module 1, we will briefly review the fundamentals of investments, including the trading off of return and risk when forming a portfolio, asset pricing models such as the Capital Asset Pricing Model (CAPM) and the 3-Factor Model, and the efficient market hypothesis. We will also discuss the two components of stock returns – dividends (cash received) and capital gains (changes in price since purchase).

Module 2: Investment Decisions in DC Pension Plans

In Module 2, we discuss the investment decisions of participants in defined-contribution (DC) pension plans like 401(k) plans in the U.S. Not falling prey to common behavioral biases is key to sound financial decision-making in these retirement plans, so we will discuss common behavioral biases of DC pension plan participants.

Module 3: Performance of Individual Investors

In Module 3, we will learn about the evidence regarding the performance of individual investors in their stock portfolios. A few key behavioral biases that affect many individuals will be highlighted, and the potential information embedded in some parts of individual investors’ stock portfolios will be discussed.

Module 4: Performance of Mutual Funds and Search for Alpha

In Module 4, we will learn about the evidence regarding the performance of actively-managed mutual funds. We will also discuss a few examples of portfolio strategies designed to “earn alpha” (i.e., yield positive risk-adjusted returns).

Course Conclusion

It's now time to say goodbye to the Investments II course! Key takeaways from the course are reviewed. Don't forget to answer the survey question regarding how was Scott's sequel that is located at the end of the Conclusion to Investments II: Lessons and Applications for Investors!

Good to know

Know what's good

, what to watch for

, and possible dealbreakers

Establishes a foundation in investment principles, making it suitable for learners with no prior knowledge in the field

Features real-world case studies and practical examples to enhance understanding

Covers advanced topics like behavioral biases and alpha-earning strategies, appealing to intermediate investors

Taught by experts from the University of Illinois' Gies College of Business, known for its reputation in finance

Part of the iMBA offered by the University of Illinois, providing credibility and a potential pathway to further education

May not be suitable for complete beginners as it assumes some familiarity with investment concepts

Reviews summary

Informative and engaging course on investments

According to students, Investments II: Lessons and Applications for Investors is an informative and engaging course that covers a great deal of material, including behavioral finance, mutual funds, and stock market analysis. Professor Scott Weisbenner is praised for his teaching style and sense of humor, and students appreciate the real-life examples and research papers that he incorporates into his lectures. While some students find the videos to be too long, overall, the course is well-received and highly recommended for anyone interested in learning more about investing.

Professor Weisbenner engages students and makes learning fun.

"Professor Scott Weisbenner is really awersome!"

"Great sequel to the Investment I course, and dives into a lot of interesting finance research."

"Professor Scott's sympathy goes a long way in convincing us to change the way we should invest our financial resources."

Excellent course content.

"This course helped me a lot as a retail investor."

"it was an excellent course. Professor Scott Weisbenner has a unique and an interactive style of teaching."

"This course was a great balancing fun part with real and serious knowledge."

Some students find the videos to be too long.

"Great course, great teacher!"

"Very good, just too long."

"I decided to give this course the maximum rating because the effort and the quality of the content was so well done."

Activities

Be better prepared before your course. Deepen your understanding during and after it. Supplement your coursework and achieve mastery of the topics covered in Investments II: Lessons and Applications for Investors with these activities:

Review: Malkiel's A Random Walk Down Wall Street

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Read Malkiel's classic book to gain insights into the history and behavior of the stock market.

View A Random Walk Down Wall Street: The Best... on Amazon

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Read the book.
Take notes on the key concepts.
Summarize the book in your own words.

Refresher: Capital Asset Pricing Model

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Review the Capital Asset Pricing Model to refresh your understanding of the relationship between risk and return.

Browse courses on Capital Asset Pricing Model

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Read the notes from your previous finance course on the CAPM.
Watch a video tutorial on the CAPM.
Complete a practice problem set on the CAPM.

Practice: Dividend and Capital Gains Calculations

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Complete practice problems to reinforce your understanding of how dividends and capital gains are taxed.

Browse courses on Stock Returns

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Solve practice problems on calculating dividends and capital gains.
Use a tax calculator to determine the tax implications of different investment scenarios.

Four other activities

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Show all seven activities

Discussion: Behavioral Biases in Investment Decisions

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Engage in a discussion with your peers to explore the common behavioral biases that can affect investment decisions.

Browse courses on Behavioral Biases

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Read the course materials on behavioral biases.
Prepare examples of behavioral biases you have observed in your own investment decisions.
Discuss your examples with your peers.

Review: Bernstein's The Intelligent Asset Allocator

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Read Bernstein's book to gain insights into the importance of asset allocation and diversification.

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Read the book.
Take notes on the key concepts.
Summarize the book in your own words.

Project: Create a Stock Pitch

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Develop a stock pitch to apply your understanding of investment strategies and techniques to identify undervalued stocks.

Browse courses on Investment Strategies

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Research different investment strategies.
Identify a stock that you believe is undervalued.
Create a presentation that outlines your investment thesis.

Contribution: Open-Source Finance Library

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Contribute to an open-source finance library to apply your programming skills and further your understanding of investment analysis.

Browse courses on Programming

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Find an open-source finance library that you would like to contribute to.
Identify an area where you can make a contribution.
Submit a pull request to the library.

Career center

Learners who complete Investments II: Lessons and Applications for Investors will develop knowledge and skills that may be useful to these careers:

Professor of Finance

A Professor of Finance teaches and conducts research in the field of finance. This course may be useful for this role as it provides a comprehensive overview of the fundamentals of investments, asset pricing models, and the performance of individual investors and actively-managed mutual funds. Additionally, the course discusses strategies for 'earning alpha', which can be useful for professors seeking to develop new investment strategies and theories.

See salaries and explore the career path for Professor of Finance

Investment Analyst

An Investment Analyst researches and evaluates investment opportunities for individuals and institutions. This course may be useful for this role as it teaches the fundamentals of investments, asset pricing models, and the performance of individual investors and actively-managed mutual funds. Additionally, the course discusses strategies for 'earning alpha', which can be useful for investment analysts seeking to identify undervalued or mispriced investments.

See salaries and explore the career path for Investment Analyst

Financial Analyst

A Financial Analyst provides financial advice and guidance to individuals, businesses, and institutions. This course may be useful for this role as it teaches the fundamentals of investments, asset pricing models, and the performance of individual investors and actively-managed mutual funds. Additionally, the course discusses strategies for 'earning alpha', which can be useful for financial analysts seeking to help clients make informed investment decisions.

See salaries and explore the career path for Financial Analyst

Portfolio Manager

A Portfolio Manager is responsible for managing and investing a portfolio of assets on behalf of clients. This course may be useful for this role as it teaches the fundamentals of investments, asset pricing models, and the performance of individual investors and actively-managed mutual funds. Additionally, the course discusses strategies for 'earning alpha', which can be useful for portfolio managers seeking to generate positive risk-adjusted returns.

See salaries and explore the career path for Portfolio Manager

Financial Planner

A Financial Planner helps individuals and families plan and manage their finances. This course may be useful for this role as it teaches the fundamentals of investments, including the trading off of return and risk when forming a portfolio, and asset pricing models. Additionally, the course discusses the performance of individual investors and actively-managed mutual funds, which can be useful for financial planners seeking to help clients make informed investment decisions.

See salaries and explore the career path for Financial Planner

Financial Advisor

A Financial Advisor provides financial advice and guidance to individuals and families. This course may be useful for this role as it teaches the fundamentals of investments, including the trading off of return and risk when forming a portfolio, and asset pricing models. Additionally, the course discusses the performance of individual investors and actively-managed mutual funds, which can be useful for financial advisors seeking to help clients make informed investment decisions.

See salaries and explore the career path for Financial Advisor

Hedge Fund Manager

A Hedge Fund Manager manages a pool of money and invests it in a variety of assets. This course may be useful for this role as it teaches the fundamentals of investments, including the trading off of return and risk when forming a portfolio, and asset pricing models. Additionally, the course discusses the performance of actively-managed mutual funds, which can be useful for hedge fund managers seeking to understand the investment behavior of institutional investors.

See salaries and explore the career path for Hedge Fund Manager

Actuary

An Actuary uses mathematical and statistical techniques to assess and manage financial risks. This course may be useful for this role as it teaches the fundamentals of investments, including the trading off of return and risk when forming a portfolio, and asset pricing models. Additionally, the course discusses the performance of individual investors and actively-managed mutual funds, which can be useful for actuaries seeking to understand the investment behavior of insurance policyholders and other clients.

See salaries and explore the career path for Actuary

Venture Capitalist

A Venture Capitalist invests in early-stage companies with the goal of generating high returns. This course may be useful for this role as it teaches the fundamentals of investments, including the trading off of return and risk when forming a portfolio, and asset pricing models. Additionally, the course discusses the performance of individual investors and actively-managed mutual funds, which can be useful for venture capitalists seeking to understand the investment behavior of potential investors.

See salaries and explore the career path for Venture Capitalist

Private Equity Investor

A Private Equity Investor invests in private companies with the goal of generating high returns. This course may be useful for this role as it teaches the fundamentals of investments, including the trading off of return and risk when forming a portfolio, and asset pricing models. Additionally, the course discusses the performance of individual investors and actively-managed mutual funds, which can be useful for private equity investors seeking to understand the investment behavior of potential investors.

See salaries and explore the career path for Private Equity Investor

Investment Banker

An Investment Banker helps companies raise capital and provides financial advice. This course may be useful for this role as it teaches the fundamentals of investments, including the trading off of return and risk when forming a portfolio, and asset pricing models. Additionally, the course discusses the performance of actively-managed mutual funds, which can be useful for investment bankers seeking to understand the investment behavior of institutional investors.

See salaries and explore the career path for Investment Banker

Risk Manager

A Risk Manager identifies, assesses, and manages financial risks for businesses and institutions. This course may be useful for this role as it teaches the fundamentals of investments, including the trading off of return and risk when forming a portfolio, and asset pricing models. Additionally, the course discusses the performance of individual investors and actively-managed mutual funds, which can be useful for risk managers seeking to understand the investment behavior of clients and other stakeholders.

See salaries and explore the career path for Risk Manager

Economist

An Economist studies and analyzes economic data and trends. This course may be useful for this role as it teaches the fundamentals of investments, including the trading off of return and risk when forming a portfolio, and asset pricing models. Additionally, the course discusses the performance of individual investors and actively-managed mutual funds, which can be useful for economists seeking to understand the investment behavior of individuals and institutions.

See salaries and explore the career path for Economist

Compliance Officer

A Compliance Officer ensures that a business or institution complies with all applicable laws and regulations. This course may be useful for this role as it teaches the fundamentals of investments, including the trading off of return and risk when forming a portfolio, and asset pricing models. Additionally, the course discusses the performance of individual investors and actively-managed mutual funds, which can be useful for compliance officers seeking to understand the investment behavior of clients and other stakeholders.

See salaries and explore the career path for Compliance Officer

Quantitative Analyst

A Quantitative Analyst develops and applies mathematical and statistical models to analyze financial data and make investment decisions. This course may be useful for this role as it teaches the fundamentals of investments and asset pricing models. Additionally, the course discusses the performance of individual investors and actively-managed mutual funds, which can be useful for developing investment strategies.

See salaries and explore the career path for Quantitative Analyst