financefirststep

Everything you need to know about helicopter money 🚁

2020-04-30T12:39:00.002+05:30

For the last few months, you might have listened about term helicopter money. This is the term which is quite famous nowadays and you must be having many questions regarding what is it all about and what its use. This article will try to answer all your questions about helicopter money and help you understand everything you need to know about helicopter money.

WHAT IS HELICOPTER MONEY?

Helicopter money is basically printing new money and distributing it to the public. It is basically an alternative to quantitative easing. This is done at the time of recession or when the interest rate is zero. It is a non-repayable money transferred from central bank to the government and its aim is to make people spend the money and boost the economy.

WHY HELICOPTER MONEY?

Usually, when the government want to boost the economy there is one option for the government that is to borrow the money which results in increasing the debt but by using helicopter money there is no need for borrowing money thus it is preferred.
The second reason for its preference is that it helps in increasing overall demand as compared to quantitative easing which results in boosting the economy well.

CONSEQUENCES OF HELICOPTER MONEY

There is a simple rule that when supply increases so the price decreases. When the supply of the country money increases then the value of the country’s money decreases. When helicopter money is used then more money is printed which results in increasing the supply of the money thus the value of money decreases.

The second negative effect of using helicopter money is that the government can’t extract the money back from the people if they decide to put the money in their savings rather then spending the money which will result in failure of the main objective of the government for boosting the economy.

WHICH COUNTRIES CAN USE HELICOPTER MONEY

Advanced economies such as the USA, EU etc can be better off by using helicopter money. The reason for this is that their currency is used worldwide for international trades thus increasing demand. If currency such as rupee should not be used for this method as they are likely to be affected.

WHY HELICOPTER MONEY IS IN NEWS NOW?

Due to COVID-19, there has been lockdown all over the world. This has resulted in a decrease in consumer spending which has harmed the economy. Many people are out of work. Poor people are not having money even for their daily need so this is one of the option for the government for helping people out and also for boosting the economy during the pandemic.

I hope all your doubts are cleared after reading the article. Please comment on how you like the article and share this with your friends.

trading vs investing.Which one is better

2020-04-24T11:01:00.000+05:30

When you enter the world of the stock market you will see three types of people one is investor, second is trader and third spectator. Spectator just watches the stock market. Traders and investors have only one motive in mind i.e to earn money from the stock market but the way they both try to earn money is quite different.
Traders try to take profit in the short term which is either weeks, days, hours and even minutes whereas investors try to take profit in the long term. In this article, we will discuss what traders and investors try to see for making a profit in the stock market and compare both of them.

TRADING: Traders watches the chart and apply various indicators to know when to enter the trade and when to exit the trade. They are not concerned about the management of the company or financial statements of the company. Traders plays with the sentiments of the market and book their profit. The person who wants to be trader should keep in mind that trading does not always go as they thought, they might get loss so they must know how much loss they can bear and should exit the trade no matter what. They should come with a game plan to know about everything they are looking for trade. Emotion is something which should not come while trading.

INVESTING: Investors investing for long terms are concerned about the company management, market share, financial statements etc. They look for companies that are below their present value. They try to find the real value of the company and its worth in future using various techniques and formulas. One of the technique is the dividend discount model. Investors are least concerned about the short term analysis and what is happening to the price of the stock in the short term. Investors look for the time value of the money. The person who wants to become an investor must learn how to read financial statements and how to know about the management. If you don’t do the analysis correctly then you can lose your money in the long term so it’s important to do the analysis correctly.

CONCLUSION:

Even though trading and investing are quite different in terms of timing and tools we use. It is quite hard to choose which one is better as in the real world both of them have shown results. One thing that one can say is that it is always good to use them both as you will then get the upper hand. In technical analysis traders sometimes use financial ratios and also analyses the company for making their strategy. Sometimes investors see that they can book short term profit based on technical analysis.

Hope you like the article. Comment below about what you think is better trading and investing. Which one will you choose?.

What is supply and demand law ?

2020-04-19T14:25:00.000+05:30

Did you ever wonder why the price of a stock goes up or down?, does it have some reason or not?

This article will clear your doubts about the price movement of a stock.

Supply and demand is one of the reasons for the movement of the price. Supply refers to how many people are willing to sell the stock and demand refers to how many people are willing to buy the stock.

There are 3 cases

1 EQUILIBRIUM: This is the case in which the demand is equal to the supply i.e. the number of people willing to sell the particular stock is equal to a number of people willing to buy the particular stock. This means that there is no surplus or shortage of goods which means that the stock price will remain the same. The price will increase/decrease only when people think that price of the particular stock is higher/lower then it is at present so to bring the price to that value they will be willing to buy/sell a particular price.

2 High demand and lower supply: This is the case in which the demand for a particular stock is higher than the supply, thus there is no equilibrium. In this case, buyers are willing to pay more and more price for the stock so they tend to drag the price of the particular stock higher as a result the price increase.

3 Higher supply and lower demand: In this case, the supply is higher than demand. People are willing to sell their stock at a lower and lower price thus dragging the price down which results in bringing the price of stock lower.

These are the cases which you will experience not only in the stock market but in real life also for example if there is the shortage of some item then people are willing to but it at a higher price then the actual price, same is true when the demand is not much but the supply is higher which results in decreasing the price of the particular item.

Hope you like the article. Please comment what are other cases you like to include in the article.

5 must read books for young investors

2020-04-16T10:45:00.000+05:30

Young investors are persons who are new to investing. It is important for a person to know basic about investing before doing it. They should know about compounding and Its power. Here in this article, I am going to tell you about 5 must-read books. These are also my favourite picks whenever I want to brush up my skills.

1 ”RICH DAD POOR DAD” - This is one of the must-read books in my list. This book is written by Robert Kiyosaki. This book brings into account the importance of financial independence and financial literal. He also brings into account the different viewpoint of middle-class and rich people, How rich make money work for them and middle class or poor people work for money, How schools want people to work for the rest of the life and don't teach them about how to become financially independent.

2 ”RICHEST MAN IN BABYLON” - This book written by “Georges S. Clason”. This is one of the books which will guide you for financial understanding. In this book, the author tells about the city called Babylon, which became the wealthiest city of the ancient world because its citizens were the richest people of their time. They know the value of money, practised the financial principle of acquiring money.

3 ”THE INTELLIGENT INVESTOR” - Benjamin Graham is considered the father of value investing. This book is also known as the Bible of the stock market. This book tells about the fundamental of the stock market from the views of value investors, Buying the stock which you think is undervalued from its intrinsic value which can be found using fundamental analysis.

4 “ONE UP ON WALL STREET “ - This book written by Peter Lynch. He is one of the most successful fund managers. This book explains important concepts that new investors must know. He explained how, why, when for the long investments. He categorized the company into 6 types, there are many ways to categorize the company but he focuses on these 6 categories. These 6 categories are slow growers, stalwarts, fast growers, cyclicals, asset plays, turnarounds.

5 ”THINK AND GROW RICH “ - This book was written by Napoleon Hill after 25 years of his research on some most economic successful persons. He published 13 principles for success and personal achievement. Some of the principles are desire, specialized knowledge, the sixth sense. This book centres on the fact that success can be achieved by mental visualisation and imagination.

Hope you like the above selection of books. Please comment the books which you think must be added to the list.

Types of stock market indicators

2020-04-08T12:00:00.001+05:30

Stock market indicators are widely used by traders. They are used to predict the future price movement of stock. They are also used by traders for knowing when to enter a trade and when to exit. There are hundreds of indicators available and used by traders.
In this article, we are going to learn about the most common and widely used indicators. These indicators work most of the time but there is no guarantee that this will work always. Now without delay let's proceed further.

1 BOLLINGER BAND: This indicator is used for measuring the volatility of the stock. It consists of an upper and a lower band and a simple moving average. The upper and lower band are above and below the simple moving average by a certain standard deviation. The standard deviation can be adjusted by the user. Higher the standard deviation higher the gap between the bands and the simple moving average and vice versa. Higher the volatility higher the gap between the bands and the simple moving average and vice versa.

2 RELATIVE STRENGTH INDICATOR: This indicator is used for determining whether the stock is overbought or oversold. The RSI can be measured between 0 to 100. Usually, it is taken that when RSI is above 70 stock is overbought and when RSI is below 30 stock is oversold and it is taken for 14 days period.

RSI = [100/(1+RS)]

RS = average gain/average loss

3 AVERAGE TRUE RANGE: This is not an indicator but this can be used to tell you how much profit or loss you can take on a particular stock. ATR tells us about the average price of a stock move. It is calculated by taking the mean of the price movement of the stock for the past few days. Typically it is taken for the past 14 days. Price movement is calculated simply by taking the difference of high and low price.

4 SIMPLE MOVING AVERAGE INDICATOR: A simple moving average indicator calculates the average of the selected range of price by the number of periods. It is used to identify the trend direction and also for determining support and resistance level. It is represented by a straight line.

5 VOLUME WEIGHTED AVERAGE PRICE: Volume weighted average price indicator is used to tell about the average price of the stock traded for the day based upon the price and volume. It is used by the traders to know when to enter and exit the position. It is typically represented by the line similar to that of the moving average indicator. If the price is above VWAP then bearish move strength is strong. If the price is below VWAP then bullish move strength is strong.

Indicators can tell us about various things but it is not always right to follow indicators as it is not hundred percent correct. Sometimes different indicators show different moves and sometimes one indicator can show one move while others do not show any move. It is typically recommended to use four indicators almost.

I hope you like the above indicators. Comment other indicators that you think should I add.

How Fear of missing out works in investment ?

2020-04-04T10:36:00.000+05:30

Fear of missing out, also referred to as FOMO, is an emotion that everyone faces at some point in time. It is feeling one has thought that another person might be having a rewarding experience from which one is absent. It has been into existence for a long time but with the evolution of social media it's effect has increased.

Let me explain FOMO with the help of an example: you and one of your friends are working in the same company but after some time your friend switches the company so you started getting feeling that you are just living a normal life and he will succeed in life.

FEAR OF MISSING OUT is something which in recent time is used by companies so as to increase its sale like when you are looking for a booking hotel room and you open one site for booking then it shows you that in one of the hotel only 2 rooms are left and in the past 5 days 20 rooms have been booked so you might get feeling that you might miss the chance to book a hotel.

DO FOMO WORKS IN INVESTING?

FOMO is something you might experience while investing and if you get in the influence of this you will not only regret but will also lose your hard-earned money. Whether you think of investing in the stock market or real estate or some scheme you experience FOMO.

One cannot ignore the fact that when you want to invest in something we look at the fact that where our neighbor or relative has invested and what return they are getting. If they are getting more return we try to copy them. It is saying that with higher returns comes higher risk but then also one change their portfolio so as to get some return and are exposed to more risk than the one they could take.

Let take one example to explain to you how FOMO works in investing you heard that one of the stock is giving great return from the past few years so you thought to buy that stock with all the money you have instead of diversifying your portfolio. Thus you are exposed to more risk as you are dependent on a single stock. While investing in real estate this works in the same way.

HOW TO OVERCOME FOMO :

Before investing just make a game plan and write all the strategy you want to follow and what are the things you have to look in and investment you have to buy and work accordingly. Stop listening to what other people have to say and how their portfolio is performing and just think about how to grow your portfolio and the risk you can take.

It is saying that once you get control over your emotions you can achieve anything in your life. Thus it will take some time to learn from mistakes and overcoming emotions. Practice make everything perfect.

I hope you like the article. Please comment and share with your friends.

What is market capitalization

2020-03-29T11:24:00.000+05:30

Did you ever wondered by looking at a company that how to know if it is large company or small company?

Then this article is going to solve your query.

WHAT IS MARKET CAPITALIZATION ?

Market capitalization or market cap determines the total market value of the company.It is calculated by multiplying the number of shares outstanding with the market price of the share.

market capitalization = number of shares outstanding * price of 1 share

For example Let assume a company has 20,000 number of shares outstanding and the share price is RS 100 so the market capitalization is equal to 20,000*100 = RS 20,00,000.

By now you must be wondering what's the use of market capitalization.Market capitalization is used by investors to determine the size of the company and thus determine which cap does the company comes in whether it is large cap company or small cap company or other.This further helps investors to diversify their investment by investing in different cap companies.

CLASSIFICATION USING MARKET CAPITALIZATION :

There is no fixed criteria for classification of the company based on market capitalization.Different people use different range for the classification.Generally the classification is :

1 Large cap companies : These are the companies whose market capitalization is larger then 28,000 crores.These companies are well established companies.Investing in large cap companies are considered to be safe option as they are less risky.The liquidity of these companies are very high.Example of large cap companies is TCS.

2 Mid cap companies : These are the companies whose market capitalization is between 8500 crores and 28000 crores.These companies are riskier then large cap companies but are less risky then small cap companies.It is expected that they generate more return then large cap companies.The liquidity of these companies are high.Example of mid cap companies is TVS motor.

3 Small cap companies : These are the companies whose market capitalization is less then 8500 crores.These are most risky companies and can also generate more return then large cap and mid cap companies.The companies in these category are considered to be growing companies that's why these companies can generate high return but many companies fail to achieve goal so these are also risky.The liquidity of these companies are low.Example of small cap companies is D-link India.

FACTORS EFFECTING MARKET CAPITALIZATION :

Market capitalization depends on price and number of shares outstanding which further depends upon

Issue of new shares
Buyback of shares
Demand and supply
Strength of the company
Competitor performance

The number of share outstanding can be changed when the company decides to issue new shares or buyback of shares.When company decides to issue new shares then the number of share outstanding increases.Buyback refers to company buying it's share from market.This decreases the number of shares outstanding further changing market cap.

The price of a particular company stock depends upon various factors such as demand and supply(when demand is high stock price increases and when supply is high stock price decreases),strength of company(is it fundamentally strong or not),performance of competitor etc. thus further affecting the market capitalization.

Final Thoughts :

Market capitalization is one of the important tools to take into account while investing but there are few things which it does not consider like the debt load of company,the dividend given by the companies etc.It's better to take market capitalization into account by using other tools also so that you can generate more information before investing

Hope you find this article useful.Please comment your thoughts and share with your friends.

What are penny stocks?

2020-03-25T08:51:00.000+05:30

I came across people who usually say to me that "Hey! have you seen this stock it's price is so low I can buy more number of shares for the money I have then that of other company whose price is high." and after some time they come and say "Stock market is a gamble".

Have you notice something,These people are ready to invest in a company just by seeing it is lower in price and for them rest all things does not matter and later instead of knowing their mistakes and try to improve it they blame stock market.

Today we are going to talk about one such topic PENNY STOCKS :

WHAT ARE PENNY STOCKS ?

Penny stocks are the stocks which are having price lower then RS 10.These are usually the stocks of the company who are new to the market,having low market capitalization or companies which have done some fraud or companies which are under financial stress.

It is quite a fact that penny stocks are most risky stocks of the market.With higher risk comes the higher return.These stocks might be having potential to give you higher return which attracts most of the new investors or person who is not having knowledge of stock market but it comes at cost of risk.

WHY PENNY STOCKS ARE SO RISKY ?

There are many reasons why penny stocks are risky some of them are :

1 These stocks can be manipulated easily : The penny stocks company have very small market capitalisation so these companies stock price can move really fast by buying or selling of the stocks,so some people might take advantage of this and can manipulate the stocks.

2 Can be delisted from the stock market : These companies can be delisted anytime from the stock market so you might not even get time to sell the stocks losing all your invested money.

3 No regular financial statements submitted : Most of the companies don't even submit financial statements regularly for this reason you will not be able to know what's going on with the company.

4 Weak Fundamentals : Penny stocks are of mostly those companies who might be having lot of debt or of those which are not having cash for operations.

IS IT WORTH BUYING?

In my opinion if you are new investor then you must try to stay away from penny stocks as it might wipe out all your investment as you are not having knowledge to choose company which is worth investing as 9 out of 10 companies of penny stocks are not worthy.It's better to invest in companies of which you are having knowledge about and are having good fundamentals.

Beginners investing in penny stocks is just like gamble in which most of the time you will lose money.

If you think that the company of penny stocks is having good fundamental and will grow in the past then just invest a small part of your money in that stock not the whole money.

Hope you find this article useful.Please comment you views and share article with your friends whom you think this will be useful.

FEW STEPS FOR SELECTING MUTUALFUNDS

2020-03-19T11:09:00.001+05:30

In present scenario more and more people want to invest in mutual funds as the return on saving accounts and FDs are not so high.It's one of common term that mutual funds are subject to market risk.People are ready to take that risk and want to invest but the problem lies when they want to decide which mutual funds to take and which not to take as there are thousands of mutual funds available.

In rest of the article there are few things which one must keep in mind while investing in mutual funds.

1 EXISTENCE : It's better for new investors to invest in mutual funds that already exist in the market.The reason for that is it is easy to track the past records of the funds that already exist in the market then the funds which are new to the market so one can track the records and then think whether to invest or not.

2 MUTUAL FUND SCHEME : After knowing the existence next step is to select the mutual fund sceheme which suits best for you and the type of mutual fund which suits best for you.It's one of the crucial step as it decides how risky your fund could be and how much return it can generate. You can read my article about the schemes and about types .

3 Portfolio : After choosing the scheme check what is the portfolio of the mutual fund.Portfolio tells you about the places where your money is going to be invested and how much percentage of the money is invested where.

4 FUND MANAGER : Fund manager is one who will handle the mutual fund portfolio and invest according to the scheme of the mutual fund.The next step is to know who is the fund manager of the scheme and the background of fund manager and also the previous performance.This will help you knowing how your fund will be handled.

5 WHICH PLAN TO CHOOSE : Next step is to choose whether you want to select direct plan or regular plan.Direct plan is the one in which there is no agent and you invest directly with the mutual fund company whereas regular plan is the one in which you invest through agent.Most of the investment is made through regular plan,however it's better to go for direct plan as there is no commission of the agent which will help you generating more return in future.

6 ENTRY AND EXIT LOAD : Entry load is the charge which one has to pay while entering the mutual fund.Entry load basically reduces the investors investment.Exit load is the charge which one has to pay while leaving the scheme.The reason for entry load is to cover all the costs,whereas exit load is to reduce number of withdrawals.Different mutual funds charges different exit loads.

7 EXPENSE RATIO : Not all mutual funds charges entry and exit load but expense ratio is charged by every fund.This is the charge which one has to pay for the management of mutual fund scheme.It is calculated by dividing total expense incurred in the management of scheme by the total Asset Under Management.

These are few steps which one must follow for getting the in-depth knowledge of fund one want to invest in and selecting the fund.

Hope you find this article useful.Please comment how you find this article and share with your friends. Thank you!!

SWOT analysis,everything you need to know

2020-03-09T09:40:00.001+05:30

WHAT IS SWOT ANALYSIS?

SWOT refers to as Strength,Weakness,Opportunity,Threats.It is one of the most widely used tools.SWOT is used for the analysis of the company.It is used to determine the internal and external factors that effect the company as well as it's potential.The strength and weakness are for the analysis of internal environment while the opportunity and threats are for analysis of external environment.This analysis focusses on real life approach.

1. STRENGTH : This helps in determining the areas in which company is best and that gives compatitive advantage to the company.For example cost advantages,product quality,loyal customers.

2 WEAKNESS : This helps in determining the area in which company is weak and need to improve.For example unreliable products,staff management problem.

3 OPPORTUNITY : This helps in determining the factors that will work in the favour of company in future and will give competitive advantage.For example changing customer taste,Technological advantages,Lower taxes,change in government regulations.

4 THREATS : This determines the factors that might work against the company in the future and company needs to focus on these factors and try hard so that it will not harm the company.For example aggressive competition,changing customer taste(not in direction of your product).

let me explain you with the help of personal life example

Suppose you have a bakery shop.You are the only one in the market who has great taste and hygine.So this is your strength.The weakness of your business is that it doesnot have a sitting while your competitors are having sitting. The opportunity is that oreo shake is trending in the market and you have already tried preparing it and now it is ready to launch so you can bring it early at the time of trend.The threats to your shop is that people are shifting towards healthy food so it's bad for bakery shop.

so when you do analysis of your company you will be able to know what is working in favour of you and what is not.It will help you in improving the things you are weak at and you have to take care of threats and need to do something so that threats become new opportunity.

ADVANTAGES OF SWOT ANALYSIS

1 As a company it tells you about the core strength and the weaknesses so you can use your strength as your main factor and improve your weaknesses.

2 It tells you about your threats in the future so you can bring projects that make your threats your opportunity.

3 This is a cost effective way of analysis as neither technical skills nor experience is required.It can be done by an individual or group and no external consultant is required for the analysis.

4 It is not necessory that SWOT can be used for large business only.It can be used by small business also.

HOW AS AN INVESTOR YOU CAN USE SWOT ANALYSIS :

As an investor,you can use SWOT analysis to compare companies in same sector. It will help you to determine which company has more competitive advantage,what are their weaknesses,who has more opportunity and who is working on their threats etc.So by comparing this you can choose one of the company to invest.

If you have already invested in a company SWOT can be used to determine whether the new project taken by the company is useful for the company or not.

DISADVANTAGES OF SWOT ANALYSIS :

1 SWOT analysis can be subjective,it reflects the facts and experience of an individual or group creating it so there may be many facts missing which the person making it might have ignored.

2 If something has been placed in one of the four category it can't be place in other three so it can result in biasing.

3 It usually reflects the current position and view point.

FINAL WORDS :

SWOT analysis might have many uses and one can use it to know more about the company,but don't rely on it too much as it is not always right.

Hope you like the article.Please share your view points in the comment section below.Share this with your friends if you think it will be useful for them.

What is IPO?Things you need to know before investing in IPO

2020-03-06T08:54:00.002+05:30

People faces difficulty while undersanding what an IPO is,How it works?,Why a company goes public? etc.This article will give you indebt knowledge about IPO.

Read the article till the end.There are bonus points for you in the end of the article.

WHAT IS IPO?

IPO stands for Initial Public Offering.IPO is the process in which a private company raises capital by selling stocks to general public.When a company decides to bring an IPO it hires an underwriter also known as investment banks.The underwriter decides the price of the stock to be issued,which exchange should the stock should trade etc.After IPO the company no longer remains private.It becomes publically held company.It has to disclose it's financial statements quaterly,it's plan for the future,the projects it is undertaking to the public.
When a company brings IPO it comes in primary market and after that the shares are traded in secondary market that is when company brings IPO the money goes direct to the company in return for the shares and after that in secondary market the shares are traded between investors.

WHY A COMPANY GOES PUBLIC ?

A company goes public when it want to raise capital and doesnot want more debt so this is the option which seems best.
Going public helps the company to share it's risk with the public.
Early investors are also benifited as it helps them for easy exit.
When a company is under huge debt and it want to reduce debt so it brings ipo so that by selling some of it's share it can reduce debt.
If a company want to raise additional funds in future it can raise by SEO as it gets already listed on stock exchange.

PROCESS OF IPO :

The company hires an underwriter to raise equity through the IPO process.
The underwriter collects the information and prepare the prospectus.
The underwriter puts together a syndicate and files the firm's intent to raise equity with regulator.
The regulator reviews the prospectus.
The underwriter and the team then estimates the demand of the stock of the perticular company and also the price.If some revision is to take place in price then it is done.
The company issues the share on IPO date.

DIFFERENT TYPES OF IPO :

Fixed price IPO
Book building IPO

Fixed price IPO : In this type of IPO the company decides the price of the price of IPO along with the investment bank and investor can invest in IPO at that fixed price only.
Book building IPO : In this type of IPO the company decides the price band of the IPO along with the investment bank and investors can bid from the price band.

DISADVANTAGES OF IPO :

When a company goes public there is more disclosure.This is bad for companies as they have to disclose everything to the investors which might be risky for them as their competitors will also know about their plans.
After going public there is more regulations for them for example it's mendatory for them to give financial statements every quator.
There is more time and efforts are required for preparing statements.

BONUS POINTS :

When a company goes public there is lock up period for the large investors such as company executives etc.Lock up period restricts these investors to sell their sale for a specific period of time after the IPO. Lock up period typically last from 90 days to 180 days.
On the first day of trading,IPO price on an average is 15% higher than offering price.
The Dutch East India Company was the world first formaly public lised company

Please comment if you find this article useful also share the points you want us to improve

Investment options for students

2020-03-01T10:50:00.000+05:30

Student life is one of the best life.Here you can make mistakes and learn from it.Students specially college going students have a lot of time to do extracurricular activities.They can try various things and figure out whether it is working or not.

There is quite disbelieve that investment is only for rich peoples.You can start investing by small amount and make it grow.It's quite a problem that when students invest money they don't really think that they are investors as they are investing small amount but one must think just like an investor thinks while investing money.They must really check the assets in which they are investing,how it is working,how can it grow in future etc.

Let me illustrate various assets in which students can invest and make money work for them.

(1)Bank FD's : This is one of the safest option for investing your money.Here your money will be blocked for some time frame.After that particular time frame you will get your money back with interest on it.The interest in FD's are higher then saving account interest.This is good option for those who has money today that is not need for a particular time frame in future.

(2)Mutual Funds : Mutual fund is a good option for students as they might not be having time for keeping eye on market regularly or not having knowledge so it's one of the best option for them as there will be one of the professional out there who will invest their money.You can read more about mutual fund here.

(3)Stock market : Students can start with investing small amount of money in companies they think will grow in future and after that start increasing their investments by putting small amount of money on regular basis.This will help them in knowing about how to read financials of the company and how to judge which company is good and which is not.You should diversify your stocks.When they start looking at their portfolio growing it will give them encouragement.You can read about basic of stock market here.

(4)Etf's : Students can directly invest in etf's also known as exchange traded funds.It will help them diversify their investment and also provide them market return which is quite good.

TIPS BEFORE INVESTING :

(1)It is highly advisable for students to know all about the background in whichever instrument they are investing in and then decide whether to go for that option or not.

(2)Calculate your risk and margins in advance as it will help them finding how much risk they can afford and where they must invest.

(3)Before investing in stock market research about various brokers out there and compare them and then choose which one suits best for you.

Hope you liked the article.Please comment your views and share this with your friends.

ROLE OF FINANCE IN THE LIFE OF STUDENT

2020-02-27T09:17:00.000+05:30

"What ! what do you mean by financial planning for students","what is even the need for this.","It's too early to care about these stuffs,","We are students it's our time to enjoy not to think about these stuffs.".These are the few comments which I hear from students and parents whenever I talk with them about financial planning.Financial planning is something which everyone must care about whether it's student or a working professional.It,s something which must be taught from early age so that no one faces problem related to money in future and live a happy life.

According to a survey conducted it was found that many students don't want to go for graduation because of high fees in private colleges.There are families which spend about 50% of their income in college fees.Many students have taken student loan for college.These students told that they were facing problem while studing because of the financial stress.They were not able to show their best because of the stress of paying back loan.This might not be the only problem,many students also use credit cards for their daily expenses which may harm their credit score when they might not be able to pay back.The students who came with monthly budget plan told that they have followed the plan for couple of months and then started unfollowing it.
Many professionals even after having good salary package faces problem financially because of lack of financial knowledge.

That's why finance play an important role in life of students.Financial planning is something which will help them reducing their stress.They should know the difference between the good expense and bad expense,How to manage money etc.This will not only help students during their school or college life but will help them prepare for future as this will teach them how to manage money.Schools and colleges must include finance as a subject so that they know what are the various options out there so as to get good return on their investment.Parents must teach their kids from their childhood about money management,investing etc.They should be open with their kids about finance and should give them small responsibilities like making budget for their home etc.
They should tell their kids about :

Difference between assets and debt
How companies work
How stock market work
What is economy,gdp etc
How to make money work for you
What banks do and how they work

As a student you must start with small things start getting basic financial knowledge and then move forward.Start with saving money,start making your expense as less as possible and then research and invest in something which you think will be of less risk and will help you growing money.However this will not be an easy task but something worth.Finance is something which is just like maths which will become something of daily use.

WHAT IS DERIVATIVE MARKET?

2020-02-24T16:26:00.000+05:30

WHAT IS DERIVATIVE MARKET?DIFFERENT TYPES OF DERIVATIVE MARKET.DIFFERENCE BETWEEN OPTIONS,FUTURES,FORWARD AND SWAP CONTRACTS

A derivative market is a financial instrument whose value is derived from or defined by one or more underlying asset.The commonly used underlying assets are stocks,bonds,currency etc.

Let me make you understand derivative market with the help of an example

Think that you and I made a contract on 31 January for oil that whatever be the price of oil after 3 months I will buy oil from you at price of 31 january.So if the price of oil after 3 months is higher then today then I will be in profit as I bought it at lower price i.e of price of 31 January.If the price of oil is lower then I will loose money as I bought it at higher price.

Derivatives can be traded on exchanges and also OTC(over the counter)market.Most of the derivatives are traded OTC.In OTC market there is high risk of default.Derivatives can we use to hedge the position.Hedge is a way to protect oneself from financial loss.

For example If I have to buy US dollar on 19 March and I am worried that the price of US dollar to INR might increase so what I can do is that I can buy a derivative contract today so that whatever be the price of USD to INR is on 19 March I will protect myself from that.

There are 4 types of derivative contracts :

Future contract
Forward contract
Option contract
Swap contract

1 FUTURE CONTRACT :

Future contracts trade on exchange.In this contract the buyer and seller agreed on the specific price at specific date.The price of future contract is marked to market daily.

After entering the future contract the parties are obligated to perform the contract.The future contract can be used by the parties to hedge their position as they might be concerned about the price in future.As the future contract might be buy or sold by a speculator so they might not be interested in buying or selling the perticular asset underlyimg the future contract so the future contract can be cash settled before the expiration through offset contract.

2 FORWARD CONTRACT :

These contracts are similar to future contract,the only difference is that they are traded OTC(over the counter)market.These contracts can be customised according to requirement of both parties.These contracts are unstandardised.In this contract there is high counterparty risk as the buyer or seller if the contract might not fulfill the contract.

3 OPTION CONTRACT :

This contract is also similar to future contract.It can also be used to hedge the position.In option contract the option buyer have to pay the premium to the option seller when entering the option contract so as to enjoy the upside because the option buyer can have limited loss or unlimited profit whereas the seller can have limited profit or unlimited loss.The buyer/seller is not obligated to fulfill the side of the contract when the other one decides to exercise the contract.

4 SWAP CONTRACT :

Swaps means exchange of something with one another.Swap contract involves the exchange of one financial instrument with another between parties.These contracts are traded OTC market.Swaps can be used for exchange of currency exchange rate risk or the risk of default on loan etc.

Open ended fund vs Close ended fund

2020-02-21T08:11:00.000+05:30

Open ended fund vs Close ended fund :Which one is better?In which fund to invest your hard earned money?

New investors when start gaining financial knowledge,they want to invest in mutual funds as the return on FD's are not high.Most of the investors know about the type of mutual fund they are investing in but very few of them know whether it is open ended mutual fund or close ended mutual fund.Before investing in mutual fund one must know the difference between open ended and close ended mutual fund and then decide in which one they should invest.Both of these funds pools money from the investors and invest acording to objective of fund.

OPEN ENDED FUNDS :

The open ended funds are available to investors all time they can enter and exit anytime they want.They don't have fixed maturity period and are usually not listed on stock exchange.It's valuation is totally dependent on investors faith.In open ended fund there is no limit how many shares are to be issued.Prices of the funds are adjusted daily according to NAV of the fund.The NAV reflects the market valuation of the asset minus the liability of the scheme.If the scheme perform well then the NAV goes up and if the scheme perform poor then the NAV decreases.

CLOSE ENDED FUNDS :

Close ended funds are open for specific period of time investors have to invest money or withdraw money within that specific period after that they can't increase or decrease their investment.These funds are then traded on stock market and thus the investors can get out of the fund or decrease or increase it's investment can buy or sell their share in stock market.

DIFFERENCE BETWEEN OPEN END AND CLOSE END

Open ended funds are more popular among investors as it give them opportunity to enter and exit any time they want.Whereas Close ended funds give only a specific period of time for enter and exit ,you are locked in for specific period and if you want to exit the position then you have to dispose of it through stock market.
The price of open ended fund is fixed once a day whereas the price of close ended fund just like any other stock changes every minute depending on supply and demand.
The open ended fund gives you option of SIP You can do SIP in fund of your choice,whereas in case of close ended fund you have to give lump sum as there is no option of SIP
The corpus of open ended fund will keep on varying since there is buying and selling whereas in case of close ended fund the corpus remains same

WHICH ONE TO CHOOSE :

It's very difficult to say which one to choose it purely depends upon your aim for investing and how much amount you can invest.As in case of close ended fund you have to give lump sum so if you can,t invest lump sum then open ended fund is a great choice for you.If you have little or no knowledge of stock market then open ended fund is a great choice whereas if you can invest the lump sum and can invest for long term then close ended fund is a great choice for you.

What is Mutual fund?

2020-02-17T19:19:00.000+05:30

What is mutual fund?Types of mutual funds.Is it right to invest money in mutual funds?

A Mutual fund pools money from different investors and invests the money in large group of securities such as bonds and stocks with the objective to get return.The mutual funds are managed by experienced and qualified professionals.These professionals invest money according to the objective of the fund.

The benefits of mutual fund

The money of investors are professionally managed.
They are affordable even for small investors.You can invest with minimum of 500 rupees in a systamatic investment plan on regular basis.
Risk is very small in mutual funds as they invest accross various industries and stocks.
All mutual funds are required to register with SEBI.They are required to follow strict regulations for the interest of investors.

The negative side of the mutual fund

That investors have to pay various fees and expenses.
Mutual funds cannot be customised.
The income is less predictable.

TYPES OF MUTUAL FUNDS

Equity Mutual Funds
Debt Mutual Funds
Hybrid Mutual Funds
Speciality Mutual Funds
International Mutual Funds
Exchange Traded Mutual Funds
Fund of Funds

1 Equity Mutual Funds :

Equity mutual funds are the funds that are invested in stocks.These funds try to generate higher returns.These funds are riskier then Debt and Hybrid mutual funds hence they can generate higher returns compared to both.Performance of company plays a key role in these funds.Equity funds are invested with almost 60% of its assets in equity shares of company in proportions.

Types of equity funds

1.1 Based on market capitalisation :

Large cap equity funds : Large cap companies are well established companies and they are having strong market presence.This type of fund invest in large cap companies.These funds are less riskier and are capable of offering stable return.
Mid cap equity funds : Mid cap companies are mid sized companies.This type of fund offers more risk compared to large size equity firm but lower then small size equity funds.These funds are capable of offering higher return compared to large cap equity funds.
Small cap equity funds : Small cap companies are those companies that are in initial phase of development.This type of fund is most riskier and are capable of offering higher return compared to large and mid cap funds.

1.2 Based on sector :

Sector fund : These are the funds that focus investment in a perticular sector.
Diversified fund : These funds invest in different sectors and in different market capitalisation companies.
Thematic fund : In this type of fund the investment is done on a perticular theme. They tends to be riskier as they face sectoral and market risk.

1.3 ELSS : ELSS refers to Equity Linked Saving Scheme. This is a tax saving fund. In this fund your money gets locked for 3 years.You cannot invest in ELSS for less then 3 years.

2 DEBT MUTUAL FUNDS :

Debt mutual funds invest in fixed interest generating securities like coorporate bonds,government security.Debt security contains a fixed maturity date and also pays a fixed interest.The interest is decided by the issuer.The fund manager of a debt fund ensures that he invest in high quality credit instrument.Conservative investor can invest in Debt fund as there is very less risk.

Types of Debt Mutual Funds :

Fixed Maturity Plans : These funds invests in fixed income securities like government bonds.These are just like bank FD'S as in this they have fixed maturity date.In this your money gets locked in for a perticular period of time.These are better then bank FD'S.
Liquid Funds : These funds invest in those debt instrument which have a maturity of not more then 91 days.These funds are similar to depositing money in saving acount as they have same liquidity but these have more returns.
Guilt Funds : These funds invest only in government securities.These securities are issued by government that's why they have very less risk.These funds are ideal choice for risk averse investors.
Dynamic Bond Funds : In this fund the fund manager keeps changing the portfolio acording to the fluctuation in the interest rate.
Junk Bond Scheme : These inludes high risk and also high return.

3 HYBRID MUTUAL FUNDS :

Hybrid mutual funds invest in both debt and equity.These funds are good for those who are ready to take some risk as it invest in equity and also for those who want to have some fixed return as they invest in debt.

Types of Hybrid Mutual Funds :

Equity Oriented Balanced Fund : These fund invest more than 65 % money in equity and rest in debt instrument.Equity helps in providing good return and debt help in providing stable income.
Debt Oriented Balanced Fund : A balanced fund is called Debt oriented if the fund invest more than 65% of money in debt and rest in equity.
Monthly Income Plan : MIP is the investment in which 60-90% of money is invested in debt instrument and rest is invested in equity.It is much safer option.However it is not risk free.
Arbiterage fund : In arbiterage fund the fund manager buys stock at lower price in one market and sells the stock at higher price in another market.Money invested in arbiterage fund is safe but are taxed like that of equity fund

4 SPECIALITY MUTUAL FUNDS :

In this type of mutual fund the investment is made predominently in one industry/sector/region.This fund is not diversified in a sector/industry/region so it is highly dependent on how that perticular industry will perform.It is high risk investment.However as high risk comes with high reward so this mutual fund can generate high return but at cost of high risk.

5 INTERNATIONAL MUTUAL FUNDS :

International mutual funds can invest the fund outside the country.It provides the investors a lot of diversification by investing in many companies.They invest in companies that are suited for investment outside of US.The return on investment is not known in this fund.

Domestic-international : In this mutual fund 65% of money is invested in domestic equity market and the rest of money is invested in foreign market.
Thematic investment : In this the investment is made on the basis of perticular theme/sector/industry.
Feeder investment : In this the fund invest money in another fund of another country which further invests in foreign stocks.

6 EXCHANGE TRADED MUTUAL FUNDS :

Exchange traded mutual funds allows a standard mutual fund to trade real time on stock exchange.The performance of this mutual fund is directly linked with the performance of stock exchange.It offers both the benefits of mutual funds and the etfs.These funds are differ from etfs as they are not required to disclose their portfolio on daily basis.It offers both the benefits of mutual funds and the etfs.The benifit of this fund is that it has very less fees and also tax advantage.

7 FUNDS OF FUNDS :

This type of mutual funds invest money in many other funds which can either be in domestic or international exchange.These funds have pre-specified the schemes in which they will invest the money.They are of advantages as investors will not have to choose different mutual funds scheme.

What are blue chip companies ?

2020-02-07T14:59:00.000+05:30

What is blue chip refers to?What are blue chip companies?Who can invest in blue chip companies?

ORIGIN

The term “blue chip” has been derived from poker.In game,poker there are various colour chips like red chip,white chip,blue chip,but among all the blue chip is the most precious chip.These chips are highest in value.

Which companies are blue chips?

Blue chips are those companies which are well established,financially stable,well recognized.These companies have very less volatile.These companies have very less effect during economic down term.They have shown consistency and have stable performance.The market capitalization of these companies are in billions of dollars.They are usually market leaders in their sectors.Some examples of blue chip companies in India are TCS,Reliance industries,Infosys and many more.

Blue chip stocks

Blue chip stocks are the shares of blue chip companies.Blue chip stocks are generally priced high because of its reputation in market.These companies can easily bought or sold as there is always supply and demand of these stocks.However investor must keep in mind that these companies are not hundred percent reliable as these companies can also become financial unstable.Before investing one must check the financial ratios and the financial statements before investing.

Who can invest in blue chip stock?

Every person should have a blue chip company stock in their portfolio,but investor must keep in mind that these stocks are for long term.You can’t expect quick returns from these stocks therefore before investing in these stocks investor should determine whether he/she has patience and after that must invest

BASIC ABOUT STOCK MARKET

2020-02-05T08:51:00.000+05:30

Basic about stock market : what is stock? How can one buy/sell share? Different types of markets Different types of analysis

Read the article full there is a bonus point for the readers at the end of article

What is stock?

Stock(or share) is a type of security that represents one ownership in a company.When a person is buying stock he/she is buying a small piece of company.The amount of piece owned by a particular shareholder depends upon the amount of shares owned by the shareholder relative to the amount of shares outstanding.

A company issues stock when it want to raise money for growing its business and by owing a particular share a person is participating in company’s growth and will make money through the growth without even putting in work.

How can one buy/sell share?

Public companies sells their shares through stock exchanges like BSE and NSE .A person can buy/sell a particular share on the exchange on it’s own with the help of stock broker.The price of the stock is managed by stock exchange with the help of supply and demand.The stock exchange also act as a guarantor of settlement.

A stock can also have private sales but it is very difficult to know the price and also to find the seller/buyer.

DIFFERENT TYPES OF MARKET

There are two types of market

1. Primary market

2. Secondary market

1 Primary market : A primary market is the market where the issuance of new security happens.When a company sell new stock and bond for the first time .It helps the company to raise money directly.

2 Secondary market : A secondary market is the market where the security is sell/brought between investors.Here the securities are exchanged which are previously issued.It helps in providing liquidity to the investors as they can easily buy or sell security they own

So the particular difference between primary and secondary market is that In primary market company raises the money whereas in secondary market shares are exchanged between investors the company gets no money with increasing the price of security.

DIFFERENT TYPES OF ANALYSIS :

There are two types of analysis

Fundamental analysis
Technical analysis

1 Fundamental analysis : This type of analysis is done for long term investment.Fundamental analysis is done by collecting the financial statements and doing research on it for finding the true value of the company and future value of company.The main aim of fundamental analysis is to know everything about the business before investing

2 Technical analysis : This type of analysis is done for short term investment .In this analysis the trader analysis the supply and demand of the stock and based on that he/she takes the decision.This is done by collecting various data using charts,momentum,price variance etc.This type of analysis has nothing to do with fundamentals of company.

Now as I said that there is a bonus point at the end

To know that whether the market is high or low , it's impossible to check each stock price so you just need to see the stock index.So just by looking at the index you will be able to know that whether market is high or low

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