S.M BLOGS

MUTUAL FUNDS AND IT'S TYPES

2020-06-15T16:55:00.000+05:30

INTRODUCTION

Hello Friends, today's blog is going to be educational and related to your personal finance. In this blog, I will educate you regarding mutual funds. What are mutual funds? How to invest in it? All the necessary information regarding it, being a common man or a beginner investor, all the information you will get in this blog. Let's start.

VARIOUS TYPES OF INVESTMENTS.

Various types of Investments.

Friends, every month when your salary is credited then you keep some part of that salary as savings. You keep some money for your later use, maybe for emergency or if you want to buy the house, or car and you save for that, so what are the ways to save. One simple way is that you keep your salary as it is in the bank and it gets collected. It's a very bad way friends, because such money loses their value, Inflation is increasing in our country and due to that the price of the commodities are increasing too. So, the value of your money keeps decreasing every year by 4-5% according to the inflation rate. People invest the money so that they don't lose their value kept just lying. There are different places to invest. Our country has mainly 4 places for investment. No. 1 is a savings account, No. 2 is FD or Fixed Deposit, No. 3 is Gold or jewellery People buy gold or jewellery with their money and No 4. is Real estate. People buy properties, or land or house. Some people who want to take more risk also invests in the stock market which is another way to invest your money. Every Investment has 3 things, Return, risk and time. Return means how much per cent of profit are you going to earn through that investment, this is normally seen in percentage. If our inflation rate is 4% then you should see that your profit return is more than at least 4 % otherwise there is no point of investment if you have put your money and the value didn't increase, because the inflation rate is also increasing Risk means how risky it is to invest, what is the chance of losing all your money in that investment. What is the chance of going in loss after investing there and time means for how long are you investing. So the basic risk here is that if the time is more, the risk is more then the returns will also be more.

DIVERSIFY YOUR INVESTMENTS.

Diversify your Investments.

If you want more return percentage on your investment then you will have to take more risk and should invest for a longer period saving accounts has the minimum risk and there is no restriction too. You can save or take the money out at any time. But the return we get here is also very less, only 4% whereas our inflation rate in the last few years have been 4-5%. Fixed deposit is also a less risky option but it has a time limit before that we can't take the money out, hence the return is also a bit more, somewhat 7-8%, Gold and jewellery these days have a significant risk, their prices fluctuate a lot if you are going to see this history then you will know that until 2012 the prices were consistently increasing if you would have invested before 2012 then you would have got a good return here. But after 2012 there have been a lot of ups and down but they have maintained a level, hence there's not a much profit. to earn in gold. Investment in the properties and real estate investments has low to moderate risk I would say, you can see India's housing prices in the last few years. It has come up and down a lot. In the quarter or March 2011, it has touched the return rates of 30%and in March 2018 latest quarter then it gives just 5% return rates. One of the disadvantages in investing in housing is that it needs a lot of capital, you need to have lakhs and crores of rupees to invest. So this is a disadvantage.

You might have heard about stock market friends, you can get a lot of returns here but also can lose a lot of money. The risk of investing in the stock market depends on the stock where you are investing. You need to have a good knowledge of the performances of the stock and how does the stock market works basically, you shouldn't be investing here if you don't have this knowledge. So these are a few main types of investments that I have told you but there are some other types too. Like Government bonds, corporate bonds, we have cryptocurrency to these days, people also invest in bitcoins A general well-known advice is that friends you should never invest your money only at one place. You should invest at different places so that if there's any crash then you will not have to bear a huge loss. It's a very less chance of everything crashing altogether like, gold, properties and even stock market as this happens very rarely, chances are that if one thing crashes then you can get profit from the other. This is called diversification, you have to invest at different places.

WHAT ARE MUTUAL FUNDS AND HOW IT WORKS?

How Mutual Funds Work.

Mutual funds are a special kind of investment through which you can invest in different types together, you can do a diversified investment by investing in one place. Asset Management Companies starts mutual funds. You give your money to Asset Management Company and many people like you do so and that company invests all the money collectively at different places. They have appointed experts and with their suggestion, they invest the money. They invest money at different places and the return rate they get collectively from these different places out of that some small per cent of 1-2% is kept as a profit by the company and the rest you get back as per that return rate. HDFC, HSBC, ICICI, Aditya Birla, Reliance, TATA, these are the few examples of companies and banks who have started their own asset management company. All the companies start different kinds of mutual funds in large numbers. For example, ICICI has started more than 1200 mutual funds.

So how risky is your mutual funds and what is the return depends on the mutual funds that you are investing in. Mutual funds can give the return rate of 4% and also of more than 30% too. It can be of zero risk and also of high risk too. Because all this depends on where the asset management company is investing your money. If that company is investing in stocks then it will be riskier and you will get more returns and if it's investing in the government bonds then it will be less risky. Different types of Mutual funds depends based on the investment done by AMC.

TYPES OF MUTUAL FUNDS.

Various types of Mutual Funds.

We can divide this into 3 categories: Equity mutual funds, Debt Mutual Funds and Hybrid Mutual funds In Equity Mutual Funds, your money will be invested in the stock market. So naturally in this type of Mutual funds generally the risk is more and also the return. In the stock market on which kind of company are you investing, if it's a big company then it's called as Large Cap Equity Funds If it's a small company then it's called as Small-cap and in the same way Mid Cap equity Funds. Big company doesn't have much risk as compared to the smaller ones but big companies won't have growth rate as high as it can be for the smaller companies. So risk and return both are less in the big companies. ICICI prudential blue-chip fund is an example of a large-cap equity fund. If you invest here for a year then after a year your expected return is of 11.3% but if you invest for 5 years then your expected return can be of 19.7% As I've told in the beginning of the blog, the more time you invest in, the more return you can expect. Here we have a very useful smartphone app. It's called as GROWW this gives information about mutual funds, here you have to set every month what amount do you want to invest, for how long and you will get the expected returns. This app works by checking the history of the mutual funds. That before today in the last 5-10 years what has been the performance of the mutual funds, what's the growth and it gives you the number based on its average growth. I gave the example of the ICICI that you will get 19.7% return in 5 years, this is an expected return rate calculated by this app based on the history of this mutual fund So it's a very good thing to calculate the expected returns of the mutual funds. But one thing keep in mind friends that this is an expected return, not the guaranteed return, it still depends on the market since the mutual fund has given such a performance in the history that doesn't mean that will perform the same way in the future. It still depends on the stock market so it will have risk, especially because it's an equity mutual funds and investment is on the stock market. So don't just look at the returns rate and invest, if you scroll down then you will see the pros and cons too.

HOW TO SELECT BEST MUTUAL FUNDS BASED ON PROS AND CONS.

How to select Mutual Funds based on it's Pros and Cons.

Pros is that the risk is lower as compared to the benchmark, that means among all the other Large-cap Equity funds, the benchmark of the risk of this particular fund is less So this is a good point here that compared to the other ones as this has less risk. Another point is the lower expense ratio, is that percentage which is the part taken by the asset management company as their profit the commission for investing on your behalf, so this is lower as compared to the others which is again a good comparison. I look at the more pros then you will see that it's returns are more than the benchmarks in 1 yr, 3 years, 5 years. In some mutual funds, they give one year 1 return more than the benchmark and less in 3 or 5 years. that means it's better for short terms. Look at the pros and cons and decide what is better for the short term and other things can also be compared.

In cons, it says that asset under management, that means they have a total value of the money this company has invested at different places has crossed 15000 crores, so it happens that if the value crosses a particular point then the returns rate gets decreasing slowly because the value of the money is so much that taking returns is difficult and this you can see for yourself.

So let's get back to the different types of equity funds. Next type is Diversified equity funds here the investment is done in the large, medium and small-cap or it's done in different companies. Next type is Equity Linked Saving scheme that is ELSS, this is a special type of Equity fund where you can save your tax. You can save the tax on its profit. The fund manager purposely invest in such places where there's high return and also has high risk. IDFC Tax advantage is an example of ELSS funds with the expected returns of 11.3% within a year.

Next type is Sector Mutual Funds, here specifically such companies are invested on which belongs to a big sectors like Agriculture sector, and invests money in all the companies which are under the agriculture sector. One example for this is UTI transportation and logistics funds. so the investment is done in that sector these funds are riskier, since all the investment is done in one sector so if the sector is going down everything depends on that. The last type of equity fund that I would want to tell you is an Index fund.

Index Funds are passively Managed funds that is no agent of AMC is looking at where to invest the money here These are passively managed that is according to the market's rate's up and downs they too go up and down. looking at the price of Sensex and Nifty it varies.

WHAT ARE DEBT MUTUAL FUNDS?

Now let's look at the second category of the mutual fund's friends, that is Debt Mutual Funds these are those mutual funds which are invested in the debt instruments. Debts instruments are bonds, debenture, certificates of deposits, I will tell you what are bonds, sometimes if the Government needs money and it's not getting that through the budget then the government borrows money from the people and take loans from the people it is called as bonds you can invest here, give money to the government and the government will return you the money after a fixed interest. Now debt mutual funds are of various kinds, let's first talk about liquid funds, these funds are those mutual funds which can be easily and quickly converted into cash ,it's not the liquid to drink. In economics, the liquid is something which can be easily converted into cash. So this thing can be converted into cash within a day or two. But it has a very low risk, such low that you can consider this as an alternative to the savings account. Asset liquid fund is one such example where you will get the return of 7.1% in a year.

Next type is Gilt Funds, these are those funds where Investments are done on the Government issued bonds. So technically it has zero risk because it's never possible for the Government to not return your money. Mostly the interest rate can fluctuate.

Next type is Fixed Maturity plans and this can be considered as an alternative to Fixed deposits, because it has very low risk just like FD and it is done for a fixed time. For a specific time investment is done here and you can't take the money before that. So these are the few main types of Debt funds there are more like Junk Bond scheme.

Hybrid Mutual Funds.

The third category of mutual funds is Hybrid Mutual Funds friends, basically its a mixture of debt and equity mutual funds. Some people want to invest in the stock market but don't want to invest all the money there and also invest some amount in the Debt instruments., so hybrid mutual funds are for them. If most of the money is invested in a Debt fund then it will be called as the Balanced savings Funds Approximately the ratio is 70:30 that means 70%of your money is at the low-risk debt funds and 30% is in the equity funds and if it's the other way, 70% is in the equity funds at a higher risk, then it is called as a balanced advantage fund.

ADVANTAGES AND DISADVANTAGES OF INVESTING IN MUTUAL FUNDS.

The biggest advantage of mutual funds in comparison to other investment is that it is already diversified. Your risk gets very low due to diversification because you are not investing in one place so if one thing crashes so it won't affect your money. So in comparison to the stock market, gold, real estate, mutual funds are less risky however the exact risk depends on the mutual fund that you are investing in. One more good advantage is that it is affordable, you don't have to invest a big amount altogether you can use SIP and invest a small amount every month and all the investment of the mutual funds is done by a professional expert or a fund manager who decided where to invest and where to not. This you don't need to so it's again a big advantage that an expert is working for you. But friends this mutual funds has a disadvantage too. If you are giving it to an unknown person, you don't know how it's going to perform however he is an expert but you can't trust 100% that an expert will be right all the time. But the biggest disadvantage that used to be for the mutual funds earlier is that the agents used to take a lot of commissions for investing in the mutual funds. They say that gives us the money we will invest for you in the mutual funds and deduct a lot of commissions for themselves now that disadvantage is not possible due to the smartphone apps who like GROWW, KUVERA etc apps where there is no hidden charges and also doesn't deduct it's hidden charges.

So I hope friends that you must have got a lot to learn so share this Blog with your friends and family and spread the knowledge with them too. and teach them about the mutual funds investment too. Let's meet in the next blog.

Thank you.

LESSONS TO LEARN FROM BERKSHIRE HATHAWAY'S AND WARREN BUFFET'S LATEST SHAREHOLDER'S MEETING 2020.

2020-05-12T15:23:00.000+05:30

Important Investing Knowledge we all can learn from Warren Buffet's Berkshire Hathaway's latest Annual Shareholder's General Meeting as an Investor.

Warren Buffet at the latest shareholder's meeting.

Whenever we talk about investing, Warren Buffet comes to our mind. He is the CEO of Berkshire Hathaway, a company that recently held its Annual Shareholder's Meeting. In this meeting, they disclosed the considerable amount of cash the company holds, where the company has invested and what are the stocks they sold. Every Investor is curious to know that what is the most successful investor doing at this time and what are his insights. So after precise analyses of what Warren Buffet said and figures his Company disclosed, there are many things we all should learn as an Investor. Let's discuss them in detail and understand how we should plan our Investments in difficult situations like this.

1. Book Losses if you have to and exit at the Right Time.

Cut your losses and exit at the right time.

This is a very difficult situation for everyone. All businesses are suffering huge losses because of the lockdown situation, Airline Sector is the most affected sector as no flights are taking off and airlines have to incur huge maintenance costs because of this, all the investors who invested in this sector are suffering huge monetary losses. Berkshire Hathaway, Warren Buffet's company recently made known that it held about a 9-11% stake in many airline businesses in the U.S., as he was very confident in this sector and its growth potential. But in the recent meet, he said his company had sold all the stocks he had in this sector, for which he and his company had to suffer huge losses. The learning we get from this is we shouldn't get linked to any company or any investment emotionally and exit at the right time even if we suffer a loss. When you feel your company or your Investment is not going to perform in the coming time, that is the right moment to exit and minimize your losses.

2. Invest in the Index and be Patient.

Index Funds are the best for naive Investor's

Investing is a broad concept, which needs great analytical skills, very active participation in the market and various other additional skills to identify good businesses and stocks, which is difficult for everyone to possess. So, the second learning covered in the speech of Warren Buffet is the best investment strategy for an investor. The finest investment strategy for a naive investor who doesn't invest very actively is to invest in an Index. If you believe in the growth story of a country, that is the best option because the equity market always recovers over time. So if you are not an active investor, you should invest in Index Funds which tracks the Index of that particular Country, like NIFTY50 and SENSEX in India.

3. Always keep an Emergency Fund.

Always have an emergency fund to mitigate your risks

The Amount of Investment done by Warren Buffet in the recent quarter is around $1.8 billion, while the amount sold is $6.8 billion. When he was asked about his Cash Reserves then the amount disclosed was $137 billion. He says that, he keeps this as a way to mitigate his risks in case the situation worsens. We all can take a lesson here that one should always keep an Emergency Fund with them and not Invest all together in his business or in the stock market at once, you never know what will happen in the future and at that time this Emergency Fund can help you to mitigate your risks.

4. Conclusion.

This article/blog was the analysis of the speech given by World's most successful investor Mr. Warren Buffet in the latest annual general meeting of his Parent Company Berkshire Hathaway's, which offers valuable teachings for Investors, that you should accept your mistake, if you invested in the wrong place or if it was in a good place and because of the current scenario it has become wrong one should exit at the right time. Secondly, the best investment strategy is to invest in an index fund instead of going to an investment advisor, which increases the chances of making money in the longer horizon and third and the most important one is that the Emergency Fund is very important to mitigate your risks in the future and everyone should keep an emergency fund with them. So with this learning I hope you invest well in the coming time, you will make good returns and with that good return, you will become a good and Intelligent Investor.

Positive Effects of Coronavirus on the Environment

2020-04-20T18:02:00.001+05:30

Positive Effects of Coronavirus on the Environment

Mumbai due to a reduction in pollution levels.

The Novel Coronavirus has been a disaster for the entire World, took lives of several people, lead to thousands of Job Losses, destroyed several families from around the World, various developing Economies have come to a halt because of the Lockdown situation, businesses are suffering Enormous monetary losses, there been a huge fall in the price of crude oil, it's like a Bad Dream, but as we say every negative side has its own positive side. Coronavirus has been a blessing in disguise for our Environment, and we all are witnessing the drastic change in our surroundings, the Sky has actually turned blue, the air has become cleaner and similar news reports are pouring in from the Worldwide. So let us understand What is the impact of Coronavirus and Lockdown on the Environment? and What can we learn from it?

Reduction in the levels of Nitrogen-Dioxide & PM 2.5

Reduction in NO₂ levels due to Lockdown.

Nitrogen dioxide or (NO₂)is a toxic gas emitted from the engine of cars, buses, trucks and from factories. World Health Organization(WHO) states that if this gas is more in concentration than 200 micrograms per cubic meter then it can cause an enormous inflammation in your breathing pipe which can cause problems like asthma. Presently, because of this lockdown, the number of cars plying on the roads has become less, factories have shut down and because of that the concentration of nitrogen dioxide in the air has fallen drastically.

Reduction in PM 2.5 Levels due to Lockdown.

Particulate matter 2.5 or PM 2.5 is another deadly form of Air Pollution it is so small that it can travel from your lungs into your Blood which will not only cause respiratory problems but also cause Heart Attacks and can also lead to Premature Death. It is so lethal that the World Health Organization estimates that more than 4 million people are killed due to PM 2.5. Now because of the Lockdown, even the PM 2.5 levels have also reduced Worldwide, and because of this, several lives of people will be saved who die because of Air Pollution.

WATER POLLUTION.

Yamuna River due to Lockdown

Not only Air, but the water of our river is additionally becoming cleaner Delhi Jal Board Vice Chairmen, Raghav Chadda, says that due to the stoppage of industrial waste there has been a beneficial impact on the water quality of River Yamuna, also a 40-50% improvement has been seen in the water quality of River Ganga.

CLIMATE CHANGE.

Change in Climate due to a reduction in Pollution levels.

All of us are aware that Carbon dioxide emissions are responsible for Climate change. If you look at the historical data of where the worldwide carbon-dioxide emissions are emitted from, then you will notice that the transportation sector has the massive contribution in it, and obviously, during the lockdown, there has been a decline in all of it, lesser number of cars are plying, lesser planes are flying, so there is a massive decline in carbon dioxide emissions. But how much massive? Experts are predicting that this is the biggest decline in carbon dioxide emissions after World War 2. Approximately, a gradual decline of 5%.

CONCLUSION.

Promote Renewable Energy.

It is a profoundly depressing situation for everyone because of the Corona Virus, but also there is a golden opportunity. Opportunity to restart the economy in a more ideal situation, the government can utilize this opportunity to push the Renewable energy industry, when the government will transfer money to the industries to revive the economy, the government should focus more on renewable energy which will benefit the environment. Maybe we should try to ensure such lockdowns every year in a planned manner, so the entire population of the country realizes and observes how clear can the air and water become, all can have a glimpse of the potential of where our country can reach. What do you all feel about this? Write your thoughts in the Comments section below. If you found this article/blog informative kindly share with your loved ones so they can also understand and realize the positive effects of Corona Virus on our Environment.

THANK YOU, STAY INFORMED, STAY UPDATED

LONDON - The Hotspot for Indian Fraudsters

2020-04-11T15:25:00.001+05:30

Why Indian Fraudsters Escape to London?

United Kingdom is Ideal Place for Fraudsters.

We have heard several times that fraudsters like Vijay Mallya, Nirav Modi, Lalit Modi, etc have fled away to London after committing huge monetary frauds in our country and not only them various fraudsters from around the world escaped to London after committing frauds in their respective countries. So, the question is, why these fraudsters like Vijay Mallya, Nirav Modi prefer London as their ideal destination and not another country? Are they safe there? let's understand and find out the real reason why these fraudsters prefer London as their ideal destination.

Top Indian Fraudsters.

INVITATION FOR FRAUDSTERS BY UNITED KINGDOM

Fraudsters are Welcomed at the United Kingdom

Anyone who has committed fraud in their country and plan to escape that country with all their wealth then the United Kingdom welcomes them on the condition that one should bring an abundance of wealth to their country, they provide different facilities to them like the GOLDEN VISA, this is the special visa to enter the United Kingdom and can be obtained if you invest £2Million in their country, after which you can easily stay in that country for a long time, they also provide various facilities by which you opt to stay there for a lifetime but for that one should have an abundance of wealth with them. Not only the U.K. several other countries also try to attract money into their economy by using similar kinds of practices like if we talk about SWITZERLAND they attract a lot of wealth on the name of Secrecy and allow people to deposit their Black Money in Swiss Banks which helps them to develop their GDP and Economy, if you wish to know more about the same then you should refer this Article about how Switzerland allows people to deposit their Black money.

THE FALSE EXCUSES OF THE UNITED KINGDOM.

India Requested U.K for Its Fraudsters

In the recent past years, Indian Government has requested the U.K Government to return 131(approx) criminals back to India which includes the likes of Vijay Mallya, Nirav Modi, Lalit Modi, Tiger Hanib(suspect of 1993 Gujrat blasts), Nadin Saifi (Murderer of T-series founder), etc. The U.K Government denies to return them to India by making various excuses that they are the Signatories of European Convention of Human Rights, which means that if the British Courts feel that any person can be tortured or have to serve Death Penalty or any country wants that person for any Political Reason then they would not return that particular person to that respective country, but as we know the truth that the U.K is protecting those fraudsters for their wealth and investment in their country.

CONCLUSION.

The United Kingdom has become the favored place for fraudsters as the Law and the Government of the country is quite favorable for them, but as we say, that to every problem there is a solution. Fraudsters can be caught or recovered from the United Kingdom if the Government is pressurized from all fronts like when U.S.A pressurized U.K Government to return back their 130(approx) fraudsters only 10% were not returned to them, so it is quite possible to recover or bring back the majority fraudsters if the Government is pressurized. If you found this article/Blog interesting share it with others and if you want more such interesting Articles Subscribe by dropping your email and do not forget to leave your thoughts in the comment section below.

THANK YOU, STAY SAFE STAY UPDATED.

Swiss banks - Ideal Place for Black Money

2020-04-01T17:42:00.001+05:30

Whenever there a fraud in our country, we often hear about SWISS BANKS and also our government tells us many times to bring back the Black Money from the SWISS BANKS. So, what makes Swiss banks different from other Banks?, and why convicted Rich people overwhelmingly prefer Swiss banks as an idle destination for hiding their Black Money.

SWISS BANKS ARE IDEAL FOR BLACK MONEY.

⦁ THE BANKING LAW OF SWITZERLAND.

Account Details are not disclosed to anyone.

As per the Banking Law of Switzerland, the bank officials are not allowed to reveal the official name and other personal details of the Accountholders to anyone without the official permission of the Government, they are revealed only on the special instructions from the Swiss Court and the court passes such instructions only when there are criminal charges against the Account Holders like Moneylaundering, Fraud, etc. So the accounts maintained with the Swiss banks are Secret accounts when someone opens a Bank account with the Swiss bank he has to do the KYC like any other normal banks but the key difference is that Swiss Banks does not make known the Name, Address or other personal details of the account holders in its Bank Statements and Bank Records so the excessive secrecy of the accountholders is obstinately maintained with the Swiss banks and one cannot identify the account holder. And this is undoubtedly the corrupt reason why corrupt people reluctantly open their private accounts with the Swiss Banks.
Many countries have opposed this system of Switzerland and have pressurized the government to change its policy, but the Swiss government feels that there is no Flaw in their policy and there is no need to make any changes in its policy.

⦁ HOW SWISS BANKS FUNCTIONS?

UBS Bank has an abundance of Black Money.

There are 400+ banks in Switzerland where people can open their accounts but the main Banks are UBS and CREDIT SUISSE out of which majority of the accounts are opened with UBS Bank if we talk about the Total Deposit of UBS Bank it is close to $2.5 trillion which is quite close to the total GDP of India. Swiss Banks is quite liquid as they are not involved in Commercial Loans, unlike other banks which are quite dependent on giving Loans and suffer huge losses when there is a default in repayment of that Loan because of which Swiss banks are considered safest banks in the world as the chances of loss of money is invariably very less.
The other difference is that Swiss banks do not serve any interest to its account holders for their abundant money instead they levy standard fees for opening accounts with them like for UBS Bank it is 0.6% and the minimum deposit to open a Swiss bank account is $50,000. The other main advantage is that Swiss Frac(the official currency of Switzerland) and their financial system is quite stable as compared to other countries in the World as the Swiss Government prefers to stay neutral in various political matters in the World, so their financial system and Government are very stable.

⦁ CONCLUSION.

People hire agents and deposit their Black money in the Swiss banks and as per the Banking Law their identity is not revealed which means their money is safe with the Swiss banks, it is next to impossible to bring back the Black Money from the Swiss Banks as the Government is quite strict and their main source of Income is through Deposits from Rich people from around the World, so if any Politician or government promises to bring back the black money from the Swiss Bank Accounts do not believe them as it is not practically possible to do so. If you assuredly found this Blog/Article informative and genuinely interesting generously share it with your dear friends and family members and leave your feedback in the comment section below.

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Reasons for Fall in Crude Oil Price in the World

2020-03-28T19:59:00.000+05:30

The Crude Oil prices have crashed drastically in the World a few months before the price of Crude Oil was $60 per barrel and now it has crashed to $20 per barrel. So, What is the reason behind this uncertain fall in the price of Crude Oil?

Fall in price of Crude Oil.

The main reason behind this is the Oil price War between three powerful countries in the World namely Russia, Saudi Arabia and the United States of America. So, what exactly is this price war? And how will it benefit the other nations in the World?

First of all, let us understand a small basic economic concept that most of us already know that the price of anything or any commodity depends upon the Demand and Supply. If the Demand is more and the Supply is less then the price will inflate and vice versa. The same concept goes with the Oil if the Demand is less and the Supply is more then the price will fall. Now, the top three oil-producing countries in the World are the USA, Russia and Saudi Arabia. It is to be known that the USA was earlier an Oil Importing country but after they discovered a new technique of Oil Drilling which was a combination of hydraulic fracturing and Horizontal drilling called 'Shale Oil' due to which it extracts more oil from existing oil fields in a more profitable manner, by the help of this new revolutionary technique the USA eventually became the oil-exporting country infact, became the number one oil-exporting country leaving behind Russia and Saudi Arabia.

USA Shale oil Drilling Technique.

So, due to the production of 'Shale Oil', the supply of oil increased and the Oil prices fell, this meant that the profit of OPEC countries and Russia began to deteriorate. But today in this current scenario when the demand for oil is very less due to the pandemic of Covid-19 and lockdown in various countries, Russia feels that it can root out the private drilling companies of the USA from the competition and can capture back its market share in Oil Production and for that, it has increased its supply of Oil and because of that the prices of the Crude oil fell drastically. If this continues for a long time the private companies of the USA would become bankrupt and eventually shutdown. Basically, Russia is frustrated with the USA for various reasons like it has imposed various sanctions on Russia which is already having a lot of bad effects on their economy, so they see this as an opportunity and is taking its revenge on the USA, and are ready to bear the loss, for the time being, Russia feels it might be able to do what OPEC countries failed to do.

But, the maximum benefit from this situation will be availed by the Oil Importing Countries like India, China, Japan etc. If we talk from the point of India, India spent $112 Billion to import oil in financial year 19-20, but if the prices remain same it is predicted that in the current financial year India will spend only around $64 Billion which means India will avail the benefit of approximately $60 Billion which is quite good for any developing country. So these are the main reasons behind the fall in crude prices in the World. I hope you would have found this article/Bolg informative if you did kindly share it with your friends and relatives and drop your feedback in the comments section.
THANK YOU, STAY SAFE, STAY INFORMED.