We have always been thought that any fluctuations albeit even the smallest one can have a very big impact on the overall economy of the country. Have you ever thought about the repercussions that the changes in the stock market can have on the society as a whole?
There are many reasons that can be attributed to the fluctuations in the stock market. In the same vein, the fluctuations in the stock market can also be responsible for changes in the individual business. Let us see some of the factors that can be attributed to the company which can lead to fluctuations in its stock prices. The impact of the following can be positive or negative depending on case to case.
- News releases from the management about anything that has a direct bearing on the bottom line of the company;
- Announcement and distribution of dividends;
- Launching of new product or introduction of a new service;
- Signing on a dotted line of a very prestigious contract;
- Layoffs, attrition or downsizing of staff;
- Any news about pending mergers, acquisitions or change of management;
- Any scandals uncovered or past skeletons that fall off from the wardrobes, etc.
The question that a lot of people have on their mind is doing the impact of a company’s stock affect others in the same industry. The answer to this question is self-explanatory. It has often been noticed that when the stock market fluctuations happen and they impact a company the entire industry is affected simultaneously. The company and its impact cannot be viewed in isolation.
The public sentiment:
- The bull market:
The general sentiment of the public determines greatly the way the companies perform during a stock market fluctuation. If the stock prices are rising and the market is bullish, there is a positive sentiment in the public and subsequently, the purchasing power of the people is on the rise because of the sentiment that they have become rich due to the notional increase in the value of the stocks that they are holding. This infuses a positive air in the market and like a circle, the economy is more of a recovery mode, especially if there is a recession lately.
- The bear market:
The opposite happens when the market is bearish. Investors and consumers have a pessimistic attitude and they shy away from spending or investing their money in goods and services and rather park it in savings accounts, this result in further stagnation of the markets.
The political conditions of a place can also have an effect on the stock market which also influences the way the companies are affected. If there is a violent change in the government or even during elections, threes a high chance of market fluctuations which can affect businesses too even if for a shorter period of time.
If you are in your youth and earning handsomely, chances are that you have settled in for investing in Equity Mutual Funds that will help you earn good returns rather than park your money in a savings account where you can only earn a pittance in interest. It is good to appreciate the fact that like all other investments, mutual funds are volatile and uncertain. It is a characteristic that is part and parcel of this kind of investment itself.
There are times when you are extremely happy with the way your portfolio is shaping up and the high returns that you are making. You may possibly think that a company which is growing your funds by leaps and bounds is something that you should stick to but in reality, it is not always possible that a company will have the same winning streak year after year. It invariably does take a beating at some point in time. And that is precisely the reason why you must consider reviewing your portfolio often without any prejudices. I am saying this because the mutual funds that you thought were underperforming in your portfolio may at one point in time perform so well that they can leave the hitherto well-performing ones in its shadow!
Here are other good reasons to review your equity mutual funds periodically:
- Building a robust portfolio;
- Monitoring performances of the various schemes in which one has invested and
- In order to be able to make additions or deletions in the portfolio
It is very important to not measure the performance of a particular mutual fund in isolation. The best method that experts recommend is to measure it against its benchmark. The moment you feel that the mutual fund that you are holding is consistently underperforming across the benchmark, it is time to replace it with another better performing one!
Avoiding the temptation of over reviewing:
It is, however, important to state here that one should be wary of reviewing a scheme too close to an upward or a downward movement in the market. One should be able to give the portfolio manager enough time to be able to generate enough funds in the portfolio. There is a consensus among the experts in the field that a period of 18 to 24 months is a good time to review all the investments.
Reviewing is helpful:
The simple exercise of reviewing investments can open your mind to understand the schemes in which the money is invested. Changing schemes definitely helps to check if the investments are in alignment with the person’s short-term and long-term goals.
Anyone excited about naming their nest with their label will be for a bit of confusion initially while approaching a home loan lender. What type of loan your application come under and what will the change in terms and conditions depending on your eligibility and so on may be roaming in your thoughts. Bid adieu to all those confusions for you can directly bank upon us if you are employed. We are specialized bankers providing home loans only to the salaried employees, both in public and private sectors.
We make the journey to your home the smoothest by:
Home service including preliminary loan inquiry, application submission, document verification, legal and technical formalities and cheque disbursement.
Twin loans: You can avail home loan for an already constructed property or purchase a residential property for the construction of a home. The loan in the latter category will be considered as a property loan initially with the same rate of interest as the home loan. There are no conversion charges either and no fresh application is required. Once your plan gets approved, you have to submit the same to us and any other requirements you would like to include in the transaction process. The loan automatically gets converted into a full home loan.
Flexible loans: You can always change your EMI schedules, the tenure of the loan, and principal top-ups by a single authentic application. The bank does not levy any extra charges for utilizing the flexible nature of your loan.
Free processing charges: For government employees, we do not levy any processing charges for applications submitted any time throughout the year. For applicants working in the private sector, the offer will be valid for a fixed time period every year and will be notified through our official website.
Joint legal and technical counseling: Right from the start of the application process, we entitle one of our representatives to make you informed and updated about the advises and look-outs regarding the legal and technical features of your property. You can also request a one-to-one meeting with the experts without paying any extra fees. Your big step of owing the dream house should take you into your family heaven and we ensure that your decision is right in all aspects.
Multiple repayment options: We offer three types of repayment options for our customers:
- Regular scheme: All is well in this traditional type of one EMI of fixed amount throughout the pre-decided tenure.
- Top-up scheme: You salary may be exponentially high next year and you are in financial crunch currently. Pay reduced installments for the current year, and increase your installments with the increase in your income.
- Pre-payment scheme: Want to close your loan early? Opt for pre-payments without any penalties.
The biggest hedge fund that was led by John Meriwether who was the Nobel Prize winner was ‘Long-Term Capital Management’ or LTCM in short. The entire global financial system almost crumbled because of the trading strategy that is arbitrage which is a high-risk one was introduced by LTCM.
About John Meriwether
John Meriwether was one of the Salomon Brothers and also was an economist. He has also won a Nobel Prize for his work that created a boom in the financial market in the year 1998 by introducing LTCM. The LTCM was found in the year 1993 by him.
Long-term Capital Management in Depth
The focus of LTCM was trading on bonds and in its initial stage, LTCM began with assets worth just $1 billion. The trading strategies of this hedge fund were making a trading that was of convergence type and when we say convergence trading it means that the trading was done in order to take the advantages of arbitrage between the two securities. The securities involved in this type of trading are mostly not correctly priced and relatively similar to each other during trading.
An example that we can consider is that when the rate of interest changes they do not reflect appropriately on the price of the securities. When the price does not reflect adequately the traders will have a lucky chance of trading this type of securities that are at this value as it is different compared to what value it will soon have when the new rates reflect on them. The other things that LTCM dealt with were interest rate swaps. This includes exchanging a serial set of interest payments that will be done in future with another and this depends on the specific principle that is agreed upon between both counterparties. Most common interest rate swaps take place between the change that takes place at a fixed rate and the floating rate or the other way around. This will reduce exposing to any fluctuation in the interest rate that is generally available.
The leverage offered by the LTCM itself is very high since it is not widespread in arbitrage opportunity hence they make money on assets. Long-term Capital Management had roughly $5 million which controls over $100 billion and totally worth $1 trillion on the positions. During this time LTCM also took the amount that was exceeding above $120 billion in financial instruments.
When we say that a company is out –and- outrun on various financial concepts and strategies, it is also important to understand why they are important and how they are important for the business. A business is generally run based on the elaborate plans and forecasts made at the beginning of the year.
Every business begins with the plan and it is based on this that the business is run and managed by the business people. Now such important decisions and forecasts are made with the help of financial concepts and strategies without which there would be no value to the business operations. Let`s now take a look at how these concepts play the game changers in business operations.
- Risk – this is a very important concept or fact that every business should be ready and prepared to try out. Yes, for example, a business that is focussed in a particular area has been very successful and is now crossed its saturation level of serving the same set of customers, must be ready to take risks and venture out the other possible, probable and profitable areas looking out for opportunities. It is this risk-taking adventure of the business that would get paid well with rewards.
- Increasing the cash flow by decreasing the delay in their receipts is an important thing for every business. There are always dormant accounts for every business and getting payments from them is always a trouble for the business. All businesses should always have strict receipt policies and dare to dissolve all the dormant and delinquent accounts taking a bold step ahead. Understanding and realizing the fact that on-time payment receipts would help a business in concentrating and focusing on the business developments make for a good and smart businessman.
- Now that being said, it is also important for a company to be prompt in its payments. When a company expects its customers to pay on time, it is also important that it, as a customer to some other company, need to be on time in its payments. So it is this strict payment concepts and schedules that would lead to smooth business transactions The regular inflows and outflows would also build a good relationship between business dealers.
- The businessman should always be on the lookout for any opportunity costs that he could make use of or benefit from. This mainly happens when he or she tries to venture into different lines of business.
Fund management is done at its best by the fund manager of a company. But how does he do this? Is this the only job of his or is he vested with some other related duties and responsibilities too in allocating and managing the cash flows of a company? Here is a detailed explanation of the same.
Responsibilities of a fund manager
The major role or responsibility of a fund manager is to handle, maintain and control the cash flows of a company. At the same time, he also becomes entitled to hold and take some other responsibilities in the company, those that are closely related to fund management. Let`s take a look at these for better understanding.
- Long-term investments – it is based on the cash availability and cash rotation that a company plans its investments and investments plans. Now since this cash flow is maintained by the fund manager he plays a crucial role in advising the company regarding the investment opportunities and windows that would suit and be profitable for the company. Generally, companies try to make long-term investments which are considered to be very profitable. It is, in fact, the best option for companies because they can afford to hold money for a longer period of time than traders as individuals and hence companies try to get into long-term investments. So in doing this, a fund manager becomes one of the best advisors apart from the financial advisors of the company.
- Asset allocation – generally it is on the assets and bonds that companies try to trade on and the selection of the best asset is done by the fund manager. Trading market is a highly volatile one and there happen changes every moment which leads to changes in the value and performances of the assets too. So it is probably the fund manager who constantly has a watch on the market who will be able to advise the company on the same when comes to investments in a particular asset.
- Diversification – it is also important for the fund manager to work on the ratio of risks a company would be able to digest in and accordingly try to allocate funds on various assets when comes to investments. Yes, this way he would also be helping the company from incurring huge losses for the loss from one investment would be offset by a profit from the other. So this job of diversifying the investments is done well by the fund managers.
We must have heard about many companies getting merged with another or one being acquired by another company. Does this happen all of a sudden or is it that they find it beneficial to merge and so they merge? Do they do it with a purpose or does this happen just on a mutual agreement between the two companies? What exactly is the reason or the circumstances under which a company gets merged with the other or gets acquired by another?
None of us might have given attention to such points because we are least interested in all these. So when do we really take a note of it? When we have our shares in one of those companies or when we are being served by the services of one of those companies?
The reason or the need might be anything or nothing at all but to understand the exact meaning or the reason behind a merger and acquisition, a person should probe into the various reasons that might be causing this. Now here are few important reasons other than the economic factor which is generally the core of any merger and acquisition and understanding these would help a person in justifying his acceptance for a merger or an acquisition.
- A company might decide to merge with another when the former one wants to make a move or an entry into a market that is already been well explored by the other company. In such cases, the former instead of just starting from scratch, it would find it more suitable and beneficial to work in a merger with the latter and this might be one very major reason for a merger.
- A company might get merged with another or acquire another company when the two feel that they should come together combining the distribution of the products they are leaders at in the market to have a competitive edge over the others. So the two products start reaching the market as a single product line thus making it easy for the two merged companies to find a position in the market.
It’s finally about the survival of the fittest in the market and when this is possible for a company when it works in unison with another company and its services, why not go for a merger or an acquisition? And it is in these lines that companies get together to capture the market and agree to share the profits on a mutual understanding and agreement.