Hole in the pocket- inflation

Signs of active and lively business in today’s world depend on the acceptance and application of changes which takes place whether it is demand supply, consumption, workers, changing prices, borrowings. All these make a great impact on the inflation movement. When not balanced and taken proper measures to handle the exchange activity, inflation can actually burn a Hole in the Pocket of any Business.

5 Impacts of economic inflation on business:

  • When inflation occurs, businesses that supply goods or services will increase the prices which are higher on demand relative to its supply, and those who want to purchase will be prepared to pay more which in turn creates Demand-pull inflation scenario. It will affect the consumer purchasing since the cost of the goods or services increases, the demand would decrease.
  • The rise in prices of factors of generation including labor, raw material results in the poor surplus of this commodity. Since the exaction prevails stable, the price of the commodity increases reasoning to increase in the all-around cost zone resulting in Cost-push inflation in business.
  • Inflation rate and inventory turnover go together throughout a business’s tenor. For the better use of resources, a company would expect a low inflation rate and a higher turnover ratio. To derive average unit cost, the total cost of goods in stock is calculated against the total stock available. It’s important to find the right way to switch inventory method for allocating inventory to sales. Especially while inflation is rising, FIFO would work better as inventory purchased at the initially lesser market price would be sold at a rising price providing higher returns. While inflation is at its peak, LIFO would work just better than FIFO as goods purchased at higher prices are sold at peak rates thereby leaving sufficient inventory in hand purchased during initially low prices to be sold at declining prices while inflation corrects.
  • Employee wages that are fixed and the employee on contract base has to be adjusted timely with inflation changes for the business to move smoothly and to encourage the employers which in turn affects the buying power relative to rising prices.
  • Investments and borrowings are the two wheels of any business which generates the monetary requirements. High inflation leads to increased rate of interest and business suffer as they have to pay a higher rate of interest for their borrowings as the risk of loan default is more when inflation rises.

 

 

 

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How to Determine the Future of Stock Market

Stock markets are the most challenging to understand and speculate. But once understood and well-read about its features this can be the top grossing business to earn a livelihood. Yes! You read that right, this can be a very promising investment for you and a very easy when you completely understand all the small loopholes and how to handle them. The timely knowledge and also investing can save you many pennies of risk and loss.

Many speculators and investment geeks suggest 5 factors which are crucial for a healthy and secure future of the stock market. They are:

  1. Economic growth:

The consumption of goods and also the investment in business has been a major factor in growth in the economy. Financial experts also feel that stable factors in the economy contribute to this growth at large ad it is very crucial for the stock market also.

  1. Monetary policy:

Though there will be many tightening government regulations, the economic growth stays stable and growing better . this is what has been seen as a positive factor by many investment advisors. Whatever central banks impose there won’t be much of any disturbance.

  1. Yield curve:

There is a very religious increase over bonds in the recent years which show that there is a positive future for the stock markets. A yield curve is an economic factor which helps to showcase such a situation of positive growth. These also boost up the economic growth in many places hence the yield curve and its shapes should be carefully analyzed.

  1. Liquidity and volatility:

The process in which the stocks can be easily made to cash is called a liquidity position and the unpredictable market where such things happen is addressed as a volatile market. These two are important to judge how a stock is dealt with the market and what can be the criteria of how it may develop in future.

  1. Investor satisfaction:

The volatile business and stock market create the risk of loss which ultimately makes the investor from buying and trading on stocks. Therefore the experts feel that there should be a proper regulation by the central bank on the certain criteria which influence stock price to be sustainable as well as profitable.

Therefore it is necessary for the markets to comply with these five factors for the future of a stock market that can be very beneficial to its investors in all ways.

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The scope and the pitfalls in the forex market

You must have at some point in time heard people discuss various foreign currencies. In the newspapers, they have an entire segment dedicated to the upward and the downward swing of the currencies around the world and then when you are traveling, you make sure to check in at a traveling agent and pick up the currencies that are valid in your holiday destination. While converting them you may realize that some currencies will fetch you more than what you hold locally while others will give you less.

Have you ever wondered what the variation in the foreign currencies means?

Currencies around the world are on gripping rides all the time. The rollercoaster ride sometimes records extreme highs and for a long time, there can even be record lows. For you to be able to make sense out of all the graphical representation that you see in the financial express you will need to have at least a minimum knowledge about the forex or the foreign exchange market.

The forex market is the world’s largest market:

The market is today valued at a whopping 3.2 trillion dollars. Simply put if the entire equity and futures markets of the world are combined together it would apparently only be equal to a quarter of the volume of trade that forex does in a year. How good is that!

Technological advances and trading in forex:

Today, with the aid of the internet and the advancement in technology, today anyone can open a trading account on a trading software and trade in foreign exchange. There is no need to be a big manager of funds. One can start with as little as $250.

The associated risks are real:

Having said about the technological advancement that has helped a steep spike in the number of people who can trade online via sophisticated trading software, the field is marked with high risks. Trading per se is fraught with risks and it is imminent that a person who is investing his capital in the market does so after calculating his risks and knowing well enough that his capital is prone to erosion. He can lose all his investments in one stroke itself.

Investing portfolio should not exceed his ability to absorb losses:

A person who wishes to trade in forex must first of all set aside how much money he can afford to lose. The markets are extremely volatile and if there is an immense potential for profiteering there is always the underlying fear of losing it all too.

 

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Get Your Mutual Funds Basics Right

Investment is the right way to ensure your financial wellness and for that investment, the mutual fund is certainly the right choice but, only when you understand and make your relevant decisions rightly. That is why we are here to help you understand the mutual funds basics right to make the right relevant choices necessary for your brighter financial future!

What is a Mutual Fund?

Mutual Fund is a joint venture, where the pool of money collected from the investors like you is directed towards securities, money market, and other assets. These securities and assets include the prominent choices like the stocks, bonds, fixed assets, tangible assets and so on. A professional money manager care takes the investment choices of the fund in such a way as to offer the necessary profits for the investors. Or in other words, depending upon the fund type the fund or the money manager proceed with the investment actions to provide the necessary benefitting results. That is, if the fund belongs to a fixed-income type, the choices carried out by the fund manager would be in such a way as to offer the highest outcome at the lowest risk.

Mutual Fund Types

There are various types of Mutual Funds available in the market today, of which the popular ones are the following,

  • Fixed Income Funds

As the name implies, investing in these funds offer the investor with a fixed rate of return.

  • Balanced Funds

Also, known as hybrid funds, they own both the stocks and the bonds, in where, generally, the 60% of the assets are placed in stocks and the remaining 40% in bonds to maintain the needed “balance”.

  • Index Funds

These funds try to imitate the performance of a market index, such as that of the specific stock or bonds.

Selecting the right funds

Although we have listed here only the 3 popular types, remember, there are more mutual finds varieties available in the market, offering various benefits and risks. Therefore, nothing could be termed as ‘the best’, as it depends upon the individual investor’s preferences and way of seeing things. So, understand your financial position, what do you expect out of your investment choice, and the respective behavior of the respective funds before considering the one has your suitable choice!

How to begin investing?

To start your mutual fund’s investment venture, the simplest way is to open a brokerage account with a trusted company and start purchasing the mutual fund’s shares as you would do with the regular stocks. Most of the mutual funds expect you to make some minimum investment and therefore, be prepared for it!

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Planning Your Tax Liability

The recent reforms in the tax structure have changed the way economy works in the country, in more ways than one. There have been some sweeping changes that have reduced the tax burden on people. People need to reorganize and change the way they invested and this may improve the economy of the country by bringing in more money into the system. Similarly, effective planning will help to boost your financial health.

Tax Liability changes from time to time

Even without these tax reforms, with every change in your life and with age the tax liability changes. When you are young, you may depend upon your salary and the assets are nonexistent. Slowly the assets increase and your liability towards the loan repayment decreases with age. By retirement, you do not have any wages but may have a good base of investment and assets. At every stage of life and every time there is a change in the job profile, the tax liabilities change and you need to keep changing the investment accordingly.

Strategies and planning

One needs to understand that the tax structure works in a multi-pronged way. It gives tax advantages to encourage people to invest wisely. For example, if people save in 401K, which is geared towards retirement, saving then there is some tax advantage. Similarly, there is some benefit when one has a mortgage to repay towards the housing loan. The aim is to have a good home and a decent amount of retirement fund. The tax structure should be utilized to get the maximum advantage but do not go overboard and focus on taxes only. A balanced approach towards, tax planning and investment is needed.

Events you can plan for

There are some events that happen in everyone’s life. There is insurance for any loss of property or life. You must also ensure adequate health care and save money accordingly. But there may be some unanticipated event that may add to your tax liability like an inheritance or winning a lottery etc. At such times you will already be burdened with the pressure of the event and should consult an expert to work out the tax liability.

Tax planning is important as it changes the way we can utilize the money at our disposal. But at times people invest every dollar on the basis of some tax advantage. The point is that your investment should get you closer to your life goals and in the process get you tax advantages. You cannot keep focusing on taxes all the time and then plan your savings. If you do not understand the financials then it is better to go to experts and take their guidance. Be tax savvy and save money.

 

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All About Debt Financing To Finance Your Business

Small businesses need money to fund their business. This is especially true when the company is just beginning and is in the startup phase. Getting the money to invest in the business can be a real challenge. Funding is especially difficult because of the lending standards that are very strict. Also, getting equity financing is not easy.

Understand debt financing

Debt financing is where the borrower will borrow funds from another source. The investor will lend the money if the company owner commits to repay back the money along with interest. This could also be loans that are offered by traditional banks. The borrower will make monthly payments against the loan as well as set aside collateral. This could be real estate or an inventory. It will be used to repay the loan amount in case the borrower defaults on making the payments.

The business owner could also opt for a merchant cash advance or get investment through personal lines of credit. There could be other methods where the borrower would have to make weekly repayments or repay a part of the profit instead of making any monthly payments.

The benefits of debt financing

There are various reasons why debt financing is beneficial. The first reason is that the lender will not have any control over your business. All that the owner has to do is to pay the loan back and then the relationship ends with the financer. Also, the interest that the business owner pays lets him enjoy a tax deduction. Also, it is easy for the business owner to forecast his expenses because the payments that he needs to do is fixed and does not fluctuate.

The business owner gets to decide for himself how to spend any extra revenue that he has earned. Some lenders will have some restrictions but in most cases how you spend the money is only dependent on you. When you take a loan then this does not impact how the business will run in the long term. Also, debt financing is flexible. There are many features in debt financing that lets you decide how much money you want to borrow and also how long should you take to make the payments.

Know the disadvantages of debt financing

The negative aspect of debt financing is that it is like any other debt. Debt is thus your future ability to pay off the loan. If your company goes in a loss then it could be a meltdown or if your business does not grow as anticipated then you would still have to pay even when you are at a loss. Debt is a form of expense and this has to be incurred irrelevant of how the company is performing.

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Blockchain and Financial Services

With the much needed hype around how Blockchain technology will impact the society in general and financial world in particular, there more on the table to discuss about how banks and financial service industry is trying to grapple the situation well and the sense of urgency to use this technology in various streams as much as possible to get the safety aspect well within their ambit. The most challenging situation faced by many commercial banks and retail industry are the frauds and financial data being compromised leading banks to run deep on debts.

Key Areas

  • a lot of potential in the financial service area,
  • investment banking, transaction processing
  • trade financing, insurance, real estates
  • customized technology as it is not like one solution which fits in all
  • sufficient regulation on the legalities of using the technology
  • collaboration between banks and FinTechs to implement it in a broader aspect

In most of the financial service segment third-party outsourced partners are trusted for the processing of most of the high volume of transactions with this technology put in place there will be no third party intermediary, as it is a distributed ledger peer to peer, imagine the amount of duplication which can be avoided and clearing the entire network of a lot of clutter and make it data junk free.

Why blockchain for Financial services?

  • most of the tasks are completed in the intermediary network, hence the requirement for the third party is eliminated, the decentralized ledger is available to all nodes and are available for the public to update and share, the original certificate of ownership being their originally created
  • usage of tokens as units of exchange in the digital space, which cannot be made good as physical money, but can be used for exchange with bitcoins, Ethereum
  • the electronically chained blocks are series of consecutive blocks of information stored and transactions which are entirely linked and data cannot be deleted or tampered with
  • it prevents the double payment system for example if one has to pay $50 for a service they can use the digital exchange medium for the services availed to that person, similarly they need not wait for the clearing of the check via the clearing houses and then transfer the funds to the person, all these are eliminated using this technology which requests the payer bank to transfer the $ 20 to payee bank with the use of private keys to validate the transactions and pay the amount within a very short time and high-level security.

 

 

 

 

 

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