Thefinanceguy's Blog

Finance..Broad Term Eh..?!

thefinanceguy — Tue, 27 Apr 2010 11:14:37 +0000

It is like the Amazon Basin..Try and wiki it..

Common Features of Amazon Basin and Finance:

1) If you are literate, you have an idea about both or at least know that they exist.

2) Both are not completely explored and thus, there are a lot of species and products, unknown to the world.

3) Both are extremely dense.

4) Both are sparsely populated, however a wide diversity witnessed.

5) Concentration of population and human resources in the developed areas.

Yeah..that was the most I knew or found about the amazon basin, over Wiki. However, I am pretty sure, you’ve got my point..

Finance broadly means efficient procurement and deployment of Funds. Even though, this statement is widely pointed out in most of the communication about Finance, I feel proud to even have recalled the same. Sometimes, you stay in a part of the city and are not aware of the vastness of the city, unless you have an aerial view (like the one we get from the Plane, at takeoff/landing). So where does it all start. You want to own/manage/lead a city, or the Amazon Basin..How do you start?! I believe you have to start piece by piece.

A Few Areas of Finance I can point out:

1) Financial Markets – Debt, Equity, Derivatives..

2) Wealth Management – PMS, Banking, Mutual Funds, ETFs, Research and credit rating

3) Corporate Finance – Internal Corporate Treasury, Inter-Corporate Finance, Project Planning and Capital Budgeting

4) Government Funding and Spending – Though there are other fields involved, I believe, it is and should be dominated by Finance

Now, the above are also very broad terms, which are broken down into sub-parts. I may have missed out on important areas above. Kindly point them out, in case you are aware.

TFG

Here I am..This is me..There is nowhere else I can be..!

thefinanceguy — Tue, 27 Apr 2010 10:36:53 +0000

For the last few months, I had been considering the idea, that world today requires expertise in more than one field. So, for excelling in Finance today, one has to have a holistic view of related subjects like Statistics, Economics, Accounts, Costing, Taxation Laws, Business Laws, and the latest addition, computer science. I had started believing that to be a decent “Finance Guy”, i have to take strides in the above related subjects as well. So, during the past months, I have initiated or plugged into my system, a set of activities that will result in my gaining valuable exposure in the above subjects. So this post..that though I have started gathering invaluable knowledge in other fields, I am doing it for the sake of Finance..!!

Cheers,

TFG

Equity Research..

thefinanceguy — Thu, 31 Dec 2009 05:22:38 +0000

The topic of discussion is Equity market Investing. To start with the very basic stuff, equity share is a share in the profit of the company against an amount of money invested in the capital of the company. This is what equity investing is all about. If you stick by this code and simplify the problem in front of you, you will have the solution. Now the economic activities around the world have grown in geometric progression and has become just humungous to be able to be using just one term to be defining the above. Therefore, there are a wide number of terms that are used to explain the different no. of ways of doing the above. I am going to tell you about the different companies that do equity research and why they do it..?!
Companies undertake equity research in order to be able to decide, if a company is going to have future profits. If the answer is yes, then definitely invest in that company, if the answer is no, then move on to some other company. Why do they do it?! Let us see, if the Mr. Singh(honorable pm) were to tell you, Reliance looks like a good bet. You should invest Rs. 1000 crores in the company. Would you actually do it..?!I really doubt it. You would want to go and have a look at the business of the company, talk to its customers, directors, look at its properties, talk to its banks, talk to its other shareholders, have a look at the economy, the market it is operating in, and that is just the beginning. I havnt yet talked about the past performance of the company, the age of the company, the ethics of the company, the auditors, its international presence, the current investor holding, law suits and prospective liabilities against the company, etc, and the list goes to the extent of even forecasting the probability of the company’s manufacturing facility being hit by an earthquake and its precautions and recovery measures against the same. Think of those 1000 crores as your own and then decide, would you not consider doing the above as a minimum consideration before taking the plunge. Now, sometimes, you leave the safety check before the bunjee jump in the hands of the professionals and take the plunge. In the same way there are a few research companies, that do just that, help you bunjee jump. So, there are companies, doing research for investing own funds, and helping others invest. Either ways, you have to have one trait while doing equity research, be sure about what you are saying. If you know that you should invest in a company, you should know why you want to do it and be able to write it down in paper, so as to convey your intent and reason behind the same. One important point I must have missed out on above, is that the kind of research that you do, depends on the amount of money involved in the business. If you are investing a hundo, then a word like ‘buy reliance’ from a finance idiot like me, may be enough research. However, you are the one who decides for your money, how much research is actually sufficient. The above was a brief answer to why research. I would love to give you a piece of my mind on ‘How research?!’..

Derivatives..The Indian Saga

thefinanceguy — Thu, 19 Nov 2009 12:38:51 +0000

Now that I just prepared and appeared for the Derivatives Module in the NCFM (NSE’s Certification in Financial Markets), I feel better placed to tell you about the Indian Derivatives Markets..(psst..I scored 93.75%)

The purpose behind the formation of the Derivatives Market was to transfer the risk from risk averters to risk takers. However, I guess in the case of India, the speculators out-number the Hedgers by a huge number. The premise on the basis of which I pass this comment – The daily volatility in the Markets. The movement in the market is huge..a 1% move in a day equals an annualised rate of 365%. And we are talking about a normal market movement of 2-3% per day on average. If we have a look at the more developed markets like that of the US, there isn’t as much daily fluctuation in the prices. Moreover, the Equity Markets are more popular compared to the derivatives in that of the US.

The reason for the above can be explained by the low margin requirements for trading in Derivatives. Who would not like to earn so much money overnight that, he/she could own a city next morning. Who would like to wait for a whole life time to be able to do that. Derivatives Market in India can help an Investor do that. With Margin Requirements averaging about 20% of the trade value, the markets provide the investors with great leverage. Thus, it is very tempting to play such a game. This reminds me of the casino, where on the Roulette table the gambler is thinking he/she can get lucky, afterall he can get paid 36 times the amount he puts on the table. Even though he is aware that odds are not in his favor and the zero on the board allows the casino a commision from it. He is ready to do it..He wants to try his luck and I guess the biggest factor driving him is that out of 36 times, atleast once he will win and hopes for that wining bet to be placed before he places his 36th. It is impossible to understand the mechanics of it. But since Ages it has been there and we are aware that Casinos have been making the money they deserve. I guess it is similar in the case of the stock markets. People will always be there thinking that they can outsmart the casino. However, on a whole the casino business is based on solid principles and if followed strictly, the casino will make a living out of it. The casino can be referred to as the whole system in our case, including the Brokers, Exchange, Banks, Government and Technology Partners. Based on the urgency of their services, they take away a share of the commision that the market participant pays.

Coming back to the Derivatives. It has really become popular in India, and given the current scenario I feel technology playing a major role in the coming years. You got to take your pick..You want to be on the playing side or on the making people play side. In order to be on the playing side there are rules that need to be followed which I will be referring to in the next post.

Awaiting your most valued Comments.

Best Regards,

TFG

Let’s Set off..

thefinanceguy — Mon, 09 Nov 2009 06:25:57 +0000

Greetings Dear Reader,

Thanks for taking time out to come up to here to read my views on Finance. Allow me the time to introduce myself and the Blog. I am a ordinarily budding Entrepreneur in Finance, with extraordinary ambitions.

My Ambition : To integrate the Financial System of the world. One Market, One Currency, Zero Waste

With this vision in mind I am setting off on a thousand mile journey with you, and expect your support and patronage to be my guiding light.

During the course of the Blog, I will be introducing my understanding of Finance first, continuing on to introduce my understanding of the Financial Systems (Please note, everything is limited to the scope of my knowledge, unless you like a divine light of knowledge, shine and contribute).

Thus, Lets drift apart from the shores and set sail..!

Bon Voyage..!

TFG