Online investment techniques

 If you want to do investment online, you can use online platforms suggested in your country. Here you can invest on partial as well as full shares of stocks of companies. As the rate of these stocks increase, there will be increase in your income. Thus you can earn some extra income. But you should be careful not to invest more than the level of savings you can handle for a loss. This way you can earn something and also get some time for learning. Here is an example i would like to share with you.

In this example i have shared an investment of $50 in stock of a company. The company is doing good and i have earned $5 within a period of some weeks. Thus my capital now totals $55.01. If i had more investment like a $1000, i would have earned 20 times of that investment and my income would have been $100. This is how this platform works.

What you have to do is simply download the app of trading software, load funds and start trading in the companies of your choice. For some trading platforms the trading amount is a simple of $50. For the rise or fall in the price of shares, these trading platforms give you detail analysis. For further analysis you can rely on your research.

 

 

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An example of Good Investment

An example of good investment is the investment done in the stock of facebook on 2013. In the year 2013,the price of one share of facebook was $30 and in the year 2016, the price of one share of facebookis $110. Thus an investor who invested in one share of facebook on the year 2013 has earned a return of:::::::::::::::

Return::::::::((110-30)/30)*100=266%

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What is Currency Market???????

Currency Market is the market which plays on the fluctuation of Currency Rates. In an open Market Economy the rate of Currency is determined by the amount of Export the Country does. Thus the currency Market plays on the Level of Fluctuation an investor can think of and thus the Margin is his/ her income. This is one of the Fundamentals of Finance.

It is estimated that the currency market is a total of 6.6 Trillion every day in the world. Thus it is one of the biggest and largest market in the world. Traders trade on the upward and downfall of the trading price of the market. Thus they earn if the value of currency increase and lose if the value of currency decrease.

for example if a trader has purchased a Currency for $1 and it's value increased to $2, then the margin is $1 profit. Similarly, if a trader has purchased a currency for $2 and the price decreased to $1, then the margin loss is $1.

As shown in this image, if you purchase a dollar for your currency of 50 and if the price of a dollar increase to 100 of your currency, then you make 100-50=50 profit. Similarly if you purchase an Euro for 50 units of your currency and it increases to 100 units of your currency, then you will make 50 of your currency units profit.

If you want to trade on currency market, you can use platform like www.etoro.com and try some trade practices..

 

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Investment Rule

 One of the best Investment Rule is to never put eggs in One Basket. This means we have to diversify our Investment. This is because if one investment is in loss, it will risk whole of your funds. This is the investment Rule in financial Market. Once the relative risk of the portfolio is determined, it's return is calculated. For this the correlation of Returns of various Assets are calculated. The correlation is an indicator of relative risks. Thus a wise investment decision is the one in which there is a correlation between assets in portfolio Such that it provides a positive return.

 

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Portfolios

 Portfolios are the mix of investments which are done on various Assets. The Assets should be allocated in such ways that it minimises risks and Maximizes the return. Thus to make a portfolio, high risk products and low risk products should be mixed in proper ratio. This mixing should Minimise Risk and Maximize Return such that it Maximizes Profit. There are formulas to calculate the relative risks and Return.

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Realistic Investor

 A realistic Investor is the one who decides the return an investment should provide on the basis of realistic logic. For example we cannot expect an investment of $100 to give $1 Million return in a short period of time. Some might feel it is very unrealistic at all. Thus an investor should decide to earn on the basis of their logic rather than other things. An investor should always try to be realistic because it will protect his/ her Investment. Thus realistic Investor is what an investment soughts. 

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Determinants of required rate of return

 The determinants of required rates of return are as follows:::::::::::::::

1. Real risk-free Rate::::::::::::::::: The risk free rate is the rate of interest an investor should earn without taking any risks. Generally the interest paid by bonds issued by governments is known as the real risk free rate. This is because there is high chances that it would be paid in the future.

2. Business Risk:::::::::::::::::::::This is the uncertainty of income flows in the business. Thus the higher the uncertainty, the higher is the risk associated with the investment. For this reason the investor can demand some extra returns and the required rate of return of business will be higher. The less the business Risk, the less an investor can demand as a premium return. Thus it is one of the determinant of required rate of Return.

3. Financial Risk::::::::::::::::::::This is the risk posed by the nature of financial investments.  If the investment is on highly risky projects, it can create problem for return. Thus the expected return can be higher. In addition, if the company has used some debt financing to invest, it can create uncertainty on good profits. Thus on taking this part into account, required rate of return can be determined.

4. Liquidity Risk::::::::::::::::::::::::This is the risk associated with liquefying the assets in the shorter term. If the investment is done on assets which can be exchanged in the terms of cash in less time, then the investment has low liquidity risk. But if the investment is done on assets which cannot be exchanged in terms of cash in less time, then it has high liquidity risk. Thus if the liquidity risk is low, lower can be the required rate of return. But if the liquidity rate is high, higher can be the required rate of return.

5. Exchange Rate Risk:::::::::::::::::::::::::This is the risk associated with the exchange rate of currency while dealing with international business. Higher exchange rate risk means there is higher chance that you may not get the expected amount while converting a currency to another. Thus an investor can increase his/her expected rate of return in this case.But if there is lower exchange rate risk, an investor can expect to get the desired amount and he/she can decide to maintain a lower required rate of return. 

6. Country Risk::::::::::::::::::::::::::::::::::Country risk is also called political risk. The more political risk, the more an investor can demand to return. And the less the political risk, the less the premium on expected return an investor can demand to gain.

Thus these factors are the required rate of return determinants.  For more Finance Concepts, be in touch with this blog.