Sunday, September 11, 2011

Institutional Investments Explained

In institutional investments capital is put in the stock market by banks, financial bodies etc, in short this is done by individual bodies that are formed with the support of many people. The amount of capital invested here is huge, the shares are bought in bulk for long-term and even sold the same way unlike retail investment wherein people investment small amount of money and make short or long-term investment.

What are the Prerequisites of Institutional Investment?

Excellent financial planning: Before going for this, the company needs to have a financial plan in place. Financial planning will give a proper dimension to the investment planning as it lets the companies know how much they can investment and how much risk they can afford. As the amount of investment is very high even the risks are high. If done in a systematic and carefully researched manner institutional investments gain good returns on their investments and in case the damage can be hard to pay back.


Sound Market knowledge: Every company that has made a fortune in it, has a strong base in the form of sound market knowledge. There are market research experts who keep their eyes on the stock markets 24/7. They assist investors in taking crucial decisions like when, where and how to invest capital, the time duration and the possible risks that can be encountered in the worst case scenario. Stock market research is like the backbone of institutional investment.

A growing number of financial establishments are turning towards it, main reason being the high profit margins. As these companies purchase large number of shares at a single point of time they are eligible for discounts on the brokerage charges too. The individuals who invest their money in small amounts in companies who do institutional investments are also at benefit, as they too are rewarded with high dividends. There are many such benefits of investing in a firm that carries out institutional investment but the fact that there is certain amount of risk involved in the stock market cannot be ignored. The companies that are actively undertaking institutional investments are many and thus individuals should do a background check and then decide where they want to put their capital.

Main stream market investment is and has always been a high risk high returns business with institutional investments coming in the picture the probability of high returns is always present. The companies have become the risk takers.

Thursday, September 8, 2011

Why Invest in Art?

When we invest in anything, we are attempting to maximize our return on that investment, given some level of acceptable risk. All financial investments involve a balance between return and risk. Investing in art is no different. We have to ask: "What is the expected rate of return, and what are the risks?" Besides these criteria, art investment offers other investment advantages. So let's take a look at these issues in art investment.

When we invest in anything, we are attempting to maximize our return on that investment, given some level of acceptable risk. All financial investments involve a balance between return and risk. Investing in art is no different. We have to ask: "What is the expected rate of return, and what are the risks?" Besides these criteria, art investment offers other investment advantages. So let's take a look at these issues in art investment.

Rate of Return

Calculating a rate of return on art investment is difficult. The difficulty lies in devising a performance index that accurately reflects the movement in the prices of art. Since we are concerned with investment, I am considering only what I call investment grade art. This is the art that is offered by the major auction houses such as Christie's and Sotheby's -- not the art you might find in a downtown gallery. Admittedly, this criterion is not precise. There have been several indexes created to measure the changes in art prices. One of the most respected indexes of investment grade art is the Mei Moses All-Art Index. The index was developed by two New York University professors, and is often quoted as the most reliable in describing art price fluctuations. This index indicates that art prices have almost matched the performance of stocks, and that over some periods, the rate of return on art has beaten the stock market. This would put the annualized rate of return somewhere close to 6%.

Other estimates for price growth in art have not been so optimistic. In fact, some estimates place the rate of return near zero. A study directed by Luc Renneboog at Netherlands, Tilburg University estimates that the rate of growth from 1970 to 1997 to be around 4%. We can speculate that the long-term rate of return for investment grade art is somewhere between 2% and 6% with 4% probably a fairly decent estimate depending on the art bundle.In today's economy where certificates of deposit are yielding close to 0%, a 4% yield on fine art would appear attractive.

Asset Diversification

It is a fundamental premise of financial management that asset diversification can reduce overall risk of a portfolio of assets. Adding new financial assets to any portfolio should serve to reduce risks, especially if the performance of the new asset does not correlate directly with other assets in the portfolio. Although price swings of stocks and fine art are often paralleled, they are not always perfectly in sync. Stock prices usually reflect economic activity whereas fine art is not as directly impacted.

Inflation Hedge

Real property can provide a hedge against inflation. Whereas inflation can eat into the value of monetary based assets such as bonds and certificates of deposits. Like real estate, coins, and gold, art is real property. Although the supply of art continues to grow, the demand for investment grade art is growing even faster. Renoir and Picasso have long stopped painting. Periods of hyperinflation, have always seen huge increases in the prices of investment grade fine art.

Tax Advantages

As it has been noted earlier long-term profits are taxed at lower rates than ordinary income. Plus, a portfolio in art offers the possibility of other tax advantages if the owner donates the art to qualifying charities, especially museums. In the same vein, fine art assets can play a significant role in an individual's estate planning.

Although current reduced tax rates for long-term gains and estate taxes have worked to reduce many of these tax advantages, these tax cuts are scheduled to expire in the next few years. New tax schedules could emerge again favoring the tax advantages of art assets.

The Joy of Collecting

There are other gains that can be derived from art investment -- the joys of collecting and displaying an art collection. One might argue if you are going to collect art anyway, you might as well pursue the collecting seriously with an aim of ultimately making a profit from the process. There is a danger of developing the mindset of a collector if you are seeking financial gain.

Investors make money in art when they sell to collectors -- not the reverse.

Summary

So why invest in art? Probably the most compelling reason is the reduction of portfolio risk by diversification and as an inflation hedge. Although a 4-6% return on investment surpasses money-based assets, it falls behind stocks and precious metals. However, price reflects supply and demand. The supply of investment grade art is diminishing as contemporary artists gravitate to electronic art mediums. Paint on canvas for the current generation of artists is passé, and new electronic forms of art-making add nothing to inventory of marketable art. This trend may not be immediately felt on the art market, but could have a tremendous effect in twenty or thirty years. And art investment is always a long-term proposition.

Tuesday, August 16, 2011

Two of the Best Ways to Make $600 in Passive Income Per Month

Here is a game plan to invest $5,000 that will give you at least 10% return on your money in a matter of weeks. My goal with this article is to show you how you can make a passive income of $500 (or more) in one month or less. Here we go, let's do this!

Passive income idea 1 Take $2,500 and buy two websites (that are already making money) from FLIPPA.

Most of the websites listed for sale can be sorted by earnings and price. Look for a websites that are making $150 or more per month OR that have a high amount of traffic coming in. If the website has a high amount of traffic, but no ads, you can place ads on your site for free or sell affiliate products. This should definitely give your earnings a boost.

But, trust me....if a site is listed for $2,000 or more it is going to have some decent traffic. Join some forums and further promote the site and it's products. Use some SEO strategies and bring even more visitors to the site. You should be able to make at least one affiliate sale in addition to the $300 you are already making. Let's say (conservatively speaking you sell one affiliate product at $90 and receive $60 commission. Your total income from this strategy is $360. You will be more than halfway there.

Note I just looked at Flippa's listings and they have one site listed for $1125 that is making $950 per month!!

Passive income idea 2 Take $2000 and buy a stock option credit spread with one month left to expiration

Buying a stock option spread greatly reduces the amount of money you need to invest when compared to buying that same stock straight out. (I used option spread trading to turn $239 into $1350 in six months so it works, trust me).

Use some technical analysis (fundamental analysis is not a big deal here, because this is a short term income strategy) to figure out if the stock is in an uptrend, flat, or in a downtrend. I will give you a hint...look for trend lines.

Once you determine the direction of a particular stock, do a Bull credit spread (if stock is going up) or a bear credit spread (if stock is going down) on that stock. The beauty about credit spreads is that you get your money upfront and all you have to do is wait for the stock options to expire worthless. If you time this right you should be able to set up a position that would give you about a 30% return with relatively low risk. Your 30% target return with this strategy would be $600.

Combine both passive income strategies and you have just added (at least) $960 in passive income to your life. Ok, I guess i told a bit of a lie...it's not 10% like we initially planned. It's more like a disappointing 20% ha ha.

Thursday, August 11, 2011

MT760 Explained - MT760 at a Glance

There are so many different procedures in the world of finance and investing that it can be hard to keep track of all the different ones used. For many, having an MT760 explained to them is important since this type of procedure can have many consequences, sometimes positive and sometimes very negative. If you're trying to learn more about an MT760 or are somehow involved in one, there are a few basic things to understand. Once that you have a solid grasp on these principles you'll be able to get a good comprehension of just what this procedure is and how it is used in finance.

Basically, an MT760 is a type of bank guarantee that serves not only as a letter of credit, but also puts a hold on any funds that are associated with the operation. It functions very similarly to other types of guarantees but carries with it a far greater risk to the issuer while greatly reducing the risks experienced by the recipient. The MT760 is an interbank communication that you'll never actually see as far as getting a document or report on, but is still a major influence on your overall financial transactions if you are involved in one.

When an MT760 occurs, the bank will place a hold on the funds of the client and allow the person who the MT760 was issued for to use them at their discretion. The original client can't use the funds, but the person who received the hold will be able to utilize them. Obviously this creates a high level of risk for those who issue this type of guarantee and it has indeed been used by more than one unsavory investor to scam others. Because of this, it's vital that you ensure this is the right call to make before you proceed with it.

Many people opt for a letter of credit instead of the MT760 since the latter is not negotiable after it has been issued. If various conditions arise that affect the funds or the use of them, there's really nothing that can be done to change the MT760. It is certainly one type of financial procedure that you may never have any interaction with, but if you do then you owe it to yourself to fully understand the basics behind it and how it will impact both parties that are involved with it. There may be better options, or this could be the best choice for your situation.

Thursday, August 4, 2011

Are Movie Investments Recession Proof?

During recessions, people still want to invest, and they start looking for businesses and investments that can still be profitable when people have less money to spend. And many people have heard how during the Great Depression of the 1930's that movies were very profitable. It is actually true, and there are reasons for it which will be explained in this article.

When the economy is in a slump, people want to escape their worries, and a movie is an affordable way to do just that. During all of the recessions in the past 50 years, the movie industry has done well. Going to a movie is the most affordable out of home entertainment option. It is easy to prove this by comparing the cost of a movie to attending a sports event or a concert. During the Great Depression, 25% of American families had no income and unemployment for factory workers was at 40%. Despite this, movie box office receipts soared. Some people would see a movie rather than eat. They did this because they were desperate to escape their problems, even if it was temporary.


The profits for a movie can be huge. These days some blockbusters pull in hundreds of millions of dollars. But they are not the whole story. There are many low budget movies, quietly making excellent returns, despite costing only a few hundred thousand to make, and staring unknown actors. The new movie technologies allow filmmakers to make high quality movies for under one hundred thousand dollars. They look good technically, and if they have a good story, they have a chance to make millions of dollars.

And these days distribution is easier, as there is no need to rely on theatres, with repeat TV broadcasts and online downloads available. This is an important consideration during a recession, as a finished movie no longer needs a huge additional budget for advertising and promotion. For consumers with limited budgets, they can download a movie for a low fee, which can be enjoyed by a whole group, making watching a movie a very low cost form of entertainment indeed.

There are people who invest in movies regularly, and they are fully aware of how movies perform well during recessions. These people are inclined to want to keep the fact that movies are recession proof unknown to the general public so that they have the most opportunities to invest in movies themselves.

Friday, July 8, 2011

How You Can Make A Steady Income With Options Trading

You have just escaped your 9 to 5 working hour's routine, where life was full of paper work and the dull routine at work. Now you want to embark on a high paying career that makes you earn much more without sitting down in an office for hours. The options strategies can make you earn more and you will have conveniently escaped from those long working hours. There are many reasons why someone will choose to be an options trader, because this is definitely one way of earning much higher investments in a short period. It increases your monthly income in shorter spans of time hence it makes your financial position much more comfortable. However, in order for you to begin this process you must be patient through this and take your time as it will require constant education about the subject. Therefore, you need to take heed of some tips that you can take on board to begin with the options trading.


The first tip is that there needs to be a known difference between short term and long-term investments. When you are starting huge at some place, there can be high levels of investments for longer durations of time that is the part where you need to do your learning about. All the benefits with the options should be known before. You need to find out for yourself and do the research to discover which options work best for you, you should learn to assess where you can get the money with the options. What you need to learn from the market is also to evaluate whether there should be investing done during this time or not, should there be a buy a put or a call option. You need to know which one is it that will gain the greater benefit.

It has been considered to try the out of the money options strategies because this seems best, it helps you earning money because the prices are not so heavily dependent on the stock movements, underlying cost of assets or the market trends. You also get paid enough for gaining an amount of investment with higher levels of premiums. However, it might be possible that you are paying more to acquire this option but there are the types of investments that gain you higher income and lesser losses hence, this stock option seems best.

You need to do ample amounts of research to start beginning with the this kind of trading; every opportunity needs to be maximized. There is always a start with the trading and the buying and selling of stocks. With the gradual process of time and experience, you can start with being a bookie or a writer. With all this information, you can now understand that there are wider options everywhere.

Once you have learnt enough with this form of trading you can then start trading freely with the experience and the knowledge. There is a constant learning of the market that you need to do to keep yourself financially stable without a proper office you have to go to everyday.

Tuesday, July 5, 2011

How to Be an Effective Options Broker

A binary option is a type of financial contract where the payoff is either on a fixed amount or nothing. It can be classified into two types: cash-or-nothing and asset-or-nothing. In cash-or-nothing, an investor will receive a sum of money based on the success of price reaching an exact level on a given time. With asset-or-nothing, the payoff is just the same as the value of the asset price.

Binary option in layman's term, means trading made simple. At first it may seem as if it will be loaded with mathematical operations or some technical computer programming terms, but this investment is easy to grasp. A better process to compare it to would be with a simple coin-flip.

This trade is often referred to as 'all or nothing option'. This is because binary option only results in two outcomes. Either you earn back a full amount or nothing at all. This type is like a gamble if the asset will reach a specific price on an exact date. If it reaches the desired amount on the strike date, you will receive the sum specified in the contract. On the other hand, if it does not reach the price, you will get zero. As experts see it, it is a risky deal but at the same time you can earn heaps on this trade.


If you wish to be successful in this, you must have a clear grasp of the option's conditions. Terms in this trade are different from those used in a regular finance trading system. For example, call options are the ones that pay out if the price strikes above the desired level on an established date. A put option on the other hand is when it fails to reach the strike price.

You need expert advice from an experienced options broker. Preferably, choose someone who has earned a college degree or has had sufficient background in finance. The job does not necessarily require someone to a high level of educational attainment. It is best, however, to choose someone who is knowledgeable not just with terms but with the inner workings of this investment.

Duties of an options broker include providing investment advice and interest-bearing accounts. The main role of this job is to act as the bridge between the investor and the market. The first thing a broker can do for you is to help you reach an agreement on the best option to invest in. Once accomplished, the broker will transfer the order to securities exchange. In short these people will assist you on the step by step process of investing in binary options trading with ease.

If you are looking into this career, you have to be prepared for a fast-paced and high-stress environment. Excelling in advanced math can be a good foundation for this job but what will make you stay is having the right attitude. Some firms will require you to own specified licenses so you can also work as a financial adviser. Other skills to propel you to success include being a good communicator, problem solving skills, structured work processes and the ability to work under pressure.