Fundamentals: The mechanisms of the futures market

In the capital market, a trader has several options and investing opportunities in which he can foray into, depending which ones suit his needs, goals, risk profile, and personal preferences best. One of these is the futures market. Basically, buyers and sellers create and finalize agreements by entering into futures contracts. It is stated within the contract how much goods will be paid for and its date of delivery.  As The Balance defines it, a future contract is “an agreement between a buyer and seller of the contract that some asset—such as a commodity, currency or index—will be bought or sold for a specific price and quantity, on a specific day, in the future (expiration date).”

 

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Image source: marketbusinessnews.com

 

As an example, let’s consider Ben and Marcus. Ben is a fisherman while Marcus is a fish vendor. They have entered into a contract wherein Ben has to sell Marcus 100 tunas at $1 per head for the next fishing season. Ben is trying to secure a future selling price, while Marcus on the other hand is trying to establish a fixed buying price. If the price of tuna increases to $2 the next day, then Marcus would have profited since the buying price is already fixed. Ben on the other hand would have incurred a loss since he can’t sell his products at the adjusted market price. These fluctuations are then calculated and monitored daily until an agreed upon date. If the next fishing season arrives and the price of the commodities hasn’t changed, then Ben would have lost $100 while Marcus would have made $100.

 

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Image source: entrepreneur.com

 

One economic importance of the futures market is price discovery. Because of its highly competitive nature, it becomes an important factor in determining the prices based on the present and future estimated supply and demand. It is also important in reducing risks when making purchases since the buying price can’t be changed even if the market price has increased (or decreased) significantly. Prices are fixed however the market moves.

 

To know more about futures contracts, trading, or the investment industry in general, consult with any of LOM Financial’s investment advisors.

REPOST: Hong Kong’s Bermuda Bent

Companies domiciled in the Cayman Islands and Bermuda make up nearly half the market capitalization of the Hang Seng index. Here’s a comprehensive report on Hong Kong’s offshore companies from Bloomberg:

As this week’s release of the Panama Papers has shown, most investors like to keep their links to offshore financial centers on the QT. Not so in Hong Kong.

Take a look, for instance, at the front page of the latest annual report from one constituent of the Hang Seng Index, a noodle maker that Chinese consumers know by the cuddly name of Master Kong:

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The name helps remind local investors nervous of Beijing that while Tingyi’s main offices are in Shanghai, its legal base is an island 90 minutes’ flight from Miami whose governor is appointed by the Queen of England.That attitude isn’t unique among the city’s businesses. About 45 percent of the market capitalization of the Hang Seng Index consists of companies whose registered offices are in the Cayman Islands or Bermuda — including its largest constituent by weighting, Tencent, and all the main firms in Li Ka-Shing’s Cheung Kong empire.

 

Bermuda Option

Companies domiciled in the Cayman Islands and Bermuda make up nearly half the market capitalization of the Hang Seng index.

Hong Kong Bermuda

As the past week’s revelations have demonstrated, Hong Kong’s companies are far from alone in carrying out this sort of global regulatory arbitrage.Wolseley, the world’s biggest supplier of plumbing parts, was founded in Australia, earns most of its revenue in the U.S., is listed on the London Stock Exchange, is domiciled in Jersey, and pays its taxes in Switzerland. Pfizer is said to be terminating its $160 billion merger with Allergan after U.S. officials proposed new rules that would make it harder for the group to benefit from low Irish tax rates.

 

Continue reading HERE.

Wallet in the cloud: The rise of the Bitcoin cryptocurrency

The United States has the dollar, Japan has the yen, while the Internet has Bitcoin. It is a computer program that acts as a unit of account or payment system that only exists in the digital world. Therefore, it is not minted from metal or printed on paper, which is always the case for real currencies. Its monetary value is completely virtual.

 

Bitcoin is the very first example of a growing trend known as cryptocurrency. During its infancy (c. 2008), there were a lot of negative speculations about it, including its authenticity as an acceptable monetary unit. However, nearly a decade since its creation, it has become a popular way to ‘buy’ goods or services. In fact, for the first time since its birth, the value of 1 Bitcoin has already eclipsed that of an ounce of gold.

 

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Image source: coindesk.com

 

Bitcoins are basically ‘rewards,’ derived mainly by winning in a competition in which users—also known as miners—offer their computing power to verify business deals into the blockchain, which is a ledger or database that record all bitcoin transactions. As of February 2015, bitcoin is accepted as a payment method by over 100,000 merchants and vendors worldwide.

 

Early this month, the Internet currency was able to gain 3 percent, while the precious metal fell down by 1.3 percent. Looking at the progress data of both assets from a year ago, Bitcoin was able to nearly triple its value, while gold practically stayed at the same level. Both of them are alternative assets, though it is important to note that they aren’t usually traded in correlation.

 

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Image source: bitcoin.org

 

Gold is practically the “gold” standard of all alternative assets. Investors usually use it as a hedge against potential losses from traditional assets such as stocks or real estate. That is why Bitcoin overtaking the valuable metal is notable since some predicted that the former would replace the latter as the preferred alternative asset. One can only speculate as to what could happen if ever the SEC approves of its listing.

 

Despite its remarkable rise in recent years, bitcoin is yet to truly prove itself as a viable and safe asset to be used in numerous transactions or even as a good addition to one’s investment portfolio. It cannot also be commoditized, unlike precious metals or crude oil. As such, bitcoin prices will tremendously suffer if the SEC does not approve a bitcoin ETF. Serious investors and investment managers will have to make extensive research before they can consider the virtual asset as something they could venture in.

Expatriates and their investment portfolio: Adding mutual funds into the mix

Investing in a variety of assets and securities, such as stocks and bonds, need not be complex and excruciating. For international investors, most especially, there are unlimited opportunities to grow their wealth base. The advent of Big Data and cloud technology has made investing in key markets around the world even more plausible and easier. Regardless of where you are in the world, you can always have the chance to tap into emerging financial powerhouses and safely diversify your portfolio with utmost security, confidence, and convenience.

mutual fund etf investing

Image source: thestar.com

Pooled funds, such as mutual funds, are among the easiest investment machines to own. In this type of investment, clients ‘pool’ their money together to form a large capital. This fund is then managed by an experienced, fully licensed professional manager who will do all the work (market monitoring, choosing which stocks to buy, etc.) on behalf of the investors in exchange of a small management fee. Mutual funds can be composed of pure stocks (equities), fixed income assets (bonds), or a combination of both (balanced).

Professional Management
Mutual funds do not require investors to have extensive market knowledge as they can delegate the specific investment decisions to a portfolio manager or a team of managers. Investors are provided with the services of an experienced professional who work with top-notch research firms, industry experts, and economic analysts to come up with the most prudent and sound financial decisions commensurate to the fund’s objectives.

Diversification
Mutual funds help mitigate risks by automatically distributing investors’ money across a wide range of assets, industries, and companies. In investing, diversification is one of the fundamental principles necessary to maximize returns and avoid significant losses. The adage “do not put all eggs in one basket,’ applies accurately on this type of fund. It also allows for a more cost-effective strategy than directly owning individual stocks or bonds.

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Image source: benzinga.com

Innovative infrastructure
Excellent online technology infrastructure, such as that of LOM Financial Management Services, is critical to making these transactions seamless and meaningful. IT systems and networking structure used by most mutual fund companies are state-of-the-art, secure, and easily navigable.

Convenience and Liquidity
Buying a mutual fund can be as easy as setting up a savings account from the bank. Cost-efficient and time-saving, it is an ideal investment option for those who lack the time to comprehensively study and monitor the market. Initial investments are relatively low while additional capital will entirely depend on how much the investor would want to deposit. They can also buy or sell their shares anytime they want. Best of all, investors are free to pursue their personal dreams and career aspirations while their money work hard for them.

For more information about mutual funds and how you can invest in them, follow this LINK.

Should you make an offshore investment?

Offshore investments means having to deposit you money in a foreign country. These investments offer a higher return rate compared to the local banks. The interest rate is usually about 8% but they require specific capital and you also have to pay some small fee.

These investments do allow for transfer of the asset’s ownership especially for those people who worry of confiscation of their assets. One can choose to change the ownership to other foreign entity, as long as it’s legal, through foundations and trusts.

Offshore investments officials will never reveal your financial details in the country. If this happens then the client has a legal reason to sue the official since most investors will not like to have their details, stocks they are buying, be made public.

These investments will offer you the freedom to make choices. They allow investors to diversify hence spreading the risks widely possible since just like any other investments offshore can go up or down.

Anybody who has the required capital can make an international investment thus protect their assets from certain liabilities that they would have experienced at home, debts and obligations.

People from some countries have a certain limited number of opportunities to make such international investments. These investments will require you to have enough capital to start as the minimum required amount can be around a hundred thousand dollars and will have such fee as corporation registration and a legal fee.

Average income earners can form a company that will make the offshore investment or get into a company to have investments that are in special funds. Trading companies that are involved in such activities as imports and exports can make offshore accounts. Other companies which can do so include; professional service providers like designers and engineers, shipping companies, intellectual property companies, asset protection companies, employment companies, holding companies and investment companies.

More info at these links from lom:

lom/mutual-funds

lom/investment-brokerage-services

These investments are safe and one should not be worried it is very important for you to get an investment firm who will make the necessary arrangements for your offshore investment process.

More info at this video:

Investing In Stocks – How To Invest In Stocks Wisely

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Before you get too excited, you have to consider first what you are getting into before you enter into the world of stock investment. Like for instance, you have to study first what stocks you will invest, how much you are willing to invest, and many other things you have to consider.

If you are new into investing, you have to study first everything – do some thorough research and talk to some investors – even in this way, you can already have a little knowledge of everything. Don’t involve yourself in something you don’t know, you might just be wasting money.

Investing in stocks needs not only time and money but also skills. People invest in stocks because they benefit from the company’s remarkable value potential. When you purchase a stock, you already become part of that corporation.

Stock investment provides great profits in return than any other investments. Investing in stocks also needs to be wisely and monitored thoroughly the same as any other investments. You need to track the record of stock market to reduce the risk of losing your investments.

Below are some ways on how to invest in stocks wisely:

  • Angel-Investing-82963_577x280If you are just a beginner in the field of investments, you have the need to consider how interested you are and how much time can you give for the said investments. It requires careful judgments as you have to distinguish a money making investments or just a financial disaster one. You have to know the risks in investing, how and what will they do of your money and most importantly if you have potential profits in it.
  • Take time or several months to invest all your money. Do not buy all at once, but invest your money one by one. This will help to minimize the risk in market timing.
  • Do not just focus on one type of asset. Do not put all your money in a single company for it may have a negative impact when the company you’re trying to invest will decline. It is much better if you diversified into other sectors and spread your investments in different categories.
  • As your investment grows, it is best if you keep adding in your investment. So, instead of investing only once a year why not try to double your investments. You might just be surprised of how much money you can make in a year. In this way you can increase your funds and you can already retire early with huge profits in your pocket.

Careful planning is a key to successful investments. Do not jump immediately to any stocks that are in demand in the market, take time in thinking what you really want to do in your money. After all it is yours and you should know how to handle and what to do with it. Always make sure that when you enter into stock investments; you are already financially and emotionally ready, because this would be your weakness or hindrance to reach success. Our partners, Idhammar cmms are notorious for understanding that.

Investing is not just all about saving or putting your money to work, it also requires technique and strategy before you get to reach your desired success in terms of money, especially in stock market where rate is inconsistent. Which means you will not be able to guarantee yourself that you are going to gain more money from just investing to any kind establishment or brands, because this is the real world of business. All is inconsistent but using your wise decisions, you will be able to reach what you desire in not time.