A Simple Way in Understanding Interest Rates

The topic of interest rates is not a topic which we usually use as an ice breaking. In fact, this topic is categorized as a dull and far from interesting that make most people will usually turn their heads away once they hear about interest rates as the interest does not interest them at all. But for those who want to learn more about investing, whether it is market neutral investment, hedge fund, etc., this topic is worth to know. Below is a brief explanation of interest rates which will come in handy when you need it.

Interest Rates: The Cost of Money

Interest rate can be best understood as the cost of borrowing money. So, the amount of your money will usually give birth to an amount of interest which the interest will usually produce more interest and so forth.

The investor will see your money as the Treasury note rate which will get full guarantee of security and credit by the Government. Moreover, it is important to know that stocks are risky assets, even riskier than bonds because bondholders are paid their capital before stockholders in the event of bankruptcy. Therefore, a higher return is required for taking on extra risk by investing in stocks instead of Treasury notes which is assumed more profitable. In this sense, investing in riskier stocks will produce you with higher returns.

So, how can interest rates affect companies? It affects companies through the raise of its cost of capital that is paid by any increase in the interest rates. This condition will make a company works harder to generate higher returns in a high interest environment before its profits has been ate away by the bloated interest expense.

Furthermore, survival may be threatened if interest rate costs rise sharply to such a level that the company cannot pay off its debt. In this case, investors will demand an even higher risk premium. Even though, as a return, the fair value will fall even further. In conclusion, high interest rates are normally in line with a stagnant economy. They will make companies reluctant to invest in growth opportunities and prevent people from buying things.



3 Simple Steps of Easy Money Ideas That Might Make You Rich!

Are you dreaming of becoming rich but don’t know ways to get there? Well, we know some of the ways that may make you rich. Below are three ways that you can follow to make your dream come true. Read it and you will find out that becoming a rich person is not like building a castle in the air.

  • Investing

Another way to earn more money through passive income to supply your own labor is through investing. You can start to invest whenever you like as long as you have some amount of cash that can be used as capital since you don’t need any urgency money. There are many categories that you can choose to invest your money, such as market neutral, real estate, semiconductor industry, publicly traded companies, and etc.

In fact, there are many ideas that you can explore as your investment tool which is range from your old boots to ancient coins, as long as that thing has a value that can produce you more money.

  • Negotiate a Raise

This idea may sound easy but the truth is it really requires bravery and confidence to do it. So, ask yourself, are you underpaid in your position? Are you an incredible performance at your job and expect to be compensated fairly? Do you add value to the company? Are you an important member of the team? Do you want to make more money?

If the answer is mostly yes, then it is the right time to come to your boss and negotiate a raise for yourself. And if the offered is approved by your Boss, you can earn extra money which is when it is calculated you will be surprise with the total amount that you will earn.

  • Create a Side Business

Other challenging way to increase your income is by creating a side business. If you think that creating a side business may be too challenging, you are wrong as it doesn’t need to be that hard or complicated since now you can easily get connected to every people all over the world, without the need of leaving your house. In fact, since you can do everything online, you don’t need to pay for a rental shop which is terribly helpful to reduce your expenses.

3 Reasons Why You Need to Consider Market Neutral Investing

Many investment products are offered nowadays, and this can be quite confusing since we don’t know which one will produce satisfying result. If you are in this kind of situation, you can try to do market neutral investing since this type of investment is considered as quite safe from any market volatility. Figure out more reasons why you need to consider market neutral investing as your investment plan by reading the three points below.

  1. They have very low correlation to other asset classes

One of the advantages that may be offered by market neutral investing is that it is not tied to the fortunes of just one or few investment options since market neutral strategies typically seek to eliminate exposure to the broader market, these strategies have also delivered attractively low levels of correlation, not only to the equity markets, but to other broad asset classes as well.

  1. They may offer lower levels of total volatility

Including strategies that may offer lower levels of total volatility is another way to potentially mitigate risk across an investment lineup. Even though it seems that these strategies were perfectly correlated with other investments, their potentially lower total volatility profile could help lower the overall average volatility of the full lineup. From this total volatility perspective, market neutral strategies also may be appealing to investors, as their volatility has tended to be less than the broader equity markets, and in some cases, similar to broad fixed income indexes. Furthermore, a spike in market level volatility may not necessarily mean a spike in market neutral volatility, since market neutral returns are expected to be independent of the broader equity market.

  1. They Shows Secure Progression During Extreme Market Stress

In market neutral strategies, you don’t need to worry about any losses since market neutral is strategies that may offer investors a way to mitigate severe losses during a sharp equity market sell-off. A big drop in equities should not influence the performance of the strategy because these strategies typically have beta exposure to the market that hovers around zero, a big drop (or surge) in equities should not influence the performance of the strategy. This works oppositely with traditional, benchmark-centric strategies, which typically have very high levels of market exposure and tend to vary similarly to the broader market.

3 Things I wish I knew before Buying Rental Property

Some people are interested to invest their money in market neutral, gold, and etc. but some others are interested in starting to invest their money through rental property. It surely requires bigger capital rather than locating your money in buying some stocks but the return from this investment is terribly worth to try. No wonder it becomes one of the top investment that people are dreaming about to have. If you are lucky enough to start your own rental property, you better learn these 3 conditions that will avoid you in making the same old mistakes like the other starters did.

  • Good Tenants Are Worth Their Weight in Gold

Being more selective in choosing your tenants is necessary since it will save your spending. In fact, having bad tenants will cost you lots of money in repair; it can charge you until $6000. Therefore, you need to appreciate your tenants if you think you already find the right tenant. So, how can I know if my tenant is good enough? A good renter will take immaculate care of the lawn and keep the home clean. In addition, they will also decorate your property for the holidays and think that your rental as it was theirs.

  • Check Your Property Taxes

Learn about your country property taxes, if there is any difference between your primary residence tax and your rental property. Mostly, property tax caps on rental properties were a full percentage point higher than those on homesteads and your primary residence. Therefore, knowing this will avoid you from any property taxes explode that you might never know simply because you never search for any information related to property taxes. Bear in mind that every country has different regulations for their property taxes, so learn it carefully is the best advice.

  • Repairs will Be Expensive and Unexpected

Always include unexpected things in your budget, or in other words, you need to provide emergency budget for your rental property. As in several months ahead, you will need to replace a furnace, air conditioner, a refrigerator, or maybe a stove and your drain system also. This doesn’t include any repair for any damage caused by your tenants. But don’t worry as your income as rental property’s owner will allow you to pay all those expenses.

3 Ways to Double Your Money in Less Than a Year

Some people think for having more jobs in order to gain their income, but simply having more job will not make you a millionaire but smart investing will certainly do, especially if you want to double it within a short time. Consider to have an investment whatever the types are, for example, income fund, mutual fund and etc. become important.

Smart investing

In investing, the first thing to understand is the difference between liability and asset. In a simple way, liabilities are things that we buy which its value will decrease as time goes by, for example are your car and gadget. While asset are things that you buy which its value will increase as time goes by, for example property, gold, and etc. This is the basic knowledge that will help you choose to invest your money at the right thing. In fact, a wrong concept between asset and liability is the primary reason why so many of us are failed to accumulate the wealth.

Mutual Funds

Mutual Funds is the best choice for those that are less experienced with stocks since buyers are not actually demanded to understand any difficult purchase decisions since all things are handle by managers. Mutual funds are simply a combination of both stocks and bonds which work like you add your money to a pool of money from other investors and hiring a manager to invest this money. One example of a mutual fund is a fixed income fund. This is where a fund manager will aim to provide the highest possible return with the lowest possible risk.

Property Investments

One of the most popular ways to double your money quickly is through having property investments, purchasing a property that is priced below average for the area or neighborhood and reselling it in a good price will give you some serious money. Even though it may be quite risky when the economy is down, but you can still choose for having smaller properties which tend to stay in demand and relatively easy to be sold.

3 ways to Invest like a Hedge Fund

For some people investing can be quite confusing, especially because there are so many products which are offered. In this article, we are going to know hedge fund better and how to invest like a hedge fund. Take a look for deeper understanding about it.

Cash Flow is King

There are many shapes and sizes of Hedge Funds; you can find it in a heavy emphasis on arbitrage situations (like buyouts or stock offerings) and many special situations. Others still may aim to be market neutral and profit in any environment, or employ complicated dual long/short investment strategies. While many investors track metrics such as earnings per share (EPS), many hedge funds also tend to keep a very close eye on another key metric: cash flow.

Cash flow is important because bottom-line EPS can be manipulated or altered by one-time events, such as charges or tax benefits. Moreover, cash flow can also describe on how a company manage their money, where it has generated a large sum from investments, or if it has taken in money from third parties as well as how it’s performing operationally, since there are three parts of the detail and the breakup of the cash flow statement, they are operations, investing and financing which is considered as a very valuable tool.

Run Trades through Multiple Brokers or Conduct Arbitrage

Buying stocks is usually simple and straightforward, since a buyer tends to buy through one preferred broker. However, hedge funds is not that simple in their effort to squeeze out every possible gain since hedge funds will require multiple brokers to do other services to assist the hedge fund.

If it means a slightly larger gain, funds may also purchase a security on one exchange and sell it on another if it means a slightly larger gain. Due to their larger size, many funds go the extra mile and may be able to pick up a couple of extra percentage points each year in returns by capitalizing on minute differences in price.

Hedge funds may also look for and try to seize upon mispricing within the market. For example, if a security’s price on the New York Stock Exchange is trading out of Sync with its corresponding futures contract on Chicago’s exchange, a trader could simultaneously sell (short) the more expensive of the two and buy the other, thus profiting on the difference.

Unique Knowledge from Good Sources

Brokerage firms and/or their own research sources usually give information to rely on to many mutual funds. The downside to mutual funds, however, is that a fund may maintain many positions, so their intimate knowledge of any one particular company may be somewhat limited.

While particularly, hedge funds only manage concentrated portfolios which provide the ability to get to know a company very well. Besides, they can give more information and cultivate relationships with top management.

Mutual funds cultivate somewhat similar relationships and do extensive due diligence for their portfolios as well. But hedge funds aren’t held back by benchmark limitations or diversification rules. Therefore, at least theoretically, they may be able to spend more time per position; and again, the way hedge fund managers get paid is a strong motivator, which can align their interests directly with those of investors.