The Speciality Of Fund Management

We get to hear a lot about fund management and the companies that are on the lookout for the best and the unparalleled fund managers in the market to manage and control their funds for a future growth and profit. Now have we ever thought as to why this field is so very special and why is there a lot of demand here? This is probably the first thing everybody should get to understand about this field for this would make the understanding and the knowledge about this a very clear and good one.

Fund management?

  • This is something very important for all the companies that are in a good and unconquerable position in the market. As all of us know, it is important for all the companies to have their cash flows maintained and controlled well for this would detail and enhance their profits in the future. Now it is the experts in this field who would be able to do this the right and the correct way of applying the right strategies and concepts required for doing this and benefitting the company. So it is important that every company has a fund manager with the right fund managers.
  • This is s field that has a lot of experts and experienced people working and hence being here would actually make a person more knowledgeable and he would get to learn a lot of things in the finance field that would help him in enhancing and honing his finance skills and talents.
  • Moreover, fund managers have the privilege of making and taking their own decisions when comes to financial decisions. When a person becomes the fund manager of a company, he gets to have equal rights on the funds of a company and has equal rights in deciding anything about the management of funds. They are in fact authorized in dealing with the funds, the cash flows of the company and they are at freedom to use and apply the right strategies when comes to managing and handling the inflows and outflows of cash of a company. They take decisions regarding the investments that company would like to take and advice the company on where to do this appropriately so that they make the best use of the money spent and make it a worthy investment.

These are probably some of the best reasons for a person to take up this field for sure.

The Crisis of LTCM- Long-Term Capital Management

Founded as a Hedge fund management company it had in its helm two great Nobel laureates adding to its great reputation as a risk arbitrage enterprise and had a great success in developing innovative risk strategies for its clients. The firm had a high growth with a lot of investments favored by lending firms across the globe due to its reputation in the financial world and garnered more than $1 trillion as a capital base, before its downfall.

Are the Markets to be blamed?

As a high return on the risk, it became the highest player in the Risk arbitrage market to grow at a very fast pace during a 5 year period. Taking a risk on something which does not have, and need could be a great disaster in the long term which was how LTCM headed for a downfall in how they risked the entire fund, clients they had.

Both the call on margins and the selling of assets to cover a systematic risk was totally an immature move on the part of the fund and thus came its downfall.

  • extreme movements in the financial markets forced the LTCM to be victimized and lose its shine in the markets drastically
  • the Russian bond default was surprising and which pushed the markets which were losing all to face such trying times by weakling the dollar against the Russian rubles
  • in the so-called Reverse Plaza accord, the US Government increased the value of the dollar against the Japanese Yuan which was reduced, shifting the focus on the halving of the Russian rubles which weakened the subsequent Asian currencies due to demand in the crude oil consumption
  • The Russian economy has been always sensitive to the oil prices, with a lesser demand for Russian oil and decrease in their revenue from oil and taxed revenue made the currencies to be diluted and fall in the global currency markets sending a ripple effect in managed funds across the world
  • As many owners scrambled to offload the Russians bonds, which coupled with the currency devaluation became a huge run for cover operation for the investors with the effect on the bonds market and ultimately on the LTCM.

The widening of the spread of the risk arbitrage US Treasury bonds saw a huge fall, made the liquidity of the investors on a high-risk radar and thus making investors not to depend on correlated trades and exposure to converging markets.

 

 

How To Screen Stocks For Day Trading?

There are different kinds of traders who trade in the stock market. Some would get in and out of the trades in seconds, while others would be holding on to their stocks for years together.

Whatever type of a trader you are it is important to know how to pick up stocks to trade in them. With thousands of stocks listed on the exchange and also actively traded, it would definitely not make sense to analyze each one of them for an intraday or a positional trade.

So how do you go about screening for stocks to trade in?

Screening stocks or day trading

A day trader will place many trades on a single day and get in and out of the trades fast. He would, however, square off all his positions at the end of the day and not carry forward any positions overnight.

Day trading is a risky business and thus should be done with care. A few things should be kept in mind when you are day trading. To select the stocks today, the trade makes sure that you keep these parameters in mind.

Trade stocks those are very liquid

Liquidity is a very crucial thing that you should consider Hendry trading. The stocks that are liquid have huge volumes and thus you can buy and sell a large quantity at one time. Your orders get filled easily when the stock is liquid. The stocks that are illiquid will do not have enough buyers and sellers so you would not be able to get in and out of the trade quickly. If the stock is very illiquid then you would have to hold on to the trade for days together. When trading intraday one could limit the stocks to only blue-chip stocks which are very liquid.

Volatile stocks should not be considered

Stocks that have a very low volume or stocks that have some news during the day tend to be very volatile. Some stocks may be volatile after the news is announced. It is best to stay away from these stocks for an intraday trader. The reason for this is that you may be stopped out unnecessarily because of the volatility. The movement will be very chaotic and your trade rules may not work out.

Pick up stocks that follow the index trend

Once you have narrowed down the stocks that are liquid and not very volatile, you may still be left with many stocks to screen through. To narrow down the search further look at the broad market trend. Analyze what the index would be doing the next day. Then go ahead and screen stocks that are following the index trend. This will increase the probability of the trade being profitable.

Give The Best To Your Company

Financial modeling is one of the most important and essential skills for a businessman. This skill of utmost importance in today`s technologically changing financial world and this is looked upon as one of the most expected skills from a financial expert.

The basic understanding about this skill is nothing but the core element based on which some very important financial decisions like investments, new project start-up etc are all planned. This is a simple yet calculative model which is considered essential and important for all the business organizations before they get into any new venture.

This is a tool that helps in the best decision making and helps in getting the best solutions. It is not just the decisions that are taken based on this model but it would also help in assessing the risks associated with each and every new decision thereby giving a very clear view of what would happen to the business if a plan designed gets executed in reality.

So basically it is like a blueprint, a pretend that would help a business in sneaking a peek into the business activities in the future. They also help in coming up with some very important and effective financial statements that help a business at the financial position and the operations of a company.

Benefits of financial models

Now that we know what a financial model is all about, let`s take a look at how this would help a business is progressing well with its future financial business plans. It is expected that every business has one in its pocket so that it is able to step a foot in the future of its business with a clarity.

  • First and foremost the value and importance of such a model are increasing day by day in today`s finance world and hence it has become a very important and essential component for a business to have one.
  • Now with this, a company would be able to calculate its financial risks and also the desired measures it needs to take in order to mitigate these risks carefully both financially and managerially. Now, this is possible in a cost-effective way when such models are used.
  • It helps the company in seeing itself in the future from the present and this helps in giving a clear future perspective of the company.
  • These models are nothing but the economy as well as financial performance of a company in the future.

The Methods of Business Valuation

Maintaining the aspects of a business in entirety is quite challenging. To know all the objectives of the business, and to assess its value in the market is termed as Business Valuation. It is also a measure for determining the company’s economic value. To know the complete details of a business, this kind of a valuation is a need.

While evaluating a business, will include the analytics of a company’s management, capital earnings, the market value of assets, and the future of the business in the market.

The need for business valuation:

The business needs to valued at times of starting a new business from an existing old business, to enter into partnership contracts and also if a business has to be dissolved. The management will take the help of professional evaluators for this purpose.

The different methods of business valuation are:

  • Times revenue method: in this method, the stream of revenues in a certain term period is applied to a multiplier depending on the economic and industry perspective and situation.
  • Book value: by analyzing the value of equity of a shareholder, this method is used to find the business value. It is calculated as the difference between the current assets and current liabilities which are present in the balance sheet statement.
  • Discounted cash flow method: this method operates on the projections of future cash flows which operate in the current market situation of the company.It takes the inflation factor into account while calculating the value of the business.
  • Market capitalization: the simplest method of business valuation which is calculated by multiplying the company’s share price with the number of shares outstanding.this is a quick method and can be a very crucial factor to know the value of a business.
  • Earnings multiplier: this method of valuation an accurate measure of the company’s value in terms of its sales revenue.here the future profits are adjusted against cash flows to predict the business value of the company.
  • Liquidation value: this is simple and easy to calculate. The value at which the assets are liquidated or changed into cash so that the liabilities can be paid off on that day.

These are the basic valuation methods but there could be many more according to the business dimensions.Another factor which needs business valuation is tax reporting.the internal revenue system requires a business to be valued in terms of its fair market value.