Cetaphil
Cetaphil Gentle Skin Cleanser, 250ml
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Tuesday, June 13, 2017
Cetaphil
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Sunday, February 12, 2017
Options
Options Definition
An ‘Option’ is a type of security
that can be bought or sold at a specified price within a specified period of
time, in exchange for a non-refundable upfront premium. An options contract
offers the buyer the right to buy, not the obligation to buy at the specified
price or date.
Types Of Options
Call and Put are two types of Options.
1. Call - A call gives the holder
the right to buy an asset at a certain price within a specific period of time.
Calls are similar to having a long position on a
stock. Buyers of calls hope that the stock will increase substantially before
the option expires.
2. Put - A put gives the holder the right to sell an asset at a certain price within a specific period of time. Puts are very similar to having a short position on a stock. Buyers of puts hope that the price of the stock will fall before the option expires.
Example of Call and Put Options
1. Suppose the stock of XYZ company is trading at $40. A call option contract with a strike price of $40 expiring in a month's time is being priced at $2. You strongly believe that XYZ stock will rise sharply in the coming weeks after their earnings report. So you paid $200 to purchase a single $40 XYZ call option covering 100 shares.
2. Suppose the stock of XYZ company is trading at $40. A put option contract with a strike price of $40 expiring in a month's time is being priced at $2. You strongly believe that XYZ stock will drop sharply in the coming weeks after their earnings report. So you paid $200 to purchase a single $40 XYZ put option covering 100 shares.
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Thursday, February 9, 2017
Gensaki
What is 'Gensaki '
Gensaki is similar to Repo and its traded only in Japanese market. Gensaki is a Japanese government bond, it can be reissued and resold at the new rate. Gensaki is available to both corporations and financial institutions.
Sunday, November 27, 2016
US Fed rate hike impact on India
What is Interest Rate?
Essentially, interest is nothing
more than the cost someone pays for the use of someone else's money. Homeowners
know this scenario quite intimately. They have to use a bank's money, through
a mortgage, to purchase a home, and they have to pay the bank for the
privilege. Credit card users also know this scenario quite well -
they borrow money for the short-term in order to buy something right away. But
when it comes to the stock market and the impact of interest rates, the term
usually refers to something other than the above examples - although we
will see that they are affected as well.
The interest rate that
applies to investors is the Federal Reserve's funds rate. This is the cost that
banks are charged for borrowing money from Federal Reserve banks. Why is
this number so important? It is the way the Federal Reserve (the
"Fed") attempts to control inflation. Inflation is caused
by too much money chasing too few goods (or too much demand for too little
supply), which causes prices to increase. By influencing the amount of money
available for purchasing goods, the Fed can control inflation. Other
countries' central banks do the same thing for the same reason.
Basically, by increasing
the federal funds rate, the Fed attempts to lower the supply of money by
making it more expensive to obtain.
Stock Price Effects
Clearly, changes in the federal
funds rate affect the behaviour of consumers and businesses, but the stock
market is also affected. Remember that one method of valuing a company is to
take the sum of all the expected future cash flows from that company
discounted back to the present. To arrive at a stock's price, take the sum
of the future discounted cash flow and divide it by the number of
shares available. This price fluctuates as a result of the different
expectations that people have about the company at different times. Because of
those differences, they are willing to buy or sell shares at different prices.
Investment Effects
For many investors, a
declining market or stock price is not a desirable outcome. Investors wish to
see their invested money increase in value. Such gains come from stock
price appreciation, the payment of dividends - or both. With a lowered
expectation in the growth
and future cash flows of the company, investors will
not get as much growth from stock price appreciation, making stock ownership
less desirable.
Furthermore, investing in stocks
can be viewed as too risky compared to other investments. When the Fed raises
the federal funds rate, newly offered government securities,
such Treasury bills and bonds, are often viewed as the safest
investments and will usually experience a corresponding increase in
interest rates. In other words, the "risk-free" rate of
return goes up, making these investments more desirable. When people
invest in stocks, they need to be compensated for taking on the additional risk
involved in such an investment, or a premium above the risk-free rate. The
desired return for investing in stocks is the sum of the risk-free rate and
the risk premium. Of course, different people have different risk
premiums, depending on their own tolerances for risk and the companies they are
buying into. In general, however, as the risk-free rate goes up, the total
return required for investing in stocks also increases. Therefore, if
the required risk premium decreases while the potential return remains the
same or becomes lower, investors might feel that stocks have become too risky,
and will put their money elsewhere.
US Fed Rate hike impact on India
After 2008 crisis, US Fed slashed the interest rates
to 0.25% to support the economy. Since then US Fed has kept interest rate
constant to increase liquidity in the US market. The emerging markets were the
major beneficial of low-interest rates since investors invested in emerging
markets because US market was fragile. But now the US economy is improved and
on 17 September, Fed will contemplate to raise interest rates. This may lead to
capital outflow from emerging markets since investors will prefer to invest in
US market both in debt (better yield) and equity (better economic growth).
Considering the strong growth in India, it is unlikely that the long-term
investment story of Indian will get impacted due to this hike. However, US
Fed’s decision may have a temporary negative impact on Indian markets in the
following ways:
Impact on Indian Rupee
Indian Rupee will depreciate if US fed will raise the
interest rate. US interest rate hike will be an indication that US economy is
in good shape. Thus foreign investors in Indian markets will withdraw their
money and invest in US market. In addition, the depreciation of Indian Rupee
will lead to higher current account deficit and higher inflation.
Impact on Indian Debt
Market
There is a huge difference in interest rate in India
and US. The policy rate is India is 7.25% while in the US it is 0.25%.
Theoretically, an investor can borrow money from the US at 0.25% and invest in
India for 7.25%. Thus, he will earn 7% return after paying back the borrowed
money. The subsequent interest rate hikes by US Fed will reduce this gap and
foreign investors will show reluctance to invest in India since the risk-reward
will become less favourable. This is in addition to lower returns due to
depreciation of the rupee.
Conclusion
India is not isolated from the impact of US interest
rates. There may be some temporary capital outflow from the Indian market if US
Fed hikes the interest rate. In long-run, Indian economy is attractive with a
growth of 7% and inflation under control, thus investors will not be able to
stay away from investing in India.
Saturday, November 12, 2016
Euroclear
Euroclear is one of two
principal clearing houses for securities traded in the Euromarket.
Euroclear specializes in verifying information supplied by two brokers in
a securities transaction and the settlement of securities. Euroclear is market
owned and governed, and has previously acquired London Crest,
Necigef Netherlands, Sicovam Paris and CIK Brussels.
Activities
Euroclear settles domestic and international
securities transactions, covering bonds, equities, derivatives and investment
funds. Euroclear provides securities services to financial institutions located
in more than 90 countries.
In addition to its role as an International Central Securities Depository (ICSD),
Euroclear also acts as the Central Securities Depository (CSD)
for Belgian, Dutch, Finnish, French, Irish, Swedish and UK securities.
Euroclear also owns EMXCo, the UK's leading provider of investment-fund order
routing. Euroclear is the largest international central securities depository
in the world.
Financial Information eXchange
What is FIX?
The Financial Information eXchange (FIX) protocol is an electronic communications protocol initiated in 1992 for international real-time exchange of information related to the securities transactions and markets. With trillions of dollars traded annually on the NASDAQ alone, financial service entities are investing heavily in optimizing electronic tradingand employing direct market access (DMA) to increase their speed to financial markets. Managing the delivery of trading applications and keeping latency low increasingly requires an understanding of the FIX protocol.
The Financial Information eXchange (FIX®) Protocol
has revolutionised the trading environment, proving fundamental in facilitating
many of the electronic trading trends that have emerged over the past decade.
FIX has become the language of the global financial
markets used extensively by buy and sell-side firms, trading platforms and even
regulators to communicate trade information. This non-proprietary, free and
open standard is constantly being developed to support evolving business and
regulatory needs, and is used by thousands of firms every day to complete
millions of transactions.
FIX is the way the world trades and it is becoming
an essential ingredient in minimising trade costs, maximising efficiencies and
achieving increased transparency. FIX offers significant benefit to firms keen
to explore new investment opportunities; it reduces the cost of market entry
with participants able to quickly communicate both domestically and
internationally, in addition to significantly reducing switching costs.
The FIX Protocol
language is comprised of a series of messaging specifications used
in trade communications. Originally developed to support equities trading in
the pre-trade and trade environment, it is now experiencing rapid expansion
into the post-trade space, supporting straight-through processing (STP) from
indications of interest (IOI) to allocations and confirmations. Additionally,
it is witnessing significant growth in the fixed income, foreign exchange and
listed derivative markets.
Who Uses FIX?
FIX®
has become the way the world trades. Virtually every major stock exchange and
investment bank uses FIX for electronic trading, alongside the world's largest
mutual funds, money managers and thousands of smaller investment firms. Leading
futures exchanges offer FIX connections and major bond dealers either have or
are implementing them. Identifying an exact number of users is impossible, as
FIX is a free and open standard, but it is very clear that the world’s
financial community now speaks FIX.
Monday, November 7, 2016
Direct and Regular Plans of Mutual Fund Schemes
There are two broad ways in which you can invest in mutual funds. Through a distributor (regular plan) or directly with the AMC (direct plan). For every MF scheme, there are two plans available, viz. direct plan and regular plan. For instance, you can invest in HDFC Balanced Fund-Direct plan or HDFC Balanced Fund-Regular plan.
What Is the Difference Between Regular and Direct Plans of the Same Scheme?
The only difference is distributor commission. Everything else including the portfolio and fund manager is same across the two types of plans.
Under regular plans, since you are going through a distributor, there is a cost attached to it. Asset management company (AMC or the mutual fund house) pays commission to the distributor on your behalf. You do not have to pay the Asset Management Company (AMC) directly. AMC pays the distributor but money comes from your investment. Since a part of your investment is going towards distributor commission, it affects your returns.
Under direct plans, you invest directly with the fund house. Recently, a few online portals have come up which let you invest in direct plans of MF schemes. Since there is no distributor involved, there is no commission to be paid. And that adds to the return.
How Do I Know If I Am Investing in Regular or Direct Plans?
Regular plans are the norm. Direct plans were launched quite recently in January, 2013 only.
You are investing in regular plans if:
- 1. You are investing through a local distributor.
- 2. You are investing through a bank branch.
- 3. You are investing through online portals such as ICICIDirect or FundsIndia.
Alternatively, you can download your account statement from AMC website or CAMS or Karvy website. You will have “Reg” mentioned in front of regular plan investments and “Direct” in front of your Direct plan investments.
Points to Note
NAV of Direct plan of a scheme is higher than NAV of regular plan of the same scheme. However, that does not mean direct plans are expensive. NAV of direct plan is higher than regular plan because direct plan offers better return. NAV of direct plan and regular plan started at the same level on January 1, 2013. NAV of direct plans have inched ahead since then due to better returns. The gap will only grow over a period of time. Direct plan of a MF scheme will always give better returns than regular plan of the same MF scheme. It is a mathematical construct.
What Is the Difference in Returns?
Difference in returns will be due to the commission paid to the distributors. Difference will vary across schemes. You can expect difference to be higher in equity funds than debt funds. Typically, it ranges from 0.5% to 1.25% p.a. in an equity fund. This difference may seem small. However, it will lead to a huge difference in portfolio value over the long term because of compounding of returns.
Can I Switch from Regular Plan to Direct Plan?
Yes, you can. For instance, you can switch your investments in HDFC Balanced Fund-Regular plan to HDFC Balanced Fund-Direct plan. However, do note switch from regular to direct plan is equivalent to redemption from regular plan of MF scheme and subsequent investment in direct plan of MF scheme. Hence, capital gains tax and exit load implication will arise at the time of redemption. Exit load refers to the penalty charged by AMC if you redeem your investment too soon. Typically, AMCs charge exit load of 1% if you exit your investment in equity mutual fund before 1 year. Short term capital gains (<=1 year) on equity funds are taxed at 15% while long term capital gains are exempt from tax. Short term capital gains (<=3 years) on debt funds are taxed at marginal income tax rate while long term capital gains are taxed at 20% less indexation. If you are planning to switch, do keep this aspect in mind.
Here is what you can do:
- 1. Make fresh investments only in direct plans.
- 2. You can also stop your existing SIPs in regular plans and start new
- SIPs in direct plans.
How can I invest in Direct plans of MF schemes?
You can visit branches of AMCs or CAMS or Karvy offices to invest in direct plans. You can also register on individual AMC websites to invest in direct plans. However, you will have to remember login credentials for every AMC website. Recently, many online portals have come up that let you invest in direct plans from multiple AMCs. If you register with them, you can invest in schemes from multiple AMCs from a single interface. A few examples are Invezta, OroWealth, UnoVest etc. All these portals charge either a flat fee or a percentage of assets for the service offered. Still, these will be less expensive than regular plans.
And yes, there is MF Utility. MF Utility is an initiative by 25 AMCs. You can register with MFUtility and invest in direct plans online. The service is free of cost. Go through this post to know more about how to register with MF Utility.
What should you do?
It makes sense to invest in direct plans of MF schemes. You must also shift your investments in regular plans to direct plans. There is a caveat though. Direct plans are more suited to Do-it-yourself (DIY)investors, who can research mutual funds and assess fund suitability on their own. Such investors can review and rebalance their portfolios themselves. It makes little sense for such investors to stick with regular plans. DIY investors must shift to direct plans. There are many of us who do everything on own but still invest in regular plans (say through online platforms such as ICICIDirect). It is criminal waste of money for such investors to invest in regular plans.
If you can’t do that, you can contact a SEBI Registered Investment Adviser (SEBI RIA). Such advisors charge a fee and recommend funds based on your requirements. You can subsequently invest in direct plans of MF schemes. If you don’t want to pay fee either (and yes, many don’t want to write a cheque), then you are better off sticking to a local distributor or a robo-advisory platform. In my opinion, cost of selecting the wrong fund and poor investment discipline is much more than 0.5%-1% p.a.
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