Important Stock Market Concepts and Terms

What is a Stock Market?
A stock market is where the shares of publicly-traded companies are bought and sold in the idea of achieving some profits. That is, buying some stock means, enjoying a ‘part’ of the ownership of the company, which when fares well, yields you the necessary profits! But, on the other hand, if the company, whose share you own witness a slump then, unfortunately, you also ought to suffer some definite losses as a shareholder. Thus, both profits and losses are a part of the stock market, in where, to achieve only the former requires some basic understanding and preparations, such as knowing the 3 important concepts and terms mentioned in here! Is Bitcoin Trader a scam.

Even those, who are not very fond of the stock trading would easily tell you that the expectation of a stock trader lies in the appreciation of the specific stocks of the company that he/she owns. That is, the trader buys the stocks in the hope of earning money with its raising value and that is the common practice. But, do you know, one can also earn profits in the declining value of the stocks by going or selling short?

Yes, short-selling allows you to earn money during the falling prices of the stock and the opposite, aka lose money if the market goes up. For this to happen, you borrow some shares of the security from a broker and immediately sell those shares at the current market price. Later, when the market value of the shares go down as expected, you repurchase them and return back to the borrower and enjoy the price difference as your profit!

Bull market & Bear Market

When you decode the exact meaning of the phrase, one can easily understand that a bull market is a rising market that is moving as fast as a Bull and a bear market is a downward market or a market moving so sluggishly as a bear! But, comes the technical meaning of these two terms!
A Bull market is a rising market, where the commonly followed stock market indices would witness a 20% rise from a recent low! Whereas the Bear market is a falling market, whose stock market indices would suffer a 20% decline from a recent high-water mark! Thus, the former denotes the growing economy and the latter, the upcoming recession!

Inflation & Deflation

It is impossible for you to have missed the word inflation, as it is a constantly debated news topic, where the experts comment about the current inflation rate. Even though the term is a familiar one, not many of you know the meaning, which is very much important for an aspiring stock trader! Inflation refers to the situation of rising prices of the goods, commodities and the services, while the deflation means the opposite aka falling prices.
Although falling prices make it easier for us to buy the respective goods and services, it also weakens the economy and eventually, the businesses would suffer losses leading to recession. Therefore, both, inflation and deflation should be kept well within the control, for the betterment of the society and the economy!

Busting The Myths Of 12B-1 Fee

Fees are not generally welcomed by the individuals who are spending money on achieving an intention or buying a product. If, as a customer, you are purchasing an item, you will look for the agents who charge the lowest handling fees, shipping charges or service taxes. This is because fees are constructed for benefitting the side that carries out a task or lends out a product or service, to serve as their income or to account for the expenditure they incur on providing the service. An investor prefers to purchase a security for investment directly from the issuing company if he is well-versed with the methodologies, in order to avoid spending more non-refundable money to any helping agent in between.

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There is a type of fee, constituting the expense ratio in the mutual fund system running on cash plays, known as the 12B-1 fee, introduced to help the investing side.

Why and how is it levied from the investor?

The fee is considered as an operational expense, used for aiding in the operational efficiency of the fund and the investor owning the fund. It is used for the marketing functions and distribution services, usually on an annual basis and fixed at a percentage between 1 and 0.25 of the net asset of the fund under question.

The fee covers charges under two sections: 1) Fees for distribution and marketing of the funds, making up 0.75% of the expense 2) Service fee, completing the remaining 0.25%. Among the shares sold with the help of brokers, Class B and Class C take the 12B-1 fee on a more usual basis.

What is expected to be its purpose?

The 12B-1 fund is collected with the aim of using it for the marketing and increasing the publicity of the securities and the security holder, with the intentions that the measures will increase the worth or asset value of the fund and hence benefit the investor on a long-term basis. The earning on the invested fund and the assets associated with it is expected to outrun the expense borne by the investor, a concept under the economies of sale.

The controversies

The present-day economic tactics have devised several hand methods to improve an investor’s return on the securities purchased and also the companies issuing them. Therefore, the actual draining destination of 12B-1 Fee is yet to be completely elucidated. It is estimated that currently, a major share of this fee is utilized to pay the agents and intermediate functionaries of the mutual fund who help in selling and trading of the assets.

How it aids in improving the performance of the fund as such is the factor where the controversy persists.

Attaining clarity

The fees collected under this section is on the ground used for covering the expenses related to promoting the funds by advertising them on personal and public media through emails, brochures and newsletters and even direct interaction. The service fee, on a high note, is used to pay for the answering of queries and information broadcasting and also the other incidental expenses like legal and administrative procedures. Mutual fund investment is no longer an area limited to the roles of just the buyer and the seller.

5 Must-Know Things About The Mutual Funds

Investing in the mutual funds is nothing new, as they are considered one of the dependable investment choices! Therefore, you can start your mutual fund’s investment venture positively only after knowing these below-mentioned 5 facts about them.

The fund’s goal

If you had already started researching about the mutual funds, by now, you would certainly know that not all funds are made to behave the same. While one fund offers certain benefits, the other might offer something else. Hence, it is necessary to understand the respective fund’s goals to match it with your preferences and enjoy the needed benefits. For example, bond funds concentrate predominantly on the bonds, whereas the balanced funds concentrate on both the stocks and the bonds. Likewise, funds of funds invest in the other mutual funds. Since the respective investment choices of the funds differ, their performance, risks also differ, which you ought to understand before making your further moves.

Active or passive?

An actively managed fund is one that has a dedicated portfolio manager or a team of managers to make the right investment choices for it. Such funds are generally costlier, that is their operating cost is higher due to the participation of a dedicated portfolio manager. The manager, to compensate for the costs incurred, strives to provide stronger-than-the-benchmark returns while the result is mostly the opposite.

That is why most of the investors prefer the cheaper passive funds, which are nothing but the index funds that mimic the performances of the market index instead of trying to outperform them.

The fees

You may think why such a small percentage of difference offered such a high importance but, what you forgot to remember is, in the end, it can cost you a big difference in the returns. Therefore, understand all the fees associated with the specific funds, compare them and make the suitable choice without overlooking your investment preferences.

Understand the risks associated

Certain mutual funds like the bond mutual fund, although comes with a set of guaranteed bonds, they never fail to include some high-risk bonds in their basket, which you have to understand and be comfortable with before deciding to choose them.

Understand thoroughly the prospectus

Every mutual fund comes with a prospectus not with the idea of attraction but with the idea of offering the needed information about the activities of the fund to the investors. Therefore, it is every investor’s duty to read the prospectus thoroughly to understand and decide your further course of actions that is whether to buy that mutual fund or not!

Advantages and Disadvantages of IPO


As a company continues to mature, they look at growing the business bigger with a successful venture, the profitability is there even if they are a closely held private company only with a small group of shareholders who share the profits and losses in the business, well this is not going to be perennial, company to expand their operation, go public is the next big venture which small business are always keen on, which require the company to fund in huge capital investment which they may not rely on banks, due to the banks being conservative in their approach may refuse to fund in huge capital requirement.

As the business contemplates the issuance of IPO there are certain advantages and disadvantages of going public with IPO which are to be kept in mind:


  • a lot of money is raised when the issue of shares goes public and the company may use it to clear off all its debts, invest in research and development, expand their operation, improve their infrastructure and even introduce a new line of products
  • the liquidity of the company increases as they have employees, venture capitalist, stakeholders who have toiled to bring the company to such high success, and the IPO is one way to repay them in form of equities, other incentives for the employees for their service and performance
  • the cash flow is increased and the operation of merger and acquisitions become a lot easier with the smaller competitors, with the shares being acquired from the smaller company the company is in a better cash position
  • Since public companies are better managed in terms of reporting, fiscal data and with a lot of due diligence and compliance requirements they are more visible and credible
  • the financial situation of the company improves with a lot of capital being generated from the IPO, the cash flow is improved and they are better in negotiating loans with banks to fund in the future requirements of the company for pecuniary situations


  • the reporting cost is a way to high as rolling costs are involved on complying with a lot of public reports, statements, proxy details all of which have to file with the regulatory agencies and then distributed to the shareholders with all the information. The number of Audits and reports are more and every report has a cost attached to it.
  • as the number of shares sold to the public is large the shareholders have a say in the decision-making process which becomes even more tedious with a lot of difference in opinion, the voting process, bringing all the shareholders in a meeting room as a focal point is pressurizing.



Managerial Finance In A Business

A business has many aspects that need to be taken care of. A person may be good at writing or maybe a good engineer. However, he may not be good at dealing with clients or working with the finance part. There are many departments in a company, that work together to make it a success. All the departments need a certain amount of money to run and there is a finance department that manages all these departments’ financial requirements.

Finance manager is responsible for this task

The work done by the finance manager can be called – Managerial finance. He is responsible for managing all the financial aspects, whether it is a big or small company, in the private or public domain and any other category. They perform a range of functions, from assessing the needs of each department, dealing with the legal aspects of finance, to the planning of each small and big expenditure.

Now businesses are global

With globalization, the reach of business companies has extended beyond their local or national boundaries. Now with businesses conducted at international levels, the financial manager has to conduct business at a bigger level, using different approaches. The rates of currencies and interest rates in different countries can change the profit level to a large extent. They also have to deal with the legal structure of financial aspects in different countries. All this makes their work more complex and more risk-prone.

What do they do exactly?

The responsibility of managerial finance expert includes understanding the financial techniques, that have an impact on the business. Their constant endeavor is to find ways to improve the profit margins and reduce the losses. It can be termed as the mix of both finance and management aspects. It does not deal with the techniques per se but deals with the assessment of the techniques to ensure that they work properly in terms of the business in question.


As we know any business survives only when it is successful and makes profits. The aim is always to reduce the expenditure and increase the savings and profits anyhow. So the managerial finance compares the techniques used by a company with others in the same niche and assesses the effectiveness. They try to improve better implementation of techniques. Their department assesses the present and future problems and ensures that the techniques are properly implemented and used to help the company work efficiently and make profits. It also ensures proper allocation of resources and ensures that the company achieves its goals in terms of reputation and financial profits.

Why is Working Capital Important for your Business

The ultimate goal of every business is to make a profit, with a good source of bringing in the money required on a frequent basis, without having to face any surprises of capital crunch while the business is booming. Being a part of the total capital employed in the business it is often termed in the financial parlance as the difference between the short-term liabilities and assets, indicating how high the liquidity of cash and cash equivalent resources is to run the business successfully.

Why is it important?

Many businesses often falter in achieving a high liquidity ratio, indicating the inefficient management skills in handling the capital requirements for the short-term period. The inflow and outflow of cash are very tight for small businesses as the exposure of their operations is not as high and frequent as bigger operational companies, and the internal cash generation is extremely important and necessary for their survival. With good cash management techniques, owners inject the amount of capital required and keep some additional cash in the business to free up from the debts and fund additional business expansion or projects which could be profitable

With an efficient working capital the business can:

  • manage the payables and receivables in the most efficient manner to increase the profitability
  • the return on the capital of business with a good liquidity, to their shareholders, are high for investors who have pooled in or hold shares in the business
  • the business is healthy and so is the credit profile, which financial institutions look while lending
  • the cash management also becomes effective once the high liquidity of the business is reached, the dependence of external source of financing is reduced once it is effective
  • with a good and healthy liquidity ratio, the value of the business is high as the cash management is done without any hassles
  • competition can be well faced if they have the good working capital capacity to withstand discounts and offers to stay at the best in their business
  • in case of additional funding required banks will be willing to fund only if the business has a good healthy working capital ratio
  • Since parables are well managed the production remains uninterrupted, with goods reaching the clients on time.

The better way to handle the funding requirements of the business taking the time, money and factoring the responsibilities, for investing in the future of the business is important and not an overnight goal seeking to be achieved.




Fintech in E-commerce

We are all aware of the e-commerce development that world has undergone in all the services like banking, investing and insurance etc. now another technology in financial services called the Fintech has successfully paved its way to creating a new route to the financial service industry. Aiming as a startup it began its career in a small level and has now grown to play a major role in most of the companies.

Now we can see banks are very interested to acquire these Fintech startups to aid their business growth. As it is understood that the customer range using the services of the Fintech startups; have been enormously growing. People prefer easy and quick money transactions with no mental tensions and too much work. This is the success of Fintech as it has exactly these features.

FINTECH in E-commerce

By altering and improving the online payments methods this has been very crucial for e-commerce. There are people in certain countries with no bank accounts, debit and credit cards, Fintech is the complete rescue to such people as these payment processes are easy and these can be simple to use as well.

With the introduction, many platforms for the payment and transactions the international transfer of money has become easy and fast and with lesser friction. Whichever platform we choose we are using Fintech and contributing to its growth.

Blockchain technology is the most crucial technology backup for Fintech which enabled the working of the operating system and database systems providing the financial services. It is the complete background technology for the successful growth of the technology.

The banking industry has also completed taken a swift into the use of this service and since the launch of the mobile and online banking the payments have become convenient and effective.the people who prefer very quick, safe and convenient services have got more than what they expected. Standing in the long queue for many hours and enquiring about any issue can be really time-consuming in a bank . all these barriers have been broken with the services online. People needn’t visit banks often but can do their transfers from the comfort of any place with good internet connectivity.

This has brought the possibility of international money transfer. Else, people have to plan the bank visit as an individual routine.

Future of Fintech

When this was introduced, many banks and other service companies have opposed against this in a fear that this will completely take over the businesses. With all the confusions and problems the Fintech survived and grew and captured its customers.

Now it is been acquired and merged with leading industries as their service partner and catering its services globally.This has been a new enlightenment to a successful business.

How to budget for risk management

Risk management plan should be framed for every company. If a startup plans about risk management early then it would be able to be able to improve the efficiency of the processes early. But there is one question that most entrepreneurs have and that is – how much should you really spend on risk management? Risk management plans are based on the fact that when a threat is predicted and averted, the costs incurred in repairs and corrections can be cut down. So how much cost can this risk management plan really incur?

Keep it in your budget planning

Risk management plan should be part of your periodic budgeting. When you allot funds for the various aspects of the project, risk management plan should also form a significant part of the plan. Some companies outsource risk management and assessment. And there are others that do it in-house. In both the cases, there is an expense involved. To do it in-house there should be a team formed to identify and analyze the risks and they would also have to be equipped with all essential risk management tools. Enterprise risk management should thus be an important part of budgeting.

Costs might depend on the dependencies involved

If there are too many interdependencies, then there might be several internal and external factors that influence the chances of occurrence of the threat. And the risks might be dependent on one another as well. So to avert one, you might have to go deeper and hit the root of it all. Such risks that lie at the root of the major issues are the ones that might be more expensive to manage.

Response and recovery costs

If the threat is handled on time there can be a lot of money saved. Understanding the costs incurred if the risk is not prevented is one way to identify the priority of the risk. Another way to set priorities is to identify the dependencies as mentioned earlier. So narrowing down the list of high priority risks would also help in budgeting for risk management. The teams would then be able to plan for the costs incurred in response and recovery after a disaster that could not be averted. This whole sequence belongs to the risk management plan.

The complicated nature of risk management is what makes it essential to rely on none other than experience risk management professionals to complete the plan.


Resolving Working Capital issues

Problems appear to be never-ending in their form! But, yes, we also believe that there can be no problems, without solutions; isn’t it! Every problem has its own solution, just that we need to dig in deeper and clearer.

For any business to thrive, we need to have the basics, the major part being the working capital. The first difficult part is to get the capital amount; which can be taken care by the bank loans, grants given by various committee and federal governments. Apart from that, we can also source the income from friends and family too.

After getting the working capital ready, the next set of problems is about managing that working capital efficiently to run your business. Its so impossible to run business, without any losses, so gearing up your mind and pocket to bear the losses and also having enough capital to arise against the losses and keep your work running, is the biggest challenge in itself.

Apart from all this, lies your performance. The way you shape up your business, with knowledge, hard work, any related experience, and skills; will determine your outcome, profits in the longer run. What if your working capital became too low? If y our business had too many outgoing bills than any incoming bills? How will you manage and balance between them?

There are many ways available to improve or manage your capital better. We all know that working capital is the money, apart from credit, expenses, and profits that are available to be invested for the welfare of the business. Here are few things that can help you balance your working capital better, even for a beginner.

Improve Payment Modes:

Yes, when the bills don’t arrive on time, your next set of capital is at stake. Once you have invested your money and are waiting for the bills from clients, if the bills don’t come on time, your business becomes low for the next set of deliverables. So, improve your payment mode for your clients.

Its okay to give credit, but there must be a line of limit for it. So set them realistically, so that the delayed payment should never interfere with your business cycle. Make your accounts team more responsible and keep the follow up right in time.

This applies even for the payables from your end. If you end up using the payables for your business, then you will not get any credit from your supplier to run your business, which harms your cycle again. So, its very important that you take care of this issue very carefully.