Investment Terms

Portfolio Construction

All portfolios, whether they are stock or bond portfolios, are compared to benchmarks to gauge their performance; indices or peer group statistics are used to monitor the success of each fund.

As composites, the indices can be thought of as similar to polls: a polling firm that seeks to understand what a certain population thinks about a certain issue will ask representatives of that cross-section of the population. Similarly, a stock or bond benchmark that seeks to measure a certain portion of the market will simply compile the values of representative stocks or bonds.

Portfolio construction refers to the manner in which securities are selected and then weighted in the overall mix of the portfolio with respect to these indices.… Read the rest

Abey Francis

The Concept of Financial Research

Here, there are several distinctions between types of research–breaking it down by style, capital structure and firm. While the main focus will be on fundamental equity and fixed income research, it will also discuss the other types of research as well as the functional roles analysts play at different types of firms.

1. Research Styles
  1. Fundamental Research:  Fundamental research takes a deep dive into a company’s financial statement as well as industry trends in order to extrapolate buy and sell investment decisions. There is no clear cut way in conducting fundamental research but it normally includes building detailed financial models, which project items such as revenue, earnings, cash flows and debt balances.
… Read the rest
Abey Francis

Commodity Futures – Meaning, Objectives and Benefits

What is “Commodity” and “Commodity Exchange”?

Any product that can be used for commerce or an article of commerce which is traded on an authorized commodity exchange is known as commodity. The article should be movable of value, something which is bought or sold and which is produced or used as the subject or barter or sale. In short commodity includes all kinds of goods. Indian Forward Contracts (Regulation) Act (FCRA), 1952 defines “goods” as “every kind of movable property other than actionable claims, money and securities”. A commodity exchange is an association or a company or any other body corporate organizing futures trading in commodities for which license has been granted by regulating authority.… Read the rest

Abey Francis

Commodities Exchange in India

Commodities (commodity) are basic raw materials and foodstuffs such as metals, petroleum, coffee, grain etc. Commodities are traded on a commodity exchange both by the companies that use them (e.g. chocolate manufacturers) and by speculators. Futures contracts allow commodity producers and commodity users to bring some predictability and stability to pricing. By buying futures contracts, they can hedge against underlying price changes in the commodity.

Commodity exchange are the   exchanges where the trading of futures and forwards take place, basically commodity exchange   are trading   in future contacts on those   commodities   which have some   regional   relevance it is   not going   to be as easy   as a share   of a company   to get   listed   in a different exchange.… Read the rest

Abey Francis

Basics of Commodity Futures Markets

Futures markets have been described as continuous auction markets and as clearing houses for the latest information about supply and demand. They are the meeting places of buyers and sellers of an ever-expanding list of commodities that today includes agricultural products, metals, petroleum, financial instruments, foreign currencies and stock indexes. Trading   has also being imitated in   future contracts , enabling   option buyers to participate in future market with known risks. In other words Futures markets have been described as continuous auction market and as a clearing house for the latest information about supply and demand.

Participants in Future Market

The following are the participant in future market which are as follows:

  • Hedgers: Hedgers are individuals and firms that makes purchases and sales in the future market   solely for the purpose   of establishing   a known price level —weeks or month in advance   -for something   they later intended to buy and sell in the cash market in this way   they attempt to protect   themselves   against   the risk of unfavorable price change   in the interim.
… Read the rest
Abey Francis

Commodity Markets and Futures Trading

The process of trading commodities is also known as futures trading. Futures Contracting is an important activity for any economy to meet raw material requirements, to facilitate storage as a profitable economic activity and also to manage supply and demand risk, forward contracts gives rise to price risk, so to the need of price risk management, unlike other kinds of investments, such as stocks and bonds, when investor trade futures, he/she do not actually buy anything or own anything. He/she are speculating on the future direction of the price in the commodity in which they are trading. This is like a bet on future price direction.… Read the rest

Abey Francis