Financial Products

Financial Products — No Comments
25
Jul 10

What are Financial Products

Whether you are salary class or business class, or you are software engineer or accountant we all need to plan to make our future financially secure, that’s why we need know about financial products that can help achieve our objective, so what exactly does financial products mean well here is the answer for it.

Credit : Flickr

Financial products refer to those instruments that help individuals to save, invest, get insurance, for tax planning etc…. These products are issued by various banks, financial institutions, stock brokerages, insurance providers, and government sponsored entities. Financial products can be classified in terms of their type or underlying asset class, volatility, risk and return. Some of the major types of financial products are –

1. Mutual funds

2. Insurance policies

3. Bonds

The best part about financial product is that they can be modified so as to suit ones requirement according to his or her risk – return profile and hence there are thousands of financial products which are available in the market and hence there are plenty of alternatives for an individual to make his investment.

Financial Products — 2 Comments
18
Jun 10

Advantages of Carbon Credits

Due to global warming a new source of income has emerged for the corporate which is called carbon credits. Carbon credit implies that a company earns credit for reducing the carbon dioxide emission into environment. One carbon credit is equal to one ton of carbon dioxide which implies that if a company has reduced the emission of carbon dioxide by 1 ton it receives 1 carbon credit which it can sell to other companies who have emitted more carbon dioxide than they are permitted to do.

Credit: Flickr

A company can reduce the carbon dioxide by adopting new technologies for production which are more environmental friendly. Carbon credits are traded in market just like stocks by giving a monetary value to the cost of polluting air and therefore an incentive for those companies who are concerned about environment. Given below are some of the advantages of carbon credits –

1. The biggest advantage of carbon credit is that they help in reducing the global warming because this is being implemented across the world.

2. It helps the companies of developing world in generating extra income from carbon credits.

3. Energy saving initiatives becomes more popular because of the awareness generated by carbon credits.

4. It is also an alternative investment for people who are looking for some innovative investments.

Financial Products — No Comments
13
May 10

Open and Close Ended Mutual Funds

Mutual funds can be classified in many ways but it is important to know their classification of mutual funds in terms of open and close ended mutual funds. Let’s look at both of them –

Credit : Flickr

Open ended mutual funds are those which remain open for issue and redemption of its units for unlimited period of time, which implies that investors can buy and sell mutual funds units at any time without any restriction. However due to this type of mutual fund have to maintain high level of cash or marketable securities in their portfolio because there can be redemption pressure from investors at any point and therefore they need to have high amount of cash so as to meet that redemption.

A close ended mutual fund is one which can issue units only in the beginning of the launch of fund and investors cannot redeem those units before a fixed duration. Since investors cannot redeem the units these types of funds have higher flexibility in terms of their portfolio strategy because they know that when investors will redeem the units and therefore they can plan the investments accordingly. However due to limit on the redemption, closed ended mutual funds tend to quote at discount to open ended mutual funds, since investors prefer those investments which they can liquidate quickly.

Financial Products — No Comments
8
Apr 10

Differences between Term Insurance and Whole Life Insurance

In case of life insurance there are two basic type of insurance which one can take one is term insurance and the other is called whole life insurance. One should have knowledge of what are the main differences between the two before making a decision on which plan to take.

1. Term insurance can be defined as that insurance which gives protection for a limited period of time only which is decided on the basis of payment which the insured has made. While whole life insurance is one which offers protection for the entire life of a person or up to 100 years whichever comes earlier.

2. Under term insurance, if insured dies during the life of the policy then the sum assured is paid to the beneficiary which the insured has mentioned in the insurance documents, however if insured does not die during the policy then he or she does not get any maturity benefit from the policy. Under whole life insurance policy as some portion of premium paid goes towards the investment into equity markets the insured will get maturity benefits under this plan unlike that of term insurance.

3. Term insurance is the cheaper than any other form of life insurance including whole life insurance.

Apart from above there can be many points which differentiate the two and it also varies on the basis of various terms and conditions which insurance company’s can attach to various policies offered by them to the person seeking insurance.

Financial Products — No Comments
22
Feb 10

What is Systematic Investment Plan

Stock markets in recent years have very volatile and many investors have done the mistake of buying at highs in the year 2008 and selling at lows in the year 2009. To overcome that situation one should start investing in stock market through SIP. Systematic Investment Plan also known as SIP is an investment approach where an investor who is willing to invest into the stock markets can invest through mutual funds. However it is different in the sense that under SIP one doesn’t need to invest whole amount at one go, rather one has to invest periodically which may be monthly or quarterly. For example if one has $12000 which he or she wants to invest into the stock market through mutual fund but he is not sure what is the right time to put that money, then he may take SIP under which he will invest $1000 each month for a year, therefore he does not have to worry about stock market fluctuations.

The main advantage of SIP is that since a fixed amount is invested on a regular basis, one gets more number of units in a falling market and fewer units when the market is on the rise and therefore the investor does not have to face the risk of buying too much when market is high and buying very little when stock market is crashing. SIP are best when one has a time frame of attest 3-5 years because it generate returns only over a long period, it is not for those who want to make short term gains in the stock market.

LetsLearnFinanceGateway Towards Financial Wisdom