The Finatical
Week of August 9th, 2021 - Investing Terms, US-China Relations, Supply Chain Disruptions
FinaticTips - 3 Investing Terms
1 - Dividends
Simply put, a dividend is the distribution of some of a company's earnings to a class of its shareholders. This distribution of earnings is usually in the form of cash but may also be in the form of additional stock and then it is referred to as stock dividend. Companies may choose to pay a dividend just to reward their shareholders for trusting the company enough to invest in it. The dividend announcement made by the company can most likely invite more shareholders and that is probably why companies do it. You are eligible to receive a dividend as long as you own stock before the ex-dividend date of the company. An ex-dividend date is the expiry date of the dividend-paying period.
Dividends are usually given out by profit-making companies. Most companies choose to not give out dividends if they are not doing too well. Dividends can be given out at fixed intervals like monthly, weekly bi-annually etc. Some companies even choose to provide a one-time dividend for special circumstances. Once you have received your dividend you can simply put it to use for your expenses or even use it for more investing.
Knowing about dividends can come into play when you do your stock research. It has been determined that when a company makes a dividend announcement, its share prices goes up and they remain that way till the ex-dividend date. Once the ex-dividend date has passed, a company’s share price is most likely to go down. Of course, this is just investing theory and might not hold true in all cases.
2 - ETFs
An exchange traded fund (ETF) is a type of security that tracks an index, sector, commodity, or other asset, but which can be purchased or sold on a stock exchange the same as a regular stock. So how is an ETF any different from a stock? Well, when you purchase a stock, you are basically investing in a single company and your profits or losses will depend on how well the company performs over a period of time and how it affects the stock price. On the other hand, when you buy an ETF, you are investing in the market as a whole. ETFs can contain all types of investments including stocks, commodities, or bonds; some offer U.S. only holdings, while others are international.
In this manner, it can be said that investing in an ETF is a much safer option as it is extremely unlikely that the market will perform terribly except in extreme situations…let’s say, a pandemic? It's even safer when you invest in a portfolio of several different types of ETFs, so that if one part of the market goes down, you'll still be invested in other parts. ETFs also have much smaller fees than actively traded investments like mutual funds. ETFs can come in handy if you prefer passive investing as it does not involve a lot of company research.
Here are some common types of ETFs that are available in the market:
Bond ETFs
Stock ETFs
Industry ETFs
Commodity ETFs
Inverse ETFs
Currency ETFs
The target point of the listed ETFs is self-explanatory and you can easily find such ETFs on various investing platforms!
3 - Market Indexes
A stock market index shows how investors feel an economy is faring. An index collects data from a variety of companies across industries. Together, that data forms a picture that helps investors compare current price levels with past prices to calculate market performance. Reading an index correctly requires that you look at how the index value changes over time. New stock market indexes always begin with a certain fixed value based on the stock prices on its starting date. Thereafter, future index values measure rising and falling prices for those component stocks. Tracking the most-followed stock market indexes can give you a general sense of the health of the overall stock market. Tracking lesser-known indexes can help you see how a particular segment of the market is performing compared to the market as a whole. If you don't want to invest in individual stocks but rather simply want to match the performance of the overall market, then a cost-effective way to earn solid returns over time is by investing in index funds that track the stock market indexes you're most interested in.
Stock market indexes make it easier to know how the market is performing without having to follow the ups and downs of every individual stock. They also open up simple investment opportunities that even novice investors can use to participate in the long-term success of the stock market.
FinaticTrends - 2 Financial Trends
1 - American-Chinese Companies Relationships' Severed
Following Germany’s decision to create strict human rights policies, US has also increased the number of Chinese companies with which US companies are not allowed to trade because of human rights violations in Chinese companies. The focus of this decision is the technology sector. The US does not want China to engulf the technology market and has thus curbed business with Chinese companies. Following this decision, China is now reducing the number of technology products that cannot be imported from 126 to 24. That is because China is keen to enable domestic companies to acquire the resources needed to become more self-sufficient. It seems that these two superpowers are racing towards technological superiority. This decision by the US puts US companies in a tough spot as if they start to reduce their dependence on Chinese supply chains, they risk offending China’s government and thereby hurting their position in the vast Chinese market. Countries that interact with both the US and China must tread carefully as well so as to not offend either side. US companies will need to find alternative sources of capital and trade as its supply chain with China has been disrupted.
2 - Global Supply Chain Disruption
The worst is not over yet. The world fails to recover completely as Covid infections are on the rise again and the globe’s path to normalcy seems delayed for the time being. The infections have disrupted the supply chain across the globe. A leading Japanese auto producer has stopped operations in Thailand due to the surge in infections as well as shortages of key components. Ho Chi Minh City in Vietnam has imposed an evening curfew of 6 p.m. to 6 a.m. The city is a major center for production of low value apparel, textiles, and footwear. Fear of the delta variant has led to restrictions for ships trying to enter Asian and European ports. The result is that roughly 100,000 merchant sailors are stuck on ships unable to complete their missions. This is disrupting trade. It is reported that surges in infections in India and Southeast Asia have led some companies to shift orders to China, thereby exacerbating the problem of shortages of goods produced in China. COVID-19 is not the only problem for global supply chains. Climate change is likely the principal cause of a slew of catastrophic weather events around the world, including major floods in Germany and China, both of which disrupted supply chains. Also, a cyberattack in South Africa has disrupted ports. In such circumstances, the global economic outlook seems dismal.
Financial Guidance
“Financial freedom is freedom from fear.” — Robert Kiyosaki
Have you ever felt stifled or stuck because you were fearful? You were scared to quit your job because of money. You were afraid to move because you weren’t sure about the opportunities you’d have in a new place. Fear can consume us and keep us stagnant. Financial freedom helps alleviate those fears so we can pursue action.
Money Fact
Apple earns $300,000 per minute.
Now that’s passive income.