Recent Trends in Asset Management

Recent Trends in Asset Management

Asset management is the financial umbrella term for any system that monitors or maintains things of value, whether for an individual or a group. An asset is anything that has actual or potential value as an economic resource. Anything tangible or intangible that can be owned and produce a profit (turned into cash) is considered an asset. Tangible assets are physical items including inventory, buildings, trucks, or equipment. Intangible assets are not physical items, and include copyrights, trademarks, patents, stocks, bonds, accounts receivable, and financial goodwill (when a buyer purchases an existing company and pays more than it is worth, the excess is considered the goodwill amount). Both tangible and intangible assets work to build the owner’s financial portfolio. While this concept has been in play for more than a hundred years, recent developments have lead to several shifting variables worth considering. The following are recent management trends and some of the implications for asset investment.

The Globalization of the Market

Even as recently as 20 years ago, the majority of investments were made in U.S. based companies. As technology expanded our range of communication and information, our interest in investing in overseas companies expanded as well. Until recently, most investing in international assets was pooled into mutual funds. Those mutual funds were typically run by a manager who specialized in the country and made all of the decisions. However, the rapid development of previously underdeveloped markets, such as those in Eastern Asia, and the formation of the European Union, has made international investment less daunting. Recently there has been a large shift to investing in individual companies instead of the previously dominant international mutual funds. This allows the assets to be managed as the investor sees fit.

Use of Index Funds

The rise of technology has not only affected the global market, it has also affected the way we invest in our own stock market. There has been a large shift away from the fund manager driven investments of before and into index funds. Index funds are a group of investments that align with the index of a specific market, like the Dow Jones for instance. As they are primarily computer driven, index funds remove the need for an asset manager, which allows for advantages such as lower costs, turnovers, and style drift. They are also simpler to understand as they cover only the targeted companies and need only to be rebalanced once or twice a year.

Drop of Interest Rates

Traditionally, stocks and bonds were the ideal assets. However, with the severe drop in interest rates that has occurred over the past 7 or 8 years, many investors are looking to alternative assets. Bonds are not providing as steady returns as they used to, and the constantly changing risk and volatility of the stock market is turning those looking for higher returns towards alternative investments. These alternatives include hedge funds, private equity (stocks held in private companies), and real estate. These have become popular as they offer relatively greater returns in a shorter time frame. However, these alternatives also carry a higher long-term risks.

While these are all trends to take into consideration when examining your investments, the key to good asset management still lies in diversification. Any investment, no matter the type, comes with some degree of risk. The best solution to limit the risk is to spread out your investments over different types and reassess as needed. A balanced portfolio and good asset management leads to a happy investor.

Why You Must Understand Financial Literacy

Why You Must Understand Financial Literacy

Financial literacy is the knowledge necessary for managing your personal finances. This is indeed a necessity for financial health. It will create a perspective that will allow you to avoid financial pitfalls. Most importantly, this will help you come up with wise decisions involving your hard-earned money. Experts highly emphasized that if you understand financial literacy, you’ll be able to make excellent choices and come up with a very strong financial management habits.

Financial Facts

When children leave their homes for college, they will certainly face a lot of new responsibilities, experiences, and environments. In order to help your student in this transition, they must be aware of the financial facts of life. These include how to open the first checking account or perhaps how to make the first purchase using a credit card. They must be ready to enter the world of becoming independent. Most people today view managing money as a symbol of independence and maturity.

Make sure that they fully understand the fundamentals of personal finance as this will guarantee that they know how begin their financial future. As a parent, be aware that you are the most important source of financial education for your young ones. Though it is not easy to talk about money, discussing personal finance with your children will show that you see them as responsible young adults.

Great Tips For Interacting With Your Kids About Money

Approach the conversation with an optimistic attitude.
Since laughter can help, consider lightening the mood with a joke.
You must set a tone of openness, trust, and confidence.
Ask several questions, and be sure to listen to the answers carefully.
Do not make it look like a lecture but an equal exchange.
Do not bring up an old financial disagreement.
Ensure that your kids know that they can always turn to you in case they will need financial help, information, and advice.
A great way of teaching your children about the fundamentals of finance is to develop a budget for college.

How To Develop A College Budget

List your regular monthly expenses.
Know your total income – these may include part-time job, financial aid refunds, and allowance.
Subtract your expenses from your income to determine if the budget is reasonable.
When the expenses are more than your income, you must work together in order to reduce your expenses until the numbers agree.

Holding on to Our Money

Holding on to Our Money

Why is it so hard to manage money and hold on to it? How can we save more and spend less? It has become an issue to make and save money.

The world is geared in such a way that it’s difficult to hold on to our money…

Everyone is after money – our money, their money, everybody’s money – because of greed and because they never have enough. They spend years in higher education, in colleges and universities, to master the art of finding ways to get our money with such ease. They have become experts in their field and their field is to find more ways for our money to escape from our wallets faster and faster.

The funny thing is, there is a collaboration between the financial institutions and the commercial world to create more wants than needs. People, in general, are innocent and ordinary. The majority work hard to try to have a life without paying too much attention to the details… and that is when it happens…

I remember when banks were not so greedy. They made it easy and a pleasure to bank with them. Now it’s all about them making more and more billions in profits every year. They charge for every little detail, and we are not done yet, because they have their geniuses looking for ways to get every hard-earned dollar from our bank accounts into theirs-the latest being that, with every transaction at the teller, if you want a receipt, there is a charge of one dollar.

The government raises taxes, and if you don’t have a good accountant, you are doomed. There is a well-organized plan to find ways for our money to fly into someone else’s nest. Therefore, people will never get out of debt unless they get smart, spend less, and save more. As the saying goes, “A penny saved is a penny earned.”

How about our young ones? Do you think there is more we can do to educate them about money matters, to help them manage their resources, money, time, and so on? I don’t think we do enough to prepare our young people for life and its money challenges!

We teach them history, the arts, geography, economics, and so on. Please, don’t get me wrong, these subjects are important, but I feel it’s more important to teach them practical and smart ways to deal with their personal finances, starting from when they’re young and into their teen years.

It would make such a huge difference in their lives. It would determine how successful they are going to be… or not.

But here is the question: Who is responsible for this task-the school system or the parents? Why do we as parents depend on others, such as schools, to ready our children for life? Isn’t it our duty to make this happen?

Here is my opinion: Parents care more for their children than anyone else does; therefore, they are responsible for teaching their children about personal finances if the school doesn’t do it. Remember, economics is not the same as personal finance. We have to teach young people to spend less than what they make, a lesson that can prove to be as valuable as gold if it’s put into action! It’s a very simple lesson but a very important one.

I wish I knew more about money management. I wish someone had told me early in life about money and how very important it is to save more and spend less… to pay myself first and then spend the rest with no guilt. Life will never be without its bills and expenses. It is what it is, and nothing is free… well, I’m trying to think what things are free-not too many! The air we breathe is still free, but I don’t know for how much longer!

A New Year’s Resolution for Your Finances

A New Year’s Resolution for Your Finances

It’s shortly after New Year’s, and that means resolutions. And it’s not too late to set a New Year’s Resolution for your finances. The goals that are most successfully accomplished are those that are manageable, not too overwhelming. So let’s look at one financial goal that is manageable enough to be accomplished this year.

Pay a little bit extra on your mortgage every month. Make it small enough that you can manage it every month, but not so much that it is stressful. Start with a small success and then build on it.

Let’s see how paying just a little more on your mortgage could really benefit your finances in the long run.

For example, if you have a 30-year mortgage for $150,000 at an interest rate of three percent, paying an additional $100 each month would save you a total of $17,214 and you would pay it off six years early. If you were only able to increase the amount to an extra $50 per month, you would still save $9,719 and pay it off three years and four months early.

If you have a 20 year for $100,000 at 4% interest, and added $50 a month to your payment, your loan would be shortened by 26 months, saving you a total of $5,563. If the same loan had an extra $100 paid on it each month, that would be $9,883 saved and it would be paid of three years and eleven months early.

So making a small sacrifice each month to pay a little bit extra on your mortgage can save you a significant amount of money in the future.

Now for the question of where to get an extra $50-$100 each month. One recommendation would be to make this extra amount automatic. Have it taken out of your paycheck or bank account automatically. If you never see it, it’s a small enough amount that hopefully you won’t feel it too much. For example, if you are paying an extra $50 per month and get paid weekly, that’s only $10 or $12.50 out of the paycheck (depending on how many weeks are in the month).

Here are a few suggestions to help you with that extra money you need each month. Don’t buy lottery tickets. Take a lunch to work and eat out a few less times each month. Make your own coffee instead of stopping to buy some on your way to work.

Wishing you success in this year’s resolution. Take it one step at a time.

What to Do When You Need Money

What to Do When You Need Money

Budget and expenses are two of the most important and critical aspects in one’s life. From bills, to school fees and household expenses, a lot of money is required and that it ends up quickly before the month’s ends as well.

Suppose you do not have money, then there are plenty of ways to get it either through the loan, or a credit card. Before making a decision, need to consider a few things so that you don’t end up in any trouble at all.

Make an assessment of your financial situation

You need to deliberate thoroughly, before you plan to borrow money. That is, you should debate whether you really require a loan or not. If there is some solution to your shortage in money, kindly address it soon.

You need to review your household budget as well. If you can save money by changing the broadband supplier or the amenities (gas or electricity) supplier, then do so. You would be surprised how much you have saved at the end of each month. This would help you to sort out your cash problems for sure.

But if there is no option left, you can opt for a credit card or a loan.

Credit Card

Before you decide to select the credit card, you need to address the following questions.

· What is the rate of interest?

· How much time will it take to pay off the balance?

· Do you need to use the card for paying other expenses that would increase the balance and eventually increase the interest rate that you need to pay?

· Are you already having some balance on the card?

· How close will you be with your credit limit when you use the card for the respective expense?

Sometimes, it happens that you have the option of spreading the payments with your creditor through a payment plan. If such is the case, you should discuss it, and if the expense is not an emergency, you can delay it too. This will help you to save some amount of money that would enable you to pay the partial cost without the need to burrow.

Personal Loan

A loan is a good option, but the following questions need to be pondered upon and clarified before applying for the loan.

· How much is the monthly payment?

· Is the interest rate variable or fixed?

· What is rate of interest?

· How much days do you have to return the interest?

· Are there fees when applying for the loan?

· Is there a penalty if the loan is paid off early?

· Do you need to provide collateral for taking the loan? That is, do you need to pledge something of value like a car or the house to the lender?

If you have decided to burrow the loan, make sure that you would be burrowing it from a reputable lender. But first you need to seek out the correct information and advice. This will help you to weigh up the options better, and then make a wise decision