Find the Best Places to Put in your Money

If you are planning to enter into the stock market, it is true that you might think of getting a considerable return from your investment quantity that ought to be greater than what you had get by spending your cash into mutual funds or also certificate of deposits having no risk where returns are particular. So, it is ideal the best site to invest wealth.

It should be learned that knowing where to spend cash is not a matter of making out instructions from experts in a foreign country. It is in fact about reaching your cash in the best places.

With the help of wide exchange-traded funds or ETFs that control entire areas of the world and every market. Though there are some risks, ETFs reduce those risks by merging investable businesses into simple tickers that you can purchase as well as sell securely through your dependable brokerage.

Various advantages of ETFs-

• Simple - purchased and sold just as shares. These are very easy or simple to deal.
• Diversification – These Easy Traded Funds are very helpful addition to a reasonable portfolio and permit you to access entire indices that are based in a variety of nations. 
• Comprehensible pricing - Since ETFs are purchased and traded like shares, average commission rates are applicable while you purchase or sell online.
• Taxation –ETFs in most cases are offshore funds and definite taxation rules are related to investors.

  Generally, if the offshore fund possesses reporting status then profits are subject to capital gains tax but if an offshore fund doesn’t have any reporting status then profits are dependent on income tax.

More Efficient Than Mutual Funds

ETFs are more inexpensive than conventional mutual funds for a lot of reasons. For beginners, many ETFs are the index finances, and following an index is naturally less costly than active management. However,ETFs that are index-based are more economical than mutual funds that are index-based.

Some places to buy ETFs are as follows-

Vanguard FTSE Emerging Markets ETF (VWO)
 

• Supplies in stocks of corporations located in developing markets all over the world, for example China, Taiwan, and so on. 
• The purpose is to directly track the yield of FTSE Emerging Index. 
• Possesses much possibility for growth, in spite of having risk. 
• Only suitable for long-term aims.

SPDR Emerging Markets Small Cap ETF

The SPDR Small Cap ETF wants to give investment outcomes that, before payments and expenses, match generally to the entire return activity of the S&P Emerging Markets ETF

iShares MSCI EAFE Growth ETF

1. Exposure to a wide variety of companies in the continent of Europe, Asia, as well as the Far East whose profits are expected to develop at an above-average speed in relation to the market.

2. Access to a definite kind of EAFE stocks

3. Take an global stock allocation to the growth stocks

iShares MSCI EAFE Value ETF

1. Contact with a large number of companies in various continents that are considered to be underestimated by the market.

2. Aimed at access to a definite kind of EAFE stocks.

BANKERS BRIGHT SIDE

Under this post, lets look at some of the positive contribution of financial institutions - very briefly:

• Bankers facilitate the inflow and outflow of investments - thus making financial institutions an integral part of the economy and GDP
• Financial Institutions organize, structure, and fundraise lending mandates to finance infrastructure projects. 
• Without an intermediary like a bank, consumers will not be able to conclude transactions and might need to keep their money under the below or hidden somewhere underground. 
• According to the UAE Banking Federation, the UAE's banking sector directly employed 34,413 professional staff excluding aucilliary personnel as of mid-2013

Above are some of the main points I would like to raise to point out that the role of Financial Institutions is very important, and we as consumers and country cannot function with out them. 

For more information about the role of banks in the use, visit the following http://www.uaebf.ae/Customers/Role-of-Banks-in-the-UAE--50-Details.html

Now lets take a deep dive into some factors that lead into bad banking practices that contributed to the current negative perceptions about banking and bankers. 

LENDERS IN FOCUS

Now its time to take a deeper dive into why lenders are perceived the way they are. Couple of things to consider, however, is the following:

• Lets look into how rates and fees are structured. To remain profitable, lenders tend to add a premium on top of Intra Bank Rates + Fees. Thus, rates tend to fluctuate depending on competitive market forces (if my competition is charging X I will charge X or Y), intra-bank rate increase or decrease, risk profile of the client, department overheads, and an institution's appetite to lend.  Another important factor is sales targets and management fiscal controls to ensure maximum returns to shareholders. For example, if a sales team is not reaching their target in a given month, they will be targeting to price products and loans on the high end of the pricing grid. 

• Banking employees in retail and commercial lending departments, which i usually refer to as carpet sellers, lack the required knowledge and skills of what they sell and how to sell. From 2006 - till date, I am seeing banking staff selling credit cards in the streets. Generally approaching anyone with a fake smile, rehearsed script, and an application. I got the chance to speak with couple of these poor dwellers, who mentioned to me that they don't get a salary from the financial institution they worked with, where their compensation is purely commission based. When I asked about qualifications, they mentioned high school degree from bangalore, another a B.S in IT from India, etc... without any formal banking related training or qualification. I personally find this to be very sad, and that banking is at its lowest now from an ethical and prestige point of view. Where did the old days go, when bankers where very highly regarded and respected in their community !!!! Wait a minute, are current bankers ... sorry "carpet sellers" from the community !!!  Who are these people and can I trust them to give me a lending advise !!!! Unfortunately, the retail segment within the UAE or region tend to focus on quantity not quality. This is in terms of employees and products. On the one hand, financial institutions tend to capture the maximum market share, so they tend to open allot of branches. To fill these branches, they try to hire sales forces (irrelevant of the experience) in order to achieve targets and to ensure that these branches are profitable. Not only experience is affected, but also the quality of employees where hiring became based on reduction of costs. This also resulted into lower customer service quality. 

• The retail or commercial lending segment lack product structuring capabilities and creativity, making products the same with very few added value differentiators that are mainly marketing related (win points, free i-pad, decoration voucher, etc...). 

I tried my best to summarize some factors that needs to be considered which - I believe, add to the perception of why lenders are perceived to be evil. The above factors are interdependent and I believe needs to be looked at in more depth, which I might be elaborating further on each factor in my future book or in other articles. 

Now, before jumping into solutions and conclusions..., it is important to throw in couple of economic terms to complicate things abit. Everything being equal, the lending sector is a competitive market, which makes it a price taker - not maker. Unfortunately, lenders and current central bank regulations makes lenders a price maker. Interesting.... so, consumers can impact pricing ? The answer is yes, but it depends !!

It depends on elasticity of demand and the number of consumers knowledgable enough to understand and actually reject lending institutions being a price maker. Consumers should also be able to understand and debate central bank regulations (although very protective), it doesn't mean its in the best interest of consumers. For example, when the central bank decided to cap DSR limits and minimum down payment required for a mortgage or car, it didn't consult with consumers...it only consulted with financial institutions !!! I know that it's not meant to be this way, but again this ties up into best practices, which I doubt is being implemented from a regulatory level.

So, lets now go back into the deeper dive in consideration to the above. Why are banks perceived to be "Evil" or "Haram".

• The above factors made financial institutions arrive to peak pricing prior to the crises. Loans where marketed like chocolate - enticing mainly the most credit worthy segment in the UAE - UAE Nationals. Sell...Sell...Sell was the means, and profit was the end. I am talking about both "Conventional" and so called "Islamic" institutions alike. "Islamic" institutions discussion is  altogether which I intent to cover separately.    

• These practices negatively impacted the community. Not only where respected UAE Nationals jailed, but also residents. Others who sustained, are still paying into the debt principal until this day, and even for the next couple of years. 

• Regulators took a very reactive approach, which I personally still don't believe is in the best interest of consumers. 

• The rule of law only protected financial institutions, and in 2010 or 2011 a decree was issued to ban jailing individuals over bounced cheques that were given against loans. Unfortunately late... but late is better than never...right !!! Thankfully we have an amazing government and leadership that came to the rescue by dedicating a sizable budget to bail out  UAE National. However, the management and executives who created the parameters and shortlist qualifications where shortsighted as they mainly focused their efforts on the low income and lazy segment of UAE Nationals. This is another case study that I will cover separately at a later stage.

I believe given the above, any educated or non educated person would perceive banks as "Evil." However, from my point of view - I see things in grey not in black or white. Adding to the above, I would argue that bad governance, leadership, and management resulted in this perception. 

If you noticed, so far the discussion was about the employees and their qualities, I also highlighted some setbacks from regulations. But lets not fault the laborers or soldiers. What about the elite sitting at the top (board- level and C-level). When the crises happened, I didn't hear about boards being restructured, or a CEO made redundant. Only the poor employees were made redundant by the dozens. Wouldn't you agree !!! 

Now that the above covers the factors that made us perceive lenders as "Evil" or "Haram." The next posts would be to evaluate what are Lenders doing right now to fix this perception and what can they do better. Followed by a post for consumers to follow in order to make better choices. I will also be adding some resources and links that are useful for consumers.

SEC Introduces New Money Market Rules Which Might Deter Investors From Investing

The Securities and Exchange Commission has announced few major changes to its money market fund (also known as MMF) regulation. SEC Chairwoman Mary Jo White had emphasised that these new rules are inculcated with an aim of reducing the risk of runs in the money market funds. The new MMF regulation is expected much needed financial stability in the funds market.

However, the Ms. White’s assertion of reducing the risk factor in money market along with bringing in of financial stability is a highly debatable call from any corner.

Detailed Analysis of the New Money Market Rule

The two major rules announced by the SEC related to MMF are:

• a. MMFs can charge a certain amount of fee to withdraw your money or they might even delay paying during the times of stress. 
• b. Second rule allows the share price to change in accordance with the market conditions.

Money Market Funds in general sense are mutual fund with a share price fixed at $1. During the normal and not-so-happening times, the MMF share remains unchanged. Furthermore, MMFs simply invests only in short-term debt which are non-volatile in nature. MMFs also respond to small price changes by adjusting their yield in a dignified manner. But currently we are living in highly unpredictable times with another crisis looming at the horizon. MMFs are also feeling the heat of the moment and bound to face liquidity risk, it is a situation where investors does not buy more as they to sell for raising cash.

Liquidity risk poses a real problem for the borrowers. It basically affects a corporation selling short term debts in order to finance its business operations. At the maturity of each debt contract, the corporation or issuer is expected to sell a new one. If the market sizes up, the corporation could get into big trouble due to lack of investment.

Credit market is often described as a highly unpredictable and volatile where everyone is having it fun until some misses a payment. When they cannot sell up the debt contracts corporation gets into a fix.
How this affects MMFs

This kind of situation is posing a serious threat to the money market funds because they own debts and hold them as their assets. Currently the market value of the MMFs assets are depreciating or falling but their share price is fixed at $1. This simply puts that fund loses more with every redemption. If a large number of redemption is made the remaining investors would end up just holding an empty bag

SEC Comes To Rescue 

Through its second rule, it allows the share price to drop as per market conditions and it saves the investors from the threat o total loss. And with its first rule of imposing penalties it cleverly discourages withdrawals to certain extent.

Through delaying of payments, it prevents the runs, which might occur even with a floating share price and withdrawal penalties. The new rule would come into effect in 60 days, which gives an ample time to the investors to pull their money if they wish to do so.

Common Financial Fears

Maintain the Suitable Way of Life Along with the Effective Monetary Condition 

Leading a happy and peaceful life appears as the significant part that you need to maintain for a better standard of living. So, it is important to sustain the strong financial condition that would fulfill all your requirement.

Problems that You Would Face

Sometimes, you may come to face the situation when you feel the strong necessity for money. It would give rise to the financial worries that may destroy the peace in your life. However, even if you have large amount of resources you may worry that how you would spend them. Also, if you lose your job the you get afraid that you do not have any source of earning. But, you need to overcome such situations sustaining the normal lifestyle.

How to overcome the situation?

You can explore manifold advanced techniques that would help you to get rid of the difficulties along with the positive approaches. If you were not able to get to eliminate the worries, you would face the difficult situations both in social as well as professional life. So, it is important to ascertain to the innovative ways through which you can reach the successful position eliminating the monetary shortfalls. Once, you come out of the difficulties you can explore a new world free from any sort of monetary crisis.

Know the Details of the Monetary Fears Along with the Solutions

Here you can get a clear view of the fears that arise due to the monetary difficulties:

• Always maintain a good volume of savings that would acts as the source of earning if you lose your job. Alongside, you also need to search for another option from where you can recognize the resources according to your needs.
• Sometimes, you hear the stories of your close friends or relatives who need the money urgently to save the precious lives. It can give rise to certain type of trauma in your brain. You can overcome such tension knowing the suitable source of the funds. Once, you understand the complete situation you can eliminate the worries returning back to the normal lifestyle.
• You may be running the shortage of money to carry out all the responsibilities efficiently. In this respect, you need to have a detailed communication with the other members to come out with the optimistic solution.
• Some people face the huge volume of debt that is really difficult to cope up with. So, you face the tremendous economic pressure and need to search the suitable destinations from where you can receive the valid resolution.
• Make your children self-sufficient that would help them to increase the source of earning. In this way, you establish a better social life.
• Finally, you may worry that you are unable to make a good savings. You need to develop an estimate of the entire expenses that would help you to maintain the suitable volume of savings.

Overall, you can get familiar with the types of tensions and the ways that you can utilize to sustain the complete peace of mind.

Money Pet Peeves

I have a money pet peeve! I was quite surprised that I was able to catch myself in the act. It started with my wife casually and innocently bringing up that she wants us to spend $200+ dollars to fix/replace the car bumper. A simple discussion quickly turned into a light argument because I became irritated, especially when the reason and justification to spend the money is only for the car to look more pleasing on the eyes. I hold belief that any money spent should have a useful purpose. Spending $200 on a night out and fun experience as a family would be much better than a new bumper.

I realize it's difficult to calmly talk about money, because there may be certain things that you don't see eye-to-eye. It's better to get those out through open communication, and it's a situation where someone has to compromise for the greater good. Do you have money pet peeves?

Analysis Paralysis

I suffer from a serious case of Analysis Paralysis. There!  I have come out and said it!  However in recent times I have noticed that the financial industry tends to amplify my inability to take a decision and execute to it.  With the myriad of options available for any financial product, it becomes very difficult to review the features of each product, compare against other similar offerings, and decide on the best course of action for my particular situation.  The inconsistent, many times inaccurate, and almost always needlessly complicated financial jargon, makes it practically impossible to decipher the pros and cons of the different products in a rational manner, and come to a critical decision.

Also, I constantly worry about either making the wrong decision, or choosing a sub-optimal product offering that does not give me the "best deal".  In the process of looking for the "best deal", the actual decision is not taken, or significantly delayed, which in reality might have a bigger impact on my overall financial health.  Take for example, my recent search for a good top-up health insurance plan.  I have been checking out health insurance documents and websites of several leading health insurance providers, trying to find a match for my requirements, and trying to secure the "best deal".  Its been six months now, and I have not settled on any single top-up plan.  The more information I read, the more data I collect, the more confusing it seems to get.  How do you deal with these kinds of situations?  In the personal finance world, there are always decisions that need to be made, and made at the right time.  Should I invest in this IPO or NFO?  Do I need more life insurance?  Are ULIPs a "good deal" now? Which MF should I pick?  Is it time to start a new SIP?  How should I save on taxes this year?  Are debt funds no longer financially attractive?  And the list goes on .. 

This reminds me of a childrens story from Aesop's Fables. The fable is about the smart and wily fox, and the simple straightforward cat.  One day the fox and cat are discussing ways to escape from danger.  The fox boasts that he knows a hundred ways to escape, he can run fast, he can zigzag, he can hide, he can walk on two legs, he can dance, he can sing, and the list goes on .. The cat on the other hand says she knows only one way to escape.  At this, the fox laughs derisively and touts his superiority and intelligence. Suddenly they both hear the sound of hunters and hounds rapidly approaching.  The dogs are running in fast and and both the fox and cat need to escape or risk getting caught. The cat quickly uses the only way she knows how to escape, and climbs up a tree as fast as she can, and out of harms way. The fox on the other hand tries to figure out the best way to outwit the dogs and the hunters.  He first decides to try and outrun the dogs, but then changes his mind and tries to hide, but then again he decides to run zigzag, but by then it is too late, and the dogs are upon him in a flash, and he is caught by the hunters.  This particular fable is ancient, and is even today a fun story to share with kids.  But the moral of the story remains clear.  Many times, it is better to take quick decisive action even if it may be simple or uncomplicated, or not the most optimal, rather than spend many hours thinking about the various possibilities but not end up making a decision.  

So now I have vowed to myself, that after I complete a basic or first-cut level of analysis for any financial product, I will take a swift decision and go ahead and execute to my plan.  I will not spend a ton of time and energy considering the many different options and secondary details, and end up with a delayed decision or worse no decision at all!  How about you?  Do you have this same issue?  Do you get an overload of information from news channels, news papers, magazines, your financial advisor, online websites, and your friendly uncle :-) Will you take the same vow and go in for a quick decision henceforth?  Let me know how it works out for you.