INTRODUCTION TO THE KNOWLEDGE FINANCIAL COURSE..
This course breaks down the basics of the financial industry,
focusing on the stock market so that anyone and everyone can
understand just how the stock market works..
The financial industry is really complicated. There
are investors, brokers, traders, lenders, borrowers, advisors,
companies, banks, stocks, shares, funds, prices…the list
goes on and on and on. It can really make your head spin!
But it’s important to have a “big picture” understanding of all
these elements because together they bring this thing we call
the “stock market” to life.
It’s true; the stock market is like a living, breathing organism.
And it’s always changing and evolving. But at some point, we’
ve got to slow things down a bit and take a look inside.
That’s what we’re here to do today.
This course will put a magnifying glass to the financial world.
We’ll go through the history of the financial industry and work
towards understanding its basic structure.
We’ll then zoom in and take a deep look at the stock market
and how it functions.
Finally, we’ll touch on the major U.S. stock exchanges and
their participants to get an idea of how it all comes together in
the real world.
'' Why Does The Financial Industry
Exist?
From bartering, metals and gold to paper bills and credit, money
has always been around, albeit in many different forms.
Money was created out of a need to trade goods and services
between one another. People always have needs. They need food
to eat, clothes to wear, and shiny sports cars to…look cool. OK,
some of our “needs” are more like “wants”. But either way, people
look for ways to staisfy their demands.
Way back when, people traded goods in order to get what they
needed, by giving up what they had. Let's say, I trade you a goat for
a gallon of milk. But not all products and services are tradable. For
instance, you wouldn’t trade wheat for electricity. So, we turn to
money.
Enter the financial industry.
In a nutshell, the financial industry is all about managing money:
investing it, growing it, saving it and ultimately spending it.
The stock market is at the centre of all this, where people
(investors) and businesses meet to make transactions and
respectively manage their money.
''Why Does The Stock Market Exist?
The real birth of what we think about today as the stock market
started way back in 1602, with the Dutch East India Company.
Historians claim it to be the first company to ever offer shares to
investors in exchange for a portion of its profits.
The stock market exists so that companies can raise money without
incurring any debt (such is the case of a loan). They issue shares
of their company to the public in what is known as an Initial Public
Offering (IPO).
Investors buy and sell these shares (or stocks) to one another on
the stock exchange, thus making stock prices move up and down.
If there are more people buying a stock than people selling it, the
price goes up with the demand. If more people are selling than
there are people buying a stock, that’s a sign that the company is
unfavorable to own and the stock price drops.
The stock market is mutually beneficial to
businesses and investors because
:
Companies raise money to (try to) make their
businesses grow
Investors invest in businesses to (try to) make
their money grow
A stock exchange is where investors trade
their shares of companies to one another. That’s
why stock prices are constantly changing. If more people are
selling (and therefore trying to get rid of) a stock than those
buying it, the stock price will drop. If more people want to buy a
stock than people selling it, the stock price will rise. Stock
exchanges bring all these investors together, so that trades
happen in a central and regulated place.
There are hundreds of stock exchanges all over the world. In
the U.S., the top stock exchanges are the New York Stock
Exchange (NYSE), the NASDAQ, and the American Stock
Exchange (AMEX). Each of these exchanges have different
companies trading on them. For example, NASDAQ is known for
technological companies. Most of the tech stocks out there
trade on the NASDAQ stock exchange.
A lot of today’s trading takes place online, rather than on trading
floors on Wall Street. But that doesn’t mean stock exchanges
lose any importance. Even though it all takes place online, each
and every trade placed has to go through a stock exchange in
order to match buyers and sellers together.
This is called the Electronic Communication Network (ECN),
which connects traders and brokers over the Internet instead
of on the trading floor.
Next we’ll go through the different type of investors that are
trading on these stock exchanges…
'' READ MORE''
'' Investors''
There are two types of investors out there: Institutional and Retail.
Institutional investors are large firms like banks, investment companies, mutual
funds or hedge funds that invest pools of money on behalf of their investors.
They make up the majority of the volume (number of shares traded) on the stock
market. Because some of these firms are so large, their trades have a significant
impact on the share price of a company. Institutional investors are sometimes
referred to as “smart money” (but usually only by other institutional investors).
A Retail investor is…well…you. It refers to someone who puts
money in the market for themselves: an individual investor. Since the financial crash
in 2008-2009, there has been an emergence of “retail investors”. People have
stopped trusting big investment banks and funds with their money, and choose to
learn how to become financially independent and in control of their own money (kind
of like what you’re doing right now!)
Another reason for this surge of retail investors is that online discount brokerages
such as E*TRADE and TD Ameritrade make it easier and cheaper for the individual
than ever before, in terms of learning, in terms of trading, and in terms of handling
one’s shares in a way that feels direct, real-time — and fun.
The following step will break down the services of a broker or brokerage firm, and
tell you about some of the top online brokerages out there.
Brokers & Brokerage Firms
Buying a stock is a tad more complicated than buying something like...
say...a used guitar. To do that, you could just jump on Craigslist and
put up an ad, find a seller, and meet up to get the guitar yourself. You’
d be killing riffs in no time.
Buying a stock is more like buying a house. Most people don’t go on
Craigslist to buy a house.
They hire a real estate agent who knows the housing market and
works with other real estate agents to find houses for sale.
Stockbrokers and brokerage firms are like the real estate agents of
the stock market. Brokers buy and sell stocks on behalf of investors
on the stock exchange.
There are a number of types of brokers. Full service brokers will not
only perform the trades for you but will also manage your portfolio for
you and give you trading advice. Other brokers, such as discount
brokers, won’t give you any advice at all. They’ll just do what you ask
of them.
The most important thing to look at when choosing a broker is the
structure of their commission fees. Brokers charge investors in
various ways, depending on the type of services you’re looking for.
'' READ MORE...

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Preferred Stock: Definition, vs.
Common Stock,
What Is It?
Preferred stock represents ownership in a
company, but it usually does not give the holder voting
rights (this may vary depending on the company).
With preferred shares, investors are guaranteed a
fixed (or sometimes variable) dividend forever, while
common stocks have variable dividends.
One of the main advantages to being a preferred
stockholder is that, should the company experience
financial trouble and have to liquidate, you would be paid
off before the common stockholders (but still after debt
holders).
A preferred stock is a share of
ownership in a public company. It has
some qualities of a common stock and some of a bond.
The price of each share of both preferred and common
stock varies with the earnings of the company.
Both trade through brokerage firms. Bond prices vary
with the company's ability to pay it as rated by Standard &
Poor's.
Preferred stocks pay a
dividend like common stock.
But preferred stocks are like bonds in that
they pay an agreed-upon dividend at regular intervals.
Common stocks may pay dividends, but they vary
depending on how profitable the company is.
Preferred stock dividends are usually
higher than common stock dividends. The
dividend can be adjustable and vary with LIBOR, or it can
be a fixed amount that never varies.
Preferred stocks are also like bonds in that, if
you hold them until maturity, you'll get your initial
investments back. That's 30 to 40 years in most cases.
Common stock values can fall to zero, in which case you'd
get nothing.
Companies that issue preferred
stocks can recall them before maturity by paying the
issue price. Like bonds, and unlike stocks, preferred
stocks do not confer any voting rights.
When You Should Buy
Preferred Stocks
You should consider preferred stocks when you need a
steady stream of income. That's especially true when
interest rates are low.
That's because preferred stock dividends pay a higher
income stream than bonds. The income is more stable
than stock dividends, although lower.
You should sell them when interest rates rise. It's
because they start to lose value. That's true with bonds
as well. The fixed income stream becomes less valuable
as interest rates push up the returns on other
investments.
Preferreds could also lose value when stock prices rise.
That's because the company may call them in. That
means they buy the preferred stocks back from you
before stock prices get any higher. (Source: "How
Preferreds Stack Up
Preferred Stocks vs.
Common Stocks
This table illustrates the difference between preferred
stocks, common stocks, and bonds.
Feature Preferred Common Bond
-----
Ownership of Company Yes Yes No
Voting Rights No Yes No
Price of Security Is Based on: Earnings
Earnings S&P Rating
Dividends Fixed Varies Fixed
Value if Held to Maturity Full Varies Full
Order Paid if Company Defaults Second Third First
Types of Preferred Stocks
Convertible preferred stocks have the option to be
converted into common stock at some point in the
future. What determines when this happens? Three
things:
The corporation's Board of Directors may
vote for a conversion.
You might decide to convert. You would only exercise
this option of the price of the common stock is more
than the net present value of your preferreds.
The net present value includes the expected dividend
payments and the price you would receive when the life
of the preferred is over.
The stock might have automatically converted on a
pre-determined date. (Source: Convertible Preferred
Stock, Joshua Kennon, About Beginning Investing.)
Cumulative preferred
stocks: only allow companies to suspend
dividend payments when times are bad. They must pay
you all the missed dividend payments when times are
good again.
In fact, they must do this before they can make any
dividend payments to common stockholders. Preferred
stocks without this advantage are called non-cumulative
stocks.
Redeemable preferred stock gives the
company the right to redeem the stock any time after a
certain date. The option usually describes the price the
company will pay for the stock. The redeemable date is
usually not for a few years.
These stocks pay a higher dividend to
compensate for the added redemption
risk. Why? The company would call for redemption if
interest rates drop. They would issue new preferreds at
the lower rate, and pay a smaller dividend. That means
less profit for the investor.
Why Do Companies Issue
Preferred Stock?
Companies use preferred stocks to raise capital for growth. Their
biggest advantage over bonds is that the corporation can
suspend the dividends. It just requires a vote of the board. They
run no risk of being sued for default. If the company doesn't pay
the interest on its bonds, it defaults.
Companies also use preferred shares to transfer corporate
ownership to another company. For one thing, companies get a
tax write-off on the dividend income of preferred stock.
In fact, they don't have to pay taxes on the first 80% of income
received from dividends. Unfortunately, individual investors
don't get that same tax advantage. Second, companies can more
quickly sell preferred stock than common stock. That's because
owners know they will be paid back before the owners of
common stock will.
That advantage was why the U.S. Treasury
bought shares of preferred stock in the banks
as part of TARP. It capitalized the banks so they wouldn't
go bankrupt. At the same time, Treasury wanted to protect the
government. Taxpayers would get paid back before the common
shareholders if the banks defaulted after all.
Preferred stock is usually
only issued as a last resort.
Companies use it after they've gotten all they can from
issuing common stock and bonds. That's because
preferred stock is more expensive than bonds. The
dividends paid by preferred stock comes from the
company's after-tax profits. These expenses are not
deductible.
Cumulative or
Non-Cumulative.
In a cumulative issue, preferred dividends that are
not paid (referred to as "in arrears") build up.
Before any dividend can be paid on the common
stock, the entire in arrears balance must be
distributed to the preferred stock investors in full.
If a preferred issue is non-cumulative
and a dividend payment is missed, the preferred
shareholders are out of luck as they will never
never receive that money from the company even if
and when the firm is fortunate enough to return to
more prosperous times.
Voting vs. Non-Voting:
Owners of preferred
stock may or may not
have voting rights.
There have been cases throughout history in which
preferred shares only received voting rights if
dividends had not been paid for a stipulated length
of time, effectively transferring a significant, if not
controlling, voting power to the
preferred investors.
Such a provision effectively puts the preferred
shareholders in the position of a first mortgage bond
holder by giving them the collective power to
enforce payment on their claim, resources permitting.
This is frequently done in certain private equity
deals, special financing arrangements with public
companies, or other non-standard situations where
the de facto lender doesn't want to pay the
substantially higher taxes that would be owed on
interest income had bonds been issued.
Convertible preferred
stock: Holders of this type
of security have the right
to convert their preferred
stock into shares of
common stock. This allows the
investor to lock in the dividend income and
potentially profit from a rise in the common stock
while being protected from a fall in the same.
Under the right conditions, with the right business, an
intelligent investor can make a lot of money while
enjoying higher income and lower risk by investing in
the convertible preferred stock first.
To learn more about how this works, read Convertible
Preferred Stock for Beginners.
Participating preferred
stock: Normally, shares of this type of preferred
stock receive a set dividend plus an additional
dividend based upon a stipulated percentage of
either the net income or the dividend paid to the
common stock holders.
The variations for preferred stock
can be endless. It is quite possible an investor
could come across a non-voting cumulative
participating convertible preferred issue.
Due to the individuality of the preferred stock field,
we must stick to generalizations.
Understanding How Preferred Stock Prices Are
Influenced By Changes in the Common Stock
Objectives and Risks Of
Preferred Stock..
The major objective of a preferred stock is to provide
a much higher dividend than that provided by
common stock.
Preferred stock is also much less volatile than
common stock and less risky if the company goes
bankrupt - a preferred shareholder is far more likely
than a common shareholder to get at least some of
his/her money back.
As a company liquidates, bondholders are paid first,
followed by preferred shareholders. Common
shareholders are at the bottom of the ladder.
How To Buy or Sell It ...
Preferred stock trades the same way as common
stock, usually through a brokerage, either full
service or discount.
Commissions to buy preferred stock are usually the
same as common stock fees.
There is no minimum investment for most preferred
stocks, but many brokerages require clients to have
at least $500 to open an account. (To learn more, see
our Stock Basics Tutorial.)
Strengths
•Dividends are higher than those of common stocks.
•If the company goes bankrupt, you have a better
chance of getting some money back than common
shareholders.
Weaknesses
•Dividends are taxed at the same rate as income, so
higher dividends mean you will likely pay more taxes.
•Rates of return on preferred stock are very close to
those for corporate bonds, and corporate bonds are
considered less risky.
Why Dividends Matter
Seven words that are
music to investors' ears?
"The dividend check is in
the mail."
Many beginning investors do not understand what a
dividend is, as it relates to an investment,
particularly an individual stock or mutual fund. A
dividend is simply a payment to shareholders,
typically of a publicly traded company.
A dividend payment is a payout of
portion of a company's profit to
eligible stockholders
However, not all companies pay a dividend. Usually,
the board of directors determines if a dividend is
desirable for their particular company based upon
various financial and economic factors.
Dividends are commonly paid in the
form of cash distributions to the shareholders
on a monthly, quarterly or yearly basis. Shareholders
of any given stock must meet certain requirements
before receiving a dividend payout, or distribution.
How to Buy Preferred Stock?
Preferred Stock Information
Like common stock, preferred
stocks represent ownership in a
company, but like a bond, they provide regular
interest payments.
They have their own stock symbols, but multiple
symbols are used to represent a company's various
kinds of preferred stock, so they can be trickier to
follow.
Knowing the different types of preferred stocks and
the pros and cons of each can help you determine
which you should add to your portfolio.
The main types are traditional,
convertible and trust. Traditional
preferred stocks are straightforward. Convertible
preferred stocks offer an income stream but can be
converted to common stock and benefit from a rise in
the company's value.
Trust preferred stocks operate like bonds that have
been carved into smaller investments; they offer the
safety of bonds but the liquidity of stocks.



An individual must plan his future
well to ensure happiness for himself
as well as his immediate family
members. Consuming everything
today and saving nothing for the
future is foolish..
============
What is Financial
Investment ?
Financial investment refers to putting aside a fixed
amount of money and expecting some kind of gain out of
it within a stipulated time frame.
---------------------
What is Important in
Financial Investment ?
Planning plays a pivotal role in
Financial Investment. Don’t just invest just for
the sake of investing. Understand why you really need to
invest money? Investing just because your friend has
said you to do so is foolish. Careful analysis and focused
approach are mandatory before investing.
Explore all the investment plans
available in the market. Go through the pros
and cons of each plan in detail. Analyze the risk factors
carefully before finalizing the plan. Invest in something
which will give you the maximum return.
Appoint a good financial planning manager who takes
care of all your investment needs. He must understand
your requirement, family income, stability etc to decide
the best plan for you.
One needs to be a little careful and sensible while
investing. An individual must read the documents
carefully before investing.
Types of Financial
Investment...
An individual can invest in any of the
following:
◾Mutual Funds
◾Fixed Deposits
◾Bonds
◾Stock
◾Equities
◾Real Estate (Residential/Commercial
Property)
◾Gold /Silver
◾Precious stones
Tips for Financial
investment..
Don’t just blindly trust your
financial advisor. Read the terms
and conditions and go through all the related
documents carefully before signing. Check
out risk factors, tenure, clauses etc before
selecting the plan.
Avoid cash transactions. It is
always advisable to issue an account payee
cheque in favour of the company rather than
giving cash to your advisor. You never know
when he disappears with all your hard
earned money.
Carefully staple all the related documents
and put it in a folder. Keep it at a proper and
safe place. Loosing even a single paper
might land you in trouble later on.
Make sure your investment plan is the best
in the market and guarantees sufficient
return in future.
If you plan to invest in property, ensure it is
at a prime location and would have takers in
the near future. Investing in non approved
properties is worthless.


Hedge fund
A hedge fund is an investment fund that pools capital from a limited number of accredited individual or institutional investors and invests in a variety of assets, often with complex portfolio construction and risk management techniques
Funds can invest in stocks, bonds, currencies, commodities,Private Equity Firm, IPO= Initial public offering
real estate, healthcare, technology, options, futures, forwards and other forms of derivative securities.
What Does a Hedge Fund Do?
Within a hedge fund, the hedge fund manager raises money from outside investors and then invests it according to whatever strategy.
---------
How Are Hedge Fund Managers Paid?
The hedge fund managers are compensated based upon whatever terms or arrangements are found in the operating agreement. Some hedge fund managers receive the standard "2 and 20", which means 2% of net assets per year plus 20% of profits above a predetermined hurdle rate.
===========
Who Can Invest In Hedge Funds?
Technically, most people are probably eligible to invest in hedge funds. Practically, only "accredited investors" and/or "sophisticated investors" will be able to do so as a result of government regulation that makes it highly unlikely a hedge fund manager is going to admit you to the partnership or firm unless you qualify.
Even if the hedge fund manager were inclined to make an exception, he or she can really only admit 35 non-accredited investors so they will want to keep those spots open for close friends and family members.
Hedge funds are made available only to certain sophisticated or accredited investors, or institutional investors and cannot be offered or sold to the general public. ========
Remuneration of portfolio managers
Hedge fund management firms are usually owned by their portfolio managers, who are therefore entitled to any profits that the business makes. As management fees are intended to cover the firm's operating costs, performance fees (and any excess management fees) are generally distributed to the firm's owners as profits.
======
A hedge fund is an investment vehicle that is most often structured as an offshore corporation, limited partnership or limited liability company. The fund is managed by an investment manager in the form of an organization or company that is legally and financially distinct from the hedge fund and its portfolio of assets
============
Prime brokers clear trades, and provide leverage and short-term financing.They are usually divisions of large investment banks.The prime broker acts as a counterparty to derivative contracts
====
Hedge fund administrators are responsible for operations, accounting, and valuation services. This back office support allows fund managers to concentrate on trades. Administrators also process subscriptions and redemptions, and perform various shareholder services.
======
A distributor is an underwriter, broker, dealer, or other person who participates in the distribution of securities.The distributor is also responsible for marketing the fund to potential investors. Many hedge funds do not have distributors, and in such cases the investment manager will be responsible for distribution of securities and marketing.
Most funds use an independent accounting firm to audit the assets of the fund, provide tax services and perform a complete audit of the fund's financial statements. The year-end audit is often performed in accordance with the standard accounting practices enforced within the country the fund it established or the International Financial Reporting Standards (IFRS).
====
Unlike mutual funds, hedge funds are not subject to some of the regulations that are designed to protect investors. Depending on the amount of assets in the hedge funds advised by a manager, some hedge fund managers may not be required to register or to file public reports with the SEC.
=====
What is a Hedge Fund Transfer Agent'
A transfer agent is a trust company, bank or similar financial institution assigned by a corporation to maintain records of investors and account balances. The transfer agent records transactions, cancels and issues certificates, processes investor mailings and deals with other investor problems ( lost or stolen certificates).
A transfer agent works closely with a registrar to ensure that investors receive interest payments and dividends when they are due and to send monthly investment statements to mutual fund shareholders.
======
Hedge Fund: 65 percent of investors must be accredited investors.
Hedge Fund has lock in for at least 1 to 3 years before redemption
Hedge Fund has infrequent redemption of initial investment
Hedge Fund has something called about 2/20, 2 percent of initial investment and 20 percent of any benefits, gains, or earnings.
Hedge Fund has the right to provide 35 percent of investors could be non accredited investors like close friends, employees, family members.
======
''In the stock financial market, one person misery is certainly another person profit''
'' When another institution loses, of course another one is winning''
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The value of your investment can go down as well as up, and you can get back less than you originally invested.
KNOWLEDGE FINANCIAL GROUP...
It does not provide advice on the suitability of products and investments; if you are unsure about the suitability of any investment you should seek professional advice.
Clients of our Investment Advisory Service and Managed Portfolio Service can use the website to obtain current valuations of their investments but cannot trade on these accounts online and should call their adviser if they wish to discuss changes to their investments.
Past performance or any yields quoted should not be considered reliable indicators of future returns. Restricted advice can be provided as part of other services offered by Bestinvest, upon request and on a fee basis.
Before investing in funds please check the specific risk factors on the key features document or refer to our risk warning notice as some funds can be high risk or complex; they may also have risks relating to the geographical area, industry sector and/or underlying assets in which they invest. ===========
Prevailing tax rates and relief are dependent on your individual circumstances and are subject to change.
3 Rules of investing: ‘’Diversify – Diversify – Diversify’’
3 Rules of investment: ‘’Keep costs low – Keep costs low – Keep costs low’’
Reach your investment goals with tools found in Knowledge Financial Group – knowledgefinancial. com a company who can make your money go further.
‘’Markets go up and go down, they always have been and they will always be’’
The world financial market: business, finance, economy, investment, real estate, insurance.
Realize your dreams, find financial independence and economic freedom with the help of Knowledge Financial Group and Fem Konsa Capital investment
========
Actively Managed Investing vs. Passive Investing
Would you rather pick individual investments or own a wide variety?
Active investing means you (or a mutual fund manager or other investment advisor) are going to use an investment approach that typically involves research such as fundamental analysis, micro and macroeconomic analysis and/or technical analysis, because you think picking investments in this way can deliver a better outcome than owning the market in its entirety.
=========
Passive investing captures returns of an entire market…
When you take this football analogy, and apply it to investing, first you look at the entire market of available stocks. A passive investor wants to own all the stocks, because they think as a whole, over long periods of time, capitalism works, and they are likely to receive higher returns from investing in the entire stock market than by trying to pick which individual stocks which will outperform the market as a whole.
The point of passive market approaches is to take advantage of something called the equity risk premium which says you should be compensated for taking on equity risk with higher returns
Actively managed funds vs. passively managed funds
When you look at mutual funds, an actively managed large cap mutual fund will try to pick the best 100-200 stocks listed in the S&P 500 Index.
A passive fund, or index fund, will own all 500 stocks that are listed in the S&P 500 Index with no attempt to pick and choose among them.
Each year academic studies are conducted to compare the returns of actively managed mutual funds to the returns of passively managed mutual funds
Passive investing is more tax efficient
Passive funds do not do a lot of trading, which means not only do they have lower fees, but they also have less capital gain distributions that will flow through to your tax return.
If you invest using non-retirement accounts this means a passive investment approach used consistently should reduce your ongoing tax bill. LKNOWLEDGE FINANCIAL GROUP
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