Posts tagged: cash

Peer to Peer Lending Around the World

p2p leadingPeer to peer lending has become a phenomenon throughout the world in a very short time Due to the many variations of this practice throughout the world it can be confusing to people when this subject is discussed. Each country or region has its own laws, attitudes and customs in this area and they can differ significantly. So, if you are interested in peer to peer lending as a borrower or lender, or just want to study the topic some more, then read on!

What are some of the differences in meanings for the term peer to peer lending? In many countries, particularly those that are more advanced, technology plays a larger role. Lending and peer to peer investing platforms are online and bring together lenders and borrowers from all over an entire country. Investors do not know the individual whom they are lending money to and only see an online credit profile with which to make their decision. These platforms engaged in hundreds of loans each day. They also process loan applications, check credit of the borrowers and collect payments. These are large, and in some cases, publicly traded companies.

On the other hand, in some countries peer to peer lending is more local and personal. The lender will likely meet the borrower and they will develop a relationship. These relationships can ultimately result in several loans and the trust that allows a borrower to get more money if they have been faithful in their payments.

In some countries, the purpose of peer to peer loans is mostly to pay off credit cards or refinance existing debt. In other places, these loans may be more likely used to start a small business or pay unexpected medical expenses. There are also many other reasons to take these loans and more personal relationships allow the lender to assess the needs of the borrower and the likelihood that the loan will be repaid.

The laws of the land also play a big factor in how these loans, platforms and relationships work. Privacy laws may limit the types of information that a lender can know about the borrower. For example, a loan request for medical expenses may not include details about the borrowers specific medical issues. Credit reporting and bankruptcy laws also vary by country which affects the information available to lenders and may make is harder for them to assess the viability of certain loans. In areas where lender and borrower meet, the personal appeal and information provided by the borrower can go a long way in convincing the investor to make the transaction.

As the world has seen rapid adoption of this type of loan over the past ten years, the number of platforms and models has grown dramatically. Also, governments have scrambled to make laws protecting both borrower and investor. While there have been some issues, for the most part this type of lending has been highly effective for both parties and the future seems bright. Experts expect the outlook to continue to be good and growth forecasts indicate the market will continue to increase significantly.

Why You Should Not Invest in Mutual Funds Based on Absolute Returns

mutual fund investmentsWith every investment decision, investors only seek higher returns. Considered as a preferred choice for many, mutual funds offer high returns at a lower risk compared to direct equities. An investment in mutual fund allows investors to avail of the benefit of compounding interest and helps them generate optimum returns in the long term. Additionally, mutual fund investments may be made in the form of a Systematic Investment Plan (SIP) and its returns carry tax benefits.

When it comes to determining the performance of a fund, investors are not aware of what to consider. Measuring the short-term performance of the fund may sometimes lead to wrong decisions. Many consider this short-term return as a benchmark and set wrong expectations. Therefore, it is important to assess the fund correctly in order to avoid wrong financial investment decisions.

Ways in which investment returns are calculated

If you want to check your mutual fund performance, you must first understand the different ways in which the returns are calculated.

• Point-to-point return or absolute return

This is the figure that, you arrive at by deducting the final Net Asset Value (NAV) from the initial investment amount. An absolute return does not take into consideration the period for which your money has been invested or the inflation during that period. For instance, if you invested INR 20,000 in 2015 and its current NAV is INR 30,000, then your absolute earning is INR 10,000.

• Annualized returns

Each fund shows returns that are compounded and not absolute. Mutual fund returns compound over a period and the Compounded Annual Growth Rate (CAGR) shows the year-on-year growth rate of the investment over a particular duration.

Why absolute returns do not reveal the right picture

Fund managers often ask investors to stay away from considering a point-to-point return. Let us delve deeper to find out why absolute returns should not be considered as a benchmark and may be misleading.

• Reflects an incorrect financial picture

For short-term mutual fund investments of a year or less, absolute returns may show the right results, but in case the investment is for a long-term, this does not hold true.Over a longer period, the fund may not be able to sustain the same or an increased return percentage. For example, if a fund outperforms in a three-year period, you may not be assured that it will perform the same way over a five-year duration. This also does not mean that you will not earn good returns over a longer period. The three-year return could be fueled by a positive market movement and a favorable macro environment. There could be a significantly higher return in a three-year period and an average or below-average return in the five-year duration.

• Performance depends on the type of fund

The performance of the mutual fund depends on the type of fund you are invested in. Equity funds are highly volatile and the returns on the same may vary from one period to another. It is also affected due to the market conditions. CAGR does not account intermittent volatility. The equity fund may have gone up by 40% in the first year and may dip by 25% in another, but the absolute return will not provide correct information about the fund. It might only show the upswing of 40% in a particular year and misguide investors.In fact, most top-performing mutual funds perform well in the first year and then slump in the next two years. Hence, the overall performance may be determined by considering a three-year or a five-year investment period.

In order to gain maximum return from mutual funds, fund managers insist investors remain invested in the long run in order to gain maximum mutual fund returns and to bring down the impact of the market changes to a minimum. Every investor should learn how to interpret the CAGR and understand the implications of three-year or five-year returns on the investment.

The biggest benefit of a mutual fund is the compounding of interest. CAGR is ideal for measuring performance over a longer period whereas absolute returns may only measure the performance for a year.

To invest in top-performing mutual funds, investors must use user-friendly tools like the Angel Wealth mobile application. It offers customized recommendations for your financial goals. It runs an ARQ investment engine, which has no human intervention and is powered by advanced algorithms. So download the Angel Wealth mobile app today and streamline your investments.

The Top Three Ways To Invest Your Pension Fund

yearly investmentsSaving for our future is one of those things we all know we should be doing. However, whether we actually get around to it is another point entirely. It is so easy to just put off sorting out for another day. But when the time comes for you to retire, you will need to have some kind of plan in place for your next steps. Chances are you will have been putting money into a pension scheme in addition to the workplace pension you will be entitled to receive. But, what do you do if this isn’t enough to tide you over? With other financial issues looming over us as we approach retirement age, such as whether you have the best life insurance policy, our retirement funds should be the least of our worries. If you are thinking about investing your pension fund, don’t rush into it. We all want to enjoy our retirement, but make sure that whatever you are investing your money in is right for you.

Property investment

Real estate is quite literally hot property these days. If you’re looking to invest your pension somewhere, look no further than the real estate sector. The best way to go about this is by acquiring property through a real estate IRA. This way, you open yourself up to unique investment opportunities and you can be sure that you are putting your money into a secure asset. It also has the added benefit of being able to rise in value, which is perfect for if you are hoping to pass the property down generations. You also don’t need to be restricted to houses or apartments when investing with an IRA. You can also claim farmland or holiday resorts, or commercial property such as shopping malls.

Stocks and shares

The stock market might initially seem like a bit of a daunting minefield. But, it could be the perfect place for your pension to go if you have chosen to self-invest. In fact, in provides a great opportunity to protect against rising inflation and bring in higher returns than cash and bonds. You can go into ‘direct investment’ into the stock market via a stockbroker. This essentially means that you buy shares in a single company, which makes you what is known as a shareholder. If you want to minimise the risk associated with investing in stocks and shares, instead consider investing indirectly. This way you can invest your money in a number of different companies rather than just one.

Precious metals

This may appear unusual at first, but precious metal investment has soared in recent years. They are a hard investment, which means that they are also hedged against inflation. If you are looking to invest in precious metals, you will need to comply with the rules and regulations set up by your pension account. Gold, silver, palladium and platinum are all approved by IRA accounts. You will need to purchase the metals yourself through a dealership, and then keep them in an approved depository.

How To Budget For A Year-End Vacation

Save for vacationYou need to start planning now if you want to have some money set aside for next year’s vacation. But how can you go about doing this without succumbing irrelevant purchases and overspending on lavish dinners? For some families, saving up money for a year-end vacation is a breeze. For others, it can be quite a challenge. In the following sections, we’ll provide you with a few key tips for helping you save money for your own year-end vacation.

Set Your Sights on Your Destination

First and foremost, you have to stay committed to whatever saving process you decide to take. If you can’t then chances are good that you’re going to overspend in areas where you shouldn’t. One of the best ways to stay persistent is to remind yourself why you are saving. Post pictures of your travel destination on your computer desktop and talk about your plans with co-workers and friends. This will ultimately increase your motivation and help you stay focused when saving money.

Use Your Miles

If you are someone who travels a lot then you can use your miles to earn a free flight at the end of the year. Keep in mind that the amount of miles that you’ll need ranges from carrier to carrier and it also depends on where you are traveling to. In general, you can acquire free flights by accumulating anywhere between 10,000 and 30,000 miles. This can be a quick and simple step to take when you are trying to save money on a year-end vacation.

Start a “Travel Fund”

Not only is starting a “travel fund” a lot of fun but it can ultimately allow you to save up a lot of money in a relatively short amount of time. Take note that there are a few golden rules that you’ll want to follow when taking this route. The first is that you shouldn’t remove money from this fund unless it is an absolute emergency.

One tip that you could utilize is putting your money in a separate bank account where you won’t be able to see it on a daily basis. Secondly, try to put at least 10% of your monthly income into your travel fund. While it may not seem like a lot at first, this number can quickly add up and provide you with a hefty fund to utilize at the end of the year for your travels.

Noc likes to travel and start saving at the beginning of the year for a big trip and sometime uses Travel Advantage Network to create lifelong memories.

Benefits Of Merchant Cash Advances

Merchant Cash AdvancesStatistics have shown that the majority of failed small businesses lack underfunding and adequate capital investment. As a small business owner, it can be difficult to find the right funding source to meet the investment levels that will ensure your business has a fair chance for success in the market. A merchant cash advance is an alternative cash source that may be an ideal way for your business to get the funding it needs without the added risk of a conventional loan.

Is a Merchant Cash Advance the Same as a Loan?

When a small business loan is contracted by a business owner, the principle amount is paid back through payments that include interest. The interest rates on small business loans tend to be less reasonable for new businesses simply because they lack the merchant credit history that is required to garner a low interest rate. Merchant cash advances are different from loans because they are based on a flat fee rather than interest. The money is paid back automatically without further action by the merchant.

How Does a Merchant Cash Advance Work?

Any business that has accepted credit card sales for more than 60 days is typically eligible for a merchant cash advance. The provider in this case is known as a factoring company. When applying, the factoring company will agree to a lump-sum payment to the applicant business in the form of an agreed amount. The business owner is then free to invest the new capital into his immediate operation. The factoring company then retrieves the investment from credit card sales payments that are made to the merchant from credit card companies in lieu of that merchant until the full amount of the cash advance and the flat-rate fee have been retrieved.

What Are the Benefits to a Merchant Cash Advance?

The most significant benefit is that the flat-rate fee associated with the transaction is highly competitive with interest rates because it does not continually accrue over the duration of the outstanding debt. Another benefit is that the risk of repayment default is lower due to the fact that the initial principle is retrieved according to the natural influx of credit card receipts. The principle is not based on a strict, predetermined timetable.

The merchant cash advance is intended to stimulate an immediate cash flow investment that is then repaid at a prorated pace according to credit card sales. The majority of small businesses that need extra funds can benefit greatly from merchant cash advances.

Fred often writes articles on how small businesses can improve their cash flow problems. He believes that a merchant cash advance company can be an excellent solution for many companies in this situation.