Algorithmic trading (algo trading) has revolutionized the financial markets by automating the execution of trades based on pre-defined criteria. But is algo trading good to do?
For many people, algo trading offers great advantages. Algorithms can process a lot of data at a very fast speed and make trades at a very low cost. This makes trading much more efficient and profitable. Algorithms can react faster than humans to market fluctuations, allowing traders to take advantage of opportunities that may otherwise not be available. By not having human emotions taking part, there is less emotional risk in trading.
Algorithmic trading is all about using computer algorithms to take control of the trading process. These smart algorithms separate through market data, spot trading opportunities, and place orders for the trader. They can execute trades at lightning speed and in volumes that far surpass what any human could manage, all while keeping emotions out of the equation—something that often clouds human judgment.
At its core, algorithmic trading relies on predefined rules, like price, volume, or time, to determine the optimal moments to buy or sell a security. These rules can range from straightforward to incredibly intricate, weaving in various market factors, technical indicators, and statistical models.
The growth of algo trading has been driven by leaps in technology. With high-speed internet, enhanced data analysis tools, and superior computational power, it’s become much easier to create, backtest, and roll out complex trading strategies. These tech advancements, along with the increased access to financial data, have opened the doors for not just institutional traders but also retail traders to dive into algo trading.
Nowadays, algo trading makes up a heavy chunk of the daily trading volume in financial markets. For instance, in the U.S. stock market, it’s estimated that over 60% of trades are executed using algorithms. This trend underscores the expanding influence of automation in shaping the global financial landscape.
One of the standout perks of algorithmic trading is its speed. Algorithms can analyze massive amounts of market data in real-time and execute trades in the blink of an eye. On the flip side, human traders are limited by their cognitive abilities and can’t react nearly as fast. This speed advantage lets algorithms capitalize on even the tiniest price discrepancies, raking in profits that would be tough to match with manual trading.
Human traders often let their emotions, like fear or greed, cloud their judgment, which can lead to some pretty poor investment decisions. On the other hand, algorithmic trading takes that emotional bias out of the equation. Since algorithms stick to strict, predefined rules, they make trades without getting caught up in the fear of losing money or the temptation to chase after big gains. This results in a more disciplined and consistent approach to trading.
Algo trading systems can be backtested using historical market data, which is a fantastic way for traders to test their strategies without any risk before putting real money on the line. Backtesting helps pinpoint which strategies work best in various market conditions. Plus, algorithms can be fine-tuned and adjusted continuously to keep up with the ever-changing market landscape.
With algo trading, traders can easily diversify their strategies by managing multiple trades at the same time. Algorithms allow them to invest in a range of markets and securities all at once, which helps spread the risk across different assets. This diversification is key to lowering the overall risk of a trading strategy.
Automated systems make trading more efficient, which in turn cuts down on transaction costs. Algorithms can execute trades faster and at lower costs than humans can, especially when you factor in things like bid-ask spreads, slippage, and commissions. For high-frequency traders, those small savings can really add up to significant profits over time.
Algo trading opens the door to executing complex strategies that would be tough for humans to handle manually. For instance, strategies like statistical arbitrage, market making, or pairs trading require quick analysis of huge amounts of data and the ability to make multiple trades simultaneously. These strategies can be effectively carried out through algorithmic trading systems.
Algo trading can be a smart move, but it really depends on what the trader is aiming for, their resources, and their level of expertise. For institutional investors who have access to cutting-edge technology and substantial capital, algorithmic trading can be an incredibly effective way to boost efficiency and profits. On the flip side, retail traders need to think carefully about the costs, complexities, and risks that come with algorithmic trading.
In short, algorithmic trading isn’t a one-size-fits-all approach. Traders must grasp the technology, recognize the potential risks, and thoughtfully evaluate whether the advantages outweigh the hurdles. By doing this, they can make well-informed choices about incorporating algorithmic trading into their investment strategies.
Investing wisely is key to building wealth over time, but one common question that many investors have is: "When is the best time to invest?" Understanding market timing can help you make informed decisions and potentially enhance your investment returns. In this blog, we'll break down what market timing is, why it's important, and how you can approach it in a simple and straightforward way.
Market timing refers to the strategy of making investment decisions based on predicting the future movements of the market. The goal is to buy low and sell high, or to avoid buying when you expect the market to fall. Essentially, it's about finding the optimal times to enter or exit investments to maximize profits or minimize losses.
While market timing sounds appealing, it comes with significant challenges:
While perfect market timing is elusive, you can use several strategies to improve your investment decisions:
The best time to invest is not about pinpointing the perfect moment but about adopting a strategic approach that aligns with your financial goals and risk tolerance. While market timing can offer potential benefits, it also comes with challenges and risks. By focusing on long-term investing, dollar-cost averaging, and keeping up-to-date, you can make more insightful decisions and improve your chances of achieving your investment goals. Remember, successful investing is often more about strategy and discipline than trying to time the market perfectly.
Last year we faced a pandemic that was very difficult to comprehend not just for individuals, but also for the overall economy.
Now, even if the second wave of a pandemic is still on the rise, the S&P BSE Midcap Index has outperformed the benchmark S&P BSE Sensex Index in the last five months since the end of 2019.
If we compare the performance of mid-cap stocks to last year, we will get to know that these companies had suffered a lot in 2019 but today, we don't see a major change in these stock’s prices.
In fact, the outperformance of India’s mid-cap stocks over their larger peers may take a deep breather, as per the new investors. In the fiscal year 2021, the BSE midcap index rose 91% as India’s market capitalization rose up to Rs91 trillion in a year and hence we can predict that the BSE Sensex Index has outperformed the Sensex post end of the pandemic; according to Bloomberg data.
Even the smaller stock of mid-cap companies has gained approximately 33% in a short period, which is more than double according to the set benchmark.
As the mid-cap stocks outperformed the large-cap stocks in 2020, this year the experts predict that these stocks may hit a pause because of the second surge of COVID 19 infections across the country.
Due to the sudden pandemic, many investors are seeking large-cap stocks, especially in Bank stocks. In the current situation, everyone wants to play safe and therefore, investors find large-cap stocks (primarily bank stocks) are the safest options to invest in.
Mid-cap stocks may take a pause for some time but the performance depends a lot on the pace of vaccination. Last week, the Indian government announced that the vaccines will be available for everyone ranging over the age of 18, applicable from May 1.
As of now, India has vaccinated over 13 crore vaccinated doses and by doing this, the country becomes one of the fastest nations to vaccinate many people within a short span of time.
Earlier, investors used to be attracted towards mid-cap stocks as these stocks were relatively cheaper than other stocks, but that’s not the condition anymore. Nowadays, large companies are better equipped to handle crises and therefore these stocks are becoming the top priority of investors.
Mid-cap companies in India are those who have a market capitalization of Rs 5k Crore and less than Rs 20k Crore. These companies come under the top 100 companies that are listed on the stock exchanges (BSE and NSE). If we compare mid-cap stocks with the small caps, you will find out that the mid-cap stocks come with a moderate risk as compared to small-cap stocks. The risks of these stocks are comparatively higher than large-cap stocks.
Another advantage of applying for mid-cap stocks is that these stocks offer an opportunity for growth and in future, these stocks perform well with outstanding returns than large-cap stocks.
Mid-cap stocks are mainly responsible for boosting up the market share and profitability.
According to the present situation, the markets are in rallied mode, and when such things happen, investors are generally inclined towards large-caps, however, after the crash of 2020, investors have started to channelize their portfolio into mid-cap and small-cap stocks.
The primary factor that worked in the favor of mid-cap stocks is its low-interest regime that has been controlled by the Reserve Bank of India. Because of the low-interest rates, the capacity of taking risk appetite increases, which makes investors invest more in mid-cap stocks than other stocks.
Experts see a strong connection between the midcap index and repo rates. High liquidity and moderate risks are the major factors that contribute to the mid-cap rally.
A brokerage house says, whenever there is a disturbance, it has been followed by outperformance in mid-cap and small-cap indices. The same trend has been noticed in 2009, 2016, and 2017. This year: in March 2021, the Midcap Index outperformed both the Nifty Small-Cap and Nifty 50 indices.
If we see the performance of the Nifty Midcap index over the others, then last year, the Nifty mid-cap index bounced back by over 70 percent post-pandemic. However, Smallcap indices gained 19% in 2020.
As the second wave of infections is still on the rise, the major indices of India Sensex and Nifty have seen some contraction this month. On April 20, Sensex fell 10 percent, after maintaining an all-time high of 52k levels in February. The Nifty has also gone down by 6% to 14,296 levels on April 20, after witnessing a peak of 15k levels.
Looking at the current scenario, investors are moving towards large-cap stocks considering it as the safest option to invest at this time.
However, the movement of investors toward large-cap stocks is temporary, they are doing this only because of market volatility. Once the market returns to its original pace, investors will prefer mid-cap stocks over long-term stocks.
The ease of availability of vaccines, and economic recovery are some of the factors that may decide the market way; which way the stock market will move in the future.
According to the credit rating agency, Moody, the second wave will definitely hurt the economy which may affect the country’s future growth, however, the agency has also stated that the economy will grow in the double digits after a few months.
If the second wave curbs quickly and the economic resurgence gets started then mid-cap stocks will become the investor’s first choice over large-cap stocks. In 2020, when the stock market fell, the market saw a big bull which extended up to 2021.
Due to the unpredictability of the stock market, mid-cap stocks too had an unbeaten run. Although the mid-cap market sees a slower pace in the market, they will rise once the market regains and all things come at a normal pace.
Over the past few years, many global technologies and fund houses have started giving you an option to invest in them. One such asset company is Mirae Asset, which is all set to open an NFO among the people of India.
Mirae Asset Investment Managers India announced the launch of two NFO (New Fund Offer) - Mirae Asset NYSE FAANG + ETF and NYSE; an open-ended fund of fund scheme mainly investing in Mirae Asset NYSE FANG + ETF. According to the news, the NFO is open for subscription between 19 April to 3 May 2021.
The house is offering you a fund of funds (FOF) route to invest directly in ETF schemes.
Exchange-Traded Funds or ETF’s are one of the types of investment funds that are traded on the stock exchange.
ETF’s are quite similar to mutual funds except one that ETF’s can be bought and sold throughout the day on the stock exchanges just like stocks while mutual funds are bought and sold based on their price at the end of the day.
A FOF or funds of the fund is nothing but a mutual fund scheme that allows investors to invest in the units of other funds. For instance, the Mirae Asset NYSE FAANG + ETF is a fund of funds that will invest in the units of Mirae Asset NYSE FAANG + ETF.
Here the NYSE FANG Plus Index (NFPI) will come into play. This is because NFPI will provide exposure to today’s highly traded top 10 tech giants in the world which are listed overseas. These tech companies include Facebook, Apple, Amazon, Netflix, Google, Tesla, Twitter, Alibaba, Baidu and NVIDIA.
You might have heard the popular acronym FAANG which stands for Facebook, Apple, Amazon, Netflix and Google (Alphabet Inc). Now, the FAANG word has spread as the five other stocks have been added to it.
Needless to say, these tech giants are extremely popular all over the world as they offer bountiful services that are used by millions of people across the world.
Therefore, if these businesses are put together in one portfolio, they offer a large number of profits as they have the ability to grow in the different geographies of the world.
If we talk about the past data, we get a detailed insight into NFPI as the index has managed to deliver 33.41% annualized returns between September 2014 and March 2021. The percentage amount is quite large if we compare it to NASDAQ - 100 which has given a 20.77% return between the same years, and 13.23% for the S&P 500 said by the reports of ICE Data Indices.
The fund offers exposures to the top industry leaders in their respective segments, which is a plus point for every individual. This is because investing your money in these companies can minimize the chance of risks associated with the business. These businesses hold minimum risks as most of the businesses present in this index are known for their innovations.
Since these companies are not listed in Indian stock exchanges, a FOF can act as a good way to invest in these established technology sector leaders. Also, including these stocks may create a beautiful diversification to your portfolio.
The addition of the top 10 tech companies into the index makes it highly concentrated. This means investors who saw a dream to invest in this index may be exposed to concentration risk. Stock market is full of volatility and hence it would be beneficial for you to be aware of the downward volatility.
Secondly, these businesses face numerous regulatory changes in many countries which may affect the stock’s price. Also, these companies often face several acquisitions by the policymakers of different countries which could lead to huge risks and downward volatility.
The subscription date for both funds starts on April 19, 2021, while the closing dates are different. The closing date of FAANg +ETF is on April 30, 2021, whereas the closing date of FAANG +ETF fund of funds is on May 3, 2021.
The Mirae Asset FAANG+ETF will be handled by Mr Siddharth Srivastava while the Mirae Asset FAANG+ETF FOF will be handled by Ms Ekta Gala.
The minimum investment amount required by both the schemes will be Rs 5000 and multiples of Re 1.
The Mirae Asset FAANG+ETF FOF will offer investors multiple options such as regular plan and direct plan.
Each stock’s weightage in NYSE FAANG+ Index is equally weighted that consists of highly traded growth stocks.
The NYSE FAANG+Index will allow Indian stock trading investors to invest in these potential stocks like Facebook, Apple, Amazon, Google, Tesla, Twitter, Netflix etc.
It may be noted that 7 out of 10 companies in the NYSE FAANG+ Index have made it a list of top 50 innovative companies with exceptionally well innovative ideas.
The Number of Funds managed by Ms Ekta Gala is mentioned below:
Mirae Asset NIFTY 50 ETF
Mirae Asset NIFTY Next 50 ETF
Mirae Asset ECG Sector Leader ETF
Mirae Asset ECG Sector Leader FOF
Mr Siddharth Srivastava, fund manager of Mirae Asset NYSE FANG+ETF said: this index gives Indian investors a new way to put their money in these highly brilliant, growth innovative companies. Through these investments, Indian investors now can invest a small part of their money into these shares and participate in the growth stories of these companies.
It has been seen that many FIIs and global investors have put their eyes on Indian stock market and investors. Many top market gainers have been constantly researching on Indian stock exchange and analyzing the pattern of the stock market.
By doing this, most of them have started to invest in the Indian stock market. Also, they want many retail investors to contribute to the top-notch stocks.
Therefore, they came with the idea of ETFs and added FAANG stocks with ETFs so that many Indian investors can benefit from these stocks.
The primary objective of these companies behind the diversification of these stocks among different geographical areas is the expansion of shares among different retailers and investors so that they can evenly contribute towards the growth of these top giants.
As far as the doubling of money is concerned, penny stocks come second to none. This is because such stocks present a wide range of opportunities for new investors as well as experienced both.
And when it comes to investing in money, investors often seek mid-cap and large-cap stocks, however, the majority of them neglect penny stocks.
Penny stocks are small stocks and come under the small-cap category. If you are a regular trader or investor, you must have heard the term penny stocks. Well, these are small-cap stocks that attract minimal pricing. According to the Indian stock market trading scenario, stocks whose market capitalization is less than Rs 10, comes under penny stocks.
Due to low market capitalization, these stocks seem alluring to many investors as these shares are available at low price and investors would purchase more shares with low investment amounts.
Another important reason behind the strong hype of penny stocks is, they have a low frequency of trading, their prices are subjected to sudden and high levels of volatility.
Let’s understand penny stocks with a suitable example:
A company XYZ Limited has a share price of Rs 500 and a penny stock to be Rs 5. If an investor has a capital of Rs 10,000, they would be able to buy only 20 shares of the established company. With the same capital amount, they can purchase the penny stocks of 2000 shares.
If you are new to the stock market, then penny stocks can act as a good choice for you. This is because penny stocks enable you to learn the ins and outs of trading first hand, i.e stock market learning. Since the price of penny stocks are low, investors purchase a high volume of penny stocks with a limited capital amount. This also helps investors to minimize their losses.
Penny stocks are not traded in the share market frequently. Due to a low volume of trades, investors may find it difficult to find both buyers and sellers. However, they can overcome this limitation to a certain extent by holding the shares of penny stocks for the long term.
Penny stocks are easy to trade and therefore many investors especially newbies find it easy to trade in the stock market. Price movement of penny stocks are speculative and require very less methodical technical analysis. This makes investors the perfect choice for you if you are just making an entry into the world of the stock market.
There are multiple companies with good financials and growth potential that are being traded for pennies. By identifying these companies, investors can generate good returns and watch their investments grow.
Penny stocks can be considered as a miss or hit opportunity. Companies issuing them might grow into large organizations and give a higher yield than average returns.
Some of these stocks can turn out to be multi-bagger stocks. This means some penny stocks can generate returns of more than 100 per cent against their investment amount. And, if some penny stocks give a return ten times its investment value then it is considered a ten-bagger.
Hence, if investors could include these stocks in their portfolio, these stocks could exponentially increase their returns and have a large chance to outperform mid-cap and large-cap funds.
To find out the best penny stocks which have the potential to be multi-baggers, investors need to go through thorough stock market research.
Let’s understand it with an example:
Suppose Mr X invested Rs 10,000 in penny stocks of ABC Pvt company. Each unit cost is Rs 10. The company did well in the market as its performance rose by a huge margin and its stock value reached up to Rs 100. If Mr.X sold its 1000 shares at Rs 1,00,000. I.e (10,000/10=1000, Rs 1000*100=Rs 1,00,000) hence this stock gains ten times a return. Such stocks are considered as a ten-bagger stock.
As we said above, these stocks are cheaper than other stocks and hence you can easily do share trading and invest in them without taking any risk of losing huge amounts of your investment finances.
Therefore, if they fill a small portion of penny stocks into their portfolio, chances are investors creating room for better investment options while minimizing the risk associated with it.
As these stocks heavily depend on the market condition for the growth in their stock’s intrinsic value, they are associated with high risk.
Apart from the fundamental risks linked with the stock market, these stocks also come with other types of risks which can’t be neglected.
The companies that mostly issue penny stocks are startups. These companies freshly come into the stock market for fundraising and needless to say, there are a lot of insecurities associated with these stocks such as lack of information on the past performance, financial soundness, growth prospects of such stocks.
Therefore, it is suggested to do complete research before investing in penny stocks. Also, there are several stock market courses available on the internet. You can take a wide range of knowledge from there.
If you look at the financial history, you might have heard that penny stock scams are very common in the international stock market. One such popular method is pump and dump. Under the pump and dump method, investors with an intention of scamming, purchase a huge amount of penny stocks. Such hype attracts new investors to purchase these stocks.
Once the company realizes that they have enough buyers who have invested in their stocks, the speculator immediately reduces the value of these stocks resulting in the losses of new investors.
Apart from investing in penny stocks, investors nowadays seek out new investment options that are suited to their portfolio and risk appetite both.
Mutual funds are one of the best investment options investors are gaining interest in. Mutual funds are a professionally managed investment scheme that pools money from numerous investors and invests this money in securities such as stocks, bonds, and debts.
While penny stocks seem an attractive investment option for many investors because of their low pricing, they do carry risks like other equity shares. The price movement of such stocks heavily depends on the market condition which makes penny stocks highly risky. However, these risks can be mitigated if you do complete research about these stocks before investing.
Well, if you need the right investment advice regarding any stocks and mutual funds, you may consider Swastika as the best stock trading platform for beginners and experienced both. The stock broking company comes with user-friendly online trading platforms at affordable brokerage rates.
Recently, fantasy sports has become the talk in the world of virtual gaming. This is because playing fantasy games is one of the most popular hobbies of sports fans around the world. There are people who love to play virtual gaming while there are other people who have no clue about it.
It is currentlyIn recent years, fantasy sports have gained massive popularity, with millions of people participating globally. The excitement of creating virtual teams and earning rewards based on real-life performances of athletes makes it appealing to sports enthusiasts. Given its growth, you might think that investing in the fantasy sports business is a great idea. However, despite its rapid expansion, investing in fantasy sports comes with significant risks that make it a less-than-ideal option.
In this blog, we will explore why fantasy sports businesses might not be the best choice for investment, focusing on market uncertainties, regulatory challenges, financial risks, and ethical concerns.
One of the biggest challenges the fantasy sports industry faces is regulatory uncertainty. Fantasy sports often operate in a grey area of the law, particularly when it comes to gambling regulations. In many countries, fantasy sports are still under scrutiny, with debates about whether they should be classified as a game of skill or a form of gambling.
This legal ambiguity can lead to sudden changes in regulations, making it difficult for companies to operate smoothly. Governments can impose restrictions or even ban fantasy sports platforms, which can cause significant financial losses for investors. For example, countries like India have state-specific laws that either allow or restrict fantasy sports, adding to the complexity for businesses and investors alike.
The fantasy sports market has become highly competitive. Several major platforms dominate the industry, making it difficult for new or smaller businesses to gain a foothold. These established companies have massive marketing budgets and user bases, creating significant barriers to entry for new businesses.
For investors, this means that entering the market is risky because the chances of competing successfully with these big players are slim. With established platforms like DraftKings and Dream11 already capturing a large share of the market, new entrants face an uphill battle for visibility and user acquisition.
Attracting and retaining users in the fantasy sports market can be very expensive. Companies often spend large sums on marketing, advertising, and promotions to build their user base. The cost of acquiring a single customer can be high, and many users tend to participate in fantasy sports only for a short period.
This high user acquisition cost means that businesses need a large volume of users to stay profitable. However, given the intense competition and the short lifespan of customer engagement, maintaining profitability can be difficult. For investors, this presents a significant financial risk, as it requires a continuous flow of capital to sustain growth.
Fantasy sports businesses typically rely on user participation fees or advertising for revenue. However, the revenue model is not always consistent, as it depends heavily on user engagement and the overall interest in sports. For example, if a popular sports league experiences a decline in viewership or faces disruptions (like during the COVID-19 pandemic), fantasy sports platforms could see a significant drop in participation.
Moreover, many users are not willing to pay large sums to participate in fantasy sports. This makes it challenging for platforms to generate consistent revenue without offering substantial prizes or incentives, which can further reduce profitability.
Fantasy sports, especially those that involve betting or monetary rewards, can lead to addictive behavior. Many users get hooked on the thrill of winning and end up spending more money than they can afford. This can lead to financial problems for users and raise ethical concerns for businesses that profit from this behavior.
From an investor’s perspective, supporting a business model that may contribute to addictive behavior and financial hardship for users can be ethically problematic. Negative publicity around addiction and financial irresponsibility can harm the brand’s reputation and reduce the platform’s long-term success.
Fantasy sports platforms are heavily dependent on technology, including mobile apps, data feeds, and online payment systems. Any disruption in these technologies can negatively impact the user experience and lead to financial losses. For example, if a platform’s data feed (which provides real-time sports data) malfunctions or experiences delays, it could cause frustration for users and damage the platform’s credibility.
Additionally, cybersecurity threats are a real concern in the digital space. If a platform is hacked or experiences data breaches, it could result in legal liabilities, loss of user trust, and financial losses for the business and its investors.
Fantasy sports participation often depends on the schedules of major sports leagues. This makes the business highly seasonal. For example, fantasy football platforms see a spike in activity during the football season but may experience a significant decline in user engagement during the offseason.
This seasonality means that businesses and investors cannot rely on steady year-round revenue, which makes it harder to maintain consistent cash flow. The fluctuating nature of user engagement adds to the risk for investors, as businesses may struggle to stay afloat during off-peak periods.
Although many fantasy sports companies argue that their games are based on skill, the lines between fantasy sports and gambling are often blurred. Some countries and states view fantasy sports as a form of gambling, subjecting these platforms to stringent regulations or outright bans.
Investors in these businesses face potential legal risks if the fantasy sports industry is reclassified as gambling in their region. Legal battles and compliance costs can significantly impact the business’s profitability and reputation, further increasing the risks involved in investing in this space.
While the fantasy sports industry may seem like a lucrative opportunity given its rapid growth, it comes with a host of risks that make it less than ideal for investors. Regulatory uncertainty, high competition, costly user acquisition, and ethical concerns are just a few of the challenges that can make this industry a risky bet.
For investors, it’s crucial to carefully consider these risks and explore alternative sectors with more stable revenue models and fewer legal and ethical complications. If you’re looking for safer, more predictable investment opportunities, the fantasy sports business might not be the right choice for your portfolio.
estimated that more than 75 million people will participate in fantasy sports this year, and that number is only going to continue to grow in the future. While fantasy sports or virtual gaming is a great way to spend your free time, there are also some issues with this popular activity.
Well, today, we are going to remove all your doubts about fantasy cricket and we will also try to provide a brief of the risks associated with it.
People nowadays show a great interest in fantasy sports as they find it a great way to stay close with their friends. Also, they find it a great chance of winning money without putting in any effort.
Well, the bitter truth is that these gaming sports are not reliable. Fantasy sports is a part of gambling that can become very addictive if you are not careful. Using your sports knowledge to win money is a huge rush which makes people get addicted to it.
If someone, even if he has adequate knowledge about a sport let's say cricket, there are huge chances that he/she may lose money.
Now, many sports-loving persons find it hard to digest the fact that fantasy sport is gambling. They consider these sports as a game of skills not a game of chance. However, this is not so true. Firstly, try to understand the terms investment and gambling.
We heard many people saying they don’t put their money in share or mutual funds as they don’t like to gamble. However, investing and gambling are two different things.
Gamblers are those who do anything for the winning amount; they are not afraid of taking risks and eventually lose all the money and go empty-handed. Investors, on the other hand, is a well-researched process.
Here are the fundamental difference between investing and gambling:
Gambling is an uncertain event. Investing is an activity that requires much knowledge, research and skills. Gambling on the other hand is an uncertain event that solely depends on emotions.
If someone wants to invest in the right asset, he first needs to do enough research, understands their goals, and financial information. Gambling doesn't require any such information. In the case of fantasy sport, if your money goes, there is no other way to buy it back.
In gambling, the result is dependent on the outcome of throwing a dice i.e. only one participant will win.
While in the stock market, if ten investors hold the shares of the same company and if the price goes up, all of them will make a profit.
Investing is done for the long term. Let’s say for 5 years or it could be extended for 10 years or more. Gambling is done for a shorter period such as for hours, or sometimes it can be stretched to a couple of weeks or months but not for a year.
Investing in share trading, mutual funds or any other assets gives investors ownership of the asset. In gambling, if you put money into it, either you will get more money or no money. There is no ownership assigned to participants at the end of gambling transactions.
Investing can happen with a specific goal in life. The goal could be anything like retirement planning, education, house planning, vehicle planning etc. While batting is done in pleasure to earn more money. One can also plan its future goals based on gambling but the risk is comparatively too high.
Several organizations identify gambling as addictive and lead to severe mental problems. While there are no such cases associated with investing. Instead, investing is a financial practice that is done for a healthy economic life.
It is extremely important to learn the thin line between investing and gambling.
Gambling is quite riskier than investing. The risk tolerance level of gamblers is slightly higher than investors. Gambling is a risk taken under certainty while investing involves risk under uncertain conditions. Gambling mainly depends on luck while investing on the other hand purely depends on practice, patience and knowledge.
Many people think putting money into the stock market is gambling. However, this is not so true. Share market trading in the stock market is not like a dice game.
In fact, trading is one of the best ways of investment as it involves examining past information of stock aka stock market research, analyzing its past performance and predicting its future growth with the help of fundamental analysis and technical analysis and other methods.
To invest in the right stocks, traders analyze their past trades, and then plan out their strategy such as which stocks to buy, at how much quantity and how much amount need to spend. Investors are well known before spending a single penny into it. These are the prerequisite for stock market trading.
Recently, fantasy sports sites were banned in 7 states of India including Tamil Nadu, Telangana, Andhra Pradesh, Odisha, Assam, Nagaland and Sikkim.
Fantasy sports apps is another example of gambling and therefore it is suggested to stay away from such sites. Instead, spend your time investing in different sectors. When it comes to investment, the stock market comes second to none. Investing in the right stocks with adequate knowledge leads to huge gains.
Two months ago, no one could have predicted that April would be the worst month of 2021 with an increasing number of COVID 19 infections among patients. The second wave of Covid 19 seems to be very fierce as it has already started slowing down the economic growth of the country while the inflation rate remains high.
Amid this uncertainty, Reserve Bank of India governor Shaktikanta Das on Thursday gave a positive statement regarding the economic activities held in the country.
He confidently said that the new wave of COVID 19 would not derail the economic journey. He maintained the RBI’s recent 10.5 percent growth forecast for the upcoming fiscal year (FY 2022). In other words, RBI Governor Shaktikanta Das has come up with an exclusive idea of keeping liquidity sufficient enough to rein in yield, preventing the currency from appreciating and inflation from going upside.
The governor’s assurance assumes significance amid apprehension about surging new COVID cases and resultant lockdown being clamped in many cities.
Many states along with the COVID hotspot state of India - Maharashtra that has marked a huge number of cases more than 50,000; are seeing a massive surge in pandemic infections, irritating the equity and bond market.
The worry is that most of these infections are caused by the strain that came this year but not the initial COVID 19 that killed over 1.5 lakh people in the country.
It may be noted that the RBI governor has given a 10.5% growth for FY 22 and the governor firmly believes that never sees a downward revision in 10.5% growth. He also does not believe that the complete lockdown will be held this year which the country witnessed last year.
When the developed markets are unleashing large fiscal stimuli, U.S. treasury yields are rising and commodity prices are going down.
The inflation rate for the Feb month was around 5 %, however, the core inflation rate in January was at 6%. Now, some economists say, there is a chance that the inflation rate could oscillate between 5.5% to 6%.
Fortunately, some helpful base effects are expected to hold down food prices.
The Indian economy somehow returned to its original track i.e. growth in the last quarter of the year 2020 and is expected to surge again by the end of March. However, with the rising Covid 19 infections, the sequential growth may drop thereafter.
As the cases are rising with strict state-wise restrictions, the country expects soft, steady growth in Q1 FY 22, financial experts said in one of her reports.
RBI clearly monitors the growth factor of the Indian economy, keeping the inflation rate in mind. According to Madhavi Arora, an economist at Emkay Global, RBI leaves no stone unturned in maintaining FY 22 growth.
Rising Covid infections lead to high inflation that even MPC will not be able to ignore the inflation effect. Retail inflation rose to 5.03% which is a three month high in February as food prices saw a modern bounce back. According to the MPC said in its last meeting, fundamental requirements such as food, fuel all have risen.
Maintaining retail inflation at 4% with a margin of 2% is a quite challenging task, especially in the current circumstances, said Govinda Rao, chief economic advisor at Brickwork ratings.
As the inflation rate is still moving upward, excess liquidity and volatility in crude oil prices could lead to upward risk, Rao further said. Once the current output gap narrows, surplus liquidity conditions could put pressure on prices, and the RBI will have to be vigilant.
At the last of the last MPC, RBI had decided to restore CRR (cash reserve ratio) in two phases. However, Governor Shaktikanta Das had assured to maintain the market liquidity despite restoring a huge amount of CRR. Also, he mentioned that a reversal of CRR cut will be given to central bank space to conduct larger bond purchases.
Rao further said, the RBI may likely drain excess liquidity. But given the higher government borrowings, which may put pressure on bond yields, the RBI may go slow in reversing its liquidity measures.
The RBI also all set to announce its first monetary policy in the first week of April. Also, high government borrowings at record high leads to soaring yields. Shaktikanta Das said, there is no fight between the central bank and the bond market.
The governor further assured, the RBI will ensure the bond purchases are of equal quantum. The RBI’s foreign exchange reserves are all its requirements.
The government took a new decision to privatize the state-run bank, he said the central bank is in continuous discussions with the RBI on the same. The centre always took into consideration the viewpoint of the regulator on such issues, he said.
Also, RBI is working on a central bank digital currency (CBDC). RBI’s stance on cryptocurrency has revealed that it will bring a new bill on cryptocurrencies.
It has been noticed that there are few practical operationalizations of CBDC which makes RBI more responsible while launching a safe and robust model. RBI further said that the UPI can act as the best medium for providing the best yet fast services for cross border payments.
Adding to this, Shaktikanta Das, further said the day is not too far when we (India) will experience cheaper, safer and faster cross border remittances, adding Rupay card which in future, will make a mark in the global financial landscape.
Needless to say, the second wave of infections badly threatens the economy which in turn increases inflation to a greater extent. Growth is clearly losing its momentum as many sectors fail to generate revenue in the upcoming months.
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