Today’s Consumers Consider Fintech Apps as Trustworthy

The pandemic and the need to stay quarantined prompted many people to search for mobile banking applications to use in the first 4 months of the year 2020, As the COVID-19 worsened, the demand for smooth and easy-to-use digital applications intensified; while the number of people using fintech apps have increased worldwide by more than a hundred percent.

Today, it has become apparent that consumers are becoming more trusting of fintech companies. Mainly because their apps are more focused on the delivery of satisfactory digital experience when providing the needs of mobile app users. The successful fintech companies nowadays, are in fact more keen on investing on innovations to improve their products and in instituting transparency in their services.

That being the case, these companies are well-prepared in satisfying the needs and expectations of their customers. Financial experts consider it noteworthy that decision-makers in the traditional financial industry are now embracing the use of disruptive technologies introduced by fintech companies.

Two Examples of Successful Fintech Apps that Focus on User Convenience

Below are two key players in the fintech industry who have achieved great results in their approach of focusing on user convenience and experience:

Grupo Financiero Actinver – Dinn App

While Grupo Financiero Actinver is already an established traditional bank in Mexico, the company still looked for ways to attract the new generation of customers who haven’t tried their hand at investing. The company’s marketing team recommended that the best way to achieve such a goal is to create an app that would give the smooth experience tech-savvy consumers look for in mobile banking apps.

In 2018, the company created a financial services app called Dinn, which targeted the younger generation of investors who have yet to learn how to effectively invest whatever little money they can spare. Using Google’s acquisition tools, Actinver was able to cost effectively build a financial services app designed to help the new breed of young Mexican investors.

The bank’s investing services required lower funnel actions as they reduce the number of options for their first-time investors, in terms of bonds, stocks, and mutual funds. Since Dinn is a digitally native financial brand, it is well positioned to meet the expectations of Mexico’s new breed of customers.

In the U.S., the most successful developer of this disruptive type of financial application is the Robinhood Markets fintech.

Greenlight

Greenlight is the consumer application focused on enhancing digital experience for children, by educating them early on about managing personal finances. The Greenlight app allows parents to monitor their children’s allowances and on how much they have learned from knowing the essentials of properly handling personal finances.

The company made sure that the app is greatly focused in providing user analytics, decision-making tools, and data infrastructure by harnessing Google Analytics. Moreover, observance of privacy regulations is assured as the Greenlight app was developed using Google’s comprehensive app development platform Firebase.

As a note, early success denotes that by word-of-mouth endorsements and exposure to the public, fintech apps are regarded as trustworthy. Nowadays fintech apps recommended by family members or relatives are regarded as 1.6x more reliable that those received as financial advice from other consumers,

POGOs Also Experiencing Financial Difficulties Due to Global Economic Crisis

Several Southeast Asian countries that invested in land based casinos to boost their tourism industry suffered from fallouts caused by the COVID-19 pandemic Yet one Southeast Asian country that benefited from the turn of events is the Philippines. Mainly because several years prior to the pandemic, the country had established itself as a regulatory haven for Asia-facing online gambling operators, officially known as POGOs (Philippine Offshore Gaming Operators).

Through its economic zones and gambling regulator, the Philippine Amusement and Gaming Corporation (PAGCOR), the Philippine government allowed numerous existing providers like Playtech and Realtime Gaming to establish their base of operations on Philippine soil so they can better serve their Asian customers. The move also encouraged numerous Asian entrepreneurs to invest in online gambling products, services and technologies.

Playtech and Real Time Gaming, by the way, provide the online casino games offered by a popular Asian online casino called 918kiss, which mainly operates by way of downloadable mobile phone applications

At the height of the global pandemic lockdowns, several POGOs were able to obtain PAGCOR’s approval in allowing them to operate and keep their online casino sites running. PAGCOR’s grant of approval however, depended on a POGO’s compliance with the health and safety measures and more importantly, on up-to-date payment of regulatory fees and tax obligations. After all, the ensuing lockdown measure imposed globally was an opportunity that POGOs could not let pass, as Asian gamblers were showing increased interests in online gambling entertainment.

Success of PAGCOR POGOs Spurred Calls for Increased Taxation Among Philippine Lawmakers

In 2019, the Philippines had established itself as a world leader in regulated online gambling, for being able to collect as much Php 8 billion (USD 164.3 million) in revenues from POGOs. In seeing the profitability of the POGO industry, several Philippine lawmakers called for proposals to increase the tax rates imposed on offshore online gambling operators.

However, the move elicited warning from PAGCOR President and Chief Operating Office, Alfredo C Lim, for the government to refrain from overtaxing POGOs as doing so would drive away offshore gambling operators. Mr. Lim asserted that in addition to taxes on offshore gaming revenues, the Philippines is also benefiting from rentals of high-end commercial space and availability of local employment opportunities.

PAGCOR and Its POGOs are Currently Dealing with Declining Revenues

True enough since the economies of neighboring Asian countries have been hurt by the pandemic, even POGOs are experiencing decline in revenues. PAGCOR’s latest report stated that POGO revenues had plummeted by as much as 80%. That is why only 111 of the 218 accredited POGO firms operating in the country were able to secure clearance from the Bureau of Internal Revenue (BIR).

A BIR clearance denotes that all fees and taxes due, including the monthly regulatory fees collected by PAGCOR, have been settled. PAGCOR continued to require it as a condition before they can resume operations, after the government eased down on lockdown orders for nonessential businesses

Moreover, Jose Tria, PAGCOR’s AVP for Offshore Gaming Licensing, reported that as many as 42 online gambling service providers have withdrawn their PAGCOR accreditation, another five (5) POGO licenses were canceled, while five (5) other licenses are currently suspended.

As a result, the monthly regulatory fees collected from POGOs that usually amounted to Php 600 million (US$12.4 million) is now down to nearly half, or Php 300 million (US$6.2 million). As several POGO offices are now closing down, even the related income from real estate leases and other businesses that benefited from POGO foreign workers, are reporting declines in revenue.

Fintech Lenders : When the Need for Extra Funds is Immediate

It is now apparent that the stimulus loans offered by the government are not as readily available and/or workable, as funding options for needy entrepreneurs.

While the Payroll Protection Program (PPP) of the CARES Act immediately grants $10,000 to successful applicants, many encountered difficulties in preparing and obtaining documents required for speedy and successful processing of their stimulus loan application.

When it became apparent that as the 2020 health crisis will drag on, it became clear for many entrepreneurs that the fastest way they can secure a loan is through fintech lenders. Small businesses have come to realize that in order to survive, they need to immediately bring their business online, incorporate e-commerce technologies as well as launch promotional and marketing campaigns.

However, they need to have additional personal financial resources, if they need to spend extra on restarting their business online.

The PPP charges only 1% of the unforgiven loan balance in case business owners do not meet the requirements to qualify for the forgiveness of loan balance. Yet for entrepreneurs whose need for funding is immediate, competing with the multitude seeking to obtain a PPP loan can be a long and arduous task. That is why many turned to fintech lenders instead.

Who are the Fintech Lenders?

Fintech lenders are companies that utilize Artificial Intelligence, big data, the power of the Internet and partnerships with traditional financial institutions in offering personal or even mortgage loans. Through innovative technologies, fintech lenders have eliminated the need to process loan applications using outdated and complicated methods.

Some examples of today’s leading fintech lenders include:

TALA – Santa Monica, California

Through a consumer-lending app, TALA underwrites loans based on data provided by app-users’ smartphones or smart devices. Examples of data used in determining a Tala loan-applicant’s credit-worthiness include bill payments, social media connections and activities. So far, TALA reports that the company has assisted more than 3 billion new users in obtaining personal loans that will help them build their credit. .

AVANT – Chicago, Illinois

Using its fintech technologies, AVANT offers consumers the Avantcard that enables customers to obtain credit for small shopping purchases or larger loans for emergency needs, home repair or a vacation trip.

BRAVIANT HOLDINGS – Chicago, Illinois

Like TALA and AVANT, Braviant Holdings uses technology and big data analytics in verifying and processing applications that allow the company to make quick decisions. Unlike other fintechs, Braviant Holdings cater mostly to under-banked people, providing them with credit cards to use like Balance Credit and Chorus.

Fintechs Provide Tools to Help SMEs, Gig Workers

While financial technology companies are themselve getting hit by the ongoing COVID-19 crisis, yet several UK fintech innovators are helping small businesses stay afloat.

In recent years and all across the globe, fintech companies have been developing new applications or financial resources to help consumers and small entrepreneurs organise and improve finances. They have managed to ruffle the feathers of traditional banks and other lending institutions, by providing consumers and business startups with agile technologies and solutions for obtaining funds.

Although financial technology companies are not immune to the disruptions caused by the current coronavirus health crisis, some have shown concern on the impact of the current crisis on small businesses in the UK. Many fintechs are currently focused on providing quick solutions that can help small players obtain the government funding relief they need in the fastest and surest ways possible.

Solution Provided by Fintechs to Gig Workers and Independent Solo Entrepreneurs

UK fintechs, many of them volunteers, have been developing new tools aligned with economic relief programs that the UK government launched in helping consumers, gig workers and solo-proprietors of small businesses. Below are some examples:

Starling Bank

Starling Bank, a UK licensed and regulated bank that operates digitally and only by way of mobile devices, recently rolled out the “Connected Card.” It works as an emergency debit card that enables a Starling Account Holders restricted by orders for self-isolation, to extend the use of his or her account, not just to family members but even to carers and friends, so they can purchase essential items on the account holder’s behalf.

The Starling account holder is protected by limiting the Connected Card balance to £200; whist allowing him or her to track and manage use of the extended card, by way of a related mobile app.

“Covid Credit”

Several dozens of UK fintechs came forward to render volunteer work in helping build an application that enabled gig workers, freelancers and self-employed individuals to self-certify their lost income. The certification, being a document required by the UK government in processing applications for economic relief.

“Coronavirus Calculator”

Developers at Countingup, touted as the leading provider of agile solutions for banking and accounting needs of small business in the UK, came out with Countingup. This app enables self-employed individuals to immediately determine how much financial relief they could obtain from the UK government’s coronavirus funding program for small businesses ran by solo proprietors.

“Coronavirus Furlough HMRC Claim Calculator”

Pento, creator of automated payroll tools specifically for use of startup small businesses, created the “Coronavirus Furlough HMRC Claim Calculator.” This tool helps startup entrepreneurs determine how much they can claim as financial relief from the UK government under the “Coronavirus Job Retention Scheme.” The government program intends to help employers of small businesses keep workers employed instead of making them take a leave of absence.

What are Fintechs? Why are They Creating a Buzz in the Financing Industry?

Fintech is short for financial technology now used in referring to companies that harness advancements in financial technologies, in providing financial services that were traditionally provided only by banking institutions.

Actually, fintechs are now at the stage where they are competing with banks in delivering fast and easy to avail financial services, which ordinary consumers can access by way of smartphones and mobile banking systems.

Many startup fintech companies made waves in 2005, 2006 and 2011 when they ventured into offering student loans. Those were the periods when the general public started to lose trust in banks.

To date, several fintech companies like Lending Club, Prosper and SoFi have expanded, furnishing not only student loans. Currently, they are also offering personal loans, home mortgages, equity loans, as well as offer savings,retirement and trading accounts and investment options.

Already servicing several millions of customers between them, these fintech companies can fund as much as $3 billion to $11 billion worth of loans to the general public on a yearly basis.

Yet that would make you pause and ask, “If they are technology companies, are they licensed to offer loans in accordance with government banking regulations?”

“Are their savings and investment offers backed by insurance agreements like those under the traditional Federal Deposit Insurance Coverage (FDIC)?”

Moreover, “Who provide the funding that fintechs loan out?” After all, fintech companies do not have the same business models as banks, in which the latter lends funds as a way of investing deposits placed by customers.

Forbes Conducts Its Own Investigations on How Fintechs Work

Last December 31, 2019, Forbes Magazine published an article that explains how fintechs operate and who provides the funding. The investigation zeroed in on an FDIC-insured and licensed charter bank called Cross River.

Apparently, Cross River also started out as a traditional bank, which financial technology company called Greensky resuscitated when the bank started failing as aftermath of the 2008 financial crisis.

At that time, Greensky, while still a financial technology development company, was already offering no-interest loans. Greensky offered those loans to property owners who wanted to add home improvements to make heir property highly vendable in the real estate market.

Greensky owner David Zalik later approached Gilles Gade, a French immigrant who until now serves as the CEO of Cross River Bank. Through the charter bank, Gade provided funds for loans originated by GreenSky. At that time, the general public had lost trust on bank-funded loans, while financial technology companies like Greensky offered alternatives.

Sure enough, Cross River became one of several charter banks that grew, by funding loans underwritten for fintech companies. After all, financial technologies now include artificial intelligence (AI) in determining, assessing and managing the risks involved in loan operations.

Many call the funding provided by licensed charter banks as peer-to-peer funding. However, Andrew Marquardt of Middlemarch Partners and former New York Fed told Forbes that investors look at fintech companies as banks. Marquardt corrected this view by saying

”They are just tech companies that leverage technology in furthering an old-school bank solution known as business or consumer lending

Brazil’s Congress Set to Undertake Deep Probe of the Country’s Cryptocurrency Market

Cryptocurrency news website Cointelegraph, reported that Brazililian lawmakers have overwhelmingly voted to approve a resolution to launch an investigation into the country’s cryptocurrency market.

Congressman Aureo Ribeiro, instigated the request to formally task the Parliamentary Inquiry Commission (PCI) to conduct the probe. The request came as a result of the widespread proliferation of cryptocurrency related fraud transpiring in Brazil. Congressional support for Ribeiro’s resolution is overwhelming, as the document was signed by 234 Congressmen, which exceeded the required minimum of 63 votes.

According to Cointelegraph, the approved resolution specifically named cryptocurrency operators Atlas Quantum and its CEO Rodrigo Marques, Trader Group and Zero 10 among many others, as needing thorough investigation.

The growing number of complaints put forward by people coming from all over Brazil, indicated that the proliferation of cryptocurrency-related fraud throughout the country, has reached epidemic proportions.

Congressman Ribeiro, who also authored a bill proposing for the regulation of Brazil’s cryptocurrency operations, wrote in the resolution that

”The lack of regulation and vigilance over the crypto market in Brazil presents potential risks to investors and users, as its operations combined with high levels of anonymity, abstraction, cross-border transactions and other peculiarities inherent to the cryptocurrency technology.”

The Brazilian congressman also explained in the resolution, why Atlas Quantum, once purported as the biggest cryptocurrency company in Brazil, calls for a deep probe.

The Main Problem with Atlas Quantum

Homegrown Brazilian cryptocurrency company Atlas Quantum, is currently facing financial problems and legal issues.

Last September 18, 2019, Atlas Quantum released a video to present itself as a robust company with more than $54 million in bitcoins to its name. However, Atlas made further claims that the exchange company HitBTC has frozen 1,862 BTC ($15.3 million) and over $5.4 million in stablecoin Tether (USDT) that Atlas allegedly maintains in three crypto accounts.

On October 05, 2019, HitBTC denied Atlas Quantum’s claim by informing investors that the said crypto-investment company does not have any value stuck in the HitBTC platform. HitBTC further stated that the video released by the alleged Atlas Quantum team is fake, as exchange company noted the non-standard placement of amounts to show the purported balances of Atlas Quantum’s account.

Moreover, HitBTC asserts that it has not received any request for assistance in connection with the supposed frozen accounts. .

The video came at a time when numerous investors expressed fears that the crypto-investment company will not be able to fulfill its obligations to meet all requests for withdrawals. The case attracted wide media coverage, to which Atlas Quantum responded by presenting an audit report allegedly attesting to the veracity of the amount of Bitcoins and other altcoins held by the beleaguered company.

The audited statement though is regarded as contentious, as many of Atlas’ investors doubt if Atlas Quantum has sufficient cryptocurrency resources to honor its commitments.

Equity Release : A Financial Scheme that Can Help Seniors Cope with the Loss of a Spouse

Home equity release is fast becoming a financial solution taken by UK’s population of senior adults. During the second quarter of this year alone, the Equity Release Council had established that as much as £971 million in equity release loans were availed by Britons aged 55 and older.

Many do so in order to cope with the loss of their spouse, when preferring to live independently in the home where they raised their brood. After all, maintaining a house requires extra funds that a state pension cannot provide.

Moreover, the Centre for Ageing and Demography of the UK National Statistics Office released a report in August 2019 that describes the dramatic change in the structure of the UK population. According to the report, there are more older people making up the UK population, since previous generations had produced fewer children. The only factor driving a rise in the number of people residing in the UK are the migrants. .

The report also said that Britons today tend to have a longer life span. Generally, most British men are said to live up to 79.2 years old, while British women often survive the death of their husband up to age 82 and beyond. Yet senior citizens who have to survive after the death of their spouse, face financial and health issues while living alone.

Seniors Address Extraordinary Financial Needs by Way of Equity Release Mortgage

In seeking professional advice from financial experts, many older adults in the UK learned that there is a financial facility offered exclusively to senior homeowners. Availed by way of an equity release arrangement, a lot of older Britons were able to borrow a percentage of their property’s value, without having to face the burden of making monthly payments.

The amount borrowed plus the total interest compounded on the outstanding balance will be settled through the sale of the property; but only when the senior borrower dies, or when he or she needs to enter a nursing home for long term. The scheme works on the principle that a real property appreciates in value and therefore can be sold in the future at a higher valuation.

It is possible that the proceeds from the sale of the property could exceed the total amount due on the loan. The borrower’s heirs would still stand to receive the residual value, once all payments due on the mortgage have been applied.

On the other hand, to avoid burdening heirs with unpaid obligations arising from an equity release mortgage, the UK Equity Release Council, requires the incorporation of a “No-Negative Equity Guarantee” to the mortgage contract. It is a clause that constrains the lender to consider the mortgage paid through the sale of the property. That is regardless of any resulting deficiency, in case the proceeds of the sale is less than the total amount due. .

Using an equity release calculator uk lenders carefully evaluate the value of a property. That way, they can ascertain that the amount loaned out as equity release plus compounded interest, can be adequately covered by the future value of the mortgaged property.

Ponzi-Scheme and Other Investment Scams on the Rise in the Cryptocurrency Market

Many cryptocurrency owners are forgetting the primary advantages of using digital money for their transactions, which is that of circumventing the red tapes and charges imposed by traditional financial institutions.

Recently though, not a few have been lured into investing their virtual money into Ponzi-schemes and other similar investment scams using the blockchain technology.

Enticed by the prospect of amassing cryptocurrency without having to mine or earn them as profits in conventional trade transactions, victims easily forget that fraudulent investment schemes can easily circumvent an unregulated financial system.

Ponzi-schemes are the most viable because scammers need only to promise cryptocurrency owners profitable returns. Over time, millions of cryptocurrency owners were lured into becoming members by using the Plus Token app, which they were led to believe as legitimate e wallets.

Unknowingly, Plus Token was also transferring small amounts of digital money to e wallets created for purposes of laundering the money collected from members.

Although Plus Token members may have seen increases in their e-wallet balances, there was no guarantee that such increases were real or had been entered in the blockchain system.

In a real-money Ponzi scheme, profits given to subscribers do not come from real investments, but are only skimmed from contributions of new members. In the blockchain platform, this can be verified only by those who are savvy enough to decrypt the blockchain transactions entered by Plus Token.

How the Plus Token Ponzi Scheme was Unraveled

.Legitimate blockchain-based ewallet operators have actually given warnings about the incredulity of the idea of paying out profits just for using a blockchain-based ewallet.

 

Still, the number of Plus Token memberships reached 10 million in July 2019, which was the same time that Dovey Wan, founder of a legitimate cryptocurrency investment firm called Primitive Ventures, took notice that Plus Token was gradually but continuously selling off cryptocurrencies in small batches.

Ms. Wan immediately tweeted warnings about the Plus Token activities, whilst urging cryptocurrency exchange operators to blacklist the site. She also furnished them with ewallet addresses that appeared to have been beneficiaries of the cryptocurrency sell-offs.

After the alarms were raised and reached proper authorities, six Chinese nationals identified as members of the core team running the Plus Token Ponzi-scheme, were located in the island country of Vanuatu. The South Pacific island country later extradited the six to mainland China.

Token Analyst, a crypto-analytic firm located in London said Plus Token maintained e wallets that they used in laundering money once online mixing services have fused the Plus Token-held cryptocurrencies with other e wallets. That way, details of where the virtual money originated will become obscure.

Online mixing services are actually offering this type of work, which in an unregulated system of financial operation, can do so freely without fear of sanctions.

Other Methods Used by Scammers in Luring Investors to Ponzi Schemes

A promise of profit and fast-talking swindlers are not as effective in order to entice millions of cryptocurrency owners in a short span of time. Other methods are in use in order to make the Ponzi-scheme look truly legitimate;

Use of forum influencers, who take part in the website’s forum to attest to how their digital money has grown since becoming a member.

 

 

Paying recruiters, who also influence potential investors by showing off their newfound wealth at social media sites; when actually, the money they earned were commissions earned for every new member they recruited.

In today’s high tech advancements, there are now sophisticated software that can interact with Telegram, an Internet-based messaging system popular among cryptocurrency users. Tech savvy scammers find legitimate methods of responding to inquiries about ewallet account balances. That way, the lured investor will read what he or she is hoping for: the money promised already appears in one’s account.

Multi Level Marketing and Pyramid Schemes, Are They Different?

Multi Level Marketing (MLM) and Pyramid Scheme are in some ways different, but share one thing in common. The people who invest during the later part of the marketing operation or pyramiding scheme are the ones who end up empty handed. .

Back in the days when product brands like Tupperware, Amway, Avon, and The Pampered Chef were still popular, a lot of women found those MLM businesses as good sources of supplementary income. Yet the MLMs of before provided support by training sellers free of charge, and allowed members to sell only on consignment;

Why Today’s MLMs are Similar to Pyramid Schemes

The problem with today’s MLMs is that to become a seller, one must buy into the business by paying beforehand, a subscription fee. In return, subscribing members receive goods to sell equal in worth to the value as the subscription fee they paid.

In order to gain quick returns on their initial investment, they are encouraged to recruit members who will be their so-called “downliners” and earn a commission for every new recruit. In the same way, new recruits will invite friends and family members to join the MLM business, so they can also earn commissions.

The initial recruiter creates her own network of members and from every level, stands to gain a commission on each new recruit, down to the latest level of “downliners.” If they get to sell their inventory, the better; as it means they were able to get back their initial investment. In the meantime, if their network of members keep growing, money coming in as commissions from “downliners,” practically poses as profits realized from joining the MLM business.

This system works well for those who joined early on, but hardly compensatory for late joiners, since the market eventually becomes saturated. Even the product they were supposed to sell, will no longer be viable in a saturated market. That is why MLMs purporting themselves as legit businesses eventually operate the way pyramid schemes do.

How Do Pyramid Schemers Scam People?

Pyramid Schemes basically operate in ways similar to MLMs but are different in some aspects. While MLMs sell a particular product, Pyramid Schemes sell “dreams,” usually targeting people who want to strike it big in as little time as possible.

In a get-rich-quick-scheme, participants need only to convince a specific number of new investors, 3 at the least. The 3 recruits will likewise try to convince another set of 3, and so it goes with every new recruit in each level. In the process, the number of new investors multiply at the bottom line, forming a pyramid with the agents and the founders positioned at the top.

Since every recruiter earns a percentage from the money invested by the network of recruits, those at the top has a longer string of money to claim and collect as earnings than those in the middle and bottom levels of the pyramid. In the event that no more new recruits bring in fresh funds, the scheme collapses; leaving many of those at the lower level of the pyramid with nothing to claim at all, not even the money they invested.

Inasmuch as the founders and the agents are aware when their scheme is about to unravel, they have enough time to pack up and disappear. They will lay low for awhile in order to elude any ensuing investigations. Once the furor over the scam dies down, they will once again start a new pyramid scheme in another location.

Fundamentals of Investing and the Need to Develop Your Own Set of Investment Guidelines

If at the moment you have extra money to use for investment purposes, try not to be in a hurry. Avoid placing funds in some investment scheme that promises big returns with very little risks. More often than not, those types of investment offerings are not built on solid foundations, since “get-rich-quick” schemes have only one purpose, to collect as much money as they can from easy to convince and overly eager investors .

One of the most common misconceptions about investing on shares of stocks and marketable securities, is that it is all about making money by simply putting faith on the recommendations of a financial expert. You also have to think like a business owner who needs to protect a business investment by adhering to fundamental strategies and guidelines.

The Need for Guidelines or Strategies When Venturing into Investment Schemes

Successful investors do not just follow popular opinions, or get swayed by current buying and selling frenzies. They first filter out all the noise, rationalize and then make decisions by working within the framework of their investment methods and fundamental guidelines.

Others call such framework as investment strategies, but actually, most of them are principles or basic foundations of the investment system. They then serve as guidelines on how to manage the ins and outs in investing.

Fundamentals of Sound Investing Practices

Always think of risks when investing, and avoid being reckless, regardless of how much you plan to invest. Consider the following fundamentals of sound investment practices:

Evaluating the Strength of the Company

Always evaluate the company not only by reading the highlights of its financial reports. Dig deeper by looking into who is running the company, and for how long and how well it has withstood the challenges posed by economic conditions. Research about changes in leadership and take note of any improvement or failures that transpired during each tenure.

Make comparisons against price shares and earnings of its competitors as a way of gauging performance, as an investment prospect and as an ongoing business.

Evaluate Your Risk Tolerance

This matter all depends on your need for liquidity and also on your personality. Financial advisers call it investment horizons. It practically means determining the length of time you intend to park your money in an investment product, while considering your future financial needs. Consider funds you need for emergency purposes, or have to set aside for future expenses like money for a child’s college education or for your retirement.

If those factors have to be taken into account, then you have a low risk tolerance. More so if you are the type of investor who easily reacts to volatile conditions that you think will adversely impact your investment.

Keep Investments at Par with Your Level of Competence

Although it is wise to diversify, that aspect does not include extending your investments on businesses of which you have very little understanding. This guideline is important because a limited understanding of the business, also means limited knowledge of the factors and conditions that can influence your investment, either positively or adversely.

Although you cannot control the securities market, you can at least control the risks you face by knowing how to evaluate your choice of investments.

Maintain a Long Term Perspective

Short term goals are great as it gives you assurance of getting returns on your investment in the quickest time possible.

However, do not forget that there are also benefits to long term goals especially if you have already raised your finances to a comfortable level. Every return on investment earned, garners a corresponding tax payment. The tax rate bracket on short term income is higher than the tax rate bracket on long term investments.

Moreover, there is such as thing as compounded interest. This element works to your advantage, because as your invested money grows through addition of interests, the greater the equivalent earnings you will receive in due time.