The role of financial markets
I am still learning more through MOOCs where I have wrote about previously. Currently, there is this interesting course about Understanding Financial Markets and I would like to share some of the course information with you although you might already know about these.
4 functions of financial markets are:
1) Pooling of resources - Transfer the savings of each investors to corporations. This will allow corporations to expand and use the resources to benefit more consumers. Investors are also able to share the profits and debts.
2) Transferring resources across space and time - You can trade across borders of different countries and time zone. This is made possible with the advancement of technology. The transactions can be done instantly and correctly.
3) Managing risk - One way is to diversify and SGX has helped by decreasing the minimum purchase from 1000 shares to 100. Never put all your eggs into one basket is the common saying. Second way is to use derivative products to insure against drop of share price but this is not for amateur investors like me.
4) Provide information - It informs you the value of the stock, the numbers of bidders, sellers, the debt, profit, revenue and also how much share each management personnel is holding.
A good financial market should be transparent, fair, efficient with no insider trading and market abuse. Markets should reflect fair value of the company but they do not necessary work like this especially in recession times.
What influences a financial market?
1) Macroeconomics like inflation, employment growth, business investment spendings are all critical factors
2) Policy decisions such as monetary (the actions of central bank), fiscal (the actions of elected officials on your money)
3) Valuation which is knowing how fast the economy is growing and which policy moves are already taken into consideration
4) Technical forces like changes of rules and regulations, flows in and out of mutual funds, positioning of speculative accounts
All this might be very common sense to you but I have never thought of the details and surprisingly, I found it interesting to know. Of course, it is not going to help in earning money but only with fundamentals, can we advance to more difficult topics.
4 functions of financial markets are:
1) Pooling of resources - Transfer the savings of each investors to corporations. This will allow corporations to expand and use the resources to benefit more consumers. Investors are also able to share the profits and debts.
2) Transferring resources across space and time - You can trade across borders of different countries and time zone. This is made possible with the advancement of technology. The transactions can be done instantly and correctly.
3) Managing risk - One way is to diversify and SGX has helped by decreasing the minimum purchase from 1000 shares to 100. Never put all your eggs into one basket is the common saying. Second way is to use derivative products to insure against drop of share price but this is not for amateur investors like me.
4) Provide information - It informs you the value of the stock, the numbers of bidders, sellers, the debt, profit, revenue and also how much share each management personnel is holding.
A good financial market should be transparent, fair, efficient with no insider trading and market abuse. Markets should reflect fair value of the company but they do not necessary work like this especially in recession times.
What influences a financial market?
1) Macroeconomics like inflation, employment growth, business investment spendings are all critical factors
2) Policy decisions such as monetary (the actions of central bank), fiscal (the actions of elected officials on your money)
3) Valuation which is knowing how fast the economy is growing and which policy moves are already taken into consideration
4) Technical forces like changes of rules and regulations, flows in and out of mutual funds, positioning of speculative accounts
All this might be very common sense to you but I have never thought of the details and surprisingly, I found it interesting to know. Of course, it is not going to help in earning money but only with fundamentals, can we advance to more difficult topics.
Jes
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Nice! I have taken a similar MOOC by Uni of Melbourne. It's really interesting to know why stocks came about in the first place and the different ways companies raise capital and allocate resources. I guess having a better understanding will give us insight on why CFOs make the decisions they do.
ReplyDeleteHi Weiqi,
DeleteYeah, seems like you are heading to be a future CFO too :) I think it's good that we are interested in such topics although it sounds kind of boring. Thanks for dropping by!
hi,
ReplyDeletewhen you say, the course are free, does it mean, the 3rd option (audit) after you click "enroll"?
how long does this course take?
Hi FC,
DeleteYep just enrol in the third option. You will not get any certificates or get the answers to their quiz but it's all right if you just want to learn. This is only 1 part of their 5 part series. You can scroll to individual topics which list their timings once you get started. It does not take that long particularly when you can accelerate to 1.5x the original speed too. Enjoy learning :)
hi Jes,
ReplyDeletei see. thanks for the reply .
So it is purely on the basis of self learning then. As there is no way for an employer to physically verify that you have actually completed the course.
unless of course, one is paying for it. (which i think some of the courses we can use the govt's freebie of skillsfuture credit.)
Hi FC,
DeleteThe basis of self learning applies to me as I am not willing to pay since it does not really improve my career path. If there is a course that could help you shine in interviews, I think the Skillsfuture credits will definitely help. I also do not mind paying in such instance. :)