Financial Investment Services

Financial Investment Services

Mutual funds, ETFs, individual stocks and bonds, closed-end mutual funds, real estate, various alternative investments and owning all or part of a business are just a few examples.

Stocks

Buying shares of stock represents ownership in the company and the opportunity to participate in the company’s success via increases in the stock’s price plus and dividends that the company might declare. Bonds

Bonds are debt instruments whereby an investor effectively is loaning money to a company or agency (the issuer) in exchange for periodic interest payments plus the return of the bond’s face amount when the bond matures. Interest on these bonds are fully taxable, but interest on municipal bonds is exempt from federal taxes and may be exempt from state taxes for residents of the issuing state. Bond prices move inversely with the direction of interest rates.

Mutual funds

A mutual fund is a pooled investment vehicle managed by an investment manager that allows investors to have their money invested in stocks, bonds or other investment vehicles as stated in the fund’s prospectus.

Mutual funds can passively track stock or bond market indexes such as the S&P 500, the Barclay’s Aggregate Bond Index and many others. Other mutual funds are actively managed where the manager actively selects the stocks, bonds or other investments held by the fund. Actively managed mutual funds are generally more costly to own. A fund’s underlying expenses serve to reduce the net investment returns to the mutual fund shareholders.

Mutual funds can make distributions in the form of dividends, interest and capital gains. Selling a mutual fund can result in a gain or loss on the investment, just as with individual stocks or bonds.

Mutual funds allow small investors to instantly buy diversified exposure to a number of investment holdings within the fund’s investment objective. 

ETFs or exchange-traded funds are like mutual funds in many respects, but are traded on the stock exchange during the trading day just like shares of stock. Many ETFs track passive market indexes like the S&P 500, the Barclay’s Aggregate Bond Index, and the Russell 2000 index of small cap stocks and many others.

Alternative investments

Beyond stocks, bonds, mutual funds and ETFs, there are many other ways to invest. Real estate investment trusts (REITs) pool investor’s money and purchase properties. REITS are traded like stocks. There are mutual funds and ETFs that invest in REITs as well.

In recent years, alternative strategies have been introduced in mutual fund and ETF formats, allowing for lower minimum investments and great liquidity for investors. 

Financial Services

Financial Services is a term used to refer to the services provided by the finance market. Financial Services is also the term used to describe organisations that deal with the management of money. Examples are the Banks, investment banks, insurance companies, credit card companies and stock brokerages.

It is part of financial system that provides different types of finance through various credit instruments, financial products and services.

These are the types of firms comprising the market, that provide a variety of money and investment related services. These services are the largest market resource within the world, in terms of earnings.

The challenges faced by the these Services market are forcing market participants to keep pace with technological advances, and to become more proactive and efficient while keeping in mind to reduce costs and risks.

These Services have been able to represent an increasingly significant financial driver, and a significant consumer of a wide range of business services and products. Importance of Financial Services:-

The financial services offered by a financial planner or a bank institution can help people manage their money much better. It is the presence of financial services that enables a country to improve its economic condition whereby there is more production in all the sectors leading to economic growth.

The benefit of economic growth is reflected on the people in the form of economic prosperity wherein the individual enjoys higher standard of living. It is here the financial services enable an individual to acquire or obtain various consumer products through hire purchase. In the process, there are a number of financial institutions which also earn profits. The presence of these financial institutions promote investment, production, saving etc.

Characteristics:-

Customer-Specific: These services are usually customer focused. The firms providing these services, study the needs of their customers in detail before deciding their financial strategy, giving due regard to costs, liquidity and maturity considerations.

Unless the financial institutions providing financial products and services have good image, enjoying the confidence of their clients, they may not be successful.

Concomitant: Production of these services and supply of these services have to be concomitant. Both these functions i.e. production of new and innovative financial services and supplying of these services are to be performed simultaneously.

Tendency to Perish: Unlike any other service, financial services do tend to perish and hence cannot be stored. People Based Services: Marketing of these services has to be people intensive and hence it's subjected to variability of performance or quality of service.

Market Dynamics: The market dynamics depends to a great extent, on socioeconomic changes such as disposable income, standard of living and educational changes related to the various classes of customers. Therefore financial services have to be constantly redefined and refined taking into consideration the market dynamics.

Promoting investment: The presence of these services creates more demand for products and the producer, in order to meet the demand from the consumer goes for more investment.

Promoting savings: These services such as mutual funds provide ample opportunity for different types of saving. Minimizing the risks: The risks of both financial services as well as producers are minimized by the presence of insurance companies. Various types of risks are covered which not only offer protection from the fluctuating business conditions but also from risks caused by natural calamities.

Maximizing the Returns: The presence of these services enables businessmen to maximize their returns. Producers can avail various types of credit facilities for acquiring assets. Benefit to Government: The presence of these services enables the government to raise both short-term and long-term funds to meet both revenue and capital expenditure. Through the money market, government raises short term funds by the issue of Treasury Bills. Capital Market: One of the barometers of any economy is the presence of a vibrant capital market.

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— Selasa, 25 April 2017 — Add Comment