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Money and Your Mind: How Psychology Influences Financial Choices
Money plays a significant role in our lives, affecting everything from our daily decisions to our long-term goals. However, our relationship with money is often shaped by our emotions, biases, and beliefs. Understanding the psychology of money can help us make better financial decisions and achieve our financial goals. The role of emotions in financial…
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What is Stagflation?
Stagflation is a combination of the words “stagnant” and “inflation.” Stagflation is defined as an economic scenario with high inflation rates, low economic growth, and often characterized by high unemployment rates. Stagflation can pose a quandary for governments because most actions aimed at lowering inflation like raising of interest rates may cause hardship to existing…
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What is an Interest Rate Swap?
An interest rate swap is a derivative contract between two parties to swap or exchange cashflows representing two separate streams of interest payments, denominated in a single currency and calculated on a ‘notional’ principal amount. Interest rate swaps can help institutions manage the risks associated with volatility in interest rates. They also provide fixed income…
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What are Interest Rate Options?
Interest rate options are financial derivative contracts that enable investors to speculate or hedge against directional changes in interest rates. Interest rate options can be exercised at the strike price of the contract which is a pre-determined rate of Interest. Interest rate options are cash settled. As with equity options, an interest rate option involves a…
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What is a Forward Rate Agreement (FRA)
A Forward Rate Agreement (FRA) is a financial contract between two parties to exchange interest payments on a `notional principal’ amount on a pre-determined settlement date, for the duration of the contract. In conventional forward rate agreements, two parties swap a fixed interest rate for a variable one. The borrower is the party responsible for…
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What is a Mortgage-Backed Security (MBS)?
A mortgage-backed security (MBS) is an financial instrument that is similar to a bond and is composed of a collection of mortgage loans that have been acquired from the banks that issued them and sold as a ‘bundle’ to individual investors. The investors of MBS earn periodic interest payments on these instruments payable by the…
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What is a Credit Default Swap (CDS)?
A credit default swap (CDS) is a type of credit derivative instrument that protects a buyer from default and other risks associated with debt instruments held by him. Until the credit maturity date, the buyer of a CDS has to pay to the seller a premium on a regular basis. In exchange, the seller guarantees…
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What are Currency Futures Contracts?
A currency futures contract, commonly referred to as an FX futures, is an agreement to exchange one currency for another at a specified future date for an agreed price (exchange rate) that is set at the time of entering into the contract. Although currency futures contracts and currency forwards have many similarities, futures contracts are…
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Timeless Lessons in Investing from Warren Buffet’s Annual Shareholder Letters
Warren Buffet, chairman of Berkshire Hathaway Inc, is widely regarded as one of the greatest investors of all time. This post ,is a collection of some timeless lessons in investing, in his own words, shared by Buffet in his annual letters to shareholders of Berkshire Hathaway Inc. Read on! In investing, outstanding long-term results [are]…
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How to Invest in Equities when Interest Rates are rising?
Recently, the world has been grappling with effects of Inflation. In my previous post we had discussed in some detail, the problem of inflation and the reasons behind the recent increase in interest rates across a majority of economies round the world; including India. Some of our learnings from the post are as below: The…
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Why are Interest Rates Rising and what it means in the Indian Context?
We know that when there is abundance of something, its price falls. The reverse happens in case of scarcity, when the price tends to increase. This is simple #Economics101. Now, think of money like any other commodity. If you need some money now and your savings fall short, you can always borrow cash from a…
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Should Retail Investors Invest in Earlystage Startups?
Investing in early stage startups might seem a rosy proposition for many retail investors with its lure of multibagger returns. There are however, significant risks factors associated with investing in startups which you as a small investor should be aware of. In this post, we will decode some of the risks and rewards associated with…
