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Market Risk – Not To Be Ignored or Overlooked

Fund managers, whether they be equity or bond traders, know all too well that returns are not simply a result of their asset selection prowess. Many external factors come into play. But what are the issues facing the professional money manager.

Commodity Trading Advisor, Genuine Trading Solutions of Toronto, find not all fund managers analyze their market risk. The company explains this is often due to a lack of education and a failure to understand the mitigating solutions for off-setting risk.

Genuine Trading Solutions President, Dwayne Strocen explains market risk as “the unexpected financial loss following a market decline due to events out of your control.” He goes on to explain that stock or bond market volatility or market reversals can be the result of global events happening in far flung corners of the globe. Top analysts and fund managers simply do not have the resources to crystal ball gaze and predict those events.

Examples of several major unexpected events that sent shock waves throughout the financial community have been:

- 1982 Mexican Peso devaluation;
- 1987 stock market crash knows as “Black Monday”;
- 1989 USA Savings and Loan Crisis;
- 1998 Russian Ruble devaluation;
- 1998 $125 billion collapse of Hedge Fund Long Term Capital Management;
- 2006 collapse of Hedge Fund Amaranth with losses of $5.85 billion.

In 1994 Bank J.P. Morgan developed a risk metrics model known as Value-At-Risk or VaR. While VaR is considered the industry standard of risk measurement, it has its drawbacks. VaR can measure total dollar value of a funds risk exposure within a certain level of confidence, usually 95% or 99%. What it cannot do, is predict when a triggering event will occur or the magnitude of the subsequent fallout. For some company’s and funds, a steep decline or protracted recession can be devastating. Even forcing some un-hedged firms into bankruptcy. A triggering event can have a ripple effect forcing people out of work and economies into recession effectively putting more people out of work. No person and no economy is immune.

If you own a mutual fund, chances are your fund is un-hedged. Until recently, mutual fund legislation prevented mutual funds from hedging. Many jurisdictions have repealed this rule however mutual fund managers have been slow or decided to continue with ‘business as usual”. The reason is that most investors of mutual funds are unsophisticated and do not understand the hedging process and may re-deem their money from an investment strategy they do not understand.

Hedge funds on the other hand do not have these restraints. Investors are more sophisticated and are more open to the nature of hedge fund strategies. Some of which are not disclosed due to a fear of piracy by competing hedge fund managers.

Risk reduction solutions are not complicated but do require the services of a professional who understands the process. This is the role of Commodity Trading Advisor firms such as Genuine Trading Solutions, also known as a CTA. President, Dwayne Strocen states that while most CTA’s are hedge fund managers, few specialize in risk management analytics. Our focus is on the analysis of solutions to reduce or eliminate market and / or operational risk. No matter the role, all Commodity Trading Advisors are specialists in the derivatives market.

The first step is the value at risk calculation to determine a funds risk liability. A risk mitigation strategy known as a hedge is then implemented. After all, identification of one’s risk is only beneficial if a solution to off-set that risk is put into place. Hedging requires the use of derivatives, either exchange traded or over-the-counter. They can take many forms. The most commonly used hedging instruments are index futures, interest rate futures, foreign exchange, exchange traded commodities such as Crude Oil, options and SWAPS.

Personal Loans and Mortgages - Secured Loan, Unsecured Loan

How much does the present day lender care for yours being with bad credit? If the recent trends in lending are to be believed, lenders are not as cautious about lending to the people with bad credit. The borrowers would often reminisce of the times when they would be considered as an outcaste if bad credit history became known. Most borrowers are unaware of a bad credit history until they get refused loans on account of bad credit. Refusal comes as a blow to the plans of these borrowers. The plans to utilise the personal loan proceeds in some or other way are all grounded. Bad credit personal loans come in support of such borrowers. Giving them an opportunity to give shape to their plans, bad credit mortgage loans are widely preferred.

Bad credit results when a debtor is not able to make full and timely payments towards a debt. Even after sufficient notice, when the debtor doesn’t make payment for the debts, the creditor may approach the County Court. Once a judgement is pronounced against the debtor for non payment, his credit file will show the bad remark for a minimum period of six years. Bankruptcy and Individual Voluntary Arrangements also count towards bad credit history. The principal drawback of credit report is that they do not show the reasons behind the poor remarks on the credit file. Loan providers have tried to mend this lacuna through bad credit personal loans. Lenders now give consideration to any unavoidable reasons because of which borrower may have attracted bad credit.

Though the outlook of lenders towards the borrowers with bad credit has certainly seen a change, loan providers still need to prepare for the worst of circumstances. For this, the lenders would lend with caution. It is for the same reason that the borrowers with bad credit are recommended to use bad credit personal loans instead of the regular personal loans.

Bad credit personal loans have a built-in difference of terms to suit the unique group, which bad credit borrowers form. Accordingly, when borrowers approach for a bad credit personal loan, they must be prepared to get loans below par with the regular borrowers, i.e. terms on which bad credit mortgage loans are lent are not as attractive as the regular mortgage loans. And each time you rise up to complain, understand that you surely pose a risk to the investments of the lenders.

Bad credit home loans may be classified into secured and unsecured personal loans depending on the collateral offered to the lender. Though borrowers regain control of the collateral offered after the specified period, personal loans become very attractive because of the use of collateral. Lenders ignore any credit deformities that the borrowers may possess if the borrower accepts to bring in certain collateral. Lenders are well aware that a borrower who cares for the safety of the collateral offered will never dither on payments to the bad credit mortgage loan; if ever the borrower fails to make repayments to bad credit mortgage loan, lender has the option of sale of collateral to recover the unpaid sum.

When bad credit personal loans are lent for any specific purpose, they take up names according to that specific purpose. So, bad credit debt consolidation loans will be employed towards settlement of debts and bad credit home improvement loan would be used for home repairs and extensions. But, before you plan a purpose and start taking steps towards the fulfilment of the purpose, it will be very necessary to confirm the amount that you are qualifying for. A reduced amount than through regular home loans is one of the chief characteristics of bad credit home loans. Loan providers may approve borrowers for as much as $50,000. Proper search can result into lenders who are ready to offer a comparatively higher sum against bad credit mortgage loan.

It is not that the bad credit personal mortgage loan restricts itself to providing finance for the borrower. Another important use of the loan is in improving credit history. The borrower does not have to take any extra efforts to bring about this improvement. While borrower continues reducing his obligation through periodical repayments, credit history automatically improves.

Basic Investing Rules

Investing your money can be a great way to ensure your financial future. With the right investment choices, you can be sure to have money for emergencies, to put towards the education of your children, and to have available when the time comes for you to retire. There is a key word in the preceding phrase however- “right”. If you make the wrong investment choices, you may just end up where you started or worse, flat broke. Most people who invest wisely by making the right decisions with their money follow the same basic investment pattern, although they may define it by another name. It might be that you are the cynical type who chooses to believe that the basic rules could not possibly be as easy as they seem, in an area that seems so complex. It is true. However, that these rules have withstood the test of time.

First of all, make sure that the money you choose to invest is indeed earmarked for the purpose. As in any form of gambling, there is nothing to be gained and everything to be lost when it comes to investing. Do not put up money that you cannot afford to lose should the market take a downturn.

One rule that people seem to refuse to apply in any area of their lives, including the world of investing, is lean not on your own understanding. Most of the time, this is the result of people balking at entrusting another person with their money, believing that with a little understanding they can work the market themselves. This reasoning is fundamentally flawed. In the first place, most people will not be able to begin to unravel the complicated graphs, pie charts, and statistics by which the investment world relates its information. In order to understand what the numbers mean, you will need to have some basic training. There may come a time after you have had some experience in the market that you will be able to make sound decisions on your own, but the initial get-your-feet-wet phase is not the time to attempt it. Check the background of the advisor you choose, as there are a lot of brokers out there looking for a quick fleece. The best brokers will have years of experience, a variety of investment backgrounds, and will probably cost you much less than you might think.

Think long term. Unless you invest millions of dollars initially, it will take time for your investments to mature and begin to accumulate substantial gains. The best investments are proven over time, and thus it is best to place your funds in long term choices. The details of this are plain- it is best to forget about this money in terms of a cash fall back, at least for a number of years.

Diversification is an oft-flogged truism of the investment world. A good portfolio will include cash and cash equivalents (GICs, fixed annuities), growth investments (stocks), and growth and income investments such as mutual funds. Diversification ensures that you do not have all your eggs in one basket should any part of the market experience a downturn. Note that diversification means not only investing in several areas, but also making sure that no one area contains a disproportionate percentage of your funds.

Forex trading, what the hype is all about

When you are thinking about getting involved in the forex markets you should know you are sending money online to be invested with other countries. This is done to prop up the investments of people involved in certain types of hedge funds, and in the markets overseas. The forex market could have your money invested in one market one day, and the next day your money is invested in another country. The daily changes are determined by your broker or financial institution. When reading your statements and learning more about your account, you will find that every type of currency has three letters that will represent that currency.

For example, the United States dollars is USD, the Japanese yen is JPY, and the British pound sterling will read as GBP. You will also find that for every transaction on your account listing you will see information that looks like this: JPYzzz/GBPzzz. This means that you took your Japanese yen money and invested it into something in the British pound market. You will find many transactions from one currency to another if you have money that is scattered through out the forex markets.

Forex markets trading by investment management firms are the companies you can trust with your money. You want to find a company that has been dealing with forex trading since the early seventies, and not someone just new on the block so you get the most for your hard earned money. It is important that you beware of companies that are popping up online, and often times from foreign countries that are stating they can get you involved in the forex markets and trading. Read the fine print, and know whom you are dealing with for the best possible protection.

If you are interested in trading on the forex market, you will find limits for investing are different from company to company. Often times you will learn that you need a minimum of $250 or $500 while other companies will need $1000 or $10,000. The company you are dealing with will set limits in how much you need to open an account with their company. The scams that are online will tell you, that you only need a $1 or $5 to open an account, but you need to learn more about that company and where they are doing business before investing any money, this is for your own protection while dealing in forex trading and markets online.