Exchange Traded Funds (ETF)

                                                              It is time for young managers to move strategically to shake the globe.  Courageous decision making in the turbulent financial world is the order of the day. Innovation of new products more so financial products would make them stay in the market.  The Indian finance market does not provide many innovative opportunities for investors to invest unlike U.S. markets, nevertheless, ETFS (Exchange traded funds) are available in Indian markets like US markets.   Most of us are familiar with mutual funds, a portfolio of different equity and debt in which one can trade easily.  But many of us are not familiar with Exchange Traded funds (ETFS).  By buying and owning an ETF, one can achieve successfully the strategy of diversification with lower investments of funds and increased return. It has the feature of diversification of index fund, the ability to sell short and also buy on margin.  It is a good product for day trading also but that may not be the right strategy for accomplishment of long- term financial goals and objectives.   I personally, may not prefer day trading of ETFs but it is a hot cake in the market for day traders.

                                                  The strength of passive ETFS is something so strong to build portfolio due to the basic feature of its expense ratios, which are lower than those of the average mutual fund.  In the world the most widely known ETF is the SPDR, which is popularly pronounced as SPIDER.  This ETF is superb to buy as it is a darling in any street- whether wall or dallal- wherever it moves. Anyhow there is no such product in Indian market.    Passive funds generally do not protect investors and the asset class depreciates in a down market, for example if Sensex falls by 10% passive ETFs also fall by 10%  but  it is not so with dynamic ETFS, such lefts now exist and are quite interesting products.

                                               ETF industry is growing rapidly in the recent past. AUM under ETF   has touched 1trillion dollars in 2011.  There are more than 1,000 ETFs available in US market and many more added daily.  In India few ETFs are available and efforts are on to improve ETFs trading in India but as of date the market is not very active.  ETFs generally compete with long term mutual funds.  It has a market share of 10% in the total 11 trillion dollars market of US.  Black Rock, Vanguard, Wisdom tree etc., are creators of ETFs.  Look into the average return of these funds for the past three years and ascertain the tradeoff between the risk and the return of ETFs, one can find 9 out of 10 funds outperforming the benchmark return.  Domestic ETFs have performed better than International ETFs even though international ETFs have diversified risk better, but failed on the risk return trade off.  Young Managers have to move strategically to ensure they stay in the market and change the whole scenario in the market with global outlook.

Difference between Accounting & Finance

Accounting: Accountant’s (sometimes called: Controller) primary function is to develop and provide data measuring the performance of the firm, assessing its financial position, and paying taxes. The accountant is responsible for preparing financial statements such as the income statement, balance sheets, and cash flows. It is normally passive work, in the sense that, the work has a very independent nature to it such as preparing forms and financial statements. It is a good job for people who want to work independently and are very organized (this is only a very brief description, if you are interested in accounting; consult your accounting instructor for more information).

Finance: The financial manager or consultant places primary emphasis on decision making. It uses the financial statements prepared by accountants to make decisions about the firm’s financial condition and to advise others about possible losses and profits. In some cases, finance is more a type of leadership position. A financial manager has to deal not only with finance, but also with economics, accounting, statistics, math, and management. For example, people working with stocks and bonds have to understand and analyze how the underlying companies are performing. How a given company is going to perform during recession?  Should they sell or buy stocks or bonds. How a decrease in the interest rate in England may affect the projects a company has in that country. Finance also deals a lot with risk. Derivative securities (options, futures, swaps, etc) are used to hedge against possible increase in risk. Risk managers are in great demand everywhere. Most finance majors find jobs in banks and other financial institutions, government, real estate, consultant companies, insurance, investment companies, stock market exchanges, fundraising, and any firm that needs someone to make financial decisions.

What Is The True Meaning Of "FINANCE"

The definition of FINANCE is the provision of funds or loan supplied to an individual or company. Often this term is used for the study of economics and how money is controlled. It can be also defined as the management of funds and capital required by a business and private activities. Management of finance has also developed into a specialized branch within the financial sector and is carried out by finance managers.


Managing this involves dealing with the optimization and allocation of funds to various areas either by borrowing or by using those available from internal resources. The word Optimizing may sound strange but it refers to taking measures that minimize the cost of financing while simultaneously attempting to maximize the profits out of the employed finance. Bad debts are poor finance management where rules have not been followed; the result of this is depressed markets, low production and a cash crisis. It is for this very reason that finance managers are very careful with finance they agree too and where it is funded from.


It is not uncommon to hear finance managers referred to as bean counters as they are looking at immediate returns and initial costs against the potential at a later stage. Finance managers are the pessimists whereas sales managers are the optimists who look to the future and not to the past! Often though, problems occur with small businesses who fail to see the distinction between a business loan and a personal one. Most lenders will cancel the loan if they feel they have been deceived this way because they are unsure what the money is to be invested in.


Hopefully by educating the small (and large) business owners of their fiscal responsibilities they may build the basis of an improved company in the future. Small businesses can be very flexible, however, and call upon friends, other businesses, family members, even their own bank for finance.


Finance managers can help improve their company's profits by using external sources which also lessens the risk on them at the same time. The famous comedian Bob Hope best summed up the subject when he 
once said; a bank is a place that will lend you money but only if you can prove that you don't need it.