Thursday, 25 August 2016

Organic growth and inorganic growth: An insight


The term 'organic' denotes the way living beings develop from the womb (internal growth). Time plays a crucial role. Inorganic growth is like assembling built parts (organs) into a system. This is how Investopedia explains: There are two ways for human beings to keep our heads warm. We can grow hair, or we can put on a hat. It takes a while to grow hair, but we create it ourselves. We do not have to pay money for hair; the body grows hair naturally. The hair is equivalent to organic growth, and a hat is equivalent to inorganic growth. Hair doesn't cost anything, but it takes a while to grow. Those people that don't grow hair fast may be better off buying a hat or a wig if it's cold outside. Likewise, it may be easier for some companies to buy a fast-growing company. Indeed, some companies use acquisitions as the foundation of their growth strategy with the expectation that year-on-year growth is expected to decline. In other words, some companies are losing their hair, and inorganic growth vehicles help to manage the loss.

For many businesses, the way forward is growing organically for the first say two to three years. For an online business, you come out with a proprietary software, unique contents, find affiliates and sponsors, build followers and customer list, raise MozRank. This comes close to organic Search Engine Optimization (SEO) where the focus is on generating unique contents and notion of time comes into play.
Organic growth gives an impression of sticking to one place, slow movement, guarding home/core territory. The idea is finding meaning with roots. For months, your business may be generating little revenue. Your confidence in what you are doing is right will be crucial. You use rail instead of flight in order to save money that adds to the bottom line. Cost accounting is in full swing.
Quick top line growth is more often after acquisitions & mergers, inorganic way to expand. With abundant capital, one could have acquired/merged an existing shop or portal on day1. Inorganic growth is more justified when you have built a foundation and then bring into force newer entities. There is a rise in gross sales figure in addition to adding more employees and suppliers. There are more press coverage and public attention. The deciding factor is whether there is a rise in net profit that justifies the expansion effort. Microeconomic theories like increasing returns to scale find relevance.
Even when one goes for inorganic growth, the business purchased is built organically. So, organic growth and inorganic growth are not mutually exclusive. One strategy could be to go for organic growth in your core business and use inorganic ways to capitalize like a catering firm expanding with acquiring confectionery brands. One could see that more than often the natural way is building a foundation through organic growth and then capitalizing on inorganic growth.
A rough way to look at organic growth and inorganic growth is doing work by yourself equivalent to organic growth and hiring others to do inorganic growth. Acquiring a new business is obviously not hiring in the strict sense. 
For a sole proprietor, the choice to grow organically or inorganically is to a great extent about personal preference. For a software vendor, one way could be to acquire newer software brands and other to continue developing the existing product because of bonding that the proprietor has with it irrespective of lost business opportunities. This is one of the reasons why sole proprietorship business remains small and listed companies expand over time, other things remaining constant.

Saturday, 6 August 2016

How learning transcription opens new doors of opportunities in this digital environment


According to Speechpad, transcription is "[a] text document that contains a transcript of everything that is spoken in an audio or video file." Transcription is divided into two broad categories:


  • Medical Transcription:  The audio file is the voice of a physician dictating about patient interactions. The file is then listened by a medical transcriptionist who types it out as a text file, cross‐checked by editors before uploading to physician’s server.
  • General Transcription: Anything other than Medical Transcription. Includes Legal like court reporting, Business including speeches,lectures, podcasts.

Medical Transcription is more specialized because you need knowledge of medical terms, follow mandatory guidelines like by HIPAA in the US. Here are the benefits of learning art of transcription while pursuing other hobbies/careers in your career timeline:

  • Transcription improves listening skill, especially for someone with English as a second language.  
  • One also needs to learn to type. At a time when most writing involves desktop/laptop, imagine how much more productive you become while writing letters, reports when fast on the keyboard. 
  • You need to be accurate in English grammar. Understanding subject and verb agreement, the right use of prepositions and punctuation marks is crucial for those who neglected English grammar during school days. In other words, it is an opportunity for an adult learner master writing English correctly. 
  • While learning transcription, your immediate motive may be to find a job. There are lots of transcription jobs available online which one can pursue as a freelancer. While the introduction of voice detection software has reduced the work, there is always a demand of trained editors to give the final copy a human touch. In fact, speech recognition software acts as productivity enhancement tool for editors in today's BPOs that specialize in transcription. For those who fear automation software taking over jobs, read Artificial Intelligence won’t lead to job cuts in India, says Microsoft chief Satya Nadella.
  • Once your listening skill is improved, you are more comfortable attending phone calls. You also learn about pronunciation/accent during training. So, you can interact with overseas clients more confidently. You may join as a caller/customer care agent in a call center.
  • In case you love to write, it is easier to change your profile as content writer producing web-based contents.
  • In the case of medical transcription, medical lessons undertaken may help selling nutritional supplements while associating with direct selling companies like Amway.
  • Translation is yet another growing field where you find a lot of jobs translating from your mother tongue to English and vice versa. Just like transcription using speech recognition software, in translation, there are wonderful aids including Google Translate with which you get a first-hand copy but needs human revision. 

Monday, 1 August 2016

Online lending platforms for loans when banks refuse




You are a budding entrepreneur with a bright idea but do not have enough time/resource/ knowhow to prepare detailed project report/business plan which is a precursor to get loan/capital for a startup business. Or, maybe you are an established entrepreneur who supplied goods on credit but finding it difficult to meet day-to-day cash obligations. Whatever your financial needs as an entrepreneur may be, you usually opt for business loans. Availing such business loans at easy, affordable terms is sometimes difficult from banks because of a lower credit score.
It is by looking at credit score that bankers evaluate your credit risk. Credit score sums up your credit history into a number that lets lenders and others quickly assess how responsible you have been with your past credit accounts and loans. 
Consider online lending platforms like faircent.comilend.in (Faircent.com, Lendbox.in and other peer-to-peer lending platforms gain popularity, draw RBI gaze) which bring together borrowers and lenders (usually individuals) under some form of administrative supervision of portal administrators for which they may charge registration fee/commission from borrowers/lenders (in general, rate of interest for borrowing is higher than banks).
For business houses, consider accounts receivable financing from these peer-to-peer lending platforms wherein lenders who specialize in accounts receivable financing know that you are going to receive payment for what you have supplied within a short period of time, say 2 months on a particular date through cheque/EFT and need liquid cash right now to run your day-to-day business operations. As need is urgent coupled with online technology, loans can be availed in hours and days rather than weeks. If you are convinced that creditors are going to pay you for what you have supplied, it means that credit strength of your accounts receivables is strong. In such case, chances increase of a favorable loan deal in terms of lower interest rates.

Direct plan in mutual fund: Time for distributors to adapt by leveraging content sharing and adding new services


Direct plan in mutual fund means investors can directly invest in mutual fund schemes without involving distributors or mutual fund brokers through AMC website. Because of no distribution fees or trail fees paid to mutual fund brokers for such mutual fund schemes, expense ratio would be lower as compared to regular plans (investing through distributors/mutual fund brokers) thereby giving investors higher returns (0.5% to 1.5% p.a. depending upon the AMC expense ratio) compared to regular plans.

The hard truth is that online platform whereby a buyer can come in direct contact with seller has changed the distribution channel across sectors including insurance, mutual fund, real estate decreasing the importance of so-called brokers/middlemen/distributors/intermediaries. 

According to Money Control, "Asset management companies (AMC) allowed direct investments in mutual fund schemes much before 2011. However, there were no separate plans for these investments. These investments were made in distributor plan itself and were tracked with single NAV- the one of the distributor plan. Hence an investor was bound to buy mutual funds based on the NAV of the distributor plans. However, things changed with the introduction of direct plans on January1, 2013."

It is tough for an individual mutual fund intermediary making his/her living from commissions earned through selling mutual funds inform clients about the newly available option of switching to direct plan and forego commission otherwise available with the regular plan. There are mutual fund distributors who are worried if clients come to know of the introduction of the direct plan, they will lose commission money (needless to say, consultancy fee is difficult to realize from clients) and so trying the best to keep the state of ignorance as long possible. This is unfortunate as clients are supposed to be provided with impartial information about all aspects of mutual funds from their mutual fund distributors; it is for information sharing for which mutual fund distributors are supposed to exist in the first place.

For distributors, instead of getting angry/worried, there is a big rural India market where awareness level of mutual fund is lower than insurance. According to a 2014 study by SEBI Penetration of Mutual Funds in India: Opportunities and Challenge, "a low number of agents (per capita) in suburban and rural areas and the slow growth rates in mutual fund sales in the corresponding areas are closely associated with each other." Instead of generating content yourself, the trick can be using/sharing contents generated by govt. bodies/media houses by bringing it right in front of a prospect in vernacular language. The golden rule in direct selling of keeping informative brochures ready while meeting a prospect one-on-one can work wonder.

Given the fact that more and more transactions are done online, for new-age mutual fund distributors, it is pertinent to start blog/website, leverage social media and find newer ways of generating revenue side-by-side. One suggestion here for AMFI regulating mutual fund in India is to come out with a web page for each distributor like www.amfi.com/myname whereby as an AMFI registered mutual fund advisor, I am allowed to showcase my profile, contents (recommendations/blog/article/audio-video content) while side-by-side allowed to post ads (like AdSense, affiliate ads from the likes of Amazon, SnapDeal, Flipkart) income of which is credited to my account.


As always for an individual, it is risky relying only on selling mutual funds and perhaps most distributors are also involved in other verticals (assistance in efiling, insurance, equity to name few). This also gives leverage to forego commission (as in direct plan) or fees (which anyway is difficult to extract) as the same can be compensated from clients with other value added services.

Invested in equity shares? Consider starting business of share trading with zero cash

https://alison.com/courses/Introduction-to-Short-Selling

Introduction to Stocks and Short Selling Course


You are holding equity shares of companies listed in stock exchanges. Maybe, your shares are lying for years, and you have not bothered to check their prices. Or, it may be that your target price is not met, and you prefer to wait. You are satisfied with your holdings and would not consider selling them because of growth that the company/companies recording and/or dividends distributed. In such scenarios, you can still use your current equity holdings to venture into the world of share trading.

Share trading and share investment are different. While share investment is done based on the fundamentals of companies, like how much year-on-year revenue and profit expected to be generated, share trading is based on short-term market fluctuations like an expected positive news flow from the central bank to reduce interest rate which should raise prices of bank shares. Unlike share investment in which you first purchase a script, there is no such compulsion in share trading: you can first sell a script (short selling) and later buy. It does not matter to you whether the price of the script goes up or down. What matters to you is the position that you have taken. In case you go short, you profit if the price of the script goes down and you square off the position (by buying at a lower price).

Share traders consider variables like the chart of a script that tracks likes of daily/monthly/yearly price movements, number of transactions carried at specific prices. This is called technicals of the script and believed to help forecast the near-term price. One of the skills you need to learn is understanding technical analysis for which you perhaps should do a course to start with. In case you have exposure to mathematical programming, software programming, you can come out with a customized automated system based upon your models.

This is a high-risk/high-reward job and requires thorough study as evident from a standard disclosure: Commodity Futures Trading Commission, Forex, Futures, Equity, and options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. Do not trade with money you can not afford to lose. This is neither a solicitation nor an offer to Buy/Sell. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this document. The past performance of any trading system or methodology is not necessarily indicative of future results.

Again, it is not that you yourself need to do all the researches like preparing charts for each script by yourself. You can take help of experts and customized software. All these may take some time (perhaps at least three months to start with) and is a continuous process.

It is advised you spend at least first two months in a learning mode. Watch business channels like CNBC-TV18. Read online content related to shares and economy. Initially, start with a modest sum (Rs.1 to 2 lacs), or still better, there are good simulation programs now available that mimic real-time market. This will give you an idea how volatile the stock market is and whether it suits your profile.

There are facilities provided by brokerage houses under which one can do margin trading or trade against pledging of shares: you get a loan to carry on share trading against your equity share holdings. You agree not to sell your investment in shares (it is rather blocked by your brokerage house) against which you get the limit to carry share trading until the time you meet your obligations.

While the outcome of an intraday trading transaction is finalized on the very trading day itself, transactions under F&O have one month time which can be rolled to next month, depending upon the existing regulations. By the end of the day (in the case of intraday trading) or month (F&O), your profit/loss is decided (squared off) based on the difference between purchase price and sale price. Of course, in case you have gone long, have surplus cash, and do not want to square off, you can exercise Convert to Delivery (CTD) option. On a routine basis, this is not a practical way as experts warn against mixing share investment strategies with share trading.

Your brokerage house knows maximum loss that you can sustain under one cycle given the limit allowed to you for share trading. This is because stock exchanges impose bands (like 5%, 10%, 20% up and down for a script beyond which trading is stopped for the day). Important to understand is the concept of margin. As your brokerage house knows that value of a script say Gitanjali Gems cannot fall below 5% on a particular trading day, you are allowed intraday trading for Gitanjali Gems by depositing 5% margin (actual percentage may slightly rise or fall) which can be either through cash or value of your holdings in equity shares (pledged shares) blocked for the trade. Your brokerage house has the right to sell your pledged shares in case you suffer a loss and do not have cash balance to forfeit the loss. In other words for a shared script of Rs.100, your brokerage house pays from their side Rs.95 and ensure you keep Rs.5 from your side either in the form of cash or pledged shares while placing a new trading order.

There is a golden rule in equity investment: Don't buy on rumors, just focus on basics. Hidden with this advice is how trading pattern of a script is manipulated by erring market participants (How Pump & Dump Works), making the process of share trading and investment all the more risky for a novice. Having said that share trading is a risky business, there are tools available to minimize risks. Like short selling of shares in intraday/F&O market while having possession of such shares in delivery form. For instance, you are holding 1000 shares of HDFC Bank whose current market price is Rs.700. Your purchase price of HDFC Bank was Rs.750. In other words, you are invested in HDFC Bank and market value of your investment in HDFC Bank is Rs.7 lacs and book value Rs.7.5 lacs.

Now, you get a limit (or loan) from your brokerage house to trade up to Rs.5.6 lacs margin as haircut value of HDFC Bank applied by your brokerage house is 20% based on current market price (or market price on the last trading day). Haircut value varies from script to script depending upon a host of factors including volatility and number of shares traded on an average trading day. Some of the scripts which are traded in very low quantity (called illiquid stocks) may not be allowed by your brokerage house to qualify for share trading against pledging equity shares. Now, as part of intraday trading, you sell (or short) 1000 shares of HDFC Bank at current market price of Rs.700. During the course of the day, HDFC Bank's price goes down to Rs.650 at which price you squared off (in other words, buy 1000 shares of HDFC Bank). The difference between purchase (Rs.700) and sale price (Rs.650) per share of HDFC Bank is Rs.50 which is the profit from your intraday trading and total profit earned is 50x1000=Rs.50,000 (There is a brokerage charge, around 0.05% of turnover by standard brokerage houses for intraday trading, plus taxes like STT which has to be taken into account for net profit.) However, market value of your investment in 1000 shares of HDFC Bank too went down by the same amount of Rs.50,000: 650x1000=6.5 lacs from 7 lacs.

As mentioned earlier, share trading is to benefit from volatility of a script which is determined by the interaction of the forces of demand and supply at any point of time. There is no way to know how many market participants are going to place buy orders, sell orders on a particular day, particular time from which current market price of the stock is determined. Now, returning to the main discussion, you will perhaps not mind of the situation encountered for HDFC Bank transaction as you have booked profit of Rs.50 per share (excluding brokerage charges and taxes) although market value of your holdings in HDFC Bank as part of share investment portfolio has gone down by Rs.50 per share as well. It would have gone down anyway as part of daily volatility even if you had not traded in which case you would have missed Rs.50 opportunity to earn.

Now, as part of risk minimization strategy while trading, suppose the price of HDFC Bank touched Rs.750 at which you were forced to square off the order at the end of the day. As part of intraday trading, you suffer a loss of Rs.50 per share of HDFC Bank. This is booked loss and you have to adjust with your cash balance with the brokerage house or the brokerage house will have the right to sell your pledged shares to forfeit the loss. However, this time, the market value of your holdings under HDFC Bank (share investment portfolio) has gone up by Rs. 50 per share to Rs. 7.5 lacs from Rs.7 lacs when you initiated the trade. This strategy helps to ensure that there is no serious capital erosion irrespective of whether the market price goes up or down and one way you can make a synergy between your share investments and share trading for optimizing returns.

It is important not to be overwhelmed with terms like short selling, margin trading, margin, call/put, derivatives on day1. However, you still need to learn fast, and this is not going to happen automatically. Else, there are missed opportunities.

The Lunchtime Trader by Marcus de Maria




Invested in equity shares? Consider starting business of share trading with zero cash

https://alison.com/courses/Introduction-to-Short-Selling

Introduction to Stocks and Short Selling Course


You are holding equity shares of companies listed in stock exchanges. Maybe, your shares are lying for years, and you have not bothered to check their prices. Or, it may be that your target price is not met, and you prefer to wait. You are satisfied with your holdings and would not consider selling them because of growth that the company/companies recording and/or dividends distributed. In such scenarios, you can still use your current equity holdings to venture into the world of share trading.

Share trading and share investment are different. While share investment is done based on the fundamentals of companies, like how much year-on-year revenue and profit expected to be generated, share trading is based on short-term market fluctuations like an expected positive news flow from the central bank to reduce interest rate which should raise prices of bank shares. Unlike share investment in which you first purchase a script, there is no such compulsion in share trading: you can first sell a script (short selling) and later buy. It does not matter to you whether the price of the script goes up or down. What matters to you is the position that you have taken. In case you go short, you profit if the price of the script goes down and you square off the position (by buying at a lower price).

Share traders consider variables like the chart of a script that tracks likes of daily/monthly/yearly price movements, number of transactions carried at specific prices. This is called technicals of the script and believed to help forecast the near-term price. One of the skills you need to learn is understanding technical analysis for which you perhaps should do a course to start with. In case you have exposure to mathematical programming, software programming, you can come out with a customized automated system based upon your models.

This is a high-risk/high-reward job and requires thorough study as evident from a standard disclosure: Commodity Futures Trading Commission, Forex, Futures, Equity, and options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. Do not trade with money you can not afford to lose. This is neither a solicitation nor an offer to Buy/Sell. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this document. The past performance of any trading system or methodology is not necessarily indicative of future results.

Again, it is not that you yourself need to do all the researches like preparing charts for each script by yourself. You can take help of experts and customized software. All these may take some time (perhaps at least three months to start with) and is a continuous process.

It is advised you spend at least first two months in a learning mode. Watch business channels like CNBC-TV18. Read online content related to shares and economy. Initially, start with a modest sum (Rs.1 to 2 lacs), or still better, there are good simulation programs now available that mimic real-time market. This will give you an idea how volatile the stock market is and whether it suits your profile.

There are facilities provided by brokerage houses under which one can do margin trading or trade against pledging of shares: you get a loan to carry on share trading against your equity share holdings. You agree not to sell your investment in shares (it is rather blocked by your brokerage house) against which you get the limit to carry share trading until the time you meet your obligations.

While the outcome of an intraday trading transaction is finalized on the very trading day itself, transactions under F&O have one month time which can be rolled to next month, depending upon the existing regulations. By the end of the day (in the case of intraday trading) or month (F&O), your profit/loss is decided (squared off) based on the difference between purchase price and sale price. Of course, in case you have gone long, have surplus cash, and do not want to square off, you can exercise Convert to Delivery (CTD) option. On a routine basis, this is not a practical way as experts warn against mixing share investment strategies with share trading.

Your brokerage house knows maximum loss that you can sustain under one cycle given the limit allowed to you for share trading. This is because stock exchanges impose circuit breakers or bands (like 5%, 10%, 20% up and down for a script beyond which trading is stopped for the day). Important to understand is the concept of margin. As your brokerage house knows that value of a script say Gitanjali Gems cannot fall below 5% on a particular trading day, you are allowed intraday trading for Gitanjali Gems by depositing 5% margin (actual percentage may slightly rise or fall) which can be either through cash or value of your holdings in equity shares (pledged shares) blocked for the trade. Your brokerage house has the right to sell your pledged shares in case you suffer a loss and do not have cash balance to forfeit the loss. In other words for a shared script of Rs.100, your brokerage house pays from their side Rs.95 and ensure you keep Rs.5 from your side either in the form of cash or pledged shares while placing a new trading order.

There is a golden rule in equity investment: Don't buy on rumors, just focus on basics. Hidden with this advice is how trading pattern of a script is manipulated by erring market participants (How Pump & Dump Works), making the process of share trading and investment all the more risky for a novice. Having said that share trading is a risky business, there are tools available to minimize risks. Like short selling of shares in intraday/F&O market while having possession of such shares in delivery form. For instance, you are holding 1000 shares of HDFC Bank whose current market price is Rs.700. Your purchase price of HDFC Bank was Rs.750. In other words, you are invested in HDFC Bank and market value of your investment in HDFC Bank is Rs.7 lacs and book value Rs.7.5 lacs.

Now, you get a limit (or loan) from your brokerage house to trade up to Rs.5.6 lacs margin as haircut value of HDFC Bank applied by your brokerage house is 20% based on current market price (or market price on the last trading day). Haircut value varies from script to script depending upon a host of factors including volatility and number of shares traded on an average trading day. Some of the scripts which are traded in very low quantity (called illiquid stocks) may not be allowed by your brokerage house to qualify for share trading against pledging equity shares. Now, as part of intraday trading, you sell (or short) 1000 shares of HDFC Bank at current market price of Rs.700. During the course of the day, HDFC Bank's price goes down to Rs.650 at which price you squared off (in other words, buy 1000 shares of HDFC Bank). The difference between purchase (Rs.700) and sale price (Rs.650) per share of HDFC Bank is Rs.50 which is the profit from your intraday trading and total profit earned is 50x1000=Rs.50,000 (There is a brokerage charge, around 0.05% of turnover by standard brokerage houses for intraday trading, plus taxes like STT which has to be taken into account for net profit.) However, market value of your investment in 1000 shares of HDFC Bank too went down by the same amount of Rs.50,000: 650x1000=6.5 lacs from 7 lacs.

As mentioned earlier, share trading is to benefit from volatility of a script which is determined by the interaction of the forces of demand and supply at any point of time. There is no way to know how many market participants are going to place buy orders, sell orders on a particular day, particular time from which current market price of the stock is determined. Now, returning to the main discussion, you will perhaps not mind of the situation encountered for HDFC Bank transaction as you have booked profit of Rs.50 per share (excluding brokerage charges and taxes) although market value of your holdings in HDFC Bank as part of share investment portfolio has gone down by Rs.50 per share as well. It would have gone down anyway as part of daily volatility even if you had not traded in which case you would have missed Rs.50 opportunity to earn.

Now, as part of risk minimization strategy while trading, suppose the price of HDFC Bank touched Rs.750 at which you were forced to square off the order at the end of the day. As part of intraday trading, you suffer a loss of Rs.50 per share of HDFC Bank. This is booked loss and you have to adjust with your cash balance with the brokerage house or the brokerage house will have the right to sell your pledged shares to forfeit the loss. However, this time, the market value of your holdings under HDFC Bank (share investment portfolio) has gone up by Rs. 50 per share to Rs. 7.5 lacs from Rs.7 lacs when you initiated the trade. This strategy helps to ensure that there is no serious capital erosion irrespective of whether the market price goes up or down and one way you can make a synergy between your share investments and share trading for optimizing returns.

It is important not to be overwhelmed with terms like short selling, margin trading, margin, call/put, derivatives on day1. However, you still need to learn fast, and this is not going to happen automatically. Else, there are missed opportunities.