WELL, IT’S ACTUALLY PRETTY INTERESTING!!!!!

As a general parlance, people might have come across the words like “Stock Market”, “World Economy”, “Globalization” and the list continues so long. So the never ending list makes these financial terms boring for common man. With this article, I will attempt to connect the various linking dots of these financial terms to our daily life and make the reader more informed of the financial market without using any complex graphs or statistical information. It is often considered that financial world is a complex string of information which can be understood only by “Pundits of Financial world”. Well to surprise, some concepts in the financial world are so common that we ought to be informed to take a rational decision. The following situation can be appraised: In a layman’s term it is often said that in 2008, when Lehman Brothers Bank (US) collapsed, global recession started. But how can the collapse of a Bank far away in another country trigger a global recession? To understand the dynamics of such a situation, we will be going through fundamentals and its application in daily life.

GLOBAL ECONOMY GOLD, DOLLAR & OIL TRIO

Take for example, many people might have heard in news that due to rise or drop in price of oil the value of dollar has changed and now they tend to question, “Why does the DOLLAR rate fluctuate with the changes in price of OIL per barrel and what has GOLD to do with this equation?” But before explaining the whole process, I would like to highlight that these three (GOLD, OIL & DOLLAR) assets are probably the most influential aspects of modern financial markets. Yes in many social gatherings I was questioned too, being a person having some background in economics and financial world I could pacify the questioning mind with this simple equation. A. GOLD CRUDE OIL (POSTIVE CORRELATION) i.e. If Price of Oil increases then Price of Gold will also increase because crude oil is a direct input in excavating, processing and refining of gold from its raw form. B. GOLD, CRUDE OIL DOLLAR (NEGATIVE CORRELATION) Since all the trade in crude oil is done in U.S. dollar, therefore if a price of crude oil rises it will lead to fall in rates of dollars as more dollars will be required to buy 1 barrel of OIL. Words of Wisdom (WOW) – Period of Economic Uncertainty → Buy GOLD →“Safe Haven” from economic turbulences Period of Market Boom → Invest In Stock Market → Higher Return than GOL The above WOW leads us to the next topic:

STOCK MARKET To be brief, Stock Market/ Exchange is an exchange platform where stock brokers & traders buy and sell the shares of company which are listed on the stock exchange

FAMOUS STOCK EXCHANGE OF THE WORLD

1. New York Stock Exchange (NYSE).

2. NASDAQ Exchange (NASDAQ)

3. London Stock Exchange (LSE)

4. Japan Stock Exchange (JPX)

5. Shanghai Stock Exchange (SSE)

6. EURONEXT Stock Exchange (ENX)

7. Bombay Stock Exchange (BSE),

These Stock Exchange measure the performance of the companies listed in its exchange in the form of INDEX. In Nepal, Nepal Stock Exchange (NEPSE) operates which has a total of 370 shares as listed. Stock Market is often associated with the Bullish or Bearish trend, brief of this trend can be found from the picture above.

Words of Wisdom (WOW)-

When we hear that BSE/NEPSE Index is going upwards/rising that means that the performance of these companies listed in BSE/NEPSE is improving & vice-versa. The general rule of trading is BUY LOW, SELL HIGH i.e. Price of Share (LOW) = BUY, Price of share (HIGH) = SELL However the investment decision should be based on broader criteria like management performance, growth prospects, govt. regulations, competition etc. Investment can be generally referred to as a part of savings for better returns, which brings us to our next topic: SAVINGS As Warren Buffet wisely said, “Don’t save what is left after spending, but spend what is left after saving”, the quote itself emphasizes the importance of savings. It is commonly understood that savings should done for the uncertain future or the rainy days that may come ahead. But as an investment advisor, it suggested that Savings and Investment should be done in such manner that your wealth is multiplied itself year on year basis. Words of Wisdom (WOW)- Have a fixed savings pattern from the income you generate i.e. on a % of salary/ profit from business and invest your savings in productive assets like Shares/SIPs Mutual Funds/Appreciating Land/New Business Venture so that your wealth multiplies and your NET WORTH increases by the growth of investment made. If we create cycle of these fundamentals it will be as follows