Tag Archives: Investing

How Opportunity Cost Can Affect Your Home Business

In order to properly plan and weigh your options, you should always consider opportunity cost as you make business decisions. So what exactly is opportunity cost? It’s an economics concept that says there is a cost to choosing one option over another. For example, imagine that your home office needed a new computer, printer, desk and scanner, yet you only had the funds for one of these items. Ultimately, you decide that the scanner is most important to your office, followed by the computer, desk and then the printer. After buying the scanner, the opportunity cost would be all the benefits and capabilities you would’ve received had you bought the computer instead.

It’s important to note that opportunity cost only applies to your second choice option, which in this case is the computer, and is not the sum of all the options you didn’t choose. Remember, you only had the funds to buy one of the options. So you can’t add up all the things you could have done with the computer, desk and printer, because it was never an option to buy all four of the items. In this case, the computer was your second option, so that’s where your opportunity cost lies.

Opportunity cost isn’t limited only to material measurements. In the example above, most of the opportunity cost would be work-related functions that you could have performed with the computer. But imagine a non-work scenario, such as choosing between three different films at a theater. You have four options: Gone With the Wind, Casablanca, Citizen Cane or Terminator 2. After mulling it over, you rank the options as follows: Terminator 2, Casablanca, Citizen Cane and Gone With the Wind. So your opportunity cost will be all the things you would’ve received had you watched Casablanca. This might include personal enjoyment, romantic inspiration and a greater appreciation for World War II history. Again, note that the opportunity cost applies only to your second option and doesn’t include Gone With the Wind and Citizen Cane.

As seen in the film example above, opportunity cost can be applied to anything of value to you. It allows you to effectively weigh options and understand the ramifications of your decisions. As you progress with your home business, use this strategy to gauge the cost of your decisions. Every course of action carries opportunity cost, giving you an accurate assessment of the future.

J.F. Crook is an experienced online marketer, website owner and consultant. Current projects include Professional Marketing International and Visionary Strategies.

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Teaching Finance For Non-Financial Managers

Each organization has its own funds. Be it a school, a hospital, a prestigious company, or even down to the smallest convenience store has fund. Funds literally mean a supply of money, stock, or resources that are set aside for a purpose. There should be an accounting of what goes in and out of an organization to properly keep track of the funding.

Funds when not handled properly can turn into a messy business. Your company may be on the verge of bankruptcy and you don’t even know it because you take bookkeeping or accounting for your costs and merits for granted. You may have been spending more than what you are earning.

This is why teaching finance for non-financial managers is an integral part of the success of a business. How can one have a leadership that gets results when one does not even know how to budget?

Finance is the act of managing funds. It often includes saving money and often lending out money. There are different areas of finance namely business finance, personal finance, and public finance. Finance deals with time, risks, and money and how they are related to each other. It also deals with where and how the money is spent and also how the funds are budgeted. There should be money set aside for savings or for storage at the bank and some are left for any expenses needed by the company.

Accounting of funds should be handled by a specialist especially if the company is a large one. A group of specialists would be better so that if something slips by one, the others can recheck it. More brains at work equals to lesser time spent and lesser mistakes.

The accountants or the ones that handle the funds should not only be the ones who should learn about proper funding. Lessons should be taught on finance for non-financial managers so that they would learn the kind of leadership that gets results. Managers should not just think of how to spend money but also how to save it. For example electricity that isn’t in use should be turned off or excess paper should be recycled. Just because a company is not yours does not mean you need not care about its expenses.

Leaders should set out an example to the members of the organization. They should be the role models that the members can look up to.

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Script Splits and Issues

Sometimes firms offer shareholders three shares in proportion to the shares they own. For example, they may be offered one free share for every share owned. This is the script issue.

Alternatively, the shares are split. For example, every share, par or nominal value one dollar, is replaced by two shares, par or nominal value $.50.

In each case, the market value of the share will fall to half of the previous figure. The idea is that markets recognize a broad range of trading prices for shares. With growing profits and dividends over the years, the share price increases. Sometimes the market feels the new price is inconvenient and deter small shareholders from buying. The theory is that shareholder’s are happier with 100 shares at $50 than 10 shares at $500. If this doesn’t seem logical it is because it is, in fact, quite illogical-it’s pure investor psychology.

For example, UK market like shares in a range, say of £1-£10. Above this level, companies frequently do scripts or splits to bring the price down to a better trading price, one which is thought to lead to a more widespread holding and more liquidity. Thus, in the autumn 1998, the Logica Share price was £20. They did a four for one script issue to bring the price down to 4 pound sterling.

In US, the same idea prevails, but at much higher share price levels. On the continent of Europe, too, shares trade typically at far higher prices than in the UK. When the Paribas was privatized, for example, 3.8 million applied for the shares and received just four each-but the price was about $450. Switzerland is a place where traditionally, shares of the banks, pharmaceutical companies and Nestlé’s have traded at a price equivalent to several thousand dollars. However, the law, which required a minimum legal value of 100 per share, has been altered to lower this to 10 per share. In May 1992, Nestlé’s took advantage of to replace each share, legal value to 100, by 10, with a legal value of 10 each. The effect was to lower the price each from 9600 to 960.

If you liked this financial topic then you might be interested in learning about forex training and the forex practice account.

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Investing In A Silver ETF

In previous decades investing in silver meant you purchased and physically held the silver you had invested in. Silver bullion bars most commonly but otherwise silver coins or another form of this precious metal. Today the most popular way to invest in silver is with silver ETF. This is an exchange traded fund. It means you have an investment in the silver without actually physically possessing the silver. Obviously this is much more practical for today’s lifestyles and great to be included in your financial plan.

The silver is held by a company, perhaps not even in the same country as you. They hold the silver but you buy it when you buy the silver exchange traded fund. The success of your investment is solely based on the market value of the silver itself. For this reason you shouldn’t be too concerned about which company physically holds your silver. If the company is doing poorly it will have no reflect on your ETF.

Experts recommend that serious investors have a 10-15% investment rate of precious metals in their portfolio. Silver has outshone the success of gold in recent times as far as profitability. Experts have noted that the fluctuation of the value of gold is larger than that of silver, making it a good choice for your first time in this market. This could be due to its continuing success in several and diverse markets around the world. Highly prized in the jewelry, electronic, coin and water industries this precious metal shows no signs of becoming obsolete.

The most popular and well known of all the silver ETF’s is the iShares Silver Trust Fund (SLV). The silver is physically held in London and prices are based on the London Silver Fix Price. An ideal place to start that offers minimal volatility. However there is many to choose from – some of the more commonly used are: ProShares Ultra Silver ETF (AGQ), PowerShares DB Silver Fund (DBS) and COMEX Silver Bull Plus ETF (HZU-TSX).

Investing in a silver ETF is an exciting way to expand your portfolio in a relatively low risk environment. Owning some of the precious metals in the world has to be a little bit more exciting than stocks and bonds too!

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