Fundamentals - financial institutions
Fundamentals of companies
Fundamentals of stocks
Fundamentals of markets
Leveraged players are those who have limited capital base to trade or invest. They need financing to trade. They do not have the wherewithal/power to move the market or trade or invest with their OWN money.
There are two types of players in the stock market. (1) leveraged players; (2) non-leveraged players.
Leveraged players always need someone's help to finance their trade. They also do not have the power to move the market.
Non-leveraged players DO NOT need any help. In fact, brokers scurry to serve them because of their capital base. The brokers will give them incentives to trade with them. Why? Because if they put money, it will be in billions of billions of rupees/dollars. Why they have large capital bases. Because these are mainly institutions that are serving HNIs and retailers.
Non-leveraged players do not have to put any request for leverage. They have so much cash or cash holdings that brokers will give them any leveraged positions free of cost.
Why non-leveraged players do not need leverage is they mainly prefer cash positions because their waiting time is always longer. They do not do short term trades. But when they do long term investments, we get short term trades.
Non-leveraged players are called real money. Because they put down real money (not leverage) while trading or investing in the market. That shows their money power.
Real money (non-leveraged players) are mainly pension funds, insurance companies, mutual funds, sovereign wealth funds, university endowments and any such financial institution which collects money now at regular intervals to give a decent risk-adjusted return to its investors over many decades (longer periods).
Real money looks for investments that are safe first. Then they will look the return potential. Because capital preservation is paramount for them. Why? Because their name is at stake. If they keep losing capital, customers will not come. They cannot exist for longer periods.
They prefer stocks with robust cash flow, good operating leverage and a strong balance sheet with superb return on capital employed.
Why they want to do like that. Because they want capital appreciation over longer periods of time and dividend payments during the shorter periods.
They will never trade for market anamolies. But they are very clear about where to buy or sell the stock. That we will see in Market Profile. Their modus operandi to buy a stock is also different. They will not buy like you and me.
Leveraged players are players who do not have a long term vision in the market. They want to come and go superfast. They can be retail traders or investors, brokers, dealers, market makers and specualtors, hedge funds and other such types. They are always in a hurry to make a fast buck. They do not have the patience, knowledge, information about the market and stocks they trade in.
Hedgers will come in non-leveraged players. Because who needs a hedge. Those who have huge money at risk. That is why real money is the one that hedges.
ASSIGNMENT: Please go to the websites of Calpers, Harvard Endowment, Norway's sovereign wealth fund, Singapore's sovereign wealth fund, Franklin Templeton and AIG.
In financial institutions, there is another classification that is more important. That is "buy side" and "sell side". Buy side mans institutions that buy research and/or trading services, and sell side means institutions that provide research and/or trading services.