Please enable JavaScript.
Coggle requires JavaScript to display documents.
Fundamentals - financial institutions and players in trading (Fundamentals…
Fundamentals - financial institutions and players in trading
Fundamentals of companies
Fundamentals of stocks
Fundamentals of market
Anand: Retail, insituttional banks, hedge funds, mutual funds, insurance companies, government.
A financial market has two kinds of players: (1) leveraged players; (2) non-leveraged players.
Leveraged players are more dependent on time and also to make matters worse, they do not have deep capital. Non-leveraged players, by contrast, have more money and also more time. So the key difference here is maneuverability.
Leveraged players do not have sufficient capital, and even if they have, it is not theirs. Moreover, they do not have time to take advantage of future time.
Most of the mistakes in the market are made by leveraged players because of their lack of access to capital and also time. This is what non-leveraged players are dependent on.
Non-leveraged players have continuous supply of capital. Moreover, their return targets have very very longer time frames.
Non-leveraged players who do not have the urgency to generate returns in the shorter terms have very long time frames as their targets. These are called real money. These are the real players who rule this market.
Who are these real money? Asset managers (pension funds), mutual funds, insurance companies, university endowments. sovereign wealth funds, and many other players who are only focused on the long term game.
Trading opportunities for us come when one or all of these real money has taken a decision to buy or sell something (only one side), and are executing it.
Real money keeps real money on the table before taking a trade or investment. They do not need any leverage. They also do not need any time to take a decision. They are long only players.
These real money will do everything in stealth. Not because they want to cheat. But because they want to lower their cost of business.
The real 'real money' always realise that it is not their money and they are answerable to their small investors.
Real money is risk averse. They do everything and they are paranoid about 'RISK'.
Real money is always for lowering risk. For this they invest truckloads of money for research and execution.
Real money always looks at lowering risk. The most important thing they do is avoiding risky areas like cancer. They just avoid. They will not even come there.
We have already looked at one attribute so far. They avoid fundamentally bad companies. They will only invest (that is when we get our trades) in companies that have good fundamentals, operating leverage, return on capital employed and above all a good cash flow.