Technical Analysis

Present Value (PV) is the amount of money you expect to get from your future potential income today. It is obtained by adding up the expected returns on future investments and discounting them at a certain expected rate of return. In other words, it’s how much a series of payments is worth right now instead of at some time in the future when the payments are actually due. So, what’s the importance of present value? Let’s say you got Rs. 10,000 today. It is more valuable than the Rs 10,000 collected after four years. The reason for this is because you have a chance to earn interest on the amount. It might be 4–6% or even higher, depending on where you invest the money. You will not receive the rate of return if you receive Rs 10,000 after four years. If you get money today, you can buy things or use services at the current rate. Things become expensive due to inflation, which is the increased cost of products and services. In layman’s words, inflation reduces the value of money for purchases. Money loses value if you don’t invest it because of inflation. The concept of Present Value is applied to financial modelling, stock valuation, bond pricing, and the evaluation of various investment options. To determine whether an investment is worthwhile making today, the investor estimates a present value from the investment’s projected cash flow. A discount rate, which is the projected rate of return determined inversely with future cash flow, is applied to the expected cash flow of the future.  Due to inflation, the prices of goods and services go up over time, which makes money worth less because what it is worth today might not be worth the same tomorrow. PV calculations make sure that the expected rate of return or the inflation rate is used to figure out the effect of inflation. Discount Rate for Finding Present Value The investment return rate used in the present value computation is called the discount rate. Given that it represents the anticipated rate of return you would experience if you had invested today’s money for a period of time, the discount rate that is used for the present value calculation is very subjective. In other words, if an investor chooses to accept an amount in the future as opposed to the same amount today, the discount rate would be the forgone rate of return. The hurdle rate, also known as the risk-free rate of return, is frequently calculated and used as the discount rate in numerous situations. The discount rate is the result of adding an applicable interest rate to the time value, which raises future value mathematically. A lender can determine the fair amount of any future earnings or liabilities in relation to the present value of the capital by using the discount rate, which is used to calculate future value in terms of present value. Future value is discounted to current value when the term “discount” is used. Calculation of Present Value Here’s the Present Value(PV) formula:  PV = Future Value / (1+i)^n Where,  FV is the future value  I is the rate of return  n is the number of periods  Here are the steps to calculate the Present Value:  Step 1: Enter the investment’s future expected value Step 2: Put the expected rate of return on your investment  Step 3: Enter the length of the investment period Let us look at an example to understand the working of the PV formula.  We are assuming that you have the option of receiving Rs.2,200 one year from now instead of Rs.2,000 today at 3% annually.  According to the present value formula, PV= Rs.2,200 / (1 +. 03)^1 = Rs. 2,135.92  The present value represents the minimal amount that would need to be given to you today for you to have Rs.2,200 in one year. To put it another way, even if you received Rs.2,000 today at a 3% interest rate, you wouldn’t receive Rs.2,200 in a year. Instead of calculating the PV manually, one can use an online Present Value calculator to calculate the present value in a jiffy. Net Present Value Another concept that is confused with Present Value is Net Present Value(NPV).   Given a specific rate of return, present value (PV) is the current value of a future financial asset or cash flow stream. Net present value (NPV), on the other hand, is the difference between the present value of cash inflows and outflows over a period of time. Net present value assesses how profitable a project or investment might be. NPV and PV may be crucial when a person or business makes investment decisions. Here’s the Net Present Value formula: Net Present Value = cash flow/(1+r)^t − initial investment where r is the rate of return and t is the total time periods. What Is the Present Value of an Annuity? The amount of money required today to fund a series of future annuity payments is referred to as the annuity’s present value. Given a specific rate of return, or discount rate, the present value of an annuity is the current value of the payments from an annuity in the future. The present value of the annuity decreases as the discount rate increases. The formula for the present value of an Annuity =  PMT * {1- (1/(1+R)^N)} /R  where: PMT is the amount of each annuity payment R is the interest rate/discount rate N is the number of times payments will be made ​Conclusion Present Value (PV) is one of the key concepts in finance. Although it sounds fancy and complicated, it is actually pretty simple. PV provides a way to calculate how much money you need today to have a certain amount of cash at a future date. Often, this concept will be used in an investment setting. 

Investors, traders and analysts have been using technical analysis to accomplish broad acceptance among the academic community and regulators – specifically pertaining to the behavioral finance aspects.  Although technical analysis trails predefined principles and rules, the results’ interpretation is generally subjective. This means that though some aspects, like the indicators’ calculation, follow specific rules, the explanation of discoveries is often based on a combination of techniques that suit the approach and style of the individual analyst.  In this post, let’s highlight technical analysis and learn more about it.  What is technical analysis? Technical analysis is referred to as a trading discipline that is used to assess investment instruments such as stocks and discover trading opportunities by evaluating statistical trends accumulated from varying trading activities, like volume and price movement. It mainly concentrates on the study of volume and price.  Understanding Technical Analysis Technical analysis was first brought into the picture by Charles Dow in the late 1800s. Later, many credible researchers, such as John Magee, Edson Gould, Robert Rhea, and William P. Hamilton, contributed to the Dow Theory to form its basis. Today, it comprises hundreds of signals and patterns curated through years of comprehensive, profound research. Technical analysis is generally used to examine how demand and supply for security will impact volume, price, and implied volatility changes. It functions from the supposition that previous price changes and trading activity of the security can be valued indicators of the security’s future price movements when combined with adequate trading or investing rules. Often, it is used to generate short-term trading signals from various charting tools. It can also assist in assessing a security’s weakness or strength related to the broader market or sector. With this information, analysts can easily enhance their valuation estimates. Types of Technical Analysis Charts There are three primarily popular technical analysis charts, such as: Line Charts A line chart is extremely basic and simple. It comprises one single line that tracks the stock’s closing price movements. Traders use it to gain a basic understanding of the change in stock prices. While this chart type doesn’t display much and may not provide extensive data, it offers a general idea of the price trend.  Candlestick Charts Candlestick charts showcase a specific stock’s closing, opening, low and high price during a trading session. However, these charts use candlesticks to display the results rather than a single line.  Bar Charts Bar charts are a bit more complex than line charts and candlestick charts. In this chart type, you will find a series of vertical lines. Every line depicts the closing, opening, low and high prices in one specific trading session. Indicators of Technical analysis Some such indicators of technical analysis primarily focus on categorizing the current market trend, including resistance and support areas. On the other hand, such indicators concentrate on comprehending a trend’s strength and its likelihood of continuation.  Some of the prevalently used charting patterns and technical indicators include: Momentum indicators Moving averages Channels Trendlines Generally, technical analysts examine the below-mentioned indicators: Price trends Support and resistance levels Chart patterns Moving averages Volume and momentum indicators Oscillators Example of technical analysis  For instance, let’s consider the S&P 500. Along with some exceptions, the 50-day moving average of the index has proven to be a dependable support level in the last few years. When the value of the S&P 500 goes above the 50-day moving average and retains that behavior, it is highly likely that the upward trend will continue. Thus, experts will purchase when there is any monetary drop below the line.  Uses of Technical Analysis  Often, analysts use technical analysis along with other research types. Retail traders might make decisions solely based on price charts of specific security and other similar statistics. However, practicing equity analysts seldom restrict their research to technical or fundamental analysis alone. Traders can apply technical analysis to any security with historical trading data. This comprises: Currencies Fixed-income securities Commodities Futures Stocks And other securities.  Technical analysis is more prevalent in forex and commodities markets, where traders prioritize short-term price movements.  The technical analysis attempts to predict the price movement of any instrument that can be traded virtually and is subject to forces of demand and supply, including currency pairs, futures, bonds, and stocks. Some experts consider technical analysis a simple study of demand and supply forces mirrored in a security’s market price movements. Most commonly, technical analysis is applied to price changes. However, some analysts keep track of numbers and not just prices, such as open interest figures or trading volume.  Technical Analysis vs Fundamental Analysis  As far as approaching the markets is concerned, both technical analysis and fundamental analysis work at the different ends of the spectrum. Both methods are used to research and predict future trends in stock prices. Moreover, like any philosophy or investment strategy, both have their adversaries and advocates.  Fundamental analysis is a method that assesses securities by attempting to evaluate a stock’s intrinsic value. Fundamental analysts generally study everything from the overall industry and economic conditions to the financial condition as well as the management of companies. Some of the important characteristics of a fundamental analyst are: Liabilities Assets Expenses Earnings Talking about technical analysis, price and stock volume are the only inputs. The principal assumption is that every known fundamental is factored into the price. Hence, you don’t have to pay any close attention to them. Generally, technical analysts don’t put effort into evaluating a security’s intrinsic value. Instead, they use stock charts to discover trends and patterns that suggest what stock could do in the future.  Conclusion Now that you have understood technical analysis, remember that there is no such technical indicator that is perfect. None will offer 100% accuracy all the time. So, being an intelligent trader, ensure you watch for warning signs. When done well, technical analysis can surely help you gain profits. However, you must spend more time and invest more effort into handling everything in a better way. 

Term insurance plan is a simple form of life insurance. This insurance plan is specifically crafted to provide financial cover to the near and dear ones in the event of a sudden demise. It provides death benefits by just paying the specific premium for a particular policy timeframe. The death benefits given to the nominee by the insurance provider would help them in meeting their financial needs during the difficult times. It is important to understand each and everything by an insurance product before deciding to invest in it. Let’s know about various advantages and disadvantages associated with a term insurance plan. What is term insurance? Term insurance plan is a legally binding contract between the insured and the insurer. The person who has invested in the term plan agrees to pay premium charges to the insurance service provider. In return, the insurer promises a protective financial cover over the life of the insured person. The insurance cover offered by a term insurance plan is valid only for specific policy time. This term can range from 10 years to 30 years or more, depending on the age at which you invest in the plan. Why do you need Term Insurance? Financial security for your family: If you are the primary earner, buying a term plan would take care of the monthly financial needs of your family in your absence. Secure your Assets: You might have taken a loan like an education loan, home loan, personal loan, or a vehicle loan. The repayment of these loans can financially weigh down your family in your absence. The proceeds from your term insurance plan pay off your loans and ensure that the financial burden does not fall upon your family. Risks related to lifestyle: The probability of developing a lifestyle disease increases with age. Some term insurance plans offer critical illness protection which not only protects your family in case of uncertain eventualities but also during your lifetime. It provides you financial security against various life-threatening health conditions such as cancer & heart attack. Types of Term Insurance Plans Level Term Plan The meaning of level term insurance is that the sum assured remains the same throughout the policy term. However some plans allow you to increase your cover based on specific life events like marriage, childbirth or home purchase. Increasing Term Insurance Plan Increasing term insurance is a term plan where the life cover amount continues to increase automatically eg- at a 5% per annum simple rate. Increasing term insurance will mean that you don’t need to worry about increasing your life cover as your lifestyle grows. The term plan will automatically keep up with it. Decreasing Term Insurance Plan Decreasing term insurance means that the life cover continues to decline with time. This term cover is usually given to cover a loan in case of your untimely demise. Term Plan with Return of Premium In this type of term insurance plan you will receive all the paid premiums at the expiry of the policy if you survive. This plan is popular for offering cash at the time of retirement as most term plans will last that long.   Advantages of Term Insurance Plans Cost-Effective: The leading benefit of term life insurance is the cost incurred. Unlike the other investment and life insurance plans, the term plans can be purchased at lower premium prices. This affordability makes even a low-income person easily own an insurance policy with maximum benefits. High Coverage: Another good thing is high coverage, which is unavailable in the case of an investment plan. A high coverage ensures high financial security to your family. Anyone would obviously prefer substantial financial security for their family, which the term plan offers. Easy and simple to buy: Buying a term insurance is quite simple, easy and quick. You need not be involved in any complicated procedures or paperwork. You can simply buy it online without even the assistance of an insurance agent. Surrender Value: The surrender value of the term insurance plan is higher. Therefore, you can surrender your policy and get the attained value in a few years of inception. Tax Benefits: The term plan offers you tax benefits, which can be used for your income tax submission or for certain tax exemptions. Therefore, the premium you are going to pay will never go to waste in the case of a term plan.  Disadvantages of Term Insurance Plans No Return on Investment: Unlike other investment plans, term insurance does not give you any return on investment during your lifetime. The only advantage you can expect is to provide your family financial protection after your life. Buying at a later stage: When you plan to buy a term insurance plan at a later stage of your life, you end up paying a high premium for a higher sum assured which is impossible for all people. People may need to go for a large sum assured but unable to pay a higher premium. In such times, people are either forced to take up an extra burden to pay the premium higher than what he budgeted or compromise the sum assured. No financial assistance if you are alive: This is the major disadvantage of the term insurance plan. You can never expect financial aid from your term plan if you are alive, especially when you want to withdraw a partial amount or any form of return that another type of insurance plan offers. No wealth creation: If people wish to create wealth by paying premium towards the term plan, they will only be leaded to disappointments. This is one of the major term insurance disadvantages. Term insurance plans are no-profit plans that means they only enforce you to pay the premium until the term plan matures or the policyholder demises and the sum assured is paid to the family members or the nominee. No cash value: You can never expect any cash value from the term insurance plan. The money you pay towards