It is a partial or conditional assent to an offer in contract law, which alters the original terms of a bill of exchange (time, event, amount, place, etc.) as drawn. It can be treated as dishonour by the bill owner by non-acceptance.
What are Hedge Funds? A hedge fund is a managed pooled fund for alternative investment method which employs trading into complex products including equities, derivatives, real estate, currencies and many others. The performance of the fund is measured in absolute return units. As the name suggests, hedge fund tries to “hedge” the risk associated with a particular investment choice based on the price relevant information. Hedge fund managers choose from the variety of options from stocks to bonds and commodities to currencies. Sometimes they may invest their own money to a fund to leverage the magnifying effect of the investment. How did it start? Alfred Winslow Jones is regarded as a pioneer in the field of hedge fund management, and he launched the first hedge fund in 1949. Alfred structured the funds by finding the loopholes in the regulations and reaping benefits from them. Alfred formed an investment partnership and committed his own money in the partnership. He fixed his remuneration in the form of performance incentive, which was 20% of profits. Alfred, in his endeavour, combined shorting and leverage, and hedged them against the market movements and reduced the risk exposure. He chose equal short and long positions for his portfolio. The overall impact of the combination of long and short positions, his portfolio became more stable with lower risks. Why opt for Hedge Funds Image source - © Kalkine Group 2020 Many fund managers joined Alfred to gain fame and fortune. Some of them even went to start their own fund houses and an SEC report of 1968 reported 140 hedge funds in the United States of America. During the stock market boom of the late 1960s led to a belief that Hedge Funds underperformed than the overall market. Many hedge fund managers dropped the idea of long term and short term positions and did not feel the need for risk hedging. To take the benefits of the market boom, many fund managers moved out from the Alfred technique of lowering market movement risks. The fund managers moved boldly to the riskier strategies, which led to heavy losses in 1969-70. The bear market of 1973-74 drove a massive plunge in hedge funds and saw closure of many such funds due to heavy losses. During the mid-80s, hedge funds again became centre of attraction for large investors due to the Julian Robertson’s Tiger Fund. The fund was one of the many global macro funds that used leveraged investments in securities and currencies after careful assessments of global macroeconomic and political situations. Tiger Fund, in 1985, correctly forecasted the end of the four-year trend of the US dollar appreciation against currencies of Europe and Japan and speculated in non-US currency call options. A report in the year 1986, reveals that since its inception, Tiger Fund gave an average of 43% return to its investors. During the late 1990s, hedge fund suffered one of the largest losses. Quantum Fund lost US$2 billion in 1998 during the Russian debt crisis. Tiger Fund lost more than US$2 billion in trading of Japanese Yen with respect to the US dollar. The losses and redemption of money by the investors led to the closure of the Tiger Fund in 2000. What are the different types of hedge funds? Hedge funds can differ based on the strategy chosen by the manager after consulting the investors. The strategy is laid out to the investors through a prospectus before going forward with it. This makes a hedge fund more flexible as investors are always aware of about where the funds are going. Thus, hedge funds can be of the following types: Macro: These hedge funds aim to profit through macroeconomic trends. These macro parameters may include global trade, interest rates, forex policies, etc. Equity: These hedge funds involve investments into stocks nationally and internationally, both. This is accompanied by a hedging position against stock market downfalls by shorting overvalued stocks. However, the striking feature of this type of hedge fund is that managers pick up undervalued stocks and split the investment between going long in stocks and shorting others. Relative-Value: This type of hedge fund takes advantage of inefficiencies existing in the spread. A Spread is the difference between bid price and ask price of a security. Event-based: These involve those funds that seek to gain from inefficiencies brought on by corporate events, corporate restructurings, mergers, and takeovers, etc. How is a hedge fund different from a mutual fund? In operation, hedge funds and mutual funds may sound the same as they both involve a pooled sum of funds being invested. However, there are some fundamental differences between both. These include: The need for accredited investors: Hedge funds are only open to certain accredited wealthy investors holding high level of capital. However, mutual funds are open to non-accredited investors as well. Liquidity: Hedge funds do not maintain daily liquidity, whereas mutual funds are much more liquid. Hedge fund investors may only liquidate after the specified subscription period is over. This period may be a quarter long or a month long depending on the type of fund. Investment instruments: Hedge funds investors can invest in various types of investments other than stocks. These include bonds, commodities, exchange rate, etc. However, mutual funds invest in stocks. This makes hedge funds much riskier than mutual funds. Regulations: Hedge funds are subjected to less regulatory checks are compared to mutual funds. Some hedge fund managers may not even be required to register the fund with the Security Exchange Authority. However, mutual funds are subject to greater level of regulations and must provide higher level of disclosure than that required by hedge funds. How is it doing now? The hedge fund industry has evolved substantially, and their numbers are in thousands and managing trillion dollars of investment around the globe. Their Modulus Operandi has also evolved over the year. They ask their investors to put the money in locking period of a minimum of 1 year. Hedge funds are usually open to qualified investors. The fees charged by the fund managers are also generally on the higher side, around 2% of the underline asset value plus the performance fee on gains generated. The basic principle of hedging the investment has now changed, and the key focus is to maximise profits or to give higher returns on the investments. To achieve higher returns, fund managers often put their money on higher risk elements. Fund managers use leverage to increase the spread of profit, but at the same time, leveraging can incur more loss than the actual investment would have made. Speculative investment has the potential of higher risk and huge losses. Being said that, the past financial blunders of hedge fund have also provided expensive learning and experience to the fund managers. Building upon the legacy, hedge funds have given higher returns over the years. The average rate of returns of hedge funds attracts most of the wealthy investors towards them. They invest in anything from bonds to securities to currencies and even real estate. There is no fixed rule of investment or instrument for investment, and no definition could cover the entire system of hedge funds. What are the two sides of investing in Hedge Funds? Image source: ©Kalkine Group
What is a Baby Boomer? According to Merriam Webster - Baby Boomer is a person born during a period in which there is a marked rise in a population's birthrate. This term is used primarily for a person born in the United States following the end of the Second World War and in the years from 1946 to 1964. Though this is the literal meaning, in general terms, this word is used to describe the older section of our society. What is the story behind the baby boomer term? Most nations' economies and industries were destroyed after the World War 2, and only the US was thriving. The country turned its war production into consumer products to meet the world demand, and it had no such competition from other countries. It led to the fastest growing economic prosperity for the nation and created the highest standard of living in any country ever witnessed in such a short span of time. From the automobile to telecommunication to atomic energy, most of the industries in the US were booming along with its population. Hence the children born during this time are called boomers. Generational cohorts are defined mainly by birth year, not current age, there are other cohorts such as Generation X, Generation Y or Millennials, and Generation Z. The term "Millennial" has become popular, and Generation Z is the youngest people on the planet right now. Also read: Millennials on Crowd Media's Radar, Tapping into Influencer Market Space The baby boomer generation is the progeny of the Silent Generations and precede Generation X. They are also known as parent of the Millennials. The silent generations grew up with the hardship of the Great Depression and won World War 2. On the other hand, baby boomers had everything handed to them in the era of newfound prosperity. The first use of the word baby boomer is from January 1963. The Daily Press newspaper article described an increase of college enrollments as the oldest boomers coming of age. In the Oxford English Dictionary, the term dates to a January 23, 1970 article published in the newspaper The Washington Post. This new generation of the Post War era were the inhabitants of the modern world, which concluded the war following it countries around the world came together to lay the foundation of the Universal Declaration of Human Rights. Its purpose is to provide equal human rights and also value and protect all lives regardless of faith, colour, and gender. Also read: Retirement, Baby Boomer Generation and Australia's Tax Scenario When were the baby boomers born? In most of the Western countries, the baby boomers are referred to those born immediately after the end of World War II with the rise of the birth rate that came with it. Interestingly in Australia, the birth rate was on the rise, even during WWII. In Europe, birth rates started rising from the mid-1930s, and it saw a post-war baby boom which lasted till the late 1960s. In China, the baby boom cohort is the largest in the world. For Korea, the baby boom happened after the Korean War. Its government then encouraged people to have two children. In the US, baby boomers are as much as 20% of the entire American population. The population played a substantial role in shaping American culture at large. Currently, most boomers are at retirement age, a matter of great concern as to how the country will deal with the ageing population. Why is the baby boomer’s generation so significant? The generation before baby boomers faced a lot of difficulty in the US. They saw the Great Depression; during the war, they endured food shortages etc. When it was all over this generation could finally afford to have a lot of children. The post-war era also saw a wave of unprecedented economic prosperity. With it came the optimism for a better life. The spike in birth rate elevated American fertility rate hike, and it continued for another 18 years. With the growth of these boomers from babies to children to adults to now seniors, the US reshaped itself. Different industries saw unprecedented growth, manufactures and advertisers targeted this new generation in the new prosperous world. Baby boomers dominated the popular culture in the 1950s and 1960s. They led the social change, which changed the basic fabric of the country. Be it the Civil Rights Movements or protest against the Vietnam War, the boomers were the forefront of it. They also gave a platform to the feminist movement. Their concerns and life experiences show a significant influence on American culture. How do baby boomers want to plan their life ahead of retirement? We need to understand the baby boomers are the generation of first men to walk on the moon, and they are the generation which promoted civil rights and encouraged an end to the Vietnam War. They also were high spirited and wanted to change the world to be a better place, but they also witnessed assassinations of iconic figures like Robert Kennedy, Martin Luther King. Depression-era parents raised them. Most importantly, they saw the rise of technology. Children of Baby boomers have seen a massive change in technology across. A quick read through How has Trading Changed for Millennials? Technology Taking Charge in Shaping Trading Habits, will help to update on how stock trading changed for them. Now that the baby boomers are at the retirement age or already retired, study suggests most of them plan on fulfilling their bucket list items like travelling or living in the countryside on a farm. The Greatest or the Silent Generation had very few investment options, typically in bonds or certificates of deposit. But baby boomers have a varied range of options to grow their hard-earned money and also enjoy its rewards. Industry experts suggest that the baby boomers may choose not to retire early. It could mean postponing retirement, or consulting or getting a part time job. Another important aspect is healthcare. Many baby boomers are in their last 60s and early 70s, it's never too late to work on the healthcare plan. Also read: Five Smart Investment Tips for Millennials
As per the US Internal Revenue Code, Qualified Dividends are dividends that are subject to the similar tax levels as long-term capital gains, which are less than rates for an individual?s ordinary income. These dividends are taxed as capital gains at 20 per cent, 15 per cent or 0 per cent rates, contingent on the tax bracket.
The retirement plan where investment income accumulates tax-deferred is referred to as a qualified retirement plan. Recognized by the US Internal Revenue Code, it meets the requirements laid out in Section 401(a) of the IRS (Internal Revenue Service).