Tag: profit

CAPITALISM

Capitalism is a political and economic system where a country’s trade and industry are controlled by private owners and not by the state. It is basically a system where there is private ownership of property. Capitalistic ownership means owners control the factors of production and derive their income from their ownership. That gives them the ability to operate their companies efficiently. It works for profit maximisation rather than public benefit. Capitalism needs a free market to work efficiently and succeed.   In a capitalist society, the distribution of goods and services is according to the laws of demand and supply. According to the law of demand, when the demand for a particular product increases then it also leads to an increase in its price. In a capitalist society there are a number of competitors. When these competitors realise that they can make a higher profit since the demand is high then, they increase production . The greater supply reduces prices to a level where only the best competitors remain.

EMERGENCE OF CAPITALISM

Capitalism emerged during the 16th century and expanded during the Industrial Revolution, pushed forward by colonialism, the nascent factory system, and the Atlantic Slave Trade. This system generated wealth and prestige for owners, but also exploited people who had very little or no power like the workers in the factory and people indigenous to Africa and the Americas. The expansion of Capitalism in America in the 19th-century relied on economic growth and was generated through the labour of enslaved people on land that were forcefully taken from Native Americans.

The United States is one example of capitalism. The other examples of capitalist countries are: Singapore, New Zealand, Australia, Switzerland, Ireland , United Kingdom, Canada, Denmark etc.

HOW CAPITALISM WORKS

In a capitalist society the owner of supply competes against each other to earn the highest profit by selling the goods at the highest possible price while keeping their costs as low as possible. Competition keeps prices moderate and production efficient, although it can also lead to worker exploitation and poor labour conditions. As there are a number of options for the consumer in the market due to competition then the consumer has a lot of choices.

Another component of capitalism is the free operation of the capital markets. The laws of supply and demand set fair prices for stocks, bonds, derivatives, currency, and commodities. Capital markets also  allow the companies to raise funds to expand.

According to the  economic theory Laissez- faire it argues that the government should take a hands-off approach to capitalism and should only intervene to maintain a level playing field. The government’s role is to protect the free market. It should prevent the unfair advantages obtained by monopolies or oligarchies. It ought to prevent the manipulation of information, making sure it is distributed equitably.

ADVANTAGES OF CAPITALISM

  • It creates healthy competition in the market.
  • Due to the number of companies and products in the market consumers have more choices.
  • Since the consumer’s demands are high and they will pay more for what they want, Capitalism results in the best products for the best prices.
  • It results in efficient production. In a capitalist system, firms have incentives to be productively efficient by cutting costs to improve competitiveness and productivity. If firms don’t remain productive and efficient they will run out of business.
  • Capitalism encourages trade between different nations and different people which is a mechanism for overcoming discrimination and bringing people together.
  • It raises the standard of living.
  • As the capitalist economy is dependent on the push factor of individuals, there is no limit to the level of wealth an individual can accumulate through progression within the economy.
  • Through capitalism, firms and companies are inclined to produce with greater efficiency, by cutting cost and improving efficiency. This is done with an aim to prevent losses in an industry where competition is high, bettering the economy as a whole.

DISADVANTAGES OF CAPITALISM

  • Private ownership of capital enables firms to gain a monopoly power in product and labour markets. Firms with monopoly power can exploit their position to charge higher prices.
  • Social benefit is ignored, as the owner cares about profit maximisation, public good is ignored, the poor people who cannot afford expensive products have no option.
  • A capitalist society argues it is good if people can earn more leading to income and wealth inequality. However, this ignores the diminishing marginal utility of wealth.
  • In a capitalist system where the means of production and distribution of goods and services are owned by just a few members of the society, the wealth of an entire nation could be controlled by just a few wealthy individuals and families and hence there is unequal distribution of wealth.
  • Due to the market being profit and demand driven, negative externalities such as pollution are generally ignored until they become a serious issue within the economy.
  • Socialists and communists are people who do not support capitalism. They say it hurts workers, because businesses make more money by selling things than they pay the workers who make the things. Business owners become rich while workers remain poor and exploited. 

Source: https://www.thebalance.com/capitalism-characteristics-examples

Segmenting a market?

See everybody has their own likes and dislikes right? It is always possible that my need and your need can be different or even similar also. Market segmentation is just the most useful aspect in which a marketer can divide the whole market into subgroups of people having the same needs and wants. Must be wondering why it is done? So by this concept marketer gets the clear idea of the group demanding the same products and can easily satisfy their demand on that basis. Suppose if their is a group of teenagers than obviously their demand and needs about a product will be different from that of old age group. Likewise we have many different basis for market segmentation let us just understand them one by one:

  • Geographic Segmentation: This is the most simple method of market segmentation as in this the people living in one region of the country have different buying behaviours from that of the people living in some other region and thus this becomes the base for dividing the market .
  • Demographic Segmentation: Demographic elements such as age(teenagers/adults/retired), occupation, education, sex and income are used here for Segmentation.
  • Psycho-graphic Segmentation: Under this basis the consumers are divided into subgroups on the basis of their psychological attitude and also includes their personality and lifestyle.
  • Behavioral Segmentation: Consumers are here divided on the basis of the knowledge , attitude and use of actual products.
  • Volume Segmentation: It is assumed that most of the product is sold to a certain percentage of people. There are light , medium and heavy users of products. It is important for the business to give due consideration to the heavy users so that they must not switch to some other brand and also along with that they are required to adopt various techniques to convert light , medium and non users into the heavy one.
Easy explaination of its benefits.

Best low-risk Investments in 2020

Due to the Corona Virus Global Pandemic 2020, our economy has faced unprecedented challenges. With businesses shutting down and stocks facing a fall, INVESTORS are looking for stability in their returns by opting for low-risk investment options. Low-risk investments earn only modest or meager returns; and inflation can erode the purchasing power of money stashed in low-risk investments. But it all depends on what your economic requirement is and how much risk you are willing to accept.

Photo by Pixabay on Pexels.com

Lets dive into the top low-risk Investments in the year 2020.

  • High YEILD Savings Accounts.

Savings accounts offer a modest return on your money. A savings account is completely safe in the sense that you’ll never lose money. Most accounts are Government insured up to certain limits, so you’ll be compensated even if the financial institution fails.

  • Saving Bonds

Scrictly speaking rather than investments these bonds are more like saving instruments. Bond is a good choice for protection against inflation because you get a fixed rate and an inflation rate added to that every six months.

  • Certificate of Deposits

With a CD, the bank promises to pay you a set rate of interest over a specified term if you leave the Certificate of deposits intact until the term ends. Some savings accounts pay higher rates of interest than some CDs, but those so-called high-yield accounts may require a large deposit.

  • Money Market Funds

Unlike a CD, a Money market fund is liquid, which means you typically can take out your funds at any time without being penalized. Money market funds usually are pretty safe. The bank tells you what rate you’ll get, and its goal is that the value per share won’t be less than $1.

  • Corporate Bonds

Companies also issue bonds, which can come in relatively low-risk varieties (issued by large profitable companies) down to very risky ones. The lowest of the low are known as “junk bonds.” When you buy a corporate bond, you’re loaning money to the company. In return, you receive periodic interest payments until the bond matures and your principal investment is returned.

  • Dividend paying stocks

A dividend is a portion of a company’s profits paid out to the company’s shareholders. When a company makes a profit, it can choose to reinvest that profit back into the business, but sometimes it pays a percentage of it back out to shareholders. Not every company pays dividends, but those that do often have slow, reliable growth.

  • Preferred Stocks

Preferred stock is more like a lower-grade bond than it is a stock. Still, it may fluctuate substantially if the market falls. Like a bond, preferred stock makes a regular cash payout. But, unusually, preferred stock may be able to suspend this dividend in some circumstances, though often it has to make up any missed payments.

Building an investment portfolio that has at least some less-risky assets can be useful in helping you ride out the volatility in the market, and there’s been no shortage of that this year.

Why investing in Real Estate is profitable, especially now?

Amidst the recent worldwide pandemic, which has resulted in massive financial loss, for not only start-ups but also leading business companies, here is one correct way to gain profit. That is by investing in real estate. Yes, you heard it right! Real estate is one of the safest investment options during the horrible pandemic situation. In this present scenario, the prices of real estate and loan interest rates have fallen rapidly. As the rates have decreased, don’t you think this would be the exact time to invest in properties? Moreover, it has become immensely convenient to get a loan at the present moment.

With the sudden change of scenario, due to COVID-19, the rate of interest on home loans has decreased considerably. Along with the cheaper interest rates, investing in real estate would inevitably bring security to the owner. Nowadays, it is best to own a house rather than rent a place. Also, the best part of investing in real estate is gaining a property of one’s own. With security, one increases stability, and hence, buying a property would inevitably bring balance in your life. Once you invest in real estate, with time, the value of property increases. If you plan on starting up your own business or even become a landlord, here is only profit for you. One-time investment, that too in less amount, can turn out to be very profitable.

Now, you might think, why is this the ideal time to invest in real estate? Though real estate has always been profitable. But, recently, mortgage rates have decreased, which has led to an increase in investors. Now, once you plan on investing, you will find an impressive percentage of good deals available in the market. With the pandemic’s presence, property choices have increased a great deal, so this is the exact time for you to choose the property you wish to invest in to gain profit.

There are many leading agencies that look after the client’s needs and brings an excellent deal to the investors once the loan is approved. The present market scenario offers many choices to the client, a unique opportunity if you plan on investing. Therefore, if you invest in real estate now, you would have to pay a much lesser amount compared to earlier times. Along with it, you would get high returns once you sell the property in the future. Besides, if you are planning on putting the property on rent, that would turn out to be as profitable as selling it. Once you rent the property, this becomes one of the simplest ways to earn a considerable amount of money every month.

To conclude, real estate is a long-term investment. Even if you are investing at a time of crisis, this is going to become profitable even in the post-pandemic situation. You would experience a steady flow of income throughout. Hence, less investment today can bring high returns tomorrow. So, you should take a step toward investing in real estate.