Educational articles

10 Common questions about dividends

These are the top 10 questions commonly asked about dividends. 1.Why do companies pay dividends? Companies decide to pay dividends to investors out of their excess earnings as a way to reward them. Companies need to be making money to be able to pay dividends. So generally speaking, firms that can pay dividends are in a financial stable position. 2.Are dividends compulsory for companies? No, dividend payouts are not mandatory for companies. Some growth companies may decide to not pay …

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6 Different Investment Strategies

There are many different investment strategies available to investors. The selection of the strategies should take into account the level of risk the investor is willing to take on, the investment time horizon, and the life circumstances of the investors. For instance, an investor who is retired will need income to fund their living expenses whereas a young investor who is still working can engage in more risk as retirement is still a long way off. See below six different …

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The Bitcoin Bubble

We have had numerous asset bubbles in the past such as the tulip mania, the US housing bubble, and the dot-com bubble. The latest bubble is the Bitcoin bubble. All these asset classes rose in value due to irrational exuberance but the same characteristics were in place which drove up the prices. The price of Bitcoin has fallen 71% in the past year. All asset bubbles burst after a period of time. In this article we discuss the reasons for …

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The stock market and the economy

It would be rational to think that there is a relationship between the economy and the stock market. If the economy is performing well, then it could be assumed that economic growth would enhance the profitability of a company and hence improve their stock price. In a recession, companies can encounter lower profits. This may mean reduced dividends for stockholders and a falling share price.  There have been numerous studies on this argument. Stock prices change rapidly and can be …

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How governments can influence the economy

Governments try to stabilise the economy by maintaining good growth, high levels of employment, and balanced inflation. This can be done via fiscal policy by the government and monetary policy by the Reserve Bank to influence the prices of goods and employment. The state of the economy has a direct impact on the stock market as it would affect the ability of companies in generating profits. Expansionary policies can lead to increased demand and employment. This in turn can lead …

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