What Is Insider Trading?

For all of you traders out there, you may want to beware of insider trading.

In case you weren’t aware, there are unscrupulous traders out there who buy or sell stocks, securities and currencies based on non-public information they have access to.

These traders are for example, owners, CEOs, directors, or other upper-level management employees of large companies along with anyone who knows them such as family or friends.

Insider trading is an unlawful and unfair form of trading which takes place by individuals who make trades based on utilizing private or stolen company information they can use to their advantage.

Because they have access to such facts, their likelihood of making a profit is a most likely a sure one.

Why is this bad?

Because they are depriving public traders the chance of doing the same and are hindering the overall performance of the market.

How Insider Trading Works

You can think of insider trading much like cheating on a test, especially a job-skills test where those who score the highest are most likely to get hired.

The insider trader would be analogous to the person(s) that somehow get secret access to the answers before the test is to be taken.

Hence, they have an unfair advantage over all the other applicants.

How is valuable data passed along in insider trading?

Let’s take the following first scenario:

Let’s say the Director of ABC Inc has the results announcement due to be released by, say Wednesday to the London Stock Exchange.

Assume that the announcement is going to hurt the ABC’s shares price since this company isn’t doing as well as the public believes it is.

Monday, in a phone conversation with a hedge funds manager, the director accidentally let’s the info slip.

While at lunch, that manager has a few drinks with his lawyer and thus mistakenly tells him.

Monday night, the lawyer then informs his wife over supper that ABC’s announcements are not too good So on Tuesday, she sells all her ABC shares to avoid taking a loss on them.

She then can be nailed for insider trading.

So, what makes insider trading just that? It consists of the following:

– The insider:

This could be any employee of a company, especially upper management or perhaps anyone they interact with on a daily basis.

Anyone that a company member passes confidential info to is considered an insider including friends, relatives, or spouses.

– Price sensitive information:

Such info is any type of fact(s) or advice that encourage one to buy or sell stock based on good news or bad.

If this info leaks out early, it will directly affect the share value of the company involved or.

Simply put, this is tomorrow’s information shared today.

– Deal:

A deal is simply the act of knowingly passing on info that is confidential and illegal at that.

Anybody with access to inside info who passes it on to others is part of the deal.

Passing inside info to any outsider (or non-employee of your company) is illegal whether it is witnessed or not.

That also goes for professionals that accompany you in your trading activities such as hedge funds managers or lawyers.

Proving Insider Trading Activity

Then comes the aspect of insider trading: proving that it has happened.

Distributing inside info or accepting it is a crime and carries criminal penalties, large fines, and prison sentences.

In the case of court action, a jury needs to be persuaded beyond a reasonable doubt, that a suspect has committed a crime.

This plays as a standard test.

Because such crimes carry big penalties including imprisonment, the bar is set quite high and it’s the jury that decides whether or not insider trading activity has taken place.

Insider trading is even more difficult to prove. In an insider’s dealing case with multiple networks of information, phone conversations, emails, tricky deals, etc, it can all quite complicated to actually prove it has occurred.

As for the defendants, they’ll deny that it happened and such communication was done only as part of their job.

Because it isn’t easy to prove, many who commit to insider trading who should be prosecuted are not.

– The SEC Versus the Supreme Court

Currently, we have two inconsistent laws of insider trading simultaneously at war with one another in the United States.

One is a law promulgated by the Security & Exchange Commission (SEC) in its enforcement program.

The second set of laws is the law of insider trading that has been articulated the the US Supreme Court in a series of views that the SEC dislikes or rejects.

What are theses views and how do they differ?

The SEC feels that insider trading should be illegal since it is unfair.

This is because when one person trades with another with an inappropriate informational advantage, such an act is unfair to public traders.

However, the Supreme Court takes a completely different view.

Rather than focusing on the counter party, the Supreme Court addresses the source of the information.

They determine whether the person engaged in this trading activity has stolen the info from its rightful owner.

Hence, we can call the SEC’s viewpoint to insiders trading as the fairness approach and coin the Supreme Court’s viewpoint as the business property approach.

Both views can be analyzed as to who is harmed under these distinct theories.

A second scenario demonstrates how differently the SEC and the Supreme Court view insider trading:

Say, a hedge managers gets inside info on how the ABC firm’s bid for the XYZ firm.

Hence ABC is the acquiring entity and XYZ is the company to be purchased or taken over.

ABC plans to pay a large premium for XYZ’s stock.

Anybody who gains inside knowledge of this unannounced bid could use it to their advantage:

by making a lot of money through purchasing shares of XYZ and then reselling them after the bid has become public.

How do these legal entities view this?

The SEC sees it as being unfair to XYZ (the seller of the stock) as they are not yet aware of ABC’s intention of acquiring their firm.

Thus, those who buy XYZ’s stock based on these facts are at fault.

On the other hand, the Supreme Court says the person doing this trading has no preexisting obligation to trade duty to this counter-party (XYZ).

What we care about is that whoever is making a trade has in essence stolen this information from the bidder (ABC).

Hence, the Supreme Court feels that the persons spreading the inside info are at fault, not the buyers of XYZ’s stock.

However, the SEC has what they call an Insider Traders Enforcement Program.

The way they find insider traders is by investigating those who have made a great amount of money on a recent buying or selling activity, especially those who’ve traded on a repetitive basis.

Hence, they look at hedge funds and private equity firms and look at the returns these firms make when investing in company stocks.

If alleged inside traders lose money, the SEC pays no attention to them.

However, if specific traders make money consistently, the SEC suspects these people have engaged in insider trading.

Once the SEC finds traders who have repeatedly outperformed the market based on its theory, this organization will investigate them, create a lawsuit against them, and once evident, throw them in jail.


Imagine that you trade stocks or securities.

What if someone lets you in on a secret as to what stocks to buy or sell?

Would you be elated with their advice or would you question it?

What if it were a friend, relative, or family member?

Should you follow their advice?

Absolutely not!

Your best bet would be to question them and find the source of this information.

More than likely, they may be engaging in insider trading.

Hence, if you gladly take their advice and do what they ask you to do, you are guilty just the same.

That’s if you get caught.

Remember, inside trading is a crime whether you inform others of non-public trading information or act on it yourself.

If caught, you may face big fines, imprisonment, or both.

If you are suspicious that one is committing such an act, refuse to cooperate and if you can remain anonymous, report them.

No amount of money is worth the risk.

11 Steps How to Make Money in Real Estate

If you have ever considered a stable source of investment, I am sure real estate has always come up as one of the sure sources of consistent returns.

Despite the ups and downs in world economic scenario, the real estate market has remained a favorite bet for investors for generations now.

Of course in the aftermath of the subprime crisis, you need to be careful about making money in real estate, but the real estate market has consistently yielded stable returns over the longer term.

However, you must remember that timing is a crucial element in real estate market transactions.

The sub-prime crisis in US can well be considered the nadir in real estate world, but the secret to how to make money in real estate market is not too difficult to guess either.

Perhaps the biggest advantage of making money in real estate is most of the dealings is for the longer term, and investment in a hurry does not work very effectively in this market.

How to Make Money in Real Estate Market

How to Make Money in Real Estate Market

One of the earliest lessons that you must keep in mind about making money in real estate is that patience and timing is crucial.

You cannot lose patience and neither should you be in a hurry.

So we decided to make the task even simpler for you with our easy list of how to make money in real estate market.

1. Buy Low

Buy Low

If you want to make money in real estate, you need to keep a hawk’s eye on the overall pricing element.

Most importantly, you must be mindful of the price that you buy the real estate property at.

Just like in stock market investment, the key to profit is buying low.

Don’t wait for the price to appreciate before you begin to buy the real estate of your choice.

Once you have undertaken a thorough research of the real estate market that you are targeting, you must then begin to pay attention to the buying price.

If the fundamentals and prospects of the property are clear, you must look at the prospect of buying it at the lowest possible price.

Don’t wait for demand to rise so much that you have to pay a premium.

If you want to make money in real estate market, you have to go for the cheapest bargain and then patiently wait for the price to rise.

Appreciation is undeniably one of the easiest and quickest sources of profit in the real estate market.

Whether you are looking at refinancing or selling your real estate property eventually, your extent of profit is directly dependent on the type of rate that you can make your initial investment.

Once you can ensure that you have bought the real estate property of your choice at a significantly discounted rate, and then every bit of appreciation in the price becomes your profit.

Whether you want to sell the property or put it up for rent, appreciation becomes your key armory to maximize profit.

2. Selling at a Higher Rate

Selling at a Higher Rate

Almost by the same logic that buying low helps in the real estate market, you can take advantage of selling higher.

If you are trying to analyze how to make money in real estate market, this becomes the most basic and pertinent lesson to master.

In terms of analogy, think about how you make a commodity or a stock market trade.

You always buy when the price is at a discount and when the price appreciates a lot higher, you decide to sell.

This makes sure that you can earn the maximum possible profit from the investment.

The same principle comes to play when you consider a real estate investment.

You must always target selling at a higher rate.

Not only should your selling price be higher than the buying price but this price should also help you recover the associated expenses.

For example, buying a real estate involves a lot of associated expenses like registration costs, transactions charges and legal expenses.

So when you are selling the property, you have to make sure that you get a price which covers all these expenses and still manages to book a decent profit for you.

This is the cardinal principle of a great investment strategy and one of the most primary pre-conditions that you must keep in mind in understanding how to make money in real estate.

Selling higher confirms to another primary aspect of real estate market investment, it reflects the premium that your investment commands.

It is a key indicator of the scalability extent of the property you have invested in.

If you get a significantly higher selling price, the profit prospect also rises a lot higher.

It also confirms your mettle in identifying profitable opportunities.

3. Rental Income

Rental Income

If you are keen about mastering how to make money in real estate market, one of the simplest solutions is to lease out your property or put it up for rent.

In fact, whether you are planning to invest in a residential or a commercial rental property, the revenue inflow is assured.

However, there are some basic calculations that you must keep in mind to realize maximum value from your rental investment.

The first and foremost aspect of investing in any real estate is location.

The location is often the primary factor that decides the future price appreciation or depreciation of a specific property.

This becomes particularly relevant if you are buying a rental.

Your primary target while investing in this type of real estate is to make money.

So in the absence of a suitable and strategic location, you will not be able to command a great rate for the property.

Forget about selling it eventually, if you cannot get a significantly adequate rent, you will not be able to recover your cost.

So whenever you are calculating your income prospect, you must always look at the difference between your initial cost, the daily maintenance and the maximum rent that you can get at any given point of time.

This will, after all, identify the exact extent of profit that you can hope to earn.

If you want to make money from real estate, there is another factor to remember while investing in rental properties.

It is the maintenance cost.

You must, on principle, avoid real estate that needs intensive maintenance.

This is because the recurrent expenses will eat into your profit from the rent income.

You can almost liken it to transaction charges in the case of stock market dealings.

If your transaction charges are too high, then your relative profit decreases and you would consider this as a bad trade.

Now you must apply the same principle while deciding on an investment in the real estate market. You have to effectively target a rental property that is

  1. Available for a bargain
  2. Has the potential to command a high rental
  3. Is strategically located to make sure you can charge a premium
  4. Needs negligible maintenance to maximize profit and limit losses

Therefore, when you are trying to earn profit from a rental investment in real estate market, the profit potential is always maximized by a healthy balance between returns and expenses.

4. Renting in Parts

Renting in Parts

Now renting real estate also has many dynamics to make it a more profitable deal.

One of the easiest options to make money in real estate is by renting out your property in parts.

For example, let’s say you have a duplex; the rent that you can get by leasing it out to a single family will always be less than the amount you can recover by dividing the house into two separate floors and renting them individually.

Another interesting aspect of this kind of real estate rental is that you are able to realize better value for your property.

For example, if you invested $100,000 in the property and have a mortgage payment of $500, a duplex apartment can yield you a rent of $700-800 on an average.

But the moment you convert them to individual floors, you get the flexibility to charge lesser and charge double.

So instead of $700-800 for the entire house, you can now charge anywhere between $500-600 per floor.

So on an annualized basis, you get to earn a cool $3000 extra, without any additional investment.

Therefore, renting in parts increases the overall returns in the real estate market.

Of course, the location yet again plays a crucial role in determining how much you can optimize the return prospects.

Supposing you have a property close to a college area or a workplace with lots of youngsters looking out for residential options.

Here, of course, you will able to make more money from the same real estate property.

Now compare this with the potential prospects of a residential property in a predominantly business area.

It will undoubtedly have much lesser demand, and the relative rate that you can get from that rental will also be significantly lesser.

5. Increasing Your Net Worth

Increasing Your Net Worth

When you look at how to make money in real estate market, it is, in general, a vanilla concept of how much money you are putting in and how much you can realize from it.

When you put in a lower amount and sell it at a higher amount, you earn a straightforward property.

But what if you do not have the cash required to buy the property?

How can you increase your equity even when you decide to invest in a real estate property using a loan?

Here your initial expenses include not just the price of the real estate property but also the financial charges that your incur.

So you can increase your net worth in this case by simply investing actively in rental properties.

The rental should be such that the rent should cover the maximum mortgage payout and it should still offer you a decent profit.

In this case, you generate some extra cash from investing a set amount.

This extra amount that you generate can be used for making further investment in real estate.

So let’s say that you used a mortgage to finance a commercial rental.

Now you saved whatever additional income the rent generated every month.

At the end of a year or even two years, you used this amount to buy another rental real estate, be it commercial or residential.

The basic idea is, therefore, for the same amount of money, you can generate additional wealth or in other words, make money from the real estate investment that you are engaged in.

This is often considered the ideal kind of return that you can expect from the real estate market.

However, for this, you need to be very alert about identifying potential properties and observe financial discipline in reinvesting this amount effectively.

6. Leverage vs Returns

Leverage vs Returns

If you want to get higher returns, the real estate market can offer the most sustainable and relatively higher returns over the longer term.

What makes the deal even better is increasing your relative leverage in the entire investment.

Let us take an example to understand this point a lot better.

Let us assume you invested in a property worth $100,000.

For this, you are leveraged about 20%. However, when you are receiving the real estate value, you will get the entire 100% on the real estate property that you are invested in.

Let’s assume that you are able to generate a rent of $700-800 and have a mortgage payout of $500.

So the balance $200-300 becomes your absolute profit on the real estate. 20% leverage on a $100,000 property means, your initial investment is close to $20,000.

On the other hand, the relative annual return is close to $3000-3500.

This means you are generating over 15% returns on the basis of a simple 20% leverage.

Now think of any other investment tool that can help you make money to this extent, given the leverage that you have in the market.

Additionally, given the long-term nature of the investment pattern in this market, you get much higher returns on a higher leveraged investment.

Also, this kind of investment pattern gives sufficient leeway to investors to leverage a relatively higher amount and optimize the overall profit that you can earn from the specific investment tool.

As an investor keen to understand how to make money in real estate market, the leverage -return balance is most evenly poised in case of the real estate world.

As an investor, you get a lot more opportunity and have a relatively limited risk, even while leveraging a higher amount.

7. Tax Liability

Tax Liability

Real estate laws are different in every country, but on an average, every country provides some kind of rebate or tax advantage on potential real estate investment.

If you want to understand how to make money in real estate market, it is very important to gain a comprehensive understanding of the tax implications of real estate investment.

For example, you must understand the types of real estate investments that can yield maximum value.

If the government has a higher tax rebate for residential vs commercial properties, you need to fashion your investment accordingly.

Also, if you realize that in residential real estate investment, rentals have better return prospects but purely residential options have a higher tax advantage, you would again need to recalibrate your investment decision.

You have to take into account the various costs and income prospects, and then take a call on the possible real estate investment that gives you the best value for money deal.

Often an inaccurate understanding of tax liabilities can erode your profits significantly.

You might end up paying a lot more tax than the actual profit that you might earn from a specific investment that you might have made in the real estate market.

Proper and detailed study of the tax implications can easily help you counter that type of losses.

8. Profit from Refinancing Opportunity

Profit from Refinancing Opportunity

When you look out to make money from real estate market, the possibilities are numerous.

The trick is how alert and vigilant you are in identifying these and capitalizing on them.

One of the best ways that you could try to make money from real estate is undeniably by taking advantage of the profit that you make once your refinance your real estate property.

In case your mortgage bill comes down significantly after refinancing the property, but the rent remains the same as before, the difference easily becomes your profit from refinancing your real estate investment.

What this essentially does, it generates a significantly large cash flow fro the same investment and irrespective of ups and downs in the real estate market, your profit remains constant in this case.

You can look to reinvest this profit back in the real estate market and expand your overall equity.

Or else you could also look at preserving cash and increasing your cash flow in the market, depending on your preference.

The moot point is this becomes one of the most convenient ways to generate additional cash or make more money from real estate.

9. Commercial Property

Commercial Property

So far most of our how to make more money from real estate was biased significantly towards residential real estate, both rentals as well as holding property.

However, commercial real estate remains one of the most under-utilized avenues of booking profit in the real estate market.

The billing rate and the profit parameters of commercial real estate are very different from residential.

This difference can enhance the profitability of this kind of investment in the real estate market.

You must understand that commercial properties gain value based on two primary factors, location and strategic importance.

So the cardinal rule while investing in commercial real estate is undeniably location.

Whatever you might consider and however cheap rates you might be getting for; it is never wise to invest in commercial property in an underdeveloped area with low prospects of business activity.

The problem that you would face is this type of real estate investment is that the rate of appreciation would be much slower and the average rate of a slump in rates will be higher in case the market sees a downturn.

Moreover, commercial properties are interesting real estate investments for the kind of value that they encompass.

However, in the absence of a suitable locality, this value gets eroded significantly, and you might even reach a state where you would try hard to get rid of it even at a loss.

This type of eventuality can be avoided, and you sure can make more money from your real estate investment if you are careful about choosing the location of the commercial property, and at the same time, able to gauge the business prospect of the area accurately.

10. Investing in Real Estate Land

Perhaps when you talk about how to make money in real estate market, this is one aspect of real estate investment that absolutely escapes your attention.

Yes, I am talking about investing in a land where you can build real estate.

But then again in case of land too, the same prospects lead to price gain or depreciation in value.

It is possible to buy under-developed land and then sell it at a premium when the area and the land get developed.

Your basic principle of buying low and selling high comes into play in this context.

Once the real estate developers start raising buildings- residential/commercial, depending on the need, the value starts rising, and you can hope for sizeable returns on your initial investment.

You could also consider investing in agricultural land or mineral rich land.

Depending on the mining activity that is undertaken or the agri-initiatives by the landowner, the relative value of the land could shoot up rather high.

Here again, locality and the prospect of the growth play a crucial role in determining how much money you can make from this type of investment.

11. Real Estate Appreciation & Inflation

Real Estate Appreciation & Inflation

Well when we discuss ways to make money from real estate market, appreciation is often the keyword.

Appreciation decides the amount of profit you make to the relative premium you can get from these investments.

But here is a little bit of complexity that gets added to the simple mathematics of buy low-sell high and profit from the difference.

In very simple words, it is the impact of the ‘inflationary forces’.

The economic implication of inflation is in fact quite far reaching and pretty long-term.

So if in the five-year period that you invested in a specific real estate, the inflation rate rose by 10%, it means that the relative amount of good that $1 dollar could buy gets reduced by 10%.

Or for the same amount of service, you have to shell out 10% more.

This, therefore, needs to reflect in the rate at which your real estate investment appreciates as well.

Only then, you will, in reality, make more money with the same amount of investment.

Calculation of the inflation impact is particularly important when you are undertaking long-term deals in the real estate market and committing a rather large cash amount for it.

Let me help you understand this concept with an example for better understanding.

Let’s say you bought a house in 1980s for about $100,000.

Even if you did not invest any amount in decorating the house or doing it up, it would still be worth a lot more than the amount you invested simply because of the steady rise in inflation in the period in between.

Even if that property remained absolutely dormant with no development at all, you will still be able to realize a significantly large amount from the same investment just by virtue of upward rise in inflation.

Therefore when you are exploring how to make more money from real estate, the long-term strategy is often the crucial game changer in this context.

Given the pace at which the global economy is growing and the relative rise in inflationary trend, just by holding a real estate property for sufficiently long time can help you realize decent gains from it.

The inflation-appreciation link in real estate market also, therefore, seals the importance of long-term holdings in real estate world.

If patience is considered virtue, it does not reflect it as effectively anywhere as you would see it in real estate market.

In fact, you can often consider it the best place to take advantage of the positive up move in inflationary forces in many circumstances.

So… It Is Possible to Make Money in Real Estate

Therefore, we can conclude that if you are interested in how to make money in real estate market, the extent of opportunities is pretty varied.

As is the case in any other investment, this asset class sure has its ups and downs, but over the long-term, the real estate market often offers the best cushion against global economic turmoil.

Pretty much like gold, real estate investment often helps you preserve your capital better, offer a rate of returns and significantly reduce the losses in terms of a sudden downturn.

However, you must understand that while you can make money from real estate market, it is a rather illiquid (thin) asset class in terms of crisis.

So, it advisable to maintain alternate investment options as well and keep a steady cash flow.

Just like they say ‘never put all your eggs in one basket,’ it is better to diversify your investment as well.

Balanced Budget Without Raising Taxes

As the United States tackles yet another budgetary allocation, the question that is top of the mind is how best can the target balanced budget be achieved?

The fundamental choice continues to be the toss between balancing spending with taxation.

When this topic comes up for discussion I am sure you might be wondering if the word balanced economy is an exaggeration?

Or how best can a country base its allocations in a way that both supply sides, as well as demand bottlenecks, are addressed simultaneously.

Some of the most important factors influencing these judgement calls include the prevalent economic conditions, the bias of the existing political party and the trade ties that a country shares with others.

Another key deciding factor would be the type of export or import.

For example, if the country is a net oil importer, then obviously a significant part of the Budget would be geared towards servicing this debt.

The Basics of Balancing the Budget

First of all let’s get a clear picture of what a balanced budget is all about?

When we talk of a balanced budget for a country or a nation boasts about a balanced budget it essentially refers to a situation where the expenditure and the revenue generated are equal.

Almost a Utopian situation, it refers to a state where the economy neither has a deficit problem or a surplus condition.

This balance can either be on an annual basis comprising of a span of one financial year, or it could extend for a cycle.

By cycle I mean a complete economic cycle.

This could comprise of a boom or a bust period.

Thus a balanced economic cycle talks of period where the economy might be seeing surplus during upswing in the markets deficit during times of negative returns.

Some of the key benefits of such a situation is…

  • Bring down interest rates
  • Help boost investment and savings
  • Reduce the trade deficit
  • Aid faster economic growth

However despite these, many economists believe that a balanced economy might not be the best case scenario always.

Especially in bust period, a deficit budget is a comparatively more desirable situation.

A cyclical balanced budget in comparison has a lot more supporters.

Most economists who argue for this state take a Keynesian perspective on the issue.

They feel while budget deficit acts as a fiscal stimulus during times of negative market trade, surplus in Budget acts as the restraining factor.

The various schools of economics continue to hold varying viewpoints on the kinds of economy they would choose or what type is more effective in maintaining the economic health of a country.

Many opine that deficits which are large but within limits to recycle savings from a growing GDP or gross domestic product is more of an economic necessity rather than a liability.

By Budget deficit, I mean the difference between the total planned expenditure and the total available budget.

A negative total is the budget deficit while a positive one if Budget Surplus.

Tools to Rein in Budget

There can be many approaches to a specific problem.

Without debating what would have worked better and how, let’s look straight into the several ways that can be employed to rein the Budget and not tip the balance even without raising the tax concerns.

As I mentioned right at the beginning, that the Budget is never the product of just economic concerns.

There are many associated elements, and all together they contribute to the essential policy making. Thus here are some options:

Look at Revenue Generation

Revenue is a strong tool if used effectively.

There are various channels through which an economy can look at generating income and funding its initiatives.

This is a key element in the overall economic construct and identifies points that have the maximum potential to benefit the exchequer in a way that could help meet up all the state’s expenditures.

Many economists have termed it as the least worst way to deal with a deficit conditions.

The finance department of the country needs to burn the midnight oil to devise strategies that can look to achieve this end.

The sale of assets is one key approach.

For example the US Federal Govt’s OMB Department or the Office of Management and Budget compiled a report in 2008 that said the Govt held public land that was worth $833 billion and this was a significantly higher amount compared to the loan obligations it had at that time which was around $209 billion.

Legislators should also explore avenues which have been thus far underutilized and can help them make significant additions to the exchequer.

For example, the US Govt provides many services like flood insurance, inland waterways and National Parks maintenance.

By raising the user fees for these services alone the Govt could rake in a considerable huge sum, given the scale of services and the widespread uses involved.

Floating of Bonds

When we talk of selling the country’s assets to expand the profit picture, it is needless to mention that one fundamental weapon used in the sale of these is the floating of bonds of various types and maturities.

The Govt can thus raise money via the issuance of these bonds.

This is perhaps one of the most basic tools employed to avoid raising taxes or cutting spending allocation.

Historically evidence supports the fact that many a time a debt issuance might be the best tool to boost the economy and directly deal with paying off the Govt’s long-term debt woes to a large extent.

Not just by floating bonds for the public but many a times as we saw in US post the Lehman Crisis, the Central Bank, Fed, in this case, bought the very bonds it issued to improve the cash flow in the market and stimulate the economy.

It was popularly known as the quantitative easing tools employed by the US Fed.

They bought huge amounts of government securities to help the economic recovery.

Expand Tax Base

It is often argued that more than raising the tax levels, it is very important to improve the base for it or rather the total number of people/organisation who can be brought under its cover and be made to pay the taxes that are due.

The Govt should also constructively look at steps to eliminate industry based subsidies, special exemptions and credit refunds.

These measures can instantly spike up the revenue generation cycle and bring in a lot more significant returns with limited transaction costs.

Also effective compliance through incentivizing the tax structure in a way that more and more people come under its net is seen as an effective measure in increasing the overall tax collection.

Tax Hitherto Untaxed Organization

Trying to capitalize on unrealized revenue potential is an operating word.

Many Govt operated institutions with reasonably high income or operating revenue.

If we take the example of the US economy, there are so many federal sponsored firms that are direct competition to the private companies, but have a major advantage in terms of, not paying any income tax.

The likes of credit unions, non-profit hospitals and many insurance companies all fall under this bracket.

There has also been an increase in the number of many non-profit units that are now engaged in profitable ventures.

While there are provisions for these organizations to pay income tax for unrelated business, a lot of them get royalties, rents which is considered exempt from the tax net.

Improve Compliance

It is often noticed that while theoretically there might be X individuals and Y firms that should be paying taxes yet millions of dollars are spent in ensuring that as many as possible actually pay their taxes and the number of total net payers of tax reach as close as possible to the original target set.

Another interesting and important element in improving the tax compliance is the way in which taxation policy is computed and how simple it is in terms of access by the average taxpayers.

By removing the complications associated with tax, payment can easily be instrumental in improving the compliance.

Tweaking the Interest Rates

Yes, even if it does not strike as the most logical solution, constructive tweaking of the interest rate can enhance the tax collection and the associated revenue generation involved in the process.

Interest rates form the core for most business development and have a significant bearing on all kinds of monetary transactions.

Hence, it is extremely important to regulate it in a way that brings out the maximum possible benefits potential for a given economy given the current conditions and the challenges associated with it.

Essentially by maintaining a low rate of interest, the govt can look at stimulating the growth outlook, as well as raise the target revenue generation in the process.

Thus, this can ultimately work towards servicing the national debt in a situation where tackling the deficit conditions might be the Govt’s core challenge.

Low-interest rates can also help stimulate the growth of individual and small businesses.

Also, this can thus be instrumental in generating employment and improving the overall income situation.

This can only be good news in terms of the health of the economy and the country’s Budget, which is nothing but the national record book of expenses and income.

Look at Ways to Grow the Economy

That logically brings us to the next destination on our economic chart, balancing the budget deficit by stimulating economic growth and bringing out maximum possible increase in the economic activity.

This is particularly important in bringing about an all round growth boost for the various elements that make up the construct of a working economy.

Economic growth is a direct result of additional manufacturing activity, increased retail spending and additional consumption of services associated with retail and consumer clients.

These can quickly provide a fillip to the revenue generation and overall collections at the exchequer.

Focus on Higher Job Creation

We need to understand a basic fact that an economy is ultimately dependent on the money that it can collect as taxes or in other words tax collection continues to be one of the most effective means of income for any country.

This is only possible when the people who are liable to pay income tax see a significant rise.

Another important fact is that the additional expense that the state incurs for the well-being of those who are unemployed and additional provisions have to be made for that.

This gain is a drain on the economy.

If the rate of employment rises as a result of the direct impact of heightened growth stimulus, more people will start paying taxes and less and fewer allocations for the unemployed benefits have to be made.

All of these translate into additional economic gains for the country’s economy.

Cut Spending

Spending cuts continue to be one of the biggest weapons in the armoury of the country’s exchequer to boost the economic situation and enhance the revenue collection for the Govt.

Another interesting element is that they are relatively easy to implement and go a long way in sustaining benefits for the country over the long-term.

For example in the 1990s when Canada faced a significantly high budget deficit, they reduced this gaping difference to zero with the help of deep spending cuts, nearly 20% in the entire tenure that it took to reduce its deficit.

In the modern context, one particular economic mantra inspired by this very fact has been the Austerity drive that you have seen in many parts of South Europe after the 2008 economic crisis.

Many stagnating economies in the region pledged to cut as much as 50% of their spending to rein in the gaping deficit woes and bring about a semblance of order in the existing economic situation of the country.

Yes, it is another fact that most times implementation of these spending cuts could be an uphill task, especially in the light of losing political support and ever growing protest against any such proposed cut.

The huge delay in implementation of the austerity programme in European nations of the years of wrangling on the Social Security program in the United States can well be counted as screaming examples of the extent of turmoil which these spending cut proposals can stir, forget about actual implementation of these measures.


The other possible options in dealing with a budget imbalance could include addressing the inflation issues and tackling supply-side challenges of the economy.

The Govt can also work towards improving social, economic mobility.

Not only these are means to achieve a balanced budget, but can go a long way in enhancing the overall health of a country’s economy.

Passive Income Tax Rate

When you look at the various facets of income opportunities available today, passive income is a much talked about alternative.

But often, people are unaware of the exact tax rate and in the process, tend to miss out the advantages of the additional income.

You must understand that the passive income tax rate is very different from nonpassive income.

There are different types of rates applicable for different income opportunities.

You can draw the biggest benefit from these income avenues by understanding your tax liabilities effectively and being able to service your needs and requirement accordingly.

Broadly, passive income tax can be deducted on passive income.

By passive income, the US revenue department refers to all such earnings for which you do not have to earn or make any effort.

It is income that follows its natural course as a result of any previous initiative that you might have undertaken.

At the current moment, you do not have to do anything to maintain the steady cash flow.

Therefore, this gets counted as passive income.

There are, of course, many prerequisites before you categorize the various income options.

Therefore, it is pertinent that you understand the different provisions.

Passive Income Tax Rate & How to Determine It?

So it is important to understand what exactly passive income is and how you can distinguish it clearly.

1. Passive Income

In very simple terms, passive income refers to income or earnings from any activity where the beneficiary has not participated actively.

The source of passive income could range from real estate to fixed deposit to business dealings as well.

This could also include your earnings from certain investments at times.

The crux of the arrangement is such that the beneficiary after the initial legwork can pretty much sit back and relax completely.

Now we all know that passive losses can be only claimed on the passive income tax liabilities.

Most people now try to have simultaneous passive income sources apart from their active ones.

This is exactly why special rules were constituted to put a cap on the amount of tax liability that you can seek to reduce through claiming passive income benefits.

The 1986 Rules

These special rules that were enacted in 1986 specified that you can look at reducing your nonpassive income by as much as $25,000 if your overall income is less than $150,000.

However, this also specifies your active participation in a passive income source like rent from real estate.

But beyond this point, you have to restrict claiming passive loss benefits from passive income.

The losses that cannot be claimed can also be carried forward in consecutive years.

You need to understand to offset the losses; you need to project passive income that can adequately account for this amount.

There are some instances where you can also use the proceeds of a sale to claim tax benefits for passive losses.

But for that, you need to understand the law clearly and make provisions accordingly.

This will make sure you are able to optimize the benefits of a separate passive income tax rate in the best possible manner.

2. Portfolio Income

One of the most popular and interesting investment opportunities is undoubtedly that of portfolio income.

In many ways, it can be considered passive income too as it comprises of various types of dividend, capital gains, interests and royalties.

Though they are all clubbed together as either portfolio income or passive alternatives, the crux of the matter is that this kind of income has a very different tax rate.

Different kind of portfolio income has different rates.

For example, the tax rate for capital gains on an investment that you have held for over 12 months would be between 10-20%.

However, if the capital gains are calculated on investment less than 12 months, then they are taxed at a regular rate.

Social security taxes and medicare expenses are not levied on portfolio income.

So whether you are trying to project your income as portfolio or passive, income will depend on several factors.

But another benefit in case of portfolio income is you can use this to offset tax liabilities and other investment/income losses.

3. Active Income

This is often termed as earned income as well.

It is what you would call as regular income opportunity.

It is one of the easiest types of income and seen everywhere.

You go to the office, earn money and come back.

At the end of the month, there is salary in your bank account.

As the name clearly indicates, this is active income because you are putting in the effort and getting the reward almost immediately.

It is needless to mention that this, of course, comes with the highest income tax rate.

Personal taxes range anywhere between 10-35%, and apart from the direct income tax, there are several other taxes too that are levied on this income as well like social security and medicare taxes.

Therefore, the overall tax on this active income can be sometimes as high as 50%.

Another point where this differs from passive income tax rate is the number of deductions.

Well, the number of deductions is much less in this form of income as compared to other income opportunities like passive income or portfolio income.

So that further exacerbates the need to understand that various prerequisites for what constitutes a passive income and then getting a fair perception of the exact tax rates.

This is important also because the overall deductions that you can claim on a given year, and what losses you can carry forward to the next year is very closely linked to these factors in totality.

You must remember that understanding the various facets of your tax rate is as important as making sure you have a reasonable income source.

This is because only a thorough understanding of tax will help you maximize your income potential and recover maximum value for every dollar that you earn.

This understanding is also crucial in opening up various channels of investment in a constructive manner.

The Effort Element in Passive Income Tax Rate

When you look at the taxation rate of passive income vs active income, one of the most striking elements to consider is the fact that why is earned income or active income come with a higher tax rate.

Technically, you are putting in a lot more effort, devoting decidedly more time and even in terms of engagement, you need to have a far better and greater level of involvement.

So how is it that you need to pay a greater amount of tax in return for your hard work.

Well, you have guessed it right, it is not the time that you devote towards generating passive income that matters but the point is how efficiently are you able to.

In many ways, I would say that the tax department is perhaps telling you something really important.

It is not important for you to work harder but on the contrary, you need to work smarter.

Instead of devoting 8 hours in the office, if you can work at your convenience and generate an income that carries a lower tax rate, then why not?

It will only work better in your favor.

I am sure you already understand by now what it really meant by passive income.

It is, after all, any form of earning for which you do not have to put in any active effort.

Effort or the lack of it is the key factor that distinguishes active from passive income.

One of the possible variants of this kind of income is dividend income.

There are other popular alternatives as well.

These include the likes of:

  1. Income from bank account
  2. Credit card reward points
  3. Royalties
  4. Licensing fees
  5. Rent from real estate

One of the unique features of passive income is it does not necessarily take into account how hard you work or how much effort you put in.

Rather passive income capitalizes on how smartly you can execute a task.

It is completely based on your ability how efficiently you can generate income without putting in a huge effort.

It doesn’t really matter how hard you are working or how many hours you have been devoting for the job.

In fact, it celebrates the fact that you have put in some effort today and can then reap the benefits of it for the rest of your life.

What’s even better is there are many opportunities whereby you can also convert the active income into passive income.

You can generate the cashflow that helps you take advantage of a far attractive tax rate.

Once you are able to turn the active dollars into passive assets, it is needless to mention that you can then take advantage of the more liberal tax policy and look to conserve the cash a lot more effectively.

Why Passive Income Tax Works in Your Favor?

Perhaps I mentioned this already, but it does not hurt to repeat that the tax department’s policy is so geared that it shows a decided bias towards those who are working smarter instead of harder, in other words, it favors those who choose passive income options.

One of the best ways to claim this tax advantage is by choosing the most appropriate channel to generate the income.

In this context, dividend income is one of the most lucrative opportunities.

In fact, if you happen to fall within the 15% tax bracket, you can even enjoy the earnings from dividend absolutely free.

This is because those individuals, who are within this specific tax slab, get taxed 0% on dividend income.

You might now ask what exactly comprises a 15% tax slab.

Well, according to data available online if your annual average income is around $37,000 you qualify for this rate of tax.

As per the existing policies, you can claim a standard deduction of not more than $6000, in case you are filing individually.

On top of that, there are personal exemptions which you can claim close to $4000.

On top of it, if you have a dividend income north of $47,000, you actually stand the chance of paying a big zero in income tax by the end of the year.

Now think about the tax rate at which you are earning at the moment.

The disparity will be visible to you in very clear terms.

But something that I missed out mentioning here is the social security and the medicare rates are still applicable on you.

So you need to account for another 7.65% in tax as well.

Apart from that, the tax rate still remains in favor of passive income

Therefore, it would not be wrong to term the passive income tax rate as one of the best representations of the ways to maximize the value of every dollar that you earn.

It helps you to not just set long-term goals, but add more value to every penny that you set aside in the investment kitty.

So whether you are planning to take an early retirement or compound your existing savings structure, the passive income tax rate can really come in handy in keeping the overall tax liabilities.

While setting long-term targets in one part of the story, the other important aspect is how well you can preserve this entire amount in a way that you pay bare minimum tax for it.

It would mean that you will be able to retain the maximum amount of that money with you and not have to part with it as a tax liability.

The Big Advantages of Passive Income Tax Rate

I am sure all of you understand by now what exactly is meant by passive income tax rate and the reason why passive income comes with a lower tax rate compared to other nonpassive opportunities to earn money for a prolonged period.

But those opting for this kind of tax policy tend to make savings in many other unique ways as well.

That also adds to the charm of opting for passive income and the associated tax rate that goes with it.

1. Limited Cost

If you follow the entire tax rate and way passive income tax is calculated, you will realize that there are no associated costs apart from what is already specified.

Alongside, those who opt for this kind of income, also make a lot of savings in the form of lesser lunches outside, better time spent at home, lower wardrobe costs and far lesser transportation expenses.

Now let’s face it that all of these services carry a certain amount of tax.

Whether you consider hospitality taxes, different kinds of surcharge and the rate of sales tax further exacerbates an individual’s tax liability over an extended period.

You must understand in choosing a specific way of working often means that you can optimize the value of every dollar you earn or save in a comprehensive manner.

2. Flexible & Financially Secure

Let us explore the crux of the entire passive income dynamics.

Why would you choose it over a conventional active income opportunity?

Most times, this is because you get to decide the working hours, you are able to gain more time due to less travel, you inevitably spend more time at work.

But at the same time, you are no longer financially dependent on anyone.

Whether you are earning via rent income or dividend or any other type of passive income avenues, you are able to maintain your financial independence.

A lower tax liability and ability to offset losses over wider time duration makes sure you would be tempted to choose this way of earning money more than any other.

3. You Are No Longer Tied to a Spot

If you have considered working from home ever, you would know that one of the most important reasons that people choose it over many other options is because they are then able to move freely.

Most times, it is only internet connection and a laptop that they needed.

When you consider passive income, the gains are even better.

You do not have to work, you travel as much as you want and choose to stay wherever you want, yet enjoy the benefit of a steady cash flow every month.

The icing on the cake is undoubtedly that your tax liabilities are also distinctly lower than what you would have to pay if you attended office every week and took bare minimum leaves.

Plus, there is no certainty that you will have the job forever.

You never know when you become a victim of a downsizing drive in office.

4. You Can Retire a Lot Earlier

Let’s understand we work, save, invest, work and continue this cycle for almost a lifetime in the hope of creating a cash flow that can sufficiently fund our requirements in a well-structured manner for our old age.

But what if you can create that passive source without much ado and gain financial independence at a much lower age, perhaps 34-35?

Moreover, it would mean that you also have to pay a lesser rate of tax and let’s face it.

Who does not want to take advantage of tax deductions?

Moreover, if time is money, this is one of the biggest income sources for you.

You save decidedly a lot of time, and that in itself can be a huge factor.

That apart, you also have to pay lesser tax, so it is indeed a win-all strategy for you.

The best part is you do not need to have a separate income source, you can easily convert your active earnings into passive income.

Some of the Key Passive Income Tax Rate That You Need to Know

Now let’s say; we have understood the great benefits of taking advantage of passive income tax rate.

But then the question might come that how should you diversify the cash flow source?

Should you depend predominantly on dividend income or can you also explore the option of bank deposit and earning interest for it?

Here is a quick guide on the tax rate of some of the best known passive income sources and how you can get more value for every dollar that you earn.

1. Interest Income

This is perhaps one of the most basic forms of passive income.

Hence, it becomes extremely important to understand the tax rate on this specific kind of income.

Interest income essentially refers to all such income that you earn as interest from various financial institutions and banks.

Whether it the interest that you earn from your savings account or the interest that your money market account yields, it is interest income.

Interest from various deposits and bank certificates are also included in this list.

Normally this interest, when credited to a specific account, is available for withdrawal.

You do not have to pay any penalty and will be taxed as per your normal taxable income.

The income tax rate, in this case, will range between 10-35% depending on the exact amount of your net income.

2. Dividend Income

This one is a very popular passive income source that is often recommended by analysts to generate steady cash.

Essentially dividend refers to any periodic payment by stocks and mutual funds to their shareholders.

This is not dependent on the market condition, and an individual can continue earning them as long as the stock or the mutual fund decides to pay to its shareholders.

Broadly this dividend income is divided into two categories:

– Ordinary Dividend:

These are regular dividend payouts that you see in the market.

The normal existing tax rate is levied.

– Qualified Dividend:

This refers to all those dividends that are paid on stocks that have been held for more than two months but within the 121 days post the dividend date or post the date the stock went ex-dividend.

These are subject to a maximum tax accounting to 15% if regular or normal income tax rate of 25% in levied.

In case, it falls below the 25% bracket, you are not liable for a single penny.

It is absolutely zero.

3. Capital Gains

In the list of the most popular passive income channels, capital gains tax occupies pole position.

Normally this refers to any kind of lump sum money that you might earn if you sell any major asset like stocks or mutual funds.

Normally the amount you earn from the sale is much higher than what you paid for it initially.

Capital gains again can have two primary variants:

  1. Short-term gains: This is the gain that you bag from asset sale that you have held for less than a year. These are taxed at the normal income tax rate that you are eligible for.
  2. Long-term gains: As the name suggests, this essentially refers to the profit that you earned from long-term holdings. The maximum tax rate for them is capped at 15%

4. Child Support

Marriages break, relationships suffer a jolt but what we don’t realize is these types of conflicts also have a financial implication.

The money that a parent pays to the other parent or the child’s custodian for the proper upbringing is also passive income.

This is not subject to income tax as opposed to alimony money that is taxed under regular tax rate depending on the bracket that you are under.

Therefore the passive income tax rate on money received as child support is zero.

5. Social Security

The extent to which this kind of passive income is taxable is entirely dependent on the tax bracket under which you fall.

Depending on your annual income, there are instances that not a penny of the social security retirement benefits is taxed.

For those with income below $25,000 on an annualized basis, as single taxpayers, or below $32,000 when paid jointly, do not have to pay any tax on their social security benefits.

On an average, if you file as a single tax paper and your annual income is worth $34,000 or above $44,000 as a joint payer, almost 85% of this income is included in your regular income.

This is then taxed at the normal rate that you are eligible for.

If your income is in between $25000-34000 as a single tax filer or between $32,000-44,000 as a joint taxpayer, 50% of the social security benefits will fall under the taxable income bracket.

Is Passive Income Tax Rate Complicated?

So I am sure you have understood by now that passive income tax rate is a rather complicated financial arrangement.

You need to have a very clear perspective of the existing tax rate, the return prospects of various income channels and your ability to generate returns from a passive income source.

Don’t get too buoyed by the lower tax liabilities for those with passive income.

You must understand that while it is quite simple to enjoy the benefits of passive income, generating it at the initial stage needs a significant bit of legwork.

You must be convinced about the channels that you choose.

That apart, you also need to make a ballpark assessment of the kind of money that you would require post retirement on an annualized basis.

This will then be able to give you a clearer perspective on the kind of money that you need to generate and what type of passive income platform can help you best.

It is needless to mention that you even need to take into consideration the various tax slabs and the rates applicable.

Retirement Planning Spreadsheet [Microsoft Excel Free Download]

Retirement Planning is a key consideration as you proceed through your professional life.

Just like you need to account for your child’s education, health and house, it is important to account for the money that you need to make your old age comfortable.

One simple way to achieve this is by accounting for every possible expense using a spreadsheet.

A Retirement Planning Spreadsheet is essentially all about encapsulating your entire retired life on an excel sheet or a spreadsheet.

The idea is geared towards creating a future account that enables you to save today and live a comfortable retired life in future.

Key Constituents of Retirement Planning Spreadsheet

While creating a spreadsheet is not very difficult, the point is what should be the key constituents of your retirement planning?

RetirementWell, there are some basic calculations that you must take into account while planning your retirement and these include:

  1. The exact level of monthly income that you would need every month post retirement
  2. How much you need to save now at current levels to get adequate funding for future rates
  3. Apart from the 401k retirement plan, figure out how much you need to save separately
  4. Exact tax liability once you reach the state where you can withdraw the retirement fund

Well, you might say that there is no real exact answer to this question.

But yes these above mentioned calculations will surely help you come up with ballpark numbers that you can use as a reference to guarantee future comfort.

A lot of it is also dependent on the kind of lifestyle you have now and what you intend to follow in future.

The amount you would require to service the future needs would solely be dependent on that crucial aspect.

An Example

For example, if your annual expenses are closer to $100,000 to live comfortably, the money that you need to save to continue the same lifestyle post retirement is significantly higher than what you would need if your annual expense is close to $50,000.

In fact, the money that you would need would be almost half of what you would need in case of the former lifestyle.

If your annual expense is even less than that, say around $25,000, then for the same money, you can spend your retired life pretty lavishly.

Just when you are creating the spreadsheet, you must pay attention to the various details that you must account for.

Only then can your retirement planning spreadsheet.

Also, keep in mind that your spreadsheet has to be extremely practical.

You cannot just assume you will save a specific amount.

Think about your existing expenses and see how you can balance both parameters efficiently.

Also, this planning needs to account for sudden financial needs or medical expenses and even economic downturn which could significantly bring down your overall returns in the longer run.

Therefore your retirement planning spreadsheet needs to adequately account for inflation related spike up in expenses, market related drop in returns and other such uncertainties have to be adequately padded up in your investment plan.

Online Options

Given the widespread use of computers and easy solutions available online, it is now possible to easily download retirement planning spreadsheet from the internet and tweak it as per your expenses to get the right amount that you need to save up.

But given the plethora of options that are available online, often making a choice can be tricky.

So, you might end up downloading an option that does not quite serve your purpose appropriately.

Ease of use is also another factor that you must take into account.

1. User Friendly Interface:

Choose a spreadsheet template that can easily adapt to your needs and yield the desired result for you.

There could be some template with the great features, but compatibility might be a major problem.

Therefore, you must pay attention and choose an option that can help you adapt to your requirement and computer software quite easily.

A user friendly interface would also ensure that you find it easy to use and can properly optimize the available features to get the right kind of result from the entire template.

This also means that you will also be able to access it in any format.

2. Flexible:

Another key requisite for your retirement planning spreadsheet is that it should be extremely flexible.

Everyone has a different type of income source and savings pattern.

Even the expense picture can be very different for various people.

It is, therefore, important to use a spreadsheet template that’s extremely flexible.

It can help you make these complex calculations without altering either your style of savings or making an irrational allocation to heads that you would not consider otherwise.

In short, the whole idea is that it needs to be adaptable and flexible to your needs.

3. Multiple Options:

Sometimes you might be investing in a traditional 401k retirement plan but perhaps given the kind of job profile that you have a SEP plan might help you garner better returns.

So an efficient spreadsheet option is essentially the one that easily helps you to compare the various options that you have at your disposal and make the most appropriate retirement planning for you.

Sometimes as individuals, we often get into herd mentality and just tend to do whatever we see others doing.

The fact is that it might not be very effective all the time.

Therefore a template that can help you compare option sand make an appropriate call based on these various alternatives will be best for you.

It will help you garner better returns for every penny that you spend.

At the same time minimize your tax burden as best as possible.

Therefore, an effective retirement planning spreadsheet is one that can address all your needs and generate options that are most appropriate for you.

While some may argue that they can easily do a back of hand calculation and know for sure how much they need, sometimes it is a much better idea to put it all down in pen and paper.

The idea is once you make a note of these various elements, it is much easier to track them both individually as well as a collective entity.

The whole idea is to guarantee a comfortable retirement for you.

And, the spreadsheet can often go a long way in ensuring this fundamental need.

Click Here to download our Retirement Planning Microsoft Excel Spreadsheet for free.

AOL Stock Price History and the Story Behind It

The long term AOL stock price history is very interesting to analyze.

It is the same with all the other companies.

But AOL is different because it has had more hard occasions compared to companies like Google, Apple or Microsoft.

You can learn a lot of things if you analyze the AOL stock price history.

The reason is this company went almost bankrupt and for such a long time the analysts were used to know it as a bankrupt company that had to be ignored by the investors.

But good and on time decisions can recover even a dead company.

Analyzing the AOL Stock Price History

There are so many big lessons to learn from AOL stock price history:

The AOL Stock Price History Charting

What you see on the left side of the AOL stock price history, is the real example of a company and business that was not scalable and their managers and owner didn’t try to scalable it.

As I have explained here, a business that is not scalable is doomed, even if it keeps on making profit for a while.

Once stronger competitors show up, it will slow down and will be kicked out of the game after a while.

As you see on the AOL stock price history chart, AOL makes a peak at $28.45 on Apr 23rd 2010, but starts struggling and goes down.

It goes up once again and makes a lower high at $26.68 on Oct 29th, 2010.

But then it collapses strongly, breaks below the support line and after breaking below $17.18, it goes down like crazy and gets close to zero.

The reason was that for such a long time, AOL was not offering anything more than what it was used to be offering during the past several years.

They had a website and search engine that used Google search system, some home and business Internet service providing, email and things they were used to offer for such a long time.

Stronger competitors like Yahoo started offering the same services and attracted AOL’s customers.

Even they called the AOL customers and ask them to cancel the AOL Internet service and sign up for their service with a lower price.

AOL was losing its customers like crazy but they didn’t take any action at all.

Maybe they have been waiting for the problem to be resolved by itself.

The AOL stock price history says that investors were keep on selling their share and the AOL market became bearish (more sellers than buyers).

It was too late to take any actions toward making the customers back.

They had to think about it sooner.

You can’t recover a business that has already started going down like crazy.

You have to prevent it from going down before it goes down.

The other important thing is that you can’t recover a falling and struggling business through doing the same things you were used to do and through offering the products and services you were used to offer (it is insane to do that according to Einstein).

If these things could save the business, it wouldn’t be collapsing now.

You have to do something new that you haven’t been doing before:

“Insanity: doing the same thing over and over again and expecting different results.” – Albert Einstein

According to the AOL stock price history, before AOL reached $11.78 on Aug 12th, 2011, they took an important step which was different from all they had been doing until that time.

On February 7th 2011, they bought HuffingtonPost.com that was a news and idea portal.

AOL agreed to pay $315 million to buy HuffingtonPost.com.

That money was almost the only money they had and taking that step was the last thing they could do to save the company.

Fortunately, it worked and AOL started getting off the ground again.

It broke above the resistance line on Jan 27th 2012 and started a strong uptrend as you can see on AOL stock price history.

The big lesson here that can be learned from the AOL stock price history’s complicated ups and downs, and use it in your life and business is that your life and your business will not get better if you don’t take some big steps that you had never taken before.

Your life will remain the same as it is now, if you don’t take some strong actions that you haven’t taken before.

That was the lesson you could learn from the left side of the AOL stock price history chart.

What the middle and the right side teach you is even more important:

AOL got a lot better on 2012 and 2013, but it is moving sideways now.

It means what they did on February 7th 2011 to save the company, is not going to push and motivate the company forever.

That was the remedy that worked at that time, but it is losing its effect now.

If they don’t take some new, strong and serious actions again, the AOL sideways market will break below the support lines and levels and will collapse again.

To make a business scalable,

  1. Expand it by adding more products and services.
  2. Keep adding more and better products and services forever.

The Best Residual Income Ideas

Do you prefer to be self-employed?

You don’t particularly enjoy the idea of doing a 9-5 office job?

There are many residual income ideas that you could explore.

You would have to put in some hard work in establishing this source of business or livelihood.

But you can enjoy the benefits for a relatively longer duration.

Residual income is the income that keeps coming even when you stop working.

There are some businesses that can generate residual income.

But they do it only when they have been promoted enough and have been taken off the ground.Best Residual Income Ideas

However, many of them need a lot of money and effort to be built.

For example, you can build some rental buildings and then rent the apartments and offices.

This is known as one of the best residual income ideas.

While it only needs some maintenance, it makes a reasonable amount of money every month which is known as the residual income.

But you already have to have a lot of money do this.

What Are the Best Residual Income Ideas?

Here is the list of the best residual income ideas and opportunities:

  1. Rental income
  2. Earning royalties
  3. Sell course online on membership basis
  4. E-commerce store with dropship facility
  5. Build a mobile app
  6. Data technology

The above residual income ideas and opportunities, in general, comprise of creating some long-term income sources.

They help you create opportunities to get involved in multiple channels at the same time.

Moreover, these residual incomes also provide you with more flexibility.

However, keep in mind that although they are among the best residual income ideas, there some other ideas that are even better.

I will let you know at the end of the article.

Learn about each idea in details:

1. Rental Income

This is perhaps one of the best classic residual income ideas.

In this, once you create some real estate and lease it out, you can continue to get residual incomes from it for as long as you keep it on rent.

Of course, you have to spend a lot of money in creating the real estate asset and maintaining it.

But beyond that, your day to day involvement in the core business is quite minimal.

You just have to get a professional broker.

He has to get you a regular flow of tenants.

He also has to do a bit if running around in getting the lease deeds done and follow up on the rent amount.

Rest, there isn’t too much of engagement that is required on a day to day basis.

The problem is, for those who don’t have enough money to create the rental real estates, this idea is out of the list already.

You have to put a lot of money at the beginning.

It takes a long time to recover it through the rents.

Therefore, you have to be financially strong to become able to go for this great residual income idea.

But be patient.

You make and save enough money through the other opportunities.

Then you will finally become able to go for this residual income idea to grow your wealth even more.

2. Earning Royalties

Written a book or created a music album are also some great residual income ideas.

You can continue to earn royalties long after the book has been published.

Of course, you need to put in significant effort in getting the entire process going and generating matter for the book.

But once that is done, you don’t have to toil any further for it.

The rest of the game is pretty simple.

The sales keep happening, and the royalties keep coming to your account.

Given the ease of operation, you can even look at publishing eBooks instead of hard copies.

You have to make the whole effort even simpler and with a far less gestation period than a regular book.

This will be a quiet time taking process and involves multiple media.

Also in an eBook, you get the option to optimize the SEO aspect and rake higher with the same effort.

Even after paying your affiliates, you will be able to make a significant amount of profit.

You will generate a sustainable long-term residual income source.

Please note that the amount of the residual income that this idea leaves for you is strongly dependent on the quality of the book, e-book, album, training video course and…

It has to attract people and goes viral over the Internet, otherwise it will be wasting of time and money.

3. Sell Course Online on Membership Basis

Other interesting and often used residual income ideas include the sale of courses online through a membership based program.

In this case, you would generally need to create a multi-media driven website selling comprehensive course materials.

Of course, you would have to work hard to ensure that the course that you choose to provide significant demand.

It has to cater to the interest of a large number of people and can make pronounced impact on the lives of all those who undertake the course.

The way you will generate revenue is by creating a subscription or membership model whereby interested users can access the information for a specific price.

In this way, you then create residual income and channelize the same time for pursuing other important initiatives.

You can also work on further upgrading the membership plans and attract more clients or members through even based discounts that can help them get better value for the money that they put into your course.

Additionally, the convenience with which you can undertake an online course often makes many opt for these courses in comparison to a physical classroom format which can be far more time consuming.

4. E-commerce Store with Dropship Facility

This is another common idea to generate residual income by many enterprising individuals.

Additionally, when people realize that they can pursue this type of an initiative along with their day jobs, it further adds to the appeal of the course and encourages them to go ahead.

Your drop ship ecommerce store can be for anything from handicraft to clothes to curios.

All that you have to do is invest time in understanding the market and generate capital for the basic investment in setting up the e-commerce store.

When you organize dropship facilities, it means that you do not have to invest time in getting a warehouse separately or invest in the upkeep or acquisition of the materials you sell.

All you are doing is getting the interested buyers and sellers under one roof and making a cool percentage as a facilitator of the service.

This also means your overhead costs are quite limited and by that extension, your residual income would be significantly larger.

This can then be counted as a sustainable and dependable source of long-term residual income ideas that a resourceful and interested individual can easily explore.

5. Build a Mobile App

It is a mobile world with zillions of ideas and opportunities especially for those who are interested in generating some residual income.

Almost our entire daily routine is very deeply entwined with our mobiles.

These days, you have a plethora of apps helping us go about our day to day work like ordering vegetables, buying medicines, listening to music, ordering cinema tickets and what not.

The possibilities are innumerable.

All you have to do is identify a niche that nobody has explored thus far.

Then you have to go ahead and develop an app that can make a difference to the lives of many.

Your gain from the entire operation is that you will be able to generate residual income by making this app available on Google Play Store or similar platforms.

The more the number of people uses your app, the bigger would be your average gain from the entire operation as such.

Of course, you have to make some initial investment in identifying the niche area, mobilizing awareness and marketing the product that you are selling.

After that, based on the actual utility factor, you can easily make a sizeable profit from this effort and enjoy the fruits for a long time.

There are so many Residual income ideas are floating around us.

The trick is to identify the appropriate platform to capitalize on and make it big.

You have to understand that your focus should not just be on creating a source of income.

You have to focus on generating the residual income without your active involvement beyond a point.

This will then help you channelize your energy on multiple fronts in one go.

6. Data Technology

All the above ideas are great to create some decent residual income.

Even some of them like e-commerce, online membership, mobile apps and… are part of the Data Technology system.

But none of them are 100% based on the data technology.

Data technology has opened some new doors on entrepreneurs to make money through the Internet and from home, even to become even millionaires.

Data Technology is above the top and best residual income ideas that I listed above.

To create some many of the above businesses, you need a lot of time and money, sometimes even millions.

But you can become a millionaire data technology entrepreneur almost for free, compared to many of the other ideas and opportunities.

It needs some time and energy to take the business off the ground.

But it is a lot easier than the other ways, and its income potential, specially the residual income potential, is a lot higher.

Learn more here.

Cash Flow Management Strategies for Your Business

Cash flow management is among the top most challenges for any entrepreneur.

The simple fact is that it is not just sufficient to get funds to start a business.

One must look at ways to create a steady flow of funds that is necessary to keep the business alive and sustain day to day running of the organization.

It is after all important to remember that effective execution is the only way to make a great entrepreneurial idea succeed.

For that reason it is necessary to keep the finances in place.

Almost 75% of entrepreneurs agreed that cash flow management remains their top challenge.

In fact, study and many leading StartUp data reveals this.

Nearly 47% entrepreneurs consider personal finance stress as primary.

They admit to having either faced the issue or continuing to face it for an extended period till the time business stabilizes.

Cash Flow ManagementAn entrepreneur’s personal finances and the cash flow management at the startup are very closely tied up in the initial stage.

Therefore, one can only fathom the importance of having an effective cash flow management for the proper functioning of business.

Do you know what is the second most common reasons for businesses failing or companies being forced to shut down?

Inadequate cash flow management and running out of sufficient funds.

Detailed study of over 100 startup failures indicates this.

The problem most time is that while gathering funds could be an uphill task.

But spending it efficiently and wisely is a greater challenge.

The importance of this can be well understood by the fact that most entrepreneurs consider gaining expertise in accounting and finance as a crucial element for recording better success.

As Tim O’Reilly, founder and CEO O’Reilly Media once said,

“Money is like gasoline during a road trip. You don’t want to run out of gas on your trip, but you’re not doing a tour of gas stations.”

The fact is that ‘cash is king’, after all, your employees need to paid regularly.

Therefore, it is true about all the rent and the long list of monthly payment outgo that you would have.

As an efficient entrepreneur, you need to keep no stone unturned in ensuring that your business remains a well-oiled machine run with the cash that you are able to generate.

The Problem Areas in Cash Flow Management

You would realize that most businesses or entrepreneurial ventures that fail are often.

The reason is that they are not able to manage their cash flow better and hardly.

They are not able to generate desirable returns.

The two main reasons why this happens is because:

  • Often entrepreneurs set unrealistic targets for the projected cash flow management from a start up. They invariably overestimate the projected income and underestimate the extent of expenses and payment outgo that they need to meet up on a daily basis to keep the business running effectively.
  • Another key reason is the fact that entrepreneurs often are not able to gauge the extent of cash shortage that they might face. This is because of a poor or no proper cash flow management strategy As a result they are forced to suspend operations to balance out the input and output of funds and the overall debt equity ratio that the business is based on.

In this context, one fundamental problem is perception, especially about cash flow management and profitability of business.

Let us understand very clearly that profitability is never same as generating cash flow. It is always important to remember that:

Profit is essentially the difference between the expense incurred and the income generated.

It is invariably based on the numbers recorded when the sale is booked and when the expense is calculated and is never on actual payment received or bill paid.

Cash flow in comparison is the difference between the actual inflow and the outflow.

As a result cash flow goes on to include either working capital infusion that an entrepreneur may resort to or any other type of debt financing that the company has to go through to ensure the smooth functioning of the business without any possible break or stoppage.

Ways to Project Cash Flow Management

That surely brings us to the next port of call in the cash flow management trail.

It is about how exactly do you need to project cash flow to gain a reasonably realistic estimate and not compromise the business basics of your organization either.

One of the simple approaches would be to stick to actuals and project only what can be realistically assess.

So this includes:

  • The actual cash in hand- your personal savings, money in hand and actual bank account balance
  • List out the anticipated fund inflows including customer payments, debt collection, earnings from interest and money that the company might earn from its investment
  • The next logical step after this is to list out the outflow as well in equally detailed manner. This should account for monthly salary payroll, overhead payment, tax liability, possible debt payment and also possible liability from future tax obligations
  • You must also list out the future expenses that you might have to incur like investing in new machinery, expenses for creating brand awareness and other marketing initiatives.

Once all these elements have been accounted for, your next step involves putting them in an excel sheet in a proper order.

This facilitates regular assessment and update of the same without any kind of problem and harassment in following of a proper cash flow management strategy for your business.

– Cash Flow Management Software

As a first time entrepreneur, you can even look at taking advantage of the many interesting and easy to use software that are available for easy accounting.

This regular updating is crucial as it will keep you abreast of any negative cash balance that you might register.

You have to remember that even a small amount of negative cash balance can be a huge problem for the business and in no situation can the business run smoothly with negative cash balance.

The regular accounting helps you to stay on top of this problem at all times.

In fact in the interest of your company’s long term gains, it pays to be exceptionally conservative in this aspect and keep the inflow estimate on lower than expected levels and projected outflow at the higher end.

What this instantly seeks to achieve is a small buffer that will help you tide over possible exigencies that you might face during the course of running the business.

Remember ending up with negative cash flow almost invariably means loss of business, trust and credibility and that is a big ‘avoid’ for a startup trying to buy a successful business model.

Another effective tool to rein in your cash flow management is tracking the actuals.

Compare and contrast the projected numbers with the actual cash flow as and when required.

This will not only help you stay updated on the company’s business but also help you gain a realistic idea on the expected level of cash flow from a specific function or endeavor.

This kind of exercise also goes well in helping entrepreneurs learning from past experiences and creating better buffers for future transactions.

Better Cash Flow Management

So that brings us to the fundamental aspect that what and how should you go about following a cash flow management strategy in your firm to create a strong gateway for future successes.

The two main aspects are managing the receivables better and organizing the payables in a clear manner to ensure that there are no major slip ups.

1. Tracking Your Receivables

1) Remember that in most businesses, you are never paid instantly and that by far, is the most important reason why cash flow management problems come to foray at all.

This is exactly why effective tracking and management of receivables is so important.

The trick is to create some easy to implement and effective alternatives to ensure better flow of the fund that you expect to receive.

2) You can begin by offering discount to customers for faster payment of bills.

3) Make deposit payment mandatory while placing orders.

4) Do away with outdated inventory that might result in greater fun outflow than inflow

5) In the case of non-cash paying customers, accept orders only after a thorough credit check.

Remember it is always better to have one customer less compared to having a problematic customer.

6) Make it a practice to issue invoices as soon as you accept orders and follow them up meticulously for faster delivery of receivables.

This will ensure that the pace of receiving payment will rise instantly and bring in better fund inflow.

2. Payables

The next challenge, therefore, is that you also have to organize your payables in a way that there is no sudden and urgent outflow and every month the payment and inflow happen in a well-regulated fashion.

Putting in a proper system facilitates not just better cash flow management but your company also gains by avoiding late payments in many instances.

This also helps in keeping a check on expenses.

Remember there is no room for complacency, and if not reined in on time it will only result in a bigger gap between inflow and outflow leading to future cash flow trouble.

Just like in case of receivables, create a system for payables too.

Pay close attention to the terms and conditions put forth by the creditor and take advantage of them in every way.

For example, if you have a 30-day period to make payment don’t strain your resources to pay in 15 days.

If you have a 90-day credit period, then organise your payables and receivables in a way that one accounts for the other without unnecessarily straining the system.

Also, try to extend retaining funds as long as possible.

For example, if you make an electronic transfer of funds closer to the due date, you will be able to remain current with suppliers without stretching your resources too much.

In case you are facing any financial crunch, try and communicate with your suppliers about potential extension of your credit till a new inflow comes in.

In this way, you can manage both ends without straining the cash flow management situation.

Don’t always fall for discount offers without paying attention to details.

Go through every possible and minute detail of the deal to ensure that your outgo is never more than estimates with or without discount.

Your reputation matters a lot in taking forward the business.

Therefore, it is extremely important that while you manage your expense, you do not cut corners that are crucial.

So settling for the lowest priced supplier is not a great way to go about doing business all the time.

Perhaps what you need is a supplier who delivers reasonably priced goods with a more flexible payment schedule.

How to Handle Cash Shortage?

Let’s say that despite all your precautionary measures, you still end up with a certain amount of cash shortage.

How are you going to handle that situation?

Speed is one of the best keys to addressing this situation.

The sooner you are able to identify the problem point the better prepared you can be about dealing with a potential shortage.

Even if you have to borrow or take a loan from a bank, it is much better to apply for it well in time rather than being a hand to mouth borrower.

When you apply well in time, you give the impression that you are a well-planned entrepreneur with a foresight about future needs.

That leaves a good impression with a banker and gives them greater assurance of recovering a loan as compared to somebody who applies for a loan today and needs money today as well.

Bankers in general are wary of putting their money in such initiatives.

Another key to creating a healthy cash flow management is creating effective channels of communication with your suppliers as well as customers.

If you are anticipating a credit crunch, try and convince your suppliers to extend credit period.

You can even request your customers to make urgent payment at certain times to tide over the potential crisis.

Resourcefulness is the other name for effective entrepreneurship.

Therefore, you need to look for all avenues to generate money and have the proper cash flow management strategies.

You can even consider raising funds by leasing machinery and office furniture to tide over any sudden crisis.

This also highlights the entrepreneur’s commitment towards the venture’s success.

Organize your bill payment effectively as well.

Sometimes what happens is that you pay smaller amounts and larger bills keep pending for a longer duration.

And suddenly you can be faced with a severe crunch in terms of cash to tide over these payments.

Therefore, it is a much better idea to be organized and regular in bill payment and plan it as per your needs.


In short, cash flow management is literally the backbone of effective entrepreneurship.

Proper cash flow management strategies provide the source of sustenance to take forward a business over the long run and work out efficient strategy to ensure flawless execution of the entrepreneur’s dreams.

Efficient cash flow management strategies are also an indicator of a well balanced and a well-managed business.

As a result, an entrepreneur on the back of good cash flow management can aspire to look at attracting more investment towards further expanding their business.

How Does eBay Make Money?

In the world of e-commerce, if there is one name that has become synonymous with success and innovation is undeniably eBay.

Founded in the mid 90s, it has played a crucial role in connecting buyers and sellers from across the world and helped them make money.

It is known both for the variety and the depth of products that is on offer on eBay.

Perhaps in this context, one of the most interesting stories is the fact that one of the first products that sold was broken laser pointer.

When Iranian founder and chairman, Pierre Omidyar, pointed it out, the seller specified that he collected and sold ‘broken’ laser points and that surely highlights the market and range of esoteric products that are on offer across the world and that which you could make money by selling or buying on eBay.

It won’t be wrong to say, eBay managed to bring about the marriage of technological advance and retail success just about the right time.

eBayIt did not just bring retail spending out of brick and mortar stores and into your bedroom, it also managed to make the physical store an option for the buyers and sellers alike.

You can well understand the depth of the eBay market when I put some basic statistics in place:

  1. eBay has over 150 million users in all, this 3000x the total users of the next biggest online marketplace, Bonanza.
  2. Though Bonanza has a pretty low listing fee of 3%, eBay managed to maintain its supremacy over others
  3. The entire market operations undertaken by eBay needs 52,533 servers
  4. The eBay servers need a total of 20 megawatts power to run efficiently
  5. From Sweden to Hong Kong, the eBay brand has a localized version in almost every corner of the world

Perhaps the point that I was trying to make with broken laser points is the also a unique element of the eBay model.

The pithiness and the esotericism overshadow almost every e-commerce site that you have ever heard or thought about.

You have everything on sale from really old cell phones to collector’s items like porcelain dolls.

Apart from a few forbidden items like guns or ivory, pretty much everything else that you might think about is simply a click away and gives you an option to make money from it as well.

But in all of it, one basic question comes across and that is how does eBay make money?

It is rather interesting to understand this key fact because often this question also holds the key to the answer, how you can make money with eBay.

This revenue model is just so successful that despite being in business for 20 years, they have never felt the need to alter or re-calibrate it.

It, therefore, highlights the sound business sense in it as well.

The eBay Business Model

On the face of it, if you analyze how does eBay make money, it is a pretty simple proceeding.

The seller lists the product, and the buyer buys it, and because both are operating a neutral platform, eBay, they earn a pre-determined sum as commission based on the pre-tax value of the product.

Pretty straight forward you would say.

But I believe that it is only the tip of the iceberg.

If you really want to get to the bottom of how does eBay make money, it almost becomes mandatory to chart the growth path that eBay followed.

Quite early on during its operation, eBay received funding of over $6 million from Benchmark venture capital and from there on followed a mix of organic and inorganic growth channels.

In fact, the number of companies that it has bought is astounding.

Pretty much every three months, this e-commerce innovator bought companies and sold some as well.

For example, Skype was first bought by eBay and then sold to Microsoft.

Not just Skype, but there are many other interesting buys as well by eBay.

It becomes extremely important to understand these various acquisitions because in many ways they tell you how does eBay make money.

Revenue Channels

The revenue channels or fund flows decide the extent of money that eBay has at its disposal to fund future growth.

In this context, one of the most noteworthy acquisitions by eBay is undeniably PayPal.

They acquired the company in 2002 for $1.5 billion and hived it eventually into a standalone entity in 2015.

This is a rather interesting development as PayPal was a major revenue driver for the e-commerce giant.

As far as 2014 results, PayPal was responsible for 40% of revenue inflow.

The reason why eBay and PayPal made the perfect pair is that though both these market players did not have an absolute monopoly, they achieved success pretty close to it.

While on the one hand, eBay is one of the most striking virtual markets for consumer goods, PayPal is also the uncrowned king of online payment.

That allows them to operate in a symbiotic and profitable manner.

But the question that comes to play now is how the split with PayPal has materially impacted eBay’s performance and the way it plans to make money.

While its success trail surely floundered for a while post the separation from its long, associates, eBay did not lose time in rebranding its image and looking for drivers that channelize the next level of growth.

It is also in the process of undergoing a complete makeover.

It has roped in supermodel Karlie Kloss as one of the brand ambassadors and reworking on its entire gamut of growth drivers.

Not only that, the San Jose based eCommerce giant also managed to deliver online results with revenue reaching $9 billion.

For 2017, they aim to better it to $9.5 levels.

What was even more striking was that eBay managed to deliver strong operating cash flow and that exactly brings to our old question- just mere commission, does that earn adequate revenue for eBay or do they make money by some other means?

How Does eBay Make Money?

  1. The Revenue Structure of eBay
  2. Exploring eBay Market Place as Way to Make Money
  3. Enterprise Helps eBay?
  4. eBay Makes Money via Auctions?
  5. eBay Makes Money via Dropshipping?

1. The Revenue Structure of eBay

Well if you have delved into the entire topic of how eBay makes money long enough, you would know that the listing fee is not the only source of eBay’s revenue flow.

You must remember that it comprises a significant chunk of their revenue at 10% listing fee.

Given the wide and deep market presence they command, the company does make money and a huge sum at it.

Therefore, while the listing fee is not everything, it surely makes some key contribution to the revenue outlook.

So how else does eBay make money?

– International Revenue

eBay today is a global entity.

This San Jose company is not just limited to the jurisdiction of United States.

In fact 2011 onwards, its international revenues have clearly outshined the domestic ones.

Compared to the domestic sales, international revenues now account for near 62-63% of the total money that eBay makes.

For market services and other revenues, the percentage or the international contribution is now close to 68-69%.

What is particularly interesting is 2015-2016 numbers take into account the planned separation between eBay and PayPal.

But despite that, the share of the international revenue has remained quite steady and highlights their intrinsic importance.

Some of the most important markets for eBay where they make significant money includes

  1. UK: This is the second largest for eBay just after the United States, and sales here are north of $2.6 billion
  2. Germany: This follows UK in terms of the money that eBay makes. The revenue collection from that market is above $2 billion
  3. The sales from the rest of the markets globally are pretty much what eBay makes from each of these markets individually.

– Advertising Revenue

Think about it- how does eBay make money from advertisements? You will be surprised that eBay sells ads worth nearly $3 billion.

On a standalone basis, if they were just an ad agency they would have been counted amongst the biggest names in United States.

Therefore, it would not be wrong to deduce that this advertising revenue too forms a major contributor to the overall kitty for eBay.

Online advertisements form the most important chunk of revenue generation for eBay in this segment.

The time period for these advertising contracts can range anywhere between 1 week to even as long as 5 years.

The normal action plan through which this advertising revenue is derived is by way of impressions that are received on the website.

The impression in simple language indicates the total number of instances when this ad appears to a specific page on eBay.

Every time a user clicks on these ads and reach the advertiser’s site, eBay can make money on a per click basis.

Normally these contracts with the advertiser firm are held on a monthly or quarterly basis.

The fee and the other details for these advertisement contracts are fixed on a set term basis that accounts for revenue rotatably.

eBay understands the potential

Increasingly eBay understands the potential and ways to make money with these advertising revenues.

As a result, eBay even expanded the list of products where the advertising feature can be used.

This new initiative has been rebranded as ‘promoted listings’ and was launched a year or so back.

This particular feature highlights a completely new approach by eBay in terms of attracting revenue and increasing the overall visibility.

The sellers get an opportunity to feature their products rather prominently through the website.

This helps them to make money and also becomes a convenient alternative for eBay to make money.

The e-commerce giant adapts fair trade practices by charging the seller only if a sale is made after users clicked the specific ad.

If you are a seller who has eBay store application, you can take advantage of this feature.

Not only does it bring about a convenient solution to how does eBay make money, this feature has a dual benefit.

It helps increase this e-commerce behemoth’s transaction as well as advertisement revenues simultaneously.

It drives significant traffic, and this transaction revenue often works up to even 70% of the total worldwide revenue collection by eBay, hence a key link in the chain that enables eBay to make money.

Key Advantage of the Dual Benefit

Another key advantage of the dual benefit is that earlier on just advertisement basis, eBay’s revenue follows a per sale approach.

This is a rather limiting opportunity but with this new feature, the chances of increasing the average user spend on the network is significantly higher adding to both transaction and ad revenues.

Therefore, in many ways, this acts as the double-edged weapon to push revenue for eBay in a constructive manner and a sustainable business model.

We could follow the company’s 2017 financial results more closely to better gauge how this step helps eBay make money.

In fact, if you closely follow the eBay 2016 full year performance, you would notice that the transaction revenue has increased significantly.

This means that eBay is using this tool to make money quite profitably.

This key data is particularly of relevance after they split with PayPal as it brings in the entire revenue structure of eBay in the new light.


This is because after eBay had parted ways with Paypal, its marketplace business became the most important growth driver apart from the revenue inflow channels that we already discussed and analyzed the broad ramifications.

Apart from the marketplaces, in your tryst to understand how does eBay make money, StubHub, the sports and concert ticket platform, would find a prominent mention in their platform for sports and concert tickets.

As per industry watchers and retail industry veteran, StubHub is undoubtedly a major player and most investors would keep an eye on its progress to better assess how does eBay make money.

In this context, it will be worthwhile to keep a tab on the transaction revenue recorded post the PayPal split.

Numbers do not lie, and often they provide the most dependable and trustworthy analysis.

For just the fourth quarter of 2016, eBay clocked transaction revenue of $274 m Vs $232 m on year on year basis.

Perhaps more than anything, this is a major pat on the back of the eBay management in assessing the most impactful growth drivers going forward, in the absence of PayPal.

The healthy transaction revenue is also indicative of the fact that eBay continues to make money with its 2-decade old policy, though the sheen might have been lost a bit tackling the struggles and competition in the e-commerce environment globally.

2. Exploring eBay Marketplace as a Way to Make Money

We already mentioned that in the absence of PayPal, the marketplaces on eBay globally are one of the most influential and important revenue generators for the e-commerce giant.

As we had seen for advertising revenue, eBay depends heavily on the transaction revenue from the marketplaces.

This transaction fee is usually levied on the seller when people approach the marketplaces to buy products internationally.

The company puts a cap on free items that users can list every month at 50.

Beyond that, eBay uses the listings as a vehicle to make money.

It charges sellers a specific transaction fee based on the product variety and keeps the revenue meters jingling without a break.

Generally, there is a fixed price that is levied by eBay depending on the product profile.

  1. It charges 5 cents for Movies, Music, Video Games, Books and DVDs
  2. The amount reduces to 30 cents for auction-style alternatives and products from the fixed price segment.
  3. They can click addition 35 cents for larger images or a strong auction style promotion

Readers must understand this amount is over and above the 10% listing fee that it charges the moment the company kicks off its association with eBay in a meaningful manner.

However the maximum amount of fees that eBay us $250. But the prices of these fees are not uniform and similar across the board.

They have different billing rates of different kind of products.

Additionally, I must mention that when you are exploring how does eBay make money.

With eBay clocking close to 150 million active users, the transaction fee even at this rather insignificant rate adds up to account for well over 50% of the overall revenue collected.

It is in general upward of $3 billion in all.

So it won’t be wrong to infer that when you are analyzing how does eBay make money, the transaction revenues comes across as one of the most serious game-changers.

It goes on to highlight how sheer volume can completely change the revenue landscape even with an insignificant base number.

3. How Enterprise Helps eBay?

In your quest about how does eBay make money, one of the biggest answers would be no doubt the role of the Enterprise.

Often in common parlance, the Enterprise, is known as the final revenue stream for the e-commerce giant.

So the question that comes into the limelight now is how pronounced is the contribution of the Enterprise and how exactly does it help eBay to make money?

Essentially for this, we must understand what Enterprise is all about in the eBay parlance.

This is that crucial branch of eBay that facilitates and often convinces brick and mortar retailers to join the internet bandwagon and experience the convenience of the online shopping sites.

The biggest challenge, in this context, is to explain the revenue inflow retailers and how it can materially improve through your liaison with an online retail portal.

Like I already mentioned, Enterprise is a comprehensive tool.

Its work is not just about convincing retailers for a transition.

They are also the one-stop destination for helping clients with every kind of market solution that they might be in need of.

This arm has come into being about half a decade ago and takes on the main responsibilities in

  1. Customer care
  2. Processing payment
  3. Detecting potential fraud
  4. Engaging consumers in a meaningful way

The impact and importance of this arm can be gauged from the fact that this alone accounted for close $300 million or almost 6% of the total revenue that eBay collected over an extended period.

What is even more worthwhile to note is that the role of the Enterprise is continuous.

At no point in time, can you wash your hands off saying that the company does not need any of the above-mentioned services?

Therefore, in your overall journey in exploring how eBay does make money, you must remember that though Enterprise is a small segment, it is a major contributor to the overall eBay wealth and therefore, takes up a strategically important position in the revenue inflow chain.

The extent of scalability that this enterprise division promises is also seen as a major positive.

4. eBay Makes Money via Auctions?

Another key revenue contributor for eBay is undoubtedly the auction division.

But the question here is how does eBay make money through this channel.

Well in very simple terms, the revenue that is collected is a happy mix of listing fees and the commission that eBay levies on every transaction of the cost.

First of all, the collector or seller in this case makes a listing of the rare items that they are interested in auctioning.

Next, the bidder or the buyer put in their bids.

Once there is a happy match achieved, the deal is finalized in totality.

Given the fact the eBay is one of the most active hunting grounds for curios and collectibles outside the regular and conventional auction houses, it remains a fundamentally strong source to make money for eBay.

In fact, with the introduction of promoted listing, creating traffic for these types of products have become even simpler and thereby, the number of users exploring this avenue has also increased.

In short, it means better sales and more listings and therefore added commission for eBay.

5. How Does eBay Make Money via Dropshipping?

This is another crucial arena to explore in understanding how does eBay make money?

You must understand that the entire eBay model is very closely linked to the delivery competence.

Not just for eBay but most e-commerce alternatives cannot make money if they do not have appropriate delivery channels in place.

Perhaps this is exactly why understanding the eBay revenue flow via drop shipping becomes so interesting.

Dropshipping is that unique arrangement in which sellers do not have to stock the product.

Once they get the order, it can be directly shipped to the buyer.

In this case, it is the logistics company or the shipping firm that handles the entire responsibility of collecting the product from the manufacturer and then taking it to the final buyer.

Apart from the listing and commission that eBay charges from the seller and makes money, there is an additional revenue source.

The shipping company pays a fixed transaction fee to eBay.

This is, of course, dependent on the type of product and the place that it needs to be shipped, and there are no uniform shipping charges.

But given the crucial role that shipping plays in the entire success of the overall e-commerce module, it becomes a key contributor to revenue for eBay.

It is, therefore, needless to mention that this revenue percentage might be rather minuscule in the entire gameplan.

However, it is undeniably one of the most crucial foundations that eBay business model is based upon.

The company is also in the constant process of improving the quality of service extended to customers.

That said, we can conclude that the answer to how does eBay make money is rather complex and multi-layered.

There are many aspects to this entire business model.

When you are trying to understand how eBay makes money, it is also extremely important to gauge the impact of seasonal forces.

For most e-commerce entities, competition becomes even more intense, and in the absence of a strong revenue model, their sales would plummet significantly.

For example, the eBay CEO mentioned that the holiday season is one of the biggest revenue earners for eBay.

It becomes one of the hottest destinations to shop online and in fact ranks as second in the list of most visited websites during holidays for shopping.

No wonder that eBay wants to put this progress in top gear and make money at an even better pace than before.

The company’s business strategy is geared to rake in revenue through this channel and improve the fund flow in a pronounced manner.

The structure data initiative, in this context, is one of the primary catalysts driving revenue for eBay going forward.

It aims to make money is a rather constructive manner by taking advantage of the ‘keyword tag’ feature provided by Google.

It is expected to ramp up transaction fees further through increased traffic.

Another initiative undertaken by eBay to help make money faster and on a much larger scale is expanding the scope of the fixed-price products.

This is also seen as a direct strategy to tackle competition from players like Amazon, who might have denied the money they make significantly.

The overall growth of the company has been slow and the 2017 guidance relatively muted.

It also signals that the company’s effort into revamping the way eBay makes money is bearing slow but a steady fruit.

Revenue might be expected to see a quiet 5% jump.

But it means they still can make money a lot better than many other new players.

Largest Hedge Funds Ever

Close to 50% of the largest hedge funds across the world are set to increase their allocation.

The tide is turning for good across the hedge fund industry.

After a few turbulent years, the outlook for the hedge fund industry is pointing northwards.

Data from some of the world’s largest hedge funds indicate that assets worth close to $300 billion will be allocated the end of 2017.

Not just that, as per the estimates from the top players, inflows could rise above $10 billion in the same period.

However, a quick survey of some of the largest hedge funds in the world indicates some anomaly in terms of regional allocation.

Even from the list of some of the largest European hedge funds, there are only very few in the list of the top performers in the global list.

But that is only one region.

We conducted a quick study of some of the top players. Based on a variety of factors like:

  • Redemption rate
  • Extent of new allocation
  • Inflows
  • New fund creation

Here is a list of some of the largest hedge funds across the world.

They don’t just represent the extent of value creation.

But in many ways, they showcase the top trends in the hedge fund world.

Largest Hedge Funds

Here is the list of the largest hedge funds and their history and description:

  1. Bridgewater Associates
  2. Man Group
  3. Balyasny Asset Management
  4. Renaissance Technologies
  5. Field Street Capital Management
  6. Adage Capital
  7. JP Morgan
  8. Cerberus Capital Management
  9. All Weather Portfolio Trading
  10. Millennium Partners LP
  11. Pine River
  12. BlackRock
  13. Och-Ziff Capital Management
  14. Two Sigma Investment
  15. AQR Capital Management
  16. Viking Global
  17. Elliot International
  18. Element Capital
  19. Citadel Global
  20. Winton Capital Management
  21. Brevan Howard
  22. Angelo Gordon
  23. Lone Pine Capital
  24. Discovery Capital Management
  25. Farallon Capital
  26. Garda Capital

1. Bridgewater Associates

Bridgewater AssociatesThis can decidedly be considered as the largest hedge fund in the world.

According to details provided on the company’s website, the total asset under management is $87 billion in the hedge fund segment alone.

A global investment firm, its headquarters are in Westport, Connecticut.

They currently employ 1400 plus staff to service their clients located globally.

Overall this investment firm manages assets north of $150 billion across global investment initiatives.

They cover a wide gamut of investment strategies.

Their clients range from pension funds to central banks, corporate funds and the like.

2. Man Group

Man GroupThis is undeniably one of the largest European hedge funds and also amongst the largest hedge funds globally.

Founded in 1783, this London-based hedge fund is also amongst the world’s oldest and largest publicly traded institutions.

With its assets under management breaching the $80 billion mark, it is also a notable sponsor of many charitable and cultural events as well.

It is also listed on the London Stock Exchange.

To further enhance its efficiency and add to the customer convenience, it has introduced multiple sub-divisions of money managers.

So you have a separate division dealing with managed future while a separate arm is doing traditional and hybrid investment management.

The hedge funds division is completely separate, and the quantitative asset management is also offered on a standalone basis.

The independent arms are set to enhance efficiency and also bring in a relatively faster rate of service delivery.

The idea is to help customers get the most profitable deal with the minimum cost involved over the longer term.

3. Balyasny Asset Management

Balyasny Asset ManagementOne of the world’s largest hedge funds, this is a registered investment advisory fund based in Chicago, United States.

The total asset under management is close to $75.1 billion as per recently available data.

In all this, hedge fund has 24 accounts managed by 521 employees.

With assets well over the $1 billion mark, they fall in the list of the largest hedge funds across the world.

Almost 100% of the asset under management is in pooled investment vehicles.

And it employs a mix of technical, fundamental and cyclical analysis to formulate the portfolios.

The rate of return is relatively muted though at par with industry average.

4. Renaissance Technologies

Renaissance TechnologiesWith assets under management close to $65 billion, this hedge fund is also believed to go about creating the maximum number of billionaires.

This is because their investment model is based on a unique approach.

It is based on a concept where market signals are identified through the noise that is created.

In fact, their program powered by innumerable lines of computer code went on to generate as much as $55 billion revenue.

One of their biggest contributions is undeniably the acceptance of quantitative analysis as an accepted means of furthering hedge fund earnings.

In fact, Renaissance made this such a popular channel that even stock picking changed tracks and started adopting this model for a sustainable gain strategy.

However, Renaissance’s cash dealings are rather opaque and are not that simple to understand the exact profit percentages and how they are divided amongst the members.

But broadly the founders’ profit share accounts for almost 50% of the average gains that Renaissance registers.

Therefore, wealth valuation of this immensely successful hedge fund is rather complicated.

But suffice it to say that the average hedge fund investor can gain from this arrangement over the longer term in a sustained manner.

5. Field Street Capital Management

Field Street Capital ManagementThis is one of the world’s largest hedge funds, with the total assets under management inching closer to $64 billion.

This New York-based investment advisory firm specializes in customized advisory services.

Founded in 2007, it actively follows macro trends.

A major part of the gain that it has seen in recent times has been an outcome of this macro focus.

There are 60 employees who are working non-stop to provide value added service to the 10 clients that they cater to.

The quality of service is absolutely customized and deals on a one on one basis.

6. Adage Capital

Adage CapitalAmongst the largest hedge funds, it manages about $42 billion.

It provides investment advisory service to about 10 clients and employs just 50 people.

Based in the United States, it is a limited partnership hedge fund.

It was founded in 2001 and specializes in fundamental analysis of various asset classes to identify their fair value.

The investment decisions, of this Boston-based hedge fund, are based on the fundamental parameters of value.

This is how they compare a specific counter faring against the other and the associated implications that follow.

7. JP Morgan

JPMorgan Asset ManagementThis is undoubtedly one of the best-known names in the investment circles.

Hedge Fund management is a part of the overall JPMorgan Asset Management firm.

Though it’s overall assets under management are north of $2 trillion, the AUM for the hedge fund segment is around $60 billion.

They operate on a global basis and adopt a mix of strategies across asset classes to maintain their profitability.

This hedge fund has a presence in pretty much every continent and is known for the consistency that they personify.

DE Shaw & Company:

One of the largest hedge funds globally, it was founded in 1988.

This New York-based firm was established by David Shaw.

Some of the key sectors that it invests heavily include technology, real estate, financial services and wind power.

All in all the hedge fund manages about $40 billion in investments across the world.

Though based in the United States, it now has offices in Europe and Asia as well.

The firm has also spread its wings adequately across North America as well.

8. Cerberus Capital Management

Cerberus Capital ManagementAnother US-based firm, this is set to figure prominently in the list of the world’s largest hedge funds. It manages over $40 billion in assets.

Some of the key investors include Government and private pension funds, insurance companies and several sovereign wealth funds as well.

Its areas of focus include technology, finance, telecommunication, healthcare, real estate, travel, leisure, retail and consumer products to name a few.

The company employs close to 100 employees for its advisory business.

They help churn out profitable strategies that can assure definitive gains in the future and help you get better value for your money.

9. All Weather Portfolio Trading

This hedge fund manages a net AUM of $38.66 billion and is based in the United States.

As the name hedge fund suggests, it is aimed at creating value pockets for investors even in a depreciating market scenario.

The idea driving one of the largest hedge funds is absolutely based on maintaining profitability irrespective of market conditions.

The rate of return too is in sync with the overall market rates.

After a few tepid set of years, experts believe the next few months and the year will bring in good tidings for the hedge fund.

10. Millennium Partners LP

Millennium Partners LPFounded in 1989, this is one of the largest hedge funds based in the US.

A global investment firm, its asset under management is well over $35 billion.

The hedge fund currently employs over 2000 people and uses a range of strategies to churn out the profit.

It depends quite heavily on quantitative analysis as well.

They have been in business for more than 25 years now.

They allocate funds across a diverse range of strategies in predominantly liquid asset classes.

High-quality return is their primary focus.

11. Pine River

Pine RiverUndeniably amongst the world’s largest hedge funds, the total AUM of this hedge fund is around $35 billion.

Based in the United States, the investment strategy of this hedge fund is based on the belief that we can always do better.

This global alternative asset management firm was founded on the principles of intellectual honesty.

They are committed to creating value across a range of global markets.

This alternative investment destination was founded by Brian Taylor in 2002.

Based in Minnesota, it now has a global presence.

Operational infrastructure and top investment talent continue to be the biggest positives about investing your money with this alternative asset management destination.

The excellence of service and performance has been internationally recognized through the plethora of awards and recognition that Pine River has won.

This has been evenly distributed through the years in a variety of disciplines.

12. BlackRock

BlackRockThis one shines brightly in the list of the world’s largest hedge funds.

If hedge funds are all about creating value even in falling markets, then BlackRock is undeniably the best example of this phenomenon.

When financial markets across the world bled, this is one of those investment platforms that generated positive and double-digit returns.

It was in many ways, one of the best manifestations of turning adversity into an opportunity.

It manages a total of $4 trillion plus AUM.

Of this, the AUM $31 million is allocated to the hedge fund segment.

It has a diversified portfolio of a variety of counters that help in maintaining profitability.

13. Och-Ziff Capital Management

Och-Ziff Capital ManagementA global alternative asset management firm, they are based in the United States.

The hedge fund saw a dramatic 80% value erosion on the back of a bribery scandal.

But experts say that at the current moment the upside is significantly higher compared to the downside potential in its value.

In fact, the fund’s strong track record of outperformance.

Experts peg this fund to rise 180% by 2020.

It currently manages about $33 billion across a host of clients.

They are one of the world’s largest hedge funds dealing with a wide range of assets.

14. Two Sigma Investment

Two Sigma InvestmentAnother New York-based form, this too finds mention in the list of the largest hedge funds globally.

It was founded in 2001 by John Overdeck along with Mark Picard and David Seigel.

The company uses a series of state of the art mechanism to bring better value to your investment.

It’s trading strategies are computed with the help of machine learning, distributed computing and artificial intelligence.

It is needless to mention that this no doubt makes the strategies a lot more pointed and makes sure that the gains too are significantly higher than what you would anticipate.

The total amount asset that it is managing at the moment is close to $35 billion.

No doubt it is ranked amongst the top most hedge funds globally.

The consistency in returns and the relatively higher rate of returns also add to the charm of the hedge fund amongst its peers and closest competitors.

It is decidedly one of the best offerings to choose for sustained long-term gains.

15. AQR Capital Management

AQR Capital ManagementThis hedge fund specifically focuses on global investment in public equity, futures and option.

Over the counter derivatives also feature prominently in the list of products that they deal with.

Founded in 1998, this one has about $30 billion AUM in the hedge fund segment.

The straightforward investment techniques coupled with focused buys makes sure that profitability is not compromised in any possible manner.

In 2009, it was amongst the first ones to offer these alternative investment strategies in a mutual fund format.

The advantage was customers associated with the mutual fund format quite effortlessly, and they were able to use it to derive maximum value too.

Overall, it has close to $175.2 billion in assets under management supported by close to 700 employees.

Given AQR’s commitment to quality and innovation, it has been able to attract a fairly large number of investor base.

Together they are able to offer assured gains without compromising the quality of gains in any way.

As a result, AQR Capital has also managed to maintain a steady rate of returns too.

16. Viking Global

Viking GlobalRanked prominently amongst the world’s largest hedge funds, this Connecticut-based hedge fund was created in 1999.

The firm manages close to $30 billion worth assets across a rather expansive range of asset classes.

It was established by its CEO and risk manager Ole Andreas Halvorsen and is registered as an advisory firm with the US Securities and Exchange Commission.

Viking has maintained a diverse focus to keep the gains consistent.

The firm has also been instrumental in actively taking forward its advisory services to seal additional gain for its investors and founders alike.

It is needless to mention that the fund has put up a better than average performance Vs peers.

17. Elliott International

Elliott InternationalRight from the time this hedge fund was created, it has consistently returned over 14% on an annual basis.

When you compare this with the 10.9% S&P gains in the same period, the contrast is evident quite distinctly.

The reason why this one is considered one of the largest hedge funds is that the asset under management is rising steadily.

Its current AUM is close to $23 billion. This hedge fund now focuses on multi-strategy investment to generate the most lasting returns.

18. Element Capital

Element CapitalThis hedge fund was founded in 2005 by Jeffery Talpins.

One of the largest hedge funds in the world, this has been in the news for its amazing capital raising abilities within a short period.

It raised close to $2 billion in a matter of two weeks.

Not just that, the return outlook is rather encouraging.

It generated 8% plus return in the same period that its competitors returned a mere 1.6%.

In the recent past, it clocked a cool7% plus gain as well, and experts peg scope for additional gains going forward.

This hedge fund ranked 17 in the list of the Penta’s Top 100 Hedge Funds for 2016.

19. Citadel Global

Citadel GlobalIt is another largest hedge fund in the world with the total asset under management around $25 billion after starting with less than $5 million capital.

This US-based hedge fund has the rare distinction of being amongst the 3% of hedge funds in business for over 20 years.

It manages assets and wealth of some of the world’s best institutional investors.

As you would see in the case of most successful hedge funds, it uses diverse strategy to maintain profitability in a sustainable manner.

BTG Pactual Global Emerging Markets:

Yet another US-based hedge fund, this one too easily counts amongst the world’s largest hedge fund.

The hedge fund manages asset worth $30.21 billion and invests in equity and fixed markets.

It was launched and managed by the Asset Management Arm of the BTG Pactual.

Global equities, US mortgages, and asset-backed securities coupled with global credit and Latin American assets are some of the top investment opportunities that this hedge fund capitalizes upon.

Middle East, Africa and Latin America remain the hub of its focus.

20. Winton Capital Management

Winton Capital ManagementThis UK based hedge fund is one of the largest European hedge funds.

It was founded in 1997 by David Harding and manages close to $32.1 billion.

Like most hedge funds it services a series of investment in a way that protects the downside of the investment as best as possible.

Several pension funds, sovereign wealth funds, and banks invest with Winton Capital to realize maximum value for their investment.

The diversified investment strategy makes sure that Winton Capital always stays ahead if competitors in terms of performance and profit.

Moreover, there is an additional focus on quality investment further enhances profitability.

21. Brevan Howard

Brevan HowardUndeniably one of the largest European hedge funds, its current asset under management is less than $20 billion.

At one point of time though, around October 2013, it was the world’s biggest macro hedge funds with AUM around $40 billion.

Even during the 2008 financial crisis, this fund delivered return well north of 20%.

It’s only in 2014 that it finally reported the loss after a consistently positive stint for 12 years.

The firm’s overall strategy continues to be focusing on near-term opportunities based on economic trends.

They believe in maintaining fairly long-term investment and call themselves ‘global alternative asset manager’.

22. Angelo Gordon

Angelo GordonThis is privately held registered advisory firm that is dedicated to an alternative investment.

It was founded in 1988 and manages close to $27 billion.

The company seeks to generate absolute returns with a relatively low level of volatility.

The firm is constantly on the lookout for innovative investment options that help the stay on top of the overall competition curve.

They have mastered a series of absolute return strategies that are applicable to both institutional investors as well as high net worth individuals.

They believe that their long-term insight and experience helps them get an edge over peers.

23. Lone Pine Capital

Lone Pine CapitalA Greenwich based hedge fund, this was founded in 1997.

One of the top most and among the largest hedge funds globally, it offers a rather unique offering.

This not just attracts a larger number of investors but also makes sure that the investors are suitably rewarded with consistent returns.

Lone Pine Capital’s innovation is borne well in its unique investment style. It combines fundamental analysis with deep bottom up approach.

Though this is not heard about that often, the benefit of it is well borne out by the popularity that this hedge fund commands.

Lone Pine uses this unique investment style to invest in a variety of global equity and manages close to $29 billion at the moment.

24. Discovery Capital Management

Discovery Capital ManagementDiscovery is another important addition to the list of the world’s largest hedge funds in terms of performance as well as the asset that they manage.

They manage around $33 billion.

They are famous for their discretionary investment strategies they follow to generate absolute returns.

The investment strategies are both unique and based on value.

They are for creating the sustainable value that they represent.

They have a position in a wide range of sectors including consumer durables, utilities, real estate, healthcare and the like.

Focused strategic return is their biggest virtue.

25. Farallon Capital

Farallon CapitalAnother of the world’s largest hedge funds, it is a rather popular alternative investment destination globally.

Some of the most important dealings include University endowments, foundations and also wealth management of high net worth individuals.

The assets under management are close to $21 billion, and they have close to 165 professionals across 8 countries servicing clients across the world.

They founded the company in 1986.

Since that time, they have maintained a steady rate of growth across a wide cross section of product offering.

In the past few decades, they have maintained their rate of return at a uniform rate.

26.Garda Capital

Garda CapitalThis hedge fund with net asset under management worth $2.9 billion took over Cargill’s Black River hedge fund.

It has a track record of churning out consistent and uncorrelated returns.

Based in Minneapolis, Minnesota, it also has a significant presence in Switzerland.

Black River chief Jeff Drobny runs this hedge fund.

There is no link between Garda Capital Cargill anymore.

However, Cargill remains a key investor in this US-based hedge fund.

The Garda Capital group still takes the Proprietary trading strategies of Cargill.

Sophisticated institutional investors are handling the investment strategy for Garda.

They make sure that the return rate continues to maintain past consistency.


When you are identifying some of the world’s largest hedge funds, you can group them under various sub-sects.

However, the assets that they manage is by far the most popular method to classify the different hedge funds that are operational worldwide.

2017 seems to be particularly positive in terms of the outlook for the hedge fund industry.

Therefore, it makes sense to list out the largest hedge funds that you can associate with for better profit and better value for your investment.

However, the regional allocation of the successful and the largest hedge funds worldwide throws us some interesting facts.

When you are looking out for the largest hedge fund in the world, a majority of them are from US.

Even the largest European hedge funds are far lower than some of the top players from US.

But globalization has made sure that customer allocation is pretty well-spread.

The largest hedge funds in the world today caters to a wide range of customers.

They serve the institutional investors as well as the several deep-pocketed high rollers.

How Does PayPal Make Money?

The moment you talk about the online transaction, it is impossible not to mention PayPal.

Today, it is almost synonymous with any type of money transfer online.

Whether you think of paying credit cards or transferring money to friends or family, PayPal is popularly known as the world’s favorite middle-man now.

Perhaps the ease with which you can transfer money online using PayPal is often seen as the biggest contribution.

Compared to the complicated and costly wire transfers that used to happen earlier, the PayPal transfers are absolutely free and minus all the hassle.

But that also highlights a key question in our mind, how does PayPal make money?

This is relevant because when we are getting the service for almost no cost or bare minimum charges, it is interesting to understand how PayPal makes money.

How Does PayPal Make Money?

This is the question I am usually asked because people know me as a person who knows a lot about currencies and their transactions.

Many entrepreneurs think about running an online business like PayPal.

That is why they want to know how PayPal makes money.

I answer this questions first and then I will tell you what I prefer not to use PayPal in my business.

How Does PayPal Make Money?Maybe that is even more important for you to know if you are interested in running a business like what PayPal does.

Better grasp of their revenue model will also help you better understand the dynamics of online transactions and the primary factors determining the movement of funds and how it can help you make money.

A detailed study of the mechanism based on which PayPal works is crucial to the overall revenue model that dictates the money flow the world over.

1. Understanding the PayPal Business Model

So the primary question is how does PayPal operate?

A premiere e-commerce merchant service provider, it was founded in 1998.

Currently, they cater close to 200 markets the world over and have almost 100 million active users.

eBay acquired the company in 2002 for $1.5 billion, and almost every big business worldwide features in the client list of this company.

Their clients include the likes of Netflix, Starbucks, Dell, WalMart and many other international plays with the global operation.

Online fund transfer is one of the most cardinal functions that PayPal specializes in, and in many ways, has revolutionized the entire concept.

It facilitates this transfer using a simple email address, irrespective of whether you are a member of the site or not.

All you need to do is to link your account to a credit card or bank account and undertake the overall transaction.

However that said, you would surely need a PayPal account to receive the money.

Now let’s reach the crux of the key discussion point; how does PayPal make money if the transactions are free on the website?

Well in this context, you must remember that though the basic account on PayPal is free, there are many other options like Premier and Business accounts which are offered to you for a price.

The Premier account is more suited for amateur sellers, and it allows you to a few other features apart from fund transfer.

It enables access to a shopping cart along with payment reporting tools that are crucial for business deals and those with regular customer interactions.

The PayPal Business Account is essentially targeted for those who handle large-scale online businesses.

This includes several full-fledged players with active online businesses in eBay and other similar accounts.

They have the ability to generate accounts under the name of their business as well as facilitate recurring payments.

Moreover, they have no cap on the debit card use and can even take advantage of extended customer service facilities.

It is needless to mention that both the business and Premier accounts involve some amount of payment to PayPal.

But it is understood that for the business model to function smoothly, just this much of payment cannot really suffice in terms of providing a long-term revenue solution for the most celebrated online middle-man.

Well, there are a few more avenues that PayPal uses to generate revenues on a sustainable basis.

2. How PayPal Makes Money?

One of the best adaptations to the growing need to replace paper money, PayPal, relies on two cardinal sources of revenue to make money.

These are the sources that primarily fund the overall monetary movement that determine the extent of PayPal’s earnings.

What is particularly interesting is that this revenue model was evolved after a detailed and multiple adaptations of the original concept.

As the service provider matured and the range of services expanded, the revenue model underwent a series of changes to reach its current avatar.

So there are some basic routes that PayPal adopts to make money.

These include:

a- Transfer of Money:

Not only was it the cardinal model on which the entire PayPal business is based upon, but in many ways, this is one of its primary sources of revenue for the online middle-man.

You must be wondering now how that is possible.

Doesn’t PayPal provide free transfer of funds from any email account across the world?

Well, the fact is that while most of the domestic money transfers are free, all international transfers entail some fixed charges on the entire transaction.

For all international transactions, PayPal charges a fixed 2.9% of the money that is being transferred along with a fixed charge for being a facilitator of this service.

This percentage, of course, reduces if you transfer more than $3000.

  1. For transactions between $3000-10000, PayPal charges 2.5%+fixed fee
  2. For $10,000-100,000, PayPal charges 2.2% along with the fixed charges
  3. Transactions above $100,000, PayPal charges 1.9% of the transaction along with the fixed mandatory charges. The fixed charges is a basic rate of $0.30 that PayPal levies on all its international transactions.

So in this context, the answer to how does PayPal make money, would be the usual route that most payment gateways offer.

They are offering a service facilitating easy and hassle free fund transfer and charging you a set fee for doing the same.

So it operates more in lines with the escrow format and PayPal in the entire transaction takes on the role of a middleman.

It is needless to mention a lot of it is on account of the safety of operations that PayPal undertakes.

It guarantees both the sender and receiver about the surety of them receiving their funds.

The number of their active users and a number of transactions that happens every day can give you a realistic idea how PayPal makes money through this mode.

The rate of PayPal charges, however, varies from country to country.

These are more or less the basic transaction charges.

There are some changes, of course, depending on the geography and the specific country that PayPal is catering to and that surely impacts the overall payment model that they depend upon.

The format that PayPal operates on to make money is quite similar to that of a payment aggregator.

All the successful fund transactions go through Transaction discount rating.

It is interesting to note that the transaction charges for PayPal are rather low at $0.30 compared to close to 3% percentage cuts that they levy.

Essentially the $0.30 is the amount of money that PayPal requires to process your overall payment and make sure that it is sent to its destination within the specified and the promised time frame.

They currently service close to 200 countries with 2016 revenues close to $11 billion.

  1. This accounted from an annual payment volume of over $350 billion
  2. On an average, every active user undertakes about 29 transactions every year on PayPal
  3. The average weekly one touch PayPal transactions exceed 1.5 million, and 17% of active users use this facility globally
  4. Over 4 million merchants use PayPal now globally
  5. In fact, the annual PayPal payment through the mobile facility increased by 55% in the past few years and averages $100 billion annually. The mobile payment is particularly important as often this is a chosen way of payment given the ease of operation and relatively swift and efficient results. The recent rise in smartphone usage over the last decade or so can also be attributed to the gradual rise in the transaction via mobiles and the rising revenue for PayPal via that route.

What is also striking is the share of international transactions in all these statistics.

Almost 22% of their digital payment was a cross-border transaction.

As PayPal makes money primarily through these international fund transfers, it is needless to mention that it is one of the key revenue indicators to analyze if you want to get a clear perception of how does PayPal make money.

On an aggregate basis, PayPal makes a total of $315 million transactions every day.

Of these e-commerce sales, the share is expected to be less than 25%.

So we can easily assume predominant portion remaining is from fund transfer and from that, you can easily deduce the monthly revenue that PayPal earns from this route.

Given the active number of users range from over 200 countries worldwide makes the mathematics even more complicated.

So overall we can say that PayPal uses this model to make money on a sustained basis.

This is by far one of the most long-standing and primary sources to earn revenues.

As the number of PayPal users keep increasing and the amount of money transfer continues, the revenue for PayPal will keep tickling.

But as you can well imagine, this is not the only source of revenue for PayPal.

b- Arbitrage Value:

PayPal can make money via arbitrage as well.

Arbitrage essentially means taking advantage of two different rates and pocketing the difference as profit.

On an average, PayPal undertakes transactions in 25 currencies globally.

They have their own unique conversion rate.

This is generally at a premium compared to existing exchange rate.

Most times, users ignore this predominantly because of the ease of transaction that PayPal facilitates.

Now have you considered what happens to the difference?

Even this is a few pence every one dollar, multiply with the total transaction that is undertaken by PayPal even on one given day and the outcome, I am sure will make you dizzy.

Let me explain to you how PayPal can make use of this opportunity to make money using an example.

Let’s assume, I am a resident of Unites States, and I am suing PayPal to send $1000 to a friend in India.

The current USD-INR rate is above 64, but PayPal offers around 61.64.

Now I know that this conversion rate is way less than the market value, additionally, I must also pay PayPal about 4% as transaction charges along with the fixed transaction fee.

The mathematics is there for you to calculate and make an assumption.

PayPal will never advertise that they are charging you close to 9% on every transaction but let’s face it; this is the business they are in and want to make money.

So you cannot possibly fault them.

For those, who are not interested, can look for other options where the average rate of conversion and the transaction charges are much lesser.

But the advantage dealing with PayPal is that it has access to 25 currencies, many of them exotic and hard to get a fair rate.

Moreover, there are very few money transfer routes that are as convenient as PayPal in terms of accessing through just your email id.

If you have old parents far away in your home country, often this is the most convenient option to send money, albeit a tad expensive.

But who cares when you can rest assured about the fact that your money is in safe hands and your loved ones who need it will get the money within the promised duration.

There is another form of arbitrage too that PayPal can undertake.

Though it is hard to confirm and the company will not talk about it, it is fairly plausible.

After all, if you are out there to do business and make money and this is surely an interesting window to explore.

Let’s say 1000 PayPal customers transact $1000 through PayPal on a given day.

Now depending on the nature and the type of the transaction that is undertaken, this money will remain in PayPal account for a minimum of 4-5 days.

All of this money 1000×1000= $1 million gets deposited in the PayPal account for those many days till it is not diverted to its final destination.

Now it is up to you to calculate the interest that this kind of fund would generate.

Also, even if there is regular inflow and outflow of funds in the PayPal account, the amount of money that would be there on any given hour/day is sure to attract a basic minimum interest.

This surely can be a way to make money for the celebrated online middle-man.

After all, who wants to give up on some handy cash that they might be able to generate?

So if you ask me how PayPal makes money, this would be one of the alternatives for sure.

c- Interest on Money in Your PayPal Account:

Now let’s say, you are a 70-year old senior citizen staying in Vietnam.

Your son has a relatively cushy job in the US, and he sends you about $5000 every month.

Now given your age and frugal expenses, you do not have to withdraw money every month.

The result, the money remains in your account for more than a month also at times.

Now, you and your son are not the only PayPal users.

According to the last count, this ‘online superpower’ has close to 200 active users, and I am sure most of them do not withdraw the money instantly.

Has PayPal ever offered you any kind of interest?

No, of course not, but that is surely a way for them to make money from the surplus fund that remains parked in their account for a given period of time.

While I would refuse to get into any debate about why or how PayPal earns this money, this is surely a means for them to generate that extra revenue.

When you are exploring how does PayPal make money, this is surely a revenue generation route that you cannot possibly ignore.

You must understand that it is a regular business like any other.

Don’t we know of huge corporates who earn tons of interest in extra cash that might be lying in their account? In fact, it is seen as a big positive for these corporates.

Often it is seen as a sign of financial security; many listed entities even give a share of this money to their shareholders as a dividend.

This reflects rather positively on the company’s fundamentals.

So in PayPal’s case also, we must look at this cash just like we would view it while analyzing the prospect of a banking firm.

Moreover, apart from the US users, the cashing out of money from PayPal electric account is not that simple either.

There are several restrictions that are applicable.

This again means that at any given instance, all the 200 PayPal users are not withdrawing the money they have or cannot withdraw it in many cases.

But the money is safe and secure in that account.

PayPal, which is the safe keeper, in this case, can then easily make money from the cash lying in its account on behalf of the close to 200 million users who access this online middleman quite actively.

d- Online Sales:

Now comes one of the most important sources that helps PayPal make money- i.e. online sales.

According to last collated data, e-commerce contributed to nearly 25% of the total revenue generated by PayPal.

Not just that, the company’s statistics as updated in 2015 indicate that almost 80% of their revenue was an outcome of processing the online transactions of various merchants associated with PayPal.

In fact, as many as 202 of the top 1000 e-commerce retailers in not just US but entire North America engage Pay Pal as their primary processor for payment.

Even a chunk of the remaining 20% is mostly from the processing of transactions by various consumers who use PayPal to buy various products online.

Now you can compute the exact impact when I give you a few more numbers.

  1. PayPal at any given point of time has close to 200 million consumers.
  2. Almost 13 million merchant consumers are associated with PayPal globally.
  3. Globally close to 500 of the top online retailers accept PayPal as a secure means of transaction.

Therefore now if you put this entire information flood in perspective, the exact answer to how PayPal makes money is not hard to gauge.

Also, you must remember that while PayPal was part of Ebay group between 2003-2014, there was a tsunami of payment from people who sold their ware on eBay.

Now you can imagine the kind of impact it had on the average revenue outlook for the company as a result of this association.

What is interesting is for most online sales, this still remains one of the most preferred ways of making payment.

This is simple, swift and convenient with a relatively much larger access than most other similar payment gateways in recent times.

Even for their online sales, PayPal operates on a fixed slab.

For example, the rate they charge for transactions below $3000 and those above $100,000 have different rates applicable to them.

Along with this, there is also the fixed transaction fee that sellers must pay PayPal.

The implications can be well understood given the steady money flow that is expected from online sales in the current scenario.

Independent studies have indicated that e-commerce is a potentially high growth avenue.

According to current data, almost 40% of the current internet users, whether you consider a laptop, desktop or even mobile devices like tablets and smartphones, are steadily joining the group of individuals who are more keen on buying products online.

This 40% totals to almost 1 billion online buyers at any given point of time.

Now you can make rest of the calculation to identify the kind of user base you can boast of and the percentage that uses PayPal.

Therefore if the rate of e-commerce keeps rising, it will soon become one of the top contributors to the PayPal revenue and no doubt, a great way to make money for them over the longer term to keep the growth projections on track.

e- Miscellaneous Fees:

Now these are no doubt the top contributor to PayPal revenue model.

But that does not mean that there is no other way to monetize its services.

Let us remember that one of the biggest contributors to PayPal’s growth is undoubtedly the free money transactions that it has come to become the brand ambassador of.

While you know that you can send and receive money within the United States for free and also open an account free of cost, there are some other services for which PayPal charges you and it no doubt helps them make money.

These include

  1. If you prefer checks to cash withdrawals, PayPal levies basic fees on you. Every check transaction entails a $1.50 fee
  2. International transactions all carry a fixed fee as well
  3. If you are a seller on PayPal, all your transactions attract a certain minimum fee apart from the percentage of sales that you would have already agreed to pay to PayPal. That apart, individual rates for specific currency differs and you must understand the exact transaction fee that is levied on you. So if you are analyzing the means of earnings, these are all various sources that PayPal uses to make money.

f- The PayPal App

The mobile or digital payment is a big money spinner for PayPal.

About 30% of all PayPal transactions happen via mobile.

The scope of this can be well gauged by the fact that the company processes $8000 worth payment every second.

So you can quite imagine the PayPal founders looking to capitalize it better make money even faster.

Therefore, it is but obvious that they have been instrumental in developing several mobile apps like Venmo which are essentially made with the purpose to make and receive payment.

So these are the many alternative platforms that PayPal has been focusing on to make money.

How Do I Like PayPal?

I use PayPal for some of my small personal transactions but I don’t like it for the business at all.

The most important reason is that they charge a lot through the exchange rates.

They apply their own exchange rates to make a lot of money through the arbitrage.

They never answer to any questions regarding their extremely high exchange rates and it seems there is no regulation or third party supervision on this.

Above all, their support team looks arrogant sometimes and they ignore the clients questions and objections.

Maybe they think they can do this because they are so big and popular, but time is a good teacher.

When a new system comes that not only offers all the services that PayPal does while they make less money for themselves compared to PayPal, but also they work as user-centered company that put more value on their clients, then PayPal will understand what their mistake has been all these years, but it can be too late.

Exactly like taxi drivers who thought they were kings of the streets but now Uber has changed everything and has made many of them cry.

Paypal Is a Good SystemDespite the above two problems, PayPal is a good system.

So when you set out to find out how does PayPal make money, the short answer to it is in myriad ways.

An immensely popular online payment facilitator with close to 200 million active users and owner of one of the most visited websites in the world; they have leveraged their earnings on both the global necessities and individual requirements.

They make money essentially helping you undertake your needs in a hassle free and convenient manner.

It is needless to mention that their revenue model is a direct outcome of the internet boom.

So, no doubt, transaction fee remains one of the platforms for PayPal to make money.

Whether you are an online seller or average professional sending money to your family and friends, PayPal becomes the facilitator of convenience and comfort to you.

In return, they charge some fees for making these transactions possible.

Given that now the active PayPal users are on the verge of crossing the 200 million mark, even $1 charged annually would yield $2 million in revenues.

So PayPal is able to capitalize on this base to make money pretty swiftly.

Last but not the least, as you explore how PayPal makes money, you cannot ignore the contribution of online sales that is soon promising to take up a dominant position.

That along with the fact that PayPal is one of the few international operators to provide service in 26 currencies globally makes sure they always have myriad channels to make money.

So to find out how does PayPal make money, all you have to do is explore the range of offerings they provide and the current number of active users they have.

Rest as they say is history.

Startup Business Plan Template

When an entrepreneur takes baby steps towards a new venture, a startup business plan template can be of immense help.

It helps you as an entrepreneur, to put the plan that you might have in your mind on pen and paper and bring out a lot more holistic strategy for your better success.

A plan will enable you to move ahead in a comprehensive manner.

It helps you be it the decision making aspect or execution element.

But something that is very special about a business plan template for startups is the fact that it is inevitably simpler and less detailed.

The financial projections occupy more space than performance aspects.

The whole focus is getting the startup business on a strong footing.

For starters, a business plan template for startups has to be more straightforward and practical.

The need for clarity and direct pitching is crucial.

The cardinal focus in the plan shifts to the execution element.

You must realize that most startups face maximum problem in that aspect.

You often face an uphill task in trying to successfully implement this core department.

So then the question is how can it help the overall business success?

How Does a Startup Business Plan Template Work?

Well, when you consider a startup business plan template, don’t think you need it only if you are putting up a huge manufacturing unit or establishing a multimillion dollar business.

Startup Business Plan TemplateIn fact, it can be equally effective for someone starting even a basic cottage industry initiative like making candles or designing jewelry.

A business plan will not just help you take a comprehensive view of the overall business.

It also throw up interesting suggestions about how to improve it.

The reason for this is when you primarily start jotting down the various scattered parts in your startup business plan template, it deepens your overall understanding of the business.

This, therefore, also helps you to

  1. Identify the sales drivers
  2. Make a note of what and how customer demand can be met
  3. How to optimize the basic business prospect
  4. Better use the available resources and create sustainable cash flow chains
  5. Improve the basic balance sheet ratios to your advantage
  6. Better plan for future eventualities through more direct future expenses and costs detailing.

Not only would these details help your business get going but often highlight aspects that could have been shrouded in uncertainty hitherto.

A well laid out plan always manages to bring the core issues in focus.

How to Get a Headstart in Your Planning?

Often when first time, business persons employ a startup business plan template, it is with the whole idea of gaining a headstart in the basic business model.

We have all read and heard about the advantage of executing a written plan.

However, the point is you need to be methodical and extremely systematic in your basic approach.

The first step in this process is inevitably the pitch of your business.

This as the name suggests inevitably focuses on the primary starter points which include your basic business line-up:

  1. Mission Statement
  2. Objectives
  3. Target customers
  4. The basic demand you are satisfying or the problem you are addressing

The detailed market analysis for bringing about this pitch is no doubt instrumental in addressing customer problems with greater depth and taking a critical overview of the overall business motives.

Therefore a startup business plan template plays the dual role of both enabling documentation and boosting execution.

This is of particular interest to entrepreneurs who might be a bit overwhelmed tackling the multiple challenges a startup throws up.

Deciding on the Exact Kind of Startup Business Plan Template

When you set about to write a business plan, even a simple one, you must remember a cardinal aspect.

Not all businesses require the same type of plan.

You have to move ahead in business in a stage-wise manner.

You must remember that there is a fundamental order that you must follow.

In this regard, it always helps if you can broadly discuss the plan with the key stakeholders, partners or other friends who share the initiative with you.

One option is to follow the basic startup business plan template keep adding elements to it on a need basis as the business progresses ahead.

Say you move gradually from the type of business to the funding sources to basic objective and then perhaps move to the ultimate aim of doing the business.

Some simple business options starting from home would require a relatively simple and lean startup business plan template.

But there are many others that would need more details and involves several complicated detailing including a broad balance sheet analysis.

The point that you must remember in this context is every business has a plan, and you must have a properly written document to make it useful and relevant to your business objective.

Why Is Planning Useful?

That said one fundamental factor could still be a concern for you.

Why is planning useful and why do you need a proper startup business plan template?

Well, planning has a multitude of benefits.

These include:

  1. Effective communication of business goals and objectives and their easy implementation.
  2. The various topics discussed in the plan add value to the fundamental idea and boost pace of decision making.
  3. If people outside the company are involved, it is a brilliant channel to provide instant and comprehensive ringside perspective of the ground realities.
  4. The plan can easily chart out the competition, the factors abetting growth, the target market and key consumers to focus on and the overall strategy that needs to be implemented.
  5. Have a clearer picture in front of you with the basic financials like sales and profit all in one place.
  6. Bring about a detailed market analysis.
  7. Help you manage inventory a lot efficiently and improve economies of scale.
  8. Boosts sale collections and improves quality of record keeping that you follow.
  9. A startup business plan template can also help more effective tax computation and significantly higher savings.


It goes without saying that a proper startup business plan template can provide a major fillip to your business whether you have started operation or still planning to do so.

From providing a realistic financial analysis to improving the fundamental quality of planning that goes into the execution of a startup business idea, it is this business plan template that can often make the cut.

As an entrepreneur, it also takes your overall comprehension of the business motive and objective to a much higher level and as a result bring out a lot more cohesive execution.

Amazon Stock Buy or Sell? That Is the Question!

One of the frequently asked questions is that should we buy Amazon stock for the long term as an investor or we should sell it?

The answer would be yes to those who want to buy the Amazon stock.

But don’t expect overnight gains in this counter.

The fact is that, Amazon is the type of stock that will help you clock gains.

But only over the longer term in a slow and steady manner.

It is, after all, a retail player and is invariably guided by the cycles of spike in sales.

A holiday time or special discount season will no doubt bring in higher gains and relatively greater footfall.

The reality is that the trend will never be same.

AmazonAs a long-term investor one needs to be geared up for tackling the interim losses as well as the long-term gains.

In case you are looking for instantaneous gratification, the Amazon stock cannot be the right bet.

However, over an extended period, this is the type of counter that is sure to yield the profit for its investors.

The company’s strong fundamentals, stable business model and management policies drive a robust revenue model.

This model is sure to bring in profit for the investors who put their trust and faith in this stock.

The market is full of lucrative stock picks that promise amazing returns.

But the problem is as an investor it sometimes becomes difficult to identify a truly long-term play.

The challenge, in this context, often is to look for counters.

They do not just promise growth today.

They will continue to provide growth opportunities for an extended period.

This is either possible through identifying stocks that have a long standing business model.

It counters where the continuous research work ensures that there are newer channels of growth to bet on and book gains.

In this context, you could look to buy Amazon stock for long-term investment as the stock is a great bet in the retail segment.

If you’ve already bought the Amazon stock, then you’d better not to sell it.

It is recommended to hold it and make your profit in long-term.

This retail e-commerce giant is pretty much one of the biggest online hubs for buying and selling goods.

Therefore, it is what further adds to the appeal of the stock.

They are moving ahead at an aggressive pace.

They also look at advancing both in terms of technology as well as core retail business.

Expanding the scope of their reach is what they do quite aggressively.

They do this with creating a presence in video content, artificial intelligence and even cloud computing.

Some of the independent research analysts have pegged the revenue growth to be close to 20% in 5 years.

So then, the question arises that should you buy Amazon stock for the long term as an investor?

The answer would be yes but don’t expect overnight gains in this counter.

Another question is should you sell Amazon stock if you have been holding it so far?

You can do that if you have already made some good profit.

But if you don’t need the money and you can afford to hold your position, then you’d better not to sell.

The fact is that, this is the type of stock that will help you clock gains only over the longer term in a slow and steady manner.

It is, after all, a retail player and is invariably guided by the cycles of spike in sales.

A holiday time or special discount season will no doubt bring in higher gains and relatively greater footfall.

The reality is that the trend will never be same and as a long-term investor one needs to be geared up for tackling the interim losses as well as the long-term gains.

Do Analysts Recommend to Buy Amazon Stock or They Recommend to Sell to Those who Are Holding It?

With many brokerages giving an average $1400/share target price, maximum analysts are bullish on the stock.

Over 24 brokerages have an ‘Outperform’ rating on the counter as opposed to 23 last year and a larger number of brokerages have also increased their Buy call on the stock.

Amazon Stock Buy or SellHowever, the Hold call on the stock has gone down, and one brokerage has issued a ‘Sell’ call on the basis of valuations.

Some of the analysts are of the view that while the long-term prospects remain good, the interim valuation seems stretched and investors might actually get lower entry points going forward.

The heartening fact nevertheless is that the stock has seen a distinct 22% rise in its overall stock price on an average basis and for a long-term investor.

This is the kind of gain that really matters and makes a difference to the overall investment profile.

This $1400 level is of course according to the median level.

The highs in this context are estimated to go as much as to $1600 level while the lows are seen close to $1000 level.

That justifies the lone ‘Sell’ call.

Some analysts expect the Amazon stock to dip this low before bracing for stronger and more sustained gains.

Therefore, it goes on to even further strengthen the conviction you could look to buy Amazon stock for long-term.

1. Business Profile

Well, you can surely then question why you should buy Amazon stock for long-term?

Well, the reason is absolutely simple and clear.

Indeed you must back the stock on account of its wide-ranging business profile.

This Seattle-based e-commerce and cloud computing major started with an online bookstore and then diversified gradually to DVDs, CDs, Blu-rays, downloading & streaming of audiobooks.

Their range then went on to includes video games, other software, electronics, clothing, appliances, furniture, toys, jewelry and even grocery items.

Even in terms of innovation, Amazon stock has been in the forefront.

Be it the Kindle e-readers, the Fire tablets or even the Fire TV, Amazon stock today has the rare distinction of being the world’s biggest cloud services provider.

They also possess the most commendable cloud infrastructure of all times.

The Amazon stock Basics brand is also known for sale of some low-end products like USB cable, etc.

The stupendous range of products coupled with the aggressive marketing ensures that Amazon stock is a market leader in the retail e-commerce segment.

The fact that they introduced several trends including one-day delivery and Amazon stock Prime further sealed their position as market leaders.

2. The Retail Revolution

For a long-term investor, it becomes even more interesting and important to study the Amazon stock brand of excellence and how they managed to beat competition so effectively.

In fact, if you see in recent times, it has even given established brands like Macy’s a run for their money and made other long-term online players like eBay pretty much redundant in terms of customer preference and choice.

A Separate Fashion Line

In fact, the new revamped Amazon stock is also set to introduce a separate fashion line.

As per some leading market studies like the Cowen’s report project, this online phenomenon to even claim the top retail spot in the US in months to come.

The same report even adds that they expect a 30% jump in Amazon’s clothing and accessory sale and Macy’s is like to clock in an alarming 4% drop during the same time.

For the next five years, analyst projection indicates a whopping 200% jump in Amazon’s top line in 5 years to well above the $60 billion mark.

Perhaps this strong sales expectation is what’s drive the strong ‘Overweight’ call on the stock.

Morgan Stanley, one of the better-known brokerages have claimed that the stock has a potential upside of well above 22% going forward.

While some have pointed out the lack of touch and feel buyer experience, others are of the opinion that the value for money pricing coupled with the strong return policy upholds customer interest and does not materially hamper sales.

The fact that this e-retail major has successfully started operations in many parts of the world apart from its base market in the US and even giving local e-commerce retailers a run for their money speaks volumes about the success of their business model and the potential for it to excel even more going forward.

Therefore, if you as an investor want to lock long-standing profit, buy Amazon stock for long-term.

3. Amazon stock Prime

Talking of a superior customer experience, you cannot complete that discussion without mentioning the ‘Amazon stock Prime’ service.

This service has also contributed well to persuade the investors to buy Amazon stock for long term.

If the customer has always been the King, it is the Amazon stock Prime service that makes them feel majestic and absolute lord and master.

A subscription based model, customers have to pay just $99 every year for guaranteed and quick and free shipping on select items.

Sometimes the shipping takes flat 2 days from the warehouse to your house.

That’s not just it; the Amazon stock Prime also allows member many other perks like free access to the Kindle Owners’ Lending Library and even Amazon stock Video.

While most other retailers offer free shipping, the 2-day shipping is a decided advantage for consumers, especially for those are buying $50 or $100.

China is the next biggest target market for Amazon.

They are promoting the advantages big time for both local goods and a wide range of international products.

The current number of Prime members has now reached as much as 65 million, and the company set the target to double the overall membership in the next couple of years.

A greater number of prime members also enhance the revenue outlook of the company.

4. Revenue & Profit Target

That narrows down the discussion to overall business basics and perhaps provides the most compelling arguments on why you could consider buying Amazon stock for long-term.

PS seeing a significant.

In fact, Goldman Sachs has put out a projection of 60% growth in the cloud business going forward.

If that happens, it will instantly spike the revenue north of $3 billion.

Looking at the average growth rate that the company has been clocking consistently, the forecast is for a 100% plus up move on a year on year basis.

Even the drop in Amazon’s recent revenue numbers below analyst estimates is more an indicator of the company’s investment into future growth verticals rather than any alarming fall in popularity or similar trend.

The company has been actively making more allocation towards improving on its video platform and channelizing greater growth in that segment.

This is also a big indicator of the company’s keen understanding of market dynamics.

The EPS or the earnings per share are also indicating a robust growth pattern.

If you are analyzing the stock’s fundamentals, the EPS number is very crucial as it breaks down the company’s performance to the smallest point and helps you to assess and decode the complex medley on the balance sheet a lot better and more clearly.

In many ways, the EPS is also an indicator of the future trend and a healthy EPS is always symptomatic of profitable times ahead for the company.

It incorporates the biggest gains and takes into account the losses incurred as well.

5. Core Valuation

That study reveals that the at the moment the Amazon stock  is trading at 75x forward earnings, and that is a huge premium for a stock with projected long-term growth of around 50%.

It is good news as well as bad news in one go.

Bad news because of the fact that at current levels, the stock is far from fair value and is almost invariably set for a correction to more accepted fair value levels.

But that only means you could look to buy Amazon stock for long-term on any such dip to further strengthen in this stock that is set to take over the global retail roadmap in a very pronounced manner.

This is particularly interesting given the fact Amazon stock is currently in a place where it is vulnerable from many fronts, be it Google Netflix or Microsoft.

How digital media and cloud services are set to pan out in years to follow is anybody’s guess.

Given the unpredictable nature of the technology sector, the absolute road ahead is also anybody’s guess.

However, there is an advantage to buy Amazon stock for long term.

It is the simple fact that you are well geared to face the future with the best and most relevant product line-up.

6. Margin Worries

However, there is one thing that might worry you and deter you to buy Amazon stock for long-term.

It is the simple fact that there is very little room for error given how thin the margin is for this e-commerce giant.

It’s net profit margin is as low as 1% and by simple logic, it would not take too much to actually sink below the red line in the stock market parlance.

But there is a silver lining, as the analyst estimates suggest, any such price dip at this juncture is all the more reason to bet more on the stock and increase one’s position in this retail and e-commerce biggie.


Therefore, it would be safe to conclude that you can buy Amazon stock for long-term.

The reason is that it offers the most compelling growth story going forward.

Given the fact that it is already a large cap and the share of e-commerce in the overall US economy is the only minuscule further cements its slot.

The growth potential is no way more than any assessment can project.

Overall prospects can only look northwards going forward in every manner.

In fact, the Amazon stock story can be almost likened to a sunflower’s story.

Amazon stock has its focus fixed on the future.

It is following trends and advances in technology, and through sheer hardcore, R&D is staying on top of it.

Not only is it a trendsetter it is also a trend creator that others are so interested in copying.

That in itself is a sign of a true leader and an impactful large cap player in the market.

The Amazon stock Go is the next catalyst that the market is looking to embrace with bated breath.

In an almost nerve-racking pace, this simple innovation is supposed to act as the biggest disruptor in the online grocery space.

It would not be wrong to term Amazon stock as the hub of innovation with imagination.

The core concept of Amazon stock Go concerns customers to go to a store and scan products and leave making the transaction absolutely cashless.

The money gets deducted from the online wallet.

But the exact execution of it will be time taking.

Till that time, it only makes sense to buy Amazon stock for long term.

Debt to Equity Ratio and How To Keep It Stable in New Businesses

There are some aspects of the business which are absolutely important to understand whether you are an entrepreneur or an investor, whether you have a small startup or a big business.

The debt to equity ratio is one of them.

I am sure you have heard about it many a time.

This is one of those crucial financial indicators that investors always check before investing money in a project.

So, the question is how exactly you would define the debt to equity ratio? How can the entrepreneur look at keeping it stable?

Back to basics first before getting into the details of how to keep the debt to equity ratio stable, it is important to understand what comprises of a stable debt/equity scenario.

As an entrepreneur, it is also necessary to understand the key elements that go on to determine this crucial ratio for your company.

Understanding Debt to Equity Ratio

In very simple terms, debt to equity ratio is a measure of a company’s financial leverage.

This is that important ratio that clearly spells out the amount of capital that has been provided by the owners and the amount that lenders or any other investor has put in.

Debt to Equity RatioEssentially, the debt amount is divided by the equity to arrive at this ratio.

This ratio then clearly identifies the startup or new business’ ability to repay its monetary obligation as well.

Say for example, if a particular company showcases more debt than capital/equity, the internal cash flow of the company is less than the funding provided by creditors.

Studies charting out the success and failure of various startups indicate that this is a dangerous trend.

It clearly signals that despite the capital infusion, the company is unable to generate the required revenue and could spell trouble for the entrepreneur in the long run.

On the contrary, when the equity portion is higher than the debt amount, it is a clear green signal in terms of the health of the company’s finances.

The assumption in this case that the entrepreneur is successful in generating a higher rate of revenue and able to rein in the debt amount.

Ideally, first-time entrepreneurs often get swayed away and try and look for additional creditors to pump in cash.

This can be a rather tricky and dangerous situation as it raises two primary red flags.

First and foremost, the business is trying to expand at a rate higher than its comfort zone and secondly it slows down asset growth as well.

One must remember that it is always a good idea for a startup to target growth at an affordable rate at the beginning.

You must understand that your firm’s growth is closely tied to the asset growth, and so to the debt to equity ratio that you can bring about and vice versa.

The ideal condition is when asset grows in tandem with the overall growth of the company.

This ensures that the overall expansion of the firm is in sync with the growth profile.

1. Stability Important For Sustained Growth

While it is never a Utopia and many a time entrepreneurs may have to take in larger debt to fund the company’s growth, it is not advisable for a sustained period.

The fact is growth that is fueled by debt does tend to falter beyond a certain point of time and is a rather risky proposition if you are looking for meaningful and sustained growth of the company.

This is exactly why you would have seen in the early 90s close to the heels of the telecom boom came a major fall as well.

These telecom companies expanded significantly on debt as they were confident of generating enough revenue to pay it off.

However, this idea did not pan out as envisaged.

The revenue generation was hardly in sync with the debt that was incurred.

As a result, these telecom companies had to restrict a lot of the expansion plan they envisaged going forward.

The debt part of the debt to equity ratio might often lead to an unstable business condition if not checked in time.

Entrepreneurs need to make informed choices at all times.

They must follow the balance sheet of the company in details and also take account of the various day to day expenses which could result in overall skew in the balance sheet.

In this way, they will be abreast with the daily dealings and can decide better on how to line up their debt planning to be more in command.

Too much debt always makes the business foundation flounder and many a time when entrepreneurs fail or are fired from their companies is because of this reason.

A case in point is the Housing.com debacle.

Here the management not just committed a lot of money in debt but also spent the money without any account of the corresponding revenue that is being generated.

What finally happened was the debt to equity ratio was skewed against growth.

2. Eyes On Equity Growth

The only way to deal with this uncertainty is to keep your focus on equity.

It is important for organizations to ensure that they measure their growth by growth in equity more than debt.

This will ensure that the pace of growth is always within affordable limits and the debt to equity ratio is never stretched unnecessarily.

So even if you need to take debt, you are always mindful that the debt numbers do not spike up unnecessarily.

Equity growth also ensures that an entrepreneur can sustain growth bit by bit without rushing through with huge debt.

The equity therefore in this case also acts as an insurance that the company does not grow at an unreasonable pace, especially if the debt is fueling that growth.

Balancing debt and equity also means that as an entrepreneur you also start budgeting expenses and never move out of your comfort zone to accommodate expenses.

The debt to equity ratio therefore also helps you improve financial discipline.

3. Debt to Equity Ratio: How Much Is Too Much?

As an experienced entrepreneur, you already understand how different sectors have varying levels of debt-equity requirement.

What works for one sector might not be true about another.

For example, the financial sector if you notice has a significantly larger debt to equity ratio compared to say perhaps technology.

So, question is how you would ascertain how much debt to equity ratio is ideal for your company?

This is a question that also takes us to the fundamental question about how much leverage are you comfortable with?

Apart from sectoral limitations or preferences, this is the other key factor that will play a decisive role.

What most investors would do is pay attention to the company’s historical debt to equity ratio and how the current number stands in comparison.

The performance of the company thus far and the current performance will easily help decide if the there are any red flags.

If the divide between the historic debt to equity ratio and the current number is too much, it invariably means there is a source of worry and corrective action is necessary.

While some capital-intensive sectors like services and utility do need a higher capital allocation and hence a higher debt, in general, it signals aggressive growth plans.

It shows the entrepreneur might have been over ambitious in setting the growth targets and achieving them.

If the revenue generation is at par, then this isn’t so much of a worry.

However, if that’s not the case.

The sooner this divide is minimized, the better it would be for the company’s growth.

This is also a key player in keeping earnings growth on track and reducing uncertainties from the company’s balance sheet.

Higher debt if not supported by higher earnings could often cause sustained problems for an enterprise.

4. Why Do You Need Debt to Equity Ratio?

Well that said, we need to address the most important factor, why do we need debt to equity ratio?

Well for starters the debt to equity ratio is the entrepreneur’s best tool to assess personal progress.

Moreover, this is important because

  • Investors always refer to the company’s debt to equity ratio and projected debt plans to assess the growth and financial health of the company
  • For an entrepreneur looking for funds, the DE ratio is the best tool to showcase superior growth standards and appropriate eligibility for loans if needed.
  • Earnings of the company are also severely depressed if the debt to equity ratio is skewed in favour of debt
  • A stable debt to equity ratio showcases your company as a safe bet to potential lenders.
  • An enterprise with stable DE also has lesser chances to falter and finds more opportunity to grow.
  • A stable DE also highlights entrepreneur’s restraint and fiscal prudence
  • In the long-run, a stable debt to equity ratio easily becomes the greatest tool to fuel expansion
  • If they list the company, stable DE makes the stock more lucrative in the stock market and that can lead to further gains.

5. Is Equity Overload Always Advisable?

That brings us to the fundamental question that is debt always bad news for a company?

Actually no! Many market veterans will explain to you how the successful running of an enterprise has to be a happy marriage between debt and equity.

While theoretically it could be projected that if you can generate enough revenue to pay off the debt, that’s ideal, in real life this is hardly the case.

In fact, that’s not always desirable either.

Actually, debt does have some advantages too, especially in terms of fueling growth for a company.

You can always look at deducting the interest you might be paying for your loans as a business expense.

Creditors who simply loan you fund never have any say in your business dealings as long as you pay their installment and loan amount on time.

On the contrary, if you bring in an equity investor they would invariably have a say as well as a stake in your dreams.

Just because they have paid the money, they will also expect you to listen to them and could often be a hindrance on your independence.

Therefore, as long as your fund requirement is within manageable limits and you are getting creditors willing to loan you the money, it is never a bad idea to opt for the loan instead of bringing in a fresh investor.

In this way, you will be able to meet your funding requirement also and not hamper the company’s growth chart or your individuality either.

Creditors often give you comfortable window to pay off the loan as well.

If you can negotiate well, you also get the chance to pay off at a pace that’s comfortable for you without inconveniencing anything.

However, as an entrepreneur you need to be careful of the interest you are paying and how much you can afford to.

6. Appropriate Planning

Therefore, it all boils down to one fundamental business basic:

As an entrepreneur, the only way you can maintain comfortable debt to equity ratio is through proper planning and financial discipline.

Let’s assume you are drawing up a plan to chart out your company’s 5-year growth plans.

You will have many parameters like improving revenue growth, profit, expansion and many other factors.

It is beneficial to also account for the potential debt requirement that you might have.

This prior planning will enable better calculation.

You can easily calculate how much debt equity you would need at a certain period to maintain business stability.

This will also help calculate how much debt payment you can afford without impacting cash flow.

This will no doubt help you identify the red flags well in advance.

Based on your actual requirement you can then plan accordingly on ways to fashion and channelize your growth initiatives and overall forward plan.

Many a time it so happens that you can easily reset the business stability by either deferring or advancing a certain expense or a certain project.

Of course, you have to ensure you do not hamper future prospects in any manner.


The debt equity situation does not just help in maintaining stability but also proper cash flow in the company.

This is because it will help you keep a check on the overall debt situation and the resultant payments.

Therefore, a health DE is often the key to a successful business.

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It goes without saying that the debt to equity ratio is a very important measure of a company’s financial progress and stability.

This number is self-explanatory in bringing out the proper business prospects of an enterprise It also acts as a signal to the entrepreneur to undertake course correction whenever require.

This can easily help you in getting funding from investors very easily and undertake important expansion.

A healthy debt to equity ratio also acts as company’s progress report to correctly showcase a firm’s business excellence.

Residual Income Formula Is Defined Differently Here

Calculating your residual income can never be difficult if you get the residual income formula correctly.

The basic formula is based on the net inflow and outflow of an individual or a company as might be the case.

However, the formula is tweaked a bit depending on the key purpose that this valuation metrics would be used for.

There are various applications of the residual income starting from assessing an individual’s capability to repay a loan to a manufacturing unit’s expansion potential.

Therefore, calculating it can be quite simple.

Below, I am explaining how to calculate your residual income based on an accounting point of view.

However, as I have already explained here, residual income has a different definition from our point of view.

It is the income that will not be stopped if you stop working.

So it is completely dependent on the nature of your job and whether it is able to generate a residual income or not.

It is very important for your future to spend your time on the jobs the will keep on making money even if you stop working.

You can’t be dependent on social security, RRSP and things like that.

The Residual Income Formula

The Real Residual Income FormulaThis is why one basic formula that you must remember is

RI = A – (B x C)

RI, in this case, stands for Residual Income.

A is the total net income on an operational level.

B represents the minimum expected return.

C is no doubt the average assets, again on operation basis.

Therefore, it is quite clear that formula uses actual figures more than the notional or estimated profit level.

As a result, they always become a way more accurate assessment of the financial state.

This is an important valuation entity not just for large corporates.

But it is also for many small time businesses and even self-employed individuals.

This becomes a very handy approach to judge the overall valuation for many individuals who are not really working at the moment to generate income and residual income is important for them.

But the mere formula for residual income would not be useful at all if you do not understand it in the appropriate context and use the right type of variables to truly bring forth its relevance.

It becomes extremely important for you to grasp how it works in sync with the other various elements of the balance sheet.

For example, the component ‘A’ in residual income formula is the net operating income.

But you can’t just have a reference figure.

You need to take into consideration your entire monthly income or the revenue that has been generated and then go on subtract the various capital costs and loan liabilities that you might have.

Let’s say you released a music album and perhaps sold about 10,000 copies.

Then your net operating income will be the actual amount after you subtract the cost involved in creating it, editing it, marketing it and designing the cover.

Once all these expenses are accounted for, the resulting amount would be your net operational income.

If you create an e-book, you won’t have any costs because you can sell millions of copies without having to pay for any hardware and duplication fee.

Therefore, any money that you make through selling your ebook, will almost be your profit.

Digital products are better to generate residual income because once they are created, they can be sold unlimitedly.

The cost of capital is no doubt the kind of cost involved in mobilizing the said assets to start generating income.

When the return on this basic investment is able to cover the cost and also create a surplus, you are then able to calculate the residual income based on the percentage of relative return.

The other aspect of the equation is the operating assets.

This essentially involves the kind of money that needs to be ploughed back into maintaining and further the production level thus far.

As a result, the more successful a company is, the better residual income can be expected from them.

Such is the value of this metrics that many companies base their business ethics on the principle of generating larger residual income.

How Is Residual Income Not Always Passive Income?

Perhaps one of the greatest benefits of using the residual income formula to work is that it easily enables you to identify the difference between residual income and passive income.

This is one of the core formulas that are enabling lots of businesses today to focus more on generating substantial residual income as opposed to passive income.

Another major advantage is that you can use this formula conveniently to create addition income channels.

The trick is as long as the result of the residual income formula is positive, it means that the business is generating additional revenue despite the cost involved.

Therefore, it would make sense for you to continue and further the scopes of such a business.

The Formula for Personal Residual Income

You already know the core formula for calculating residual income.

But you must understand it needs some tweaking depending on the specific purpose that it is employed for.

So when you set out to calculate personal residual income

The fundamental factor is that it is often also referred to as discretionary income.

It would be pretty simple to calculate it.

All you have to do is subtract the various expenses like loans and mortgages and look at the net amount remaining.

Therefore the formula is relatively a more simplified version incorporating these two simple parameters.

Residual Income (RI) = Total salary – debt outgo

For example, if your monthly salary is $10,000 and you have one mortgage payment of $2000, $1000 loan EMI and other expenses worth $2000, your residual income would be $10,000 – $5000 = $5000

Now if someone’s loan worthiness needs to be assessed, it would be based on this RI figure of $5000.

A higher RI would always entail a greater possibility of getting a loan.

The Formula for Business Residual Income

Now when the same residual income formula is used for assessing corporate accounts, it takes into account the many facets of operational income that go hand in hand with a business establishment.

The net operational income would be the total revenue subtracted from the cost of capital used up to create the kind of revenue that it starts to generate.

So it is not just the profit level, but profit subtracted from the basic return that the business is set to generate.

Residual Income = Net Operating Income – (Min Required Return x cost of operating assets)

When the residual income turns positive from this calculation, it is a major plus as it denotes that the business is profitable after all the costs and is creating a surplus profit over and above the basic minimum rate.

There the residual income formula is not just an easy way to grasp the true profitability of business.

But it also enables you to get appropriate indicators in terms of the financial viability of a business.

Even in personal employment terms, this formula is also beneficent in creating multiple channels of employment.

An individual can use this formula for getting the right perspective about the kind of surplus income they need to generate, and this leads to a far effective fund allocation.

That was all about the accounting aspect of residual income and the formula that accounts use to calculate it.

Are There Any Legitimate Work from Home Jobs Stuffing Envelopes?

I am sure you might have often seen ads in the weekly papers about work from home jobs in stuffing envelopes and make $1000 a month.

I am often intrigued by this whole advertisement and the sheer length of time that they have continued to woo potential participants.

The question is how does this entire working from home envelope stuffing really work?

Most importantly, is it legitimate at all?

Stuffing EnvelopesThe point is why anyone would pay you that kind of money for stuffing envelopes in a day and era where computer and emails have pretty much taken over the communication world?

Why Do I Doubt Legit Work from Home Job Stuffing Envelopes?

There are many reasons why I feel that the work from home job of stuffing envelope is simply too good to be true and borders more towards the side of a potential scam in terms of its authenticity overall.

The Rationale of Investment Weak

The first reason that the working from home envelope stuffing raises my doubt is because of the claim of the potential money involved in this transaction.

The fact is for earning $1000 a month, how many envelopes a month would you have to stuff and most importantly where would all these envelopes be going.

Let’s face it, when people can easily distribute flyers, pamphlets, why would they want to distribute mailers stuffed in a proper envelope.

Marketing is all about getting maximum exposure with the minimum expense involved.

Today, you can email flyers or even whatsapp them, so why would anyone want to actually pay money, invest in postage stamps and then send these mailers.

What kind of information would be there in these envelopes to deserve that kind of expenses?

Cost Involved

Postage stamps and envelopes are really expensive these days.

No one gets envelopes and stamps free unless these are self addressed.

The point is why anyone would send you self address envelopes with postage stamps.

This is a rather remote concept and seems so out of sync in today’s world.

After all, the primary motive of any business and its marketing initiative is reducing expenses and assuming these are meant for marketing.

You can get a lot better impact by creating a Facebook page for almost zero cost and sending invites to a host of contacts.

Start-up Kit

It is a myth that you will require no fee to start.

Most times they camouflage the fees as the cost of a start-up kit to help you understand the dynamics of work from home stuffing envelopes.

Well, you might be at home for whatever reason, but the fact is at no point of time, would you be so dumb that you won’t be able to understand how to stuff an envelope.

That is basic, and almost anyone can tell you how to start stuffing envelope.

The fact is anyone who is able to read their name would be able to stuff an envelope.

Spreading Misinformation

Most times, you would hear people talking a lot about work from home stuffing envelopes before they start but once they get on with it, the chances are you have never really heard from them.

Have you wondered why?

Well, that is because they never get paid for stuffing envelopes really.

What they get paid for is convincing another set of people to fall in the trap.

So for every person whom you can convince to buy the starter kit, you get a percentage as commission and that is how you get an opportunity to make money.

Let’s face it that cannot be legit, and neither is the claim that work from home stuffing envelopes has no fee to start.

Therefore, a business which has its roots based on unethical business practices cannot be a fair trade to be associated with.

It surely reeks of malpractices and misinformation, and it can’t be something that you would be proud to talk about in your friend circles.

This is exactly why when anyone tells you that it is a great business, think twice, ask relevant questions, and only then you should go on to make a decision about joining it or not.

Type of Pyramid Structure

Most times, there is a huge question mark on the legitimacy of a pyramid structure that does not sell anything exactly.

This is exactly why I am not convinced about the legitimacy of the work from home option of stuffing envelopes.

Let’s face it; you are getting paid for convincing others to fall into the trap.

So knowing very well about the dangers involved, you are actually trying to get more people into the scheme just to retrieve the money that you have put into it.

This is exactly how a pyramid scheme works and puts a huge question mark on its authenticity.

This is exactly the reason that there is a question on whether the scheme of envelope stuffing as working from home option is legit.

Though there is no regulatory warning against this business, the truth is that this is a scam from the word go.

There is absolutely no business sense in getting more and more people in the scam.

In the absence of any real product for sale, the only gainers can be the people who are perpetrators of the scheme or who start it off and collect money for the start up kits.


While envelope stuffing as a working from home alternative has merit in the concept that it needs no skill, no degree or experience to excel, the relative purpose of the whole scheme is extremely questionable.

There are many red flags in the business model.

These include

  • Whole purpose of the effort
  • No end product to sell
  • Intent to create a pyramid structure by getting more and more recruits
  • Charging for a start-up kit.

Come to think of it.

Do you really need a start-up kit to learn how to stuff envelopes in any form whatsoever?

The biggest problem with the whole initiative is the fact that in this era of social media marketing, the idea of sending envelopes stuffed with flyers with postage paid for seemed extremely out of sync with the current need and the demand trends.

It is almost like trying to light the fire using stones when you have matchsticks or gas lighters at your disposal.

What Is an Executive Summary in Simple Words?

The executive summary is often one of the most important features of a business plan.

It is both the heart and the soul of the entire business plan.

It succinctly puts forward your objective for the business and encapsulates the core purpose of putting forth the venture.

Executive SummaryWhether an investor reads it or a banker, whoever the reader might be, they get an instant idea of the overall business and the processes involved.

In very simple words, therefore, the executive summary is a precise version of the entire business plan in simple and lucid fashion.

Often also known as a management summary, this is a rather short document in comparison to the entire business plan.

In common terms, you can say it is a non-technical statement that summarizes the longer business plan.

This makes possible to easily read through the entire details of the plan quite rapidly without losing the key highlights.

The key elements of the business plan include:

  1. Statement of purpose
  2. Key proposal
  3. Background document
  4. Analysis of business plan
  5. Conclusion

The main purpose of this executive summary is to help readers make a quick decision and provide an overall overview of the entire business.

As I explained above, the reader can be an investor who wants to invest in our company.

He can even be a banker who is going to approve our loan application.

Structure of an Executive Summary

Structure of an Executive Summary

A typical executive summary has a set structure that it follows.

A condensed version of the overall detailed business report, the structure is very important to bring to light the true purpose of the business plan.

Not only it makes the document more readable, but also becomes successful in the main purpose of this executive summary, i.e. enabling a quick portrayal of the overall business details.

So what are the key parts of this set structure?

If you look at any training material or book on the issue, here is a quick lowdown of the main elements:

1) The summary should not be very long.

2) On an average, it should not be more than 5-10% the overall length of the business plan.

3) The choice of the language is very important.

4) Only when the report is in a way that is appropriate for the target audience it can make the necessary impact.

5) Decide on the target audience and ensure the language of the executive summary follows that brief.

6) It is always a good idea to split up the executive summary into number of paragraphs.

7) Therefore a summary should not only be short and crisp, but also you need to ensure it is not monotonous.

8) The order that you follow in your executive summary is also very important.

It should be essentially the same that is in the entire business plan.

9) Also, that implies that there cannot be any difference in the content of the executive summary and the business plan It should essentially be same.

10) You have the option of including justification and recommendation in it.

11) The introduction and conclusion are very important elements.

12) They improve the readability of the document and also help highlight the core points.

13) Though it should have the same content as the business plan, you must ensure that it is also a separate document without the detailed report as well.

14) Depending on the nature of the business plan, an executive summary could also be a summary of more than one document.

15) It should be only page one and two.

16) You could include the Vision of your firm and the mission statement for your business too.

17) You can briefly give a sketch of your basic goals of your business.

Therefore when you ask, what is an executive summary, it is the structure of it that can most easily help answer the question.

This is because the structure is often self explanatory and easily brings the primary aspects to foray.

Example of an executive summary:

Sample of an executive summery

The Importance of Executive Summary

That brings us to the core point that what is the importance of the executive summary?

Firstly, it needs to be very catchy so that the reader is instantly hooked on to it.

The advantage of this is that the potential investor or the business partner can easily get an idea of the purpose that you have in mind.

It also highlights the key pointers that your potential readers might pay attention in the overall business plan.

It helps them identify sections in the broader plan that could yield answers to the questions that they might have in mind along with the portions that could hold special interest for you.

Moreover, you must remember that the executive summary is often the most strategically advantageous position for posting the mission statement of the company.

The mission statement is often the outline of the key objective of the core business purposes and placing it appropriately is crucial.

While the executive summary is the right place to place it, you must position this correctly to get a fair perspective of the entire business motive.

Overall, it also serves the same purpose as window shopping does to any avid shopaholic.

You must remember the kind of attention that retailers spend on placing products for window shopping and that exactly should be the kind of attention that you must give to the overall executive summary and especially the mission statement in it.

Broadly it gives you a peep into the gems hidden inside and makes the business plan a compelling read for even someone who might not be very keen.

That’s exactly why just like the showcasing of the right kind of products enable proper selling of the products, intelligent placement of elements in the executive summary would always ensure a much better response to the entire plan as such.

It not just enhances the reach of the overall business, but also improves the rate of acceptance of the business idea.

You must understand that often the way the executive summary represents the core factors, it becomes far more acceptable than you would have considered otherwise.

Therefore, if your idea is to win over more readers with your executive summary, you must work towards making it:

  1. Clear
  2. Concise
  3. Precise
  4. Direct
  5. To the point

These are the features that help your readers to connect with the content of the entire plan quite easily.

This also means that the set of readers, who get motivated by the executive summary that you have created, also spread the word to others who would not have otherwise spent that much attention to the business plan.

In a way, it also becomes part of your publicity plan as such.

Advantages of Executive Summary

That, therefore, brings us to the next chapter, that is identifying the key advantages of the executive summary.

1) Appropriate Business Description

An executive summary inevitably describes the overall details of the business in a concise manner.

That ensures that for anyone interested in understanding the business basics, all they need to do is simply refer to the executive summary.

They will be able to grasp the fundamentals as well as the strategy employed by the entrepreneur in conceptualizing the broad business plan.

It also describes the nature of target customers and clients, and therefore you can easily get a clear idea who the business is targeting.

2) The Power of Number

The executive summary is inevitably trying to convey the basic business plan in a concise manner so as a result, you need to use a lot more numbers to convey the same set of messages that could have been achieved in a couple of paragraphs.

That is why it also becomes a lot more impactful.

Here is a short example, if you just said that with mere 20 employees working, your average monthly reach is 2000 clients, it sure does convey the same message in a more powerful manner than saying, despite the small size, your business has potential to reach a large cross-section of people.

4) Projections Are Attractive

That takes us to the next important advantage of the executive summary, attracting the viewer attention.

As a result of the key numbers used like future projections, client reach, turnover and expected revenue, the executive summary becomes a crucial positive point.

Readers get genuinely excited about reading these, assessing the relevance in future and responding as per that.

These projections therefore surely enhance the readability of the entire business plan.

5) Improves Risk Appetite

It is needless to mention that positive projections beget positive responses.

Given the paucity of space, the executive summary, in general, crams up all the highlights of the business and the major attention grabbing details.

As a result, the potential investor who might be reading the executive summary surely gets more excited about the whole plan.

As a result, it won’t be wrong to say that it spikes up an investor’s relative risk appetite and helps them take on challenges that they might not have considered otherwise.

This greater risk appetite can often be credited to a well written executive summary.

6) Highlights Unique Business Senses

I am sure that when you conceptualize the business plan, there is a unique motive that goes with it.

Whether you are looking at serving a niche area or providing a better quality of service in an already overcrowded space, a well written executive summary can work as an effective tool in helping convey this information.

Moreover, the style of presenting it or in short the way the executive summary is created can totally transform the whole impact of the plan and the response that you can expect.

So it acts as an appropriate medium to convey the message more effectively.

7) Criticism

That said, the executive summary is not without its set of demerits.

Many corporate veterans have often claimed that too much importance is often ascribed to this executive summary.

By providing an easy to read version of a complex issue, it could often lead to key issues being overlooked.

Unlike how business books have you believed, your business is never just as good as the executive summary looks.

Sometimes the original and longer plan could be way more complex and multi-textured than the actual plan.

This by extension, one could argue that this summary might actually provide a dumbed down version of the actual plan and might miss out some highlights.

As a result, often key elements of the business might be missed for the paucity of space in the executive summary.

Let’s face it that the summary hardly comprises of a few pages.

It would just not be possible to cram every detail in it.

Therefore, if you decided to take a decision on the entire business on the basis of the mere executive summary, the possibility of misses are quite high.

Using an old corollary that we used, this executive summary is after all the mere window to attract shoppers.

The shopping plan cannot be completed on the basis of this mere element.

While it surely helps you woo readers to your business plan, your readers need to get past the executive summary.

That’s why equal attention needs to be given to the other elements of the business plan.

There is no reason why you should devote your entire attention to just writing this executive summary.

You also need to ensure that the other elements of the plan are equally well conceptualized.

They should give your readers a detailed perspective of every element of the entire business process.

The idea to create a comprehensive content is crucial.

An Executive Summary Is Like the Central Pendant

To conclude, an executive summary is like the central pendant in a beautifully carved necklace.

While each element in the necklace is beautiful and attention grabbing, the centerpiece is what actually pulls the buyer to the shop eventually.

Therefore, quite understandably the quality of it has to be undeniably great.

While a well written and properly conceptualized executive summary can enhance the business prospects, the reverse is also true.

If due attention is not given to the overall summary, it could also result in the entire business plan falling apart.

A badly written executive summary might also result in creating a sub-par response for the overall business plan.

Inevitably when the readers cannot get past the first few pages, the chances of them reading the entire plan becomes even lesser.

They might not be able to devote the desired attention if the executive summary is not able to make the desired attention.

Consistency and cohesiveness form the key pillars of the executive summary, and whether you like it or not, a great version of this summary could often shape the direction of your overall business success.

Social Security Ponzi Scheme: Really?

The US social security system has come under a lot of criticism.

Often the argument is that it is a kind of Ponzi scheme where the money from new investors is used to pay off the older investors.

Technically, this is true about the social security system in some ways.

So the question that comes to our mind is that whether the US social security is really a Ponzi scheme?

If you track the growth of the social security system, you would realize that it has grown manifold from the initial phase.

Every expansion meant that the older investors needed to be paid off.

Along with that those who have already retired don’t have to pay any additional tax and those nearing retirement have to bear the tax burden just for a few more years.

But all of these people continued receiving benefits, increased ones as well and the burden of funding these fell entirely on the newer generation.

So in common terms, whatever we have understood about Ponzi scheme it would appear, that in many ways, the Social security system is confirming to these.

Understanding a Social Security System

Social Security Ponzi SchemeBefore we delve deeper into the criticism about social security vs Ponzi scheme, it is very important to comprehend the basics of the Social Security system.

The US Social Security created in 1935 is primarily funded via employee payroll taxes.

It is also either known as the FICA or the Federal Insurance Contribution Act Tax.

All salaried employees barring a few exception are bound to pay this tax, and the extent of their contribution is pre-decided by the law.

It is also otherwise known as Self Employed Contributions Act Tax or the SECA.

These tax deposits are collected by the US revenue department, IRS and then handed over to the Federal Disability Insurance Trust Fund and Federal Old-Age and Survivors Insurance Trust.

These are the two US Social Security Trust Funds.

As per 2015 data, the total social security expenditure was close to $900 billion all inclusive.

In fact, this social security contribution is seen playing a major role in reducing the overall poverty rate Americans above 65 years to 10% from a whopping 40% earlier.

But then the question is whether the social security a Ponzi scheme?

Predominantly for those in favor of the argument take into account the investment methodology that the social security system follows to draw the similarities and hence the allegation.

Criticism Against Social Security System

Many people have said that the social security is a Ponzi scheme by a number of factors that are similar to the way a Ponzi scheme is run.

1. Money Not Invested

A significant part of the money that an average US citizen pays as social security is not invested anywhere.

The money is directly routed towards paying benefits to those citizens who are retiring or perhaps you can call the early investors in Ponzi scheme terminology.

2. High Returns

Essentially the subsequent generation is the next layer in the so called pyramid, and they bear the burden of paying for the benefits enjoyed by the previous generation.

It obviously comprises of a great scheme for those investors who got in really early, the older generation.

For example, there are many who paid less than $100 in Social Security taxes but enjoyed benefits exceeding $20,000.

This type of high returns was considered possible only in a Ponzi scheme.

But in a social security, it was made possible as the number of people who were retiring was far lesser than the total number of people who are paying the taxes.

3. Funds Drying Up

However, as the pyramid grows bigger, the claimants begin to expand and exert pressure on the existing system.

If you look at data, nearly 16 workers used to support every retiree, and by 2030, there will be just 2 who would be supporting every retiree.

As seen in the case of many Ponzi schemes, the number of new contributors is undoubtedly drying up.

A stage will come when paying the promised returns will become a lot more difficult than now.

As a result, when the current set of employees who are paying the taxes retires, the relative rate of return will be much lesser.

Social Security Is Not a Ponzi Scheme

While if you analyze purely on the basis of structure, perhaps it is easy to draw up similarities, but the fact is that a social security system is a lot more than a mere Ponzi scheme.

1. Different Types of Transparencies

For example, the transparencies of a social security vs Ponzi scheme are completely different.

In a Ponzi, it is impossible to trace the origin and absolutely no way to gauge the actual return-generating mechanism.

But on the contrary, there is nothing obscure about the social security system.

Every employee who pays it knows pretty well the terms and conditions and can calculate the relative rate of return going forward.

The payouts have all been underwritten by the tax revenue that is collected, and the interest that is earned by the Government on Treasury bonds is essentially helped for the payout in lieu of social security system.

2. No Fear of Collapse

A private Ponzi is susceptible to a collapse, and those who invest their money can suffer severe losses.

There is also no guarantee that they will ever get back their original investment. But that is never the case for the social security system.

Apart from the Government underwriting every payout, the other factor is that this is dependent on the population growth.

The investments can actually grow at an exponential rate if the population grows exponentially.

Therefore, it can be easily concluded that while there are some similarities in the basic structure of a Ponzi and social security scheme, the biggest difference is that a social security number will never collapse.

The Government underwrites every payout and people will never suffer losses or lose their investment made in this format.

Hence Social security is not a Ponzi scheme.

The most important thing is that even if US social security is really a Ponzi scheme, it will not be a big deal because the US government is behind it and it can easily resolve any kinds of problems.

For example, in a private Ponzi scheme like Bernie Madoff, when the number of new investors and the money they invest is not enough to pay the previous investors and those who are the higher levels of the pyramid, the scheme collapses and turns to a big scandal.

However, if such a thing happens with US social security, the US government can easily pay the retirees and older investors through the other resources.

But the private Ponzi scheme has no resource but the money that the new investors pay.

This is true that in the US social security program, the older investors are paid with the money that the new investors and tax payers invest for now.

However, it doesn’t mean that if one day the money that new investors pay, didn’t suffice, the whole US social security system would collapse and the old investors wouldn’t receive anything.

A big government and nation and unlimited sources of income is behind this program.

On the other hand, a private Ponzi scheme can never keep on attracting new investors forever.

But in the US social security program, there are always new employees who start working and paying tax.

People have to work and make money to survive, and so, they pay tax too because they have to.

And, this cycle will be continued forever.

Interview Questions and Answers That Help You Get the Job

You will agree with me that if getting a job is difficult, preparing for interview questions and answers is a far greater challenge than that.

The kind of impression that you create at the job interview goes on to decide the future of your career.

Often more than academic excellence or professional recommendation, it is your performance at the interview that goes on to decide the course of your career.

Interview Questions and AnswersIncreasingly, the interview is being seen at the perfect place to assess an individual’s presence of mind, ability to take a quick decision and overall behavioral trends and characters.

Some of the common interview questions and answers can help us to understand an individual’s character and ability to respond to situations and think out of the box.

The trend with interview questions and answers is all about being unconventional today and testing unchartered territories.

Several top companies today are known for the completely unexpected and unconventional questions that they ask their interviewees and these range from the total number of cows in Canada to estimate the net windows across New York.

The possibilities are huge, and the stake is very high.

Surprisingly, a lot of studies have revealed that this fear of handling interview questions and answers efficiently often come in the way of an individual’s career growth.

They are so apprehensive of tackling these questions and answers all over again that they rather prefer to continue with the same job and even deal with a certain amount of dissatisfaction.

Therefore, we decided to bring you some of the top interview questions and answers.

We want to help you prepare better for the interview and tackle tricky questions in a way that can help you get the maximum leverage and edge over many others who might be appearing for the same interview.

Some Common Interview Questions and Answers

Let’s say that you need a Google or Amazon to come up with wacky interview questions and answers like total windows in New York.

However, there are a set of questions which most interviewers ask and you need to be prepared for.

1. Tell Us about Yourself?

Whether you appeared an interview 30 years ago or preparing for it today, this is one of the top interview questions and answers and one of those that you need to be prepared at all times.

It is not just a description of who you are but one of the best opportunities that you can get to sell yourself and convince the management that you can be one of the most valuable assets for the company.

It is a simple but also a tricky question at the same time.

The fact that this is a rather broad question means an interviewee might easily tend to ramble or go overboard trying to explain.

The biggest outcome of that can be the interviewers get utterly bored and lose interest in the entire interview process as a result.

We feel the best way you can answer this question and let it work towards your advantage is by avoiding anything very generic.

You should add more of your personal experiences and don’t let it appear rehearsed and pre-decided.

The more fluent and eloquent you are, the better grip you would have on the overall content and concept of the entire question and its complete purpose.

But even when you are narrating your own experiences, never ramble.

Think about how a story progresses.

There is a clear beginning, climax and then eventual end.

Try and weave your narration with master storytelling skills.

It should be answered in a way that the interviewers would pause at every break and ask and then?

So, the trick is at no point in time should you let the interviewers lose interest.

Also, consider yourself the hero of the story that you are narrating and use this narrative to your advantage.

There are times in life where modesty does not pay, and this is one such moment.

End it in a way that you can link it with applying for the new job.

Perhaps you can finish the answer saying, “and that is why I want to join your firm,” etc.

2. Why Do You Want to Work with Us?

Though this one too is one of the top interview questions and answers that you need to be prepared for, this is also one of those that you can slip really hard and lose out an opportunity to make a strong profit.

You can stick to a conventional line like the XYZ company that you are being interviewed by is the market leader, and you want to gain from their superior exposure.

But the problem with this kind of answer is it is a rather old school approach replete with signs of boredom, artificiality and incredibly annoying undertones if they are not presented appropriately.

On the contrary, you could answer it quite simply saying you were badly in need of a job and theirs was the first call you received.

Don’t be afraid thinking what kind of an impression the management might form.

They might actually appreciate your honesty and encourage your pragmatic and candid approach.

Many times companies want their employees to be straightforward and honest to take forward the same values in their overall working philosophy and performance parameters that help you move forward.

A good answer to this question would be all about connecting your goals and dreams with the overall working of the company that you might set to join.

So instead of trying to appease anyone with your answer, try and showcase your understanding, proficiency and intellect in a way where the interviewer would be convinced that you can meaningfully contribute to the firm.

This is a very important consideration whenever you are preparing common interview questions and answers.

Remember more than your actual answers, the interviewers are trying to assess your overall approach and thinking capability along with troubleshooting abilities.

3. What Are Your Strengths?

Another popular interview question and answer, this question often has some serious associated meaning to it.

Often the interviewer is trying to assess the interviewee’s overall proficiency for a job.

You must understand that mere academic qualification or professional experience is not always enough to justify your recruitment for a certain job.

Often it is a person’s approach or the manner in which you handle that is important.

In many ways, the management uses this question to assess a person’s understanding of their own abilities.

We know by nature some people would brag more and some will say less than what they deserve.

While there would be many others, who would be rather fair in assessing their strength and abilities.

So the safest option for you, in this case, is that sell you but within the limit.

Don’t go for overkill.

When you start to answer one of these top interview questions and answers, select a few 3-4 strengths that are relevant to the specific job that you are applying and then expand on those points.

Instead of just bragging about your abilities, it is much better to relate examples and instances to the interviewers and let them make their own assumption.

For example, if you are applying for the post of a beat reporter in a news channel, you can easily say that I can communicate and connect with people quite easily so as a result, I can quickly establish contacts and use them as a potential news source.

A company can instantly relate to it.

A seasoned journalist would know how important it is to maintain contacts and extract news from sources.

Therefore, the management can quite easily relate to the strength that you are alluding to and take a call on whether to recruit you.

Use the strength that you allude to sell your position and indispensability in the overall game plan.

4. What Are Your Weaknesses?

With strength comes weakness and your ability to understand, accept and work on your strength can often be your greatest asset as an employee.

In many ways, this is one of those interview questions and answers that interviewers use to understand how well or how badly you deal with your failings.

In the professional world, this is a very important quality.

You must understand none of us is perfect, but what makes some of us better is the fact that we are aware of our failings and can deal with it in a constructive manner.

Therefore, your strategy in dealing with this specific answer is extremely crucial.

Your choice of flaws has to be considered strategic.

There are ten thousand things about you that you might not like about you or which you consider as possible weaknesses.

But that does not mean you would talk about all of them.

It is always better to avoid any fundamental fallacy about yourself.

What will be important is you choose a fallacy that does not make the interviewer form a negative opinion about you, but at the same time, you can highlight it in a constructive fashion.

You need to show that you are not just aware of the fallacy, but are taking constructive steps to improve on it.

In fact, you can choose a fallacy that is not directly linked to your profession.

For example if you are being interviewed for a post of a literature professor, you can say that your mathematical skills need improvement and you are working on it.

It instantly gives the potential employer an insight on two aspects about you.

You are not ashamed of your weakness and looking to improve them, and at the same time, your weakness has no direct bearing on your efficiency or ability to discharge your responsibilities successfully.

5. Why Are You Interested in the Position?

This one too figures prominently in the list of top interview questions and answers.

Invariably candidates try too hard to project how well the role fits into their career plan or how they can mold their career to make this role relevant.

Most veterans would tell you that this kind of an answer can be actually suicidal in an interview.

A much better approach would be line your answer in sync with the long-term goals of the company.

Let’s face it; every company hires fresh talent with a hope to add value to their existing structure and profitability.

Therefore, it is a good idea to read up a bit about how the company plans to grow and then base your response along with those lines.

This will help in two ways, firstly the company always looks at how an employee can value add to their long-term growth plans and your response will provide just the right kind of impression.

Moreover, when the interviewer realizes that you have invested that much of energy in understanding the company’s vision and worked towards it, they will value your commitment and can even use this as the key deciding factor when selecting a single candidate from a list of prospective ones.

Also, your fluency and eloquence are extremely important when you are handling these common interview questions and answers.

Often even if you are speaking the truth, but your speech is staccato, it can project an inaccurate picture of you and the level of efficiency that you might be capable of.

6. Why Did You Leave Your Last Company?

In the list of interview questions and answers, this is a rather tricky question.

Most candidates would shudder to think about the prospect of having to face them and then how to come out of it with dignity is the challenge.

After all, none of us want to accept that we were wrong or at fault and we could have done something that proved detrimental to our career prospects.

It is hard but at the same time, you must understand that to bad mouth one company in front of the management of another company will not help you either.

So then how do you deal with it?

– If Fired:

If you have been fired by your previous company, it is very important that you are pragmatic when you try to answer one of these common interview questions and answers.

Without becoming spiteful and trying to shift the blame, just keep a neutral stance.

Explain the circumstances under which you were let go and try and convince the interviewer how you have learned from the past mistakes and taking meaningful steps to improve your efficiency and overall performance scope going forward in future.

– Victim of Downsizing:

In case you have been subject to the downsizing exercise taken in your previous company, don’t be shy to accept it.

Without taking sides or justifying any specific set of people, be practical in your explanation.

Tell them how you understand that the situation was tough, or how you understand that the previous company was in a difficult situation and had to resort to downsizing.

Also, convince the interviewer how you don’t want such incident to demotivate you, and you have again gathered your strength to get back to the working mode and get over the past experiences.

– Better Pay:

It could also be possible that while everything else about your previous company remains fine, it was not a great paymaster.

For the same amount of work, you would be perhaps paid relatively more.

You don’t have to be shy about it.

You can be quite honest in accepting the fact.

But how you place it would be crucial.

Don’t crib about the lack of pay but rather accept that you feel better value for the same amount of work in the new company and therefore, would like to accept this offer, join the company and move ahead in your career.

The whole idea about keeping a positive stance here is solely dependent on the factor that an interviewer will see the grievances you have as the potential behavior that you might harbor about them in future too.

On the contrary, your positivity will help the potential employer appreciate your commitment, rationale and poise even in the face of unpleasant circumstances.

The biggest advantage is that interviewer would be convinced that you will be as understanding towards the company as every employee expects its employer to be towards them.

Therefore, it starts off the whole employee-employer relationship on a positive note.

7. Why Do We Hire You?

Though this is a rather oft-repeated option in the list of common interview questions and answers, almost everyone gets stumped by this question.

So when your interviewer asks you the question, why should we hire you?

What should be your answer?

Should you detail all your great strength and try convincing the interviewer how amazing an asset you might be to the company?

Well, if you ask industry experts and veterans, almost everyone would be unanimous in asking you to avoid any such self-indulgence in any manner.

A much better way to deal with this situation is that keeping a calm poise, but at the same time, highlighting your positive personality traits.

You must acknowledge that you have no idea about the rest of the candidates, but you can add a certain amount of value to the company with the help of the various skills that you might have.

This is that crucial juncture in the interview where you can highlight the myriad soft skills that you have and how well your qualifications complement the role in question.

Talk about real life examples where you have brought about meaningful growth in the previous company with the help of the various special qualities that you have.

The idea is to make this opportunity your hall of fame but is careful that you do not undermine the ability and efficiency of any other candidates who might be appearing for the same interview.

Remember that the idea is not to show how inferior the others are.

You need to keep harping on the key fact that you can become a major asset for the firm.

But in trying to portray this, do not in any way undermine someone else’s capability.

That might project negatively and put you in a bad light.

8. Where Do You See Yourself in 5 Years?

As we try to zero in on the most popular interview question and answers, it is important to remember one basic fact about job interviews and the entire hiring.

Why do companies hire?

Why do they recruit additional talent, pay huge salaries and take pains to maintain a certain quality of life for their employees?

It is primarily because most businesses want to add value to their current operation, they want their profits to increase, and they want to perform better than their peers.

Often in the race to excellence, it so happens that companies, corporates realize that they must use the intellect and understanding of someone else who could be an expert in a specific field.

So using your expertise and hard work, the company aims to enhance its profitability.

In return it is paying you a reasonable salary that justifies the hard work that you are putting in and the results that the company is enjoying.

Your hard work, dedication, commitment is what the company is banking upon to channelise its growth forward in a constructive and sustainable manner.

How You See Yourself Growing or What Your Long-Term Plans Are

It is therefore only natural that the company would be interested in knowing how you see yourself growing or what your long-term plans are?

But the problem is how you should answer one of the most popular and common interview questions?

Balance is a very important factor here while answering this question.

In case you sound very aggressive, the interviewer might get worried that you are here to claim their job.

But at the same time, if you sound too mild, the interviewer could conclude that you do not have the drive to move forward and do better in lives.

Instead, a much better response is you sync your growth plans along with the 5-year projection for the company.

For example, if you know the company discussed plans for inorganic growth, you can always say you want to gain experience or get exposure.

Be passionate about the specific elements that you might be wanting to pursue and leave no stone in explaining your growth avenues and how you plan to take it forward.

It is also extremely important that you are able to put a timeline to each of your short-term and long-term goals that you might have.

This gives the interviewer a better idea about your commitment.

9. Why Was There a Gap in Your Employment?

Let’s say you took a two year break between two jobs and tried a new business.

The business did not work out as planned and in the end, you decide to wrap it up and join a 9-5 job again.

If that is the case, you can almost be sure that this will be amongst the top interview questions and answers.

The point is should be worried about how you are going to answer it.

Do you hide these crucial facts about your career or should you come out in the open?

Well, we suggest that you must come out in the open.

So what if you failed in your mission, at least you had the guts to try out something new, get out of your comfort zone and put your resources in trying something news.

The fact that you are ready to go ahead despite uncertainty and then pragmatic enough to accept failure and move ahead highlights a great personality trait in you.

This will often give your interviewer faith that you will be committed to the job 100% and also have the courage to overcome failure.

10. What Are Your Long-Term Career Goals?

This is one of those common interview questions and answers that are asked and discussed in all possible permutation and combination.

Essentially most interviewers want to be very sure about the levels of commitment and dedication of a potential employee before hiring them.

As an interviewee, these interview questions and answers are opportunities that you must cash in on.

The idea should not be about you but predominantly the company that interviewing you.

List out your goals and aspiration in relation to the situation that the company might be in.

Link your growth with that of the company and highlight how you can help the company stay on track.

Purpose of the Interview Questions and Answers

Therefore it can be easily concluded that the interview questions and answers most times serve a double purpose.

Do not just go by the superficial knowledge that they impact.

Go to the deepest core of the matter and understand how the interviewer is using these as means to understand and gauge your overall efficiency levels.

Whatever might be the relative level of excellence that you must aspire to gain at interviews, it is important to understand these common questions and answers have survived the perils of time on the basis of the relevance they have every time.

Reflect on your past experiences and think about the ways in which you might have faltered in any of these questions.

Don’t get disheartened by failure, use it as the stepping stone to reach new heights.

Make these top interview questions and answers road to reach professional success and constructively use your experience to ensure a better tomorrow.

A Professional Multi-Pronged Food Truck Business Plan

If you have seen the iconic movie, Chef in recent times and if you have always wanted to be an entrepreneur, there are chances that you are already considering a food truck business.

But you don’t believe that even food truck business needs a business plan.

Although it may look easy, even a food truck business plan has its own complications.

Though food trucks have come a long way from the times those ugly grey trucks sold greasy and often slightly unhealthy food, the journey is not as simple as the movie.

Perhaps it is, for this reason, that of the nearly 1500 food trucks in Austin, Texas alone, you barely have a handful of them being showcased on shows like National Geographic and the like.

While the content of the food truck is crucial, it is not really the only driver for robust sales.

A reasonably strong food truck business plan takes into account a lot of other factors.

Along with serving quirky food or some healthy innovative inspirational food, it is important to understand the time and location where it would be serving it.

Different locations have a different demand profile and its own set of challenges that a food truck owner must handle.

Food Truck Business Plan

Features of the Food Truck Business Plan

Here is quick step by step outlining of a food truck business plan that can help you make money while you make your dreams into a reality.

1. Get the Legal Formalities out of the Way, Ensure You Have All Permits

This is perhaps one of the biggest and most important aspects of your food truck business plan.

Before anything else, you must get these in the plan.

As food truck owner, Jordan from Mustache Mike’s says,

“As an owner, it can get quite confusing trying to keep up with and understand all of the different mobile vending laws & to obtain all of the required credentials.”

Therefore first and foremost, draw up a list of all the permits you require at the chosen location clearly, understand the dos and don’ts and then go ahead with the actual business of getting the food truck on the road.

Different cities have different requirements and licenses from the health department, traffic authorities as well as parking formalities.

Therefore it becomes very important to plan out the whole game plan very minutely and then take a call on how and why you should plan your move going forward.

It is the most crucial catalyst that can enable your food truck business plan to move forward.

2. Decide on a Cart/Truck

While the shot of Jon Favreau on the steering wheel of the food truck as Chef Carl Casper surely glamorized the profession, reality is not that simple.

Buying a food truck needs a significant bit of funding, and if you are working on a tight budget, perhaps you could even start with a low budget cart.

While drawing up your food truck business plan, it is very important to fix the budget and look at organizing resources.

This is the only way to ensure you have that kind of money that you need for buying a truck.

Remember apart from the cost of the vehicle alone; you also need to spend a significant amount to equip it.

More often than not health departments have pretty many similar rules for food trucks as you might have seen for restaurants.

A completely equipped food truck can cost anywhere between $20,000-40,000.

Sometimes it could be a good idea to check online stores for a great bargain.

3. The Menu Is Important

The greatest element of a food truck business plan is decidedly the food that it peddles.

For this, you need to conduct a deep market research.

For example, the taco and sandwiches market is pretty saturated.

Therefore, if you are planning to peddle the same product, you need to figure out the special factor that will drive up sales.

Think about the food item that will showcase your ultimate expertise and at the same time, come across as a money making idea.

The important factor in your food truck business plan is no doubt about creating your niche.

Remember that when Chef Carl Casper decided to sell the same old sandwiches, he made the Cubanos, the hero of his truck and went big on the authentic flavors of Cuba.

4. Organize Financing

The next pit stop in your food truck business plan is no doubt organizing the funds to execute your overall plan.

Remember that the food truck business requires quite a bit of financing and how you organize the funds remains a primary concern.

You can either look at approaching banks, at crowdfunding or get into a partnership with a friend or family to start off operations.

As a result, you need to concentrate on working out deep-pocketed funding sources for smooth execution.

Remember the initial years throw up a number of challenges that need efficient handling.

5. Get Insurance

Well, running a food truck can be a rather dangerous proposition.

You are dealing with a wide range of inflammable fuel starting with the cooking medium to the fuel used for running the truck.

Therefore, it is important to ensure that your food truck business plan makes sufficient provision for a strong insurance plan.

It is advisable that you talk to a proper agent and explain the exact purpose you need the food truck for.

They will be then able to suggest the most profitable proposition for you.

This will also enable them to help you getting the maximum possible cover.


It can, therefore, be concluded that your food truck business plan has to be multi-pronged.

You cannot rest easy concentrating on any one aspect.

You have to be alert and pay attention to a wide number of factors.

From the menu to the location, every aspect of the food truck business plan need attention.

The ultimate success of the food truck is deeply dependent on all these elements coming together in a cohesive manner.

As we wish you and your clients bon appétit, we also emphasize the need to be alert and active in scanning the multiple requirements of running the food business on wheels.