Top 3 Disadvantages of Paying Dividends

Index Development plays a very important role in the growth and development of each and every phase. This requires the Index Maintenance which might put extra burden on the financial resources of the company. An important aspect of running the company smoothly in the appropriate application of Dividend Index policy. A company might profit by paying the regular dividends. However, there are certain disadvantages of paying dividends regularly. Here are the top 3 disadvantages of paying dividends.

Loss of clientele

The company that is known to pay dividend to the clients on timely basis, for some reason it is not possible to do so for a continuous time period that it has a negative effect on the clientele. This may cause a drastic loss to the company in terms of old clientele who have always expected the regular dividends from the company. Such investors might prefer to sell-off the stocks in the short term.

Reduction in retained earning

A company that constantly and regularly pays dividend cause reduction in the retained earning that it has. At any time, there may arise the conditions of debt obligations or else the unexpected expenses may crop up. In such circumstances, due to reduction in the retained earnings the company will not have enough cash.

Limits the growth of company

The company that pays dividend means that it has less usable cash. This implies that there is a big time hurdle that may hinder the growth of the company. The company this way remains with the less money that it can really invest in the growth of its business.

All in all, these are the top 3 disadvantages of paying dividends. You need to acknowledge that the dividends are vital when it comes to making the investors satisfied and happy. Therefore, it becomes important for a company to take the decisions related to time as well as the form of dividends carefully so that it reaps benefits and has no adverse effects. All the pros and cons of the dividends must be considered prior to framing the policy for dividend payments.

Source : http://agriculturetrindex.wikidot.com/top-3-disadvantages-of-paying-dividends

Top 3 Limitations of Thematic Investing

Smart Beta is one of the trendiest term these days fetching the attention of people from all the spheres of life. Be it the regular dividend paying company or a normal Index Company all are diversifying in terms of investment. This diversification is leading companies and individuals towards the Thematic Investing. However, with every rose comes a thorn. Similarly, thematic investment also has its own set of advantages and disadvantages to offer. Advantages are many but paying heed to the pitfalls is equally important. Here are the top 3 limitations of Thematic Investing.

Long run or short run

Thematic funds are known to focus on the trends that are in itself negative. The foremost problem that relates to this type of investing is knowing whether it is going to reap benefits in the short run only or also in the long run. The investment trends must have something worthy to offer in the long run. Also, it is important to invest in the lasting theme on time if you wish to have great results.

Proportional factors

There are a lot of factors that impact the success of thematic investment. These are the factors like the alterations in government policy and the advancement in technology. Some of the themes result in distillation of the things that the investment bankers are selling.

Appropriate securities

Another problem associated with thematic investing is choosing the appropriate securities for the trend in question. This is not an easy task. However, if you tend to do this appropriately then you tend to get great results. Though many of the investors have an inclination towards the passive strategies, yet there are many who are stepping away from this.

All in all, these are the top 3 limitations of Thematic Investing. Prior to making a decision as per to go in for this type of an investment or not it becomes pivotal to pay attention towards each and every aspect of the same. Knowing the pitfalls of a certain thing makes taking decision a bit easier for you. such is the case with thematic investing.

Source : https://sites.google.com/site/agriculturetrindex/top-3-limitations-of-thematic-investing

Top 3 Must Know About Total Return Index

Total Return Indices plays a very important role when it comes to analysing the end result. Taking Custom Index into consideration can help the individual clients in particular and the company in general. In this case the knowledge about the Index Provider is a must. Prior to taking any risk it is obvious that all go in for having a look at the advantages that they can get from the same but pointing out the limitations also becomes important. Here we will highlight the top 3 must know about Total Return Index.

Basic implication of total return index

Total return index is basically a kind of equity index able to track not only the capital gains of a segment of the stocks over the time but also assumes that cash distributions, be it of any type is reinvested back into the index. It is a clearer picture of the index's performance. The latter effectively lets your account for the stocks in the index that fail to issue dividends.

Objective of the index fund

The major objective of the index fund is to demonstrate the activity, or say the growth, of the index that functions as its benchmark. This implies that index funds only need the passive management when it comes to adjustments that are required to be made so as to help the index fund remain in hand with the associated index.

Advantages of TRI

Another thing that you must know about the total return index is the advantage of the same. Total returns include the interest, the capital gains, as well as the dividends and the distributions that are realised over the given frame period of time. It also lets you have an insight of the true picture of the real alpha.

All in all, these are the top 3 must know about Total Return Index. Having known all these it will become easy for you to consider what investment will be the best for you. besides, you must also pay heed to the disadvantages that are associated with the same.

Top 3 Downsides of Equity Index

There is not one but many aspects attached to the Index Services. The priority in all the cases remains the Index Calculation. In order to gain the maximum out of it, it is important to pay attention not only towards the positives but also the negatives. There is requirement to pay attention towards the downside of the Equity Index. Here are the top 3 downsides of Equity Index.

Ambiguity in index calculation

There is no clarity as per to how the stock indexes are calculated. This can be a big problem or the limitation. Taking a price-weighted index, the calculation of the of the index is done, taking into account the sum of the prices of all the stocks which is then divided by divisor which is further adjusted in accordance to the splits, the spinoffs and other market factors. This is therefore not a crystal clear thing.

 Relative size not considered

The stocks that carry a higher price tends to have more impact on the movements in the index in comparison to the ones that have a lower price. However, the price-weighted index does not consider the relative size of the industry sector relevant to the stock. This implies that market capitalization is not taken into consideration. It takes into consideration only a small portion.

Inappropriate exposure to small companies

More focus is laid on the companies that have the larger capitalizations as these are considered to influence the level of the index to a greater extent. This means that the index does not give the required exposure to the smaller-cap companies. However, the fact remains that the latter ones are also important for the economy when it comes to calculation of the equity index.

All in all, these are the top 3 downsides of Equity Index. Once you get to know these, it becomes easy for you to understand the market and the risks associated with the same. This further ensures success in all the spheres as well as aspects because you are able to know the market and make predictions in a better way.

Source : http://agriculturetrindex.over-blog.com/2018/03/top-3-downsides-of-equity-index.html