Sunday, April 20, 2014

Futures Market as an Alternative Investment

The nature business at JAB Oceanic, as I mentioned in the earlier article is the futures brokerage firm involving the gold trading.

We offer to the potential clients various services including educating the customer to trade, brokering, local and international delivery futures transactions mandate. These includes 24-hours advisory services, hedging, risk management and customer transaction management.

OK, I am sorry if all of these terms sound complicated and make you, felt refused. It is entirely understandable because this market and investment need time for you to really understand how it’s working. Let us start with the simplest thing first and slowly go further into the technical parts in future writings.

I will try to include as much as simple examples and analogies to make the reading process much easier to digest. I hope by the end of reading this article, you will find a basic understanding of futures markets. In general, we also called futures market as futures exchanges.

Basically, it’s the same thing.

Why Do Investment?

Guys, this is the first and foremost question you need to ask yourself when you want to dive in this area.

Why do I want to make an investment?

Which investment or market should I enter?

What are the differences between all these markets?

How long I should wait before, I was able to gain the profit?

Which investment offers the highest return in profit?

And, what is the advantages and disadvantages of each investment?

How convenient of each of investment? Which one better?

Yes. YES. You need to ask all these questions first before you make decisions to jump in this area.

In all the major reason, peoples make investment because they want to grow their money. It’s the one, and only reason to justify your decision to make an investment, in the sense of any kind of investment, existed in the world.

It is solely to grow the money. If you have any other reason, please let me know in the comment area below. Therefore, here came some choices in investment for you to decide the most suit with your profit target after some period. There is some investment that offers you a short-term ROI and some other investment tools provides a long –term ROI.

Wikipedia: Return on investment (ROI) is the concept of an investment of some resource yielding a benefit to the investor. A high ROI means the investment gains compare favorably to the investment cost. As a performance measure, ROI is used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. In purely economic terms, it is one way of considering profits in relation to capital invested.

I mean some investment tools like Amanah Saham Berhad (ASB) and Fixed Deposit (FDI) will give you a yearly return in profit. Plus there are some more other instruments which give you an even longer period of ROI.

Some other investment gave a monthly return in profit. Or even shorter. So here what I am doing now at JAB Oceanic, and what Jalatama Artha Berangka do in this business. We offer an investment platform in the futures market, which it will give the opportunity to the client to set-up their own target of ROI every month based on their capital.

We will talk more about it later in details. What I want to share here is when you decide to make an investment; you need to identify your target whether it is long-term or short-term of ROI. This step will ease your decision on which kind of investment you should pursue.

So how much profit return you want from your investment?

Monthly Return Guarantee

The return mean, how much in percent the profit you will get by the end of the consensus period of investment. For example, if you intend to invest in ASB or unit trusts, they will give you 8-10% of the interest (profit) yearly.

If you tend to have fixed deposited investment, its around 3-4% yearly depending which bank you have. Or maybe on any other investment, everything already has their interest return from the initial.

For example, let look at some study cases here for the monthly return. The best fixed deposits is offered by Bank Rakyat through its scheme, Bank Rakyat Deposits Account-I with the highest 1-month FD rate at 3.20% p.a. Others are, Affin Islamic Bank General Investment Account-I with a 1-month rate at 3.06% p.a. and Public Bank Golden 50 PLUS Fixed Deposit Account with the highest 1-month among major banks at 3.1% p.a.

Thus, in futures market investment at JAB Oceanic or any other brokerage firms, we provided the return in monthly, but the obvious difference here is the profit performance is about 5-10% per month. From this notion, you might calculate how long your investment will get 100% ROI, in a very short time.

Is it feasible, I mean to get 50% ROI in 5 month period?

Actually, yes it is. The futures market in Malaysia can be considered as the untapped market. It is vast of opportunities here that a lot of Malaysians never knew about it. So here, the purpose I write this article and try to articulate all the info so that you can digest and understand it very well.

I share here the comparison between all investment instruments in Malaysia, credit to Amanah Saham National Berhad. Take note here, the futures market is part of the financial derivatives products.

Got what I mean? This table simply explained the metaphor, high-risk, high return.

Understanding Futures Market

For a simple explanation, futures mean you trade something, i.e. Commodities in the future, date. Therefore, from the notion, the trades mostly will affect by the market speculations, sentiments and all over surrounding issues e.g. War, elections that directly or indirectly affected the market of particular commodities.

The main reason is that we are dealing with a human being, a creature full of sentiments, feelings and scepticism. So I hope you will not question why the market should be named after “futures”.

To not further any irrelevant babbling from me, let watch this 3-minute video explaining how the futures market working.

Got some pictures on, how is it working? OK, let me explain a little bit more.

Why the price of commodities (wheat, crude oil, gold, rice) or in the video they used milk as the subject changes over times?

It’s how the market work. The prices, dependable on the surrounding issues revolved around them. The traders, is the responsible group here who speculating the price and making the price go up or down, accelerating the sentiments in no time, and these all conscious actions make a price in commodity for delivery in future date.

Using JAB Oceanic as a platform here, 2 main parties play the primary role to ensure each of the investment makes will gain profits for investors and traders that is investors and a clearinghouse.

In facts, there are lot and lot of other parties involve in each transaction, but please let me introduce the 3 main parties which I think you need to know first before going further to the discussion, at least you will know how the transaction done and how the profit will be gained.

How Futures Market Make Profits?

Like in the video, there are also several parties involved. Al (Ice cream), Tim (Milk) and investors. Did you understand the video through entirely? If not I suggest you guys sketch the storyline so that you can understand more and relate it with the brief explanation I made here.

Same here in JAB Oceanic, instead we do gold. Therefore, we got investors (gold buyers and sellers), market and the clearing house.

Clearinghouse to act as an intermediary, the body that responsible to close deals with the investors for each transaction. If I decide to buy, the clearinghouse will find any investors who sell at the same time, match it with my request, and sell it to me. Same goes when I decide to sell, the clearinghouse will find me another investor who want to buy then match it to me so I can close the deal.

So here the function of clearing house. They will act as the buyer of the seller of each transaction request made by investors.

Investors or clients, as what we usually called, will provide capital to invest. The trader will use the capital given to make transactions, whether it is a buy or sell, in precise moment according to the exact market analysis. The trader buys the futures gold with clearing houses, and sell the futures gold to the same clearinghouse.

So there are no questions about where do we, – traders – do the business.

All deals done with clearing house itself. The profit gains from both ways that means we make a profit in both modes of the transaction whether it is selling or buying. That we called a two-way market. It's already briefly explained through the video.

To simplify these things, we buy (start deal) at the lower price and sell (close deal) at a higher price so that we gain the profit from there. How about the sell deals? It is questionable right?

OK, let me give you an analogy on how we make a profit through selling deals.

Let say we have 3 people here; Tom, Sam and Ata. The situation started when Ata borrow a book from Tom. The book itself valued in market about $12. Ata met Sam and sell Tom’s book to him for $15. After Ata got $15 in his hand, he went to the nearest bookstore, bought the exact same book to replace the book he sold to Sam at the price at $12 and return the new book to Tom, and thanks him for the books.

See, Ata has already made a profit about $3 from selling Tom’s book and buy a new one at the lowest price. He returned the book and kept the remaining $3. Can you relate this analogy with what explained in the video? Or precisely, do you get how we make a profit from the selling thing?

I tried to not make it sound too technical. That is why I came out with sort of explanation.

Another justification on why I try to explain to the main parties involved in the investment, including clearing house is simply because I almost certain sure the most concerning part of all the clients is where does my money going and how safe my money during the investment period.

Yes, the clearinghouse involved here is Indonesia Derivatives Clearing House (IDCH) or locally goes with the name PT Kliring Berjangka Indonesia (PERSERO). Under PERSERO, PT Jalatama Artha Berjangka (JAB Oceanic) and the clients will put their capital in two most popular banks in the South-East Asia region that are Bank CIMB Niaga and Bank Central Asia.

In the next chapter I will go further explaining how PERSERO work with Jalatama — here are Malaysia, JAB Oceanic as subsidiaries, Indonesian authorities and financial authorities around the world so that it will clear all the uncertainty especially when answering about the scamming issues. If you still have any question about the safety issues of your money, please let me know in the comment section.

OK, let us hold the further lecture on upcoming articles. Try to digest this, and please put your comment below if you get any questions in mind about the subject. I am too happy to answer your questions about this investment and welcoming your intriguing about the subject we discussed here.

The Alternative Investment

And, please bear in mind too, as I said clearly at the start that futures market as an alternative investment for whom tried to find another kind of investment besides the usual like ASB, fixed deposits or unit trust.

See you in the next article. Please let me know if the article is too long to read or you never understand even a bit of it. Just shout it!