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Essay Samples > Economics > The Financial System
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The Financial System

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Investment is a critical step one should take in life to enhance financial freedom. There are numerous ventures in which a person has the liberty to divulge into. In the stock market, a number of ventures such as stocks, shares and mutual funds exist. This essay will discuss the investment into mutual funds by taking an example of three active funds and comparing them. The essay will also analyze the effect of treating a substance as a commodity in the market place. Here, a case study will be analyzed.

The e-activity

From the MSN investment website (2012), the three mutual funds chosen are OceanstoneFund, symbol OSFDX, SPDR Gold Shares, symbol GLD and iShares Gold Trust, symbolIAU. These funds have been selected on the basis of being the top performers with OSFDX, GLD and IAU being numbers one two and three respectively in the top performers list.

The five year annualized returns for these companies have been given as 39.28, 16.55 and 16.52 respectively. From this data, it can be observed that OSFDX fund was the highest performing fund at a price of 39.28 in comparison to the other two funds, GLD and IAU being priced at 16.55 and 16.52 respectively.

IAU is the lowest performer in this category. However, the pricing of the funds are still very close to that of the second best performer, GLD with a margin of 0.03 in their pricing. The margin between the two mutual funds and the top performing funds is however very significant with a difference of 22.73 from the GLD’s pricing and 22.76 from the IAU’s pricing.

If I had a business that required the investment into a mutual fund like the ones highlighted above, I would go for the investment into the OSFDX fund. From the data given above and the observation conducted in a period of five years, the OSFDX fund has been observed to perform better that the other funds, GLD and IAU. The five year annualized returns for OSFDX fund are a distant 39.28 in comparison to the pricing of the other two funds, GLD and IAU being at 16.55 and 16.52 respectively.

The case study: new harvest coffee goes beyond fair trade

Coffee has for along time been sold as a commodity in the marketplace, something that New Harvest is seeking to change. This sale of coffee on the market place has its drawbacks as well as advantages. The drawbacks may include that the quality of coffee is not guaranteed because it is taken from very many small farms which are differentiated in quality. Also the determination of the price of the coffee by the marketplace may mean that coffee is bought from the farmers at a price that is way low than its worth. On the other hand, this same pricing could offer the farmers a price that is way above what the coffee is worth. Also, the conglomeration of many small firms ensures that they have a bigger say in the market compared to small firms.

The artisan coffee business model might succeed in the long run if well nurtured. This is because, New Harvest has guaranteed their customers that they source only for the best coffee by taking actual visits to the farm themselves. Also, the pricing of their coffee is attractive because it is higher than that of other more distinguished brands like Starbucks.

Conclusion

From the brief discussion above, it has been observed that the higher the performance of a fund, the more the fund becomes attractive for investment purposes. People will always go for the investment opportunities that are more promising in returns as compared to those which do not.

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  1. Marketability
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