The stock market is a marketplace where stocks of companies are traded and not physical commodities like rice, coffee, or gold. There is a popular passive investing strategy that has been steadily gaining traction since its inception in the 1970’s which is called “indexing”. Indexing is where you attempt to replicate the overall performance of a stock market index, such as the S&P 500 index, which is a market capitalization weighted index comprised of the largest 500 stocks proportional to their market capitalizations. Market capitalization weighting works like this. If Apple’s overall stock value of its available shares represents 10% of the overall value of all the stocks in the S&P 500, then the weight given to Apple will be 10% in the index. So if you buy a single share of an index fund that tracks the S&P 500, then 10% of your investment is devoted to Apple stock. The reason I am talking about this is because part of macroeconomics is to distinguish between the aggregate and the micro, or the difference between open and closed systems. While also taking into account the fallacy of composition. For example, lets imagine a hypothetical situation where the 500 stocks comprising the S&P 500 were the only stocks you could buy or sell. In this hypothetical situation every market participant each has a thousand dollars to invest. The overall market performance of 500 stocks is a closed system, whereas the actions or performance of individuals is an open system. Let’s say that over a years’ time the value of the S&P 500 index goes up by 15%. An individual could take a selective position and buy a select number of stocks and have the remarkable performance of a 100% return over the same years’ time. However, by mathematical definition not every person participating in the market can have a 100% return, in fact the returns for each individual is a zero-sum game. This means that for every person that does better than the 15% average return, there is another person that does worse than 15%. In fact, the 15% return of the S&P 500 is only a weighted average return of all the market participants, which means that if you were to add up every market participants’ return and divide it by the number of participants it would come to 15%. So indexing takes advantage of this mathematical truism by attempting to become the market return. Indexing strategists realize that it is very difficult to know ahead of time which stocks are going to perform better than the overall market. In fact, even attempting to beat the market entails significant costs such as research, transaction fees, and labor costs. And there is no guarantee that you will beat the market, rather you could actually underperform the market as mentioned earlier
Watch the following PBS Frontline video on the financial industry and its involvement in the 401(k) retirement system:
http://www.pbs.org/wgbh/frontline/film/retirement-gamble/ (Links to an external site.)Links to an external site.
1. The financial industry is able to hire vast amounts of highly educated workers from elite universities. In fact, large numbers of these new graduates are from engineering, physics, and science backgrounds. How do you think productivity, technological innovation, and GDP are affected by the fact that the financial industry is able to lure these highly skilled graduates into the financial industry, and away from their respective fields?
2. Due to the exorbitant fees hidden in mutual funds, many retirees will not be able to keep the same standard of living that they were accustomed to in retirement. How do you feel this will affect GDP and governmental expenditures once people start retiring and living off their savings from their 401 (k)?
Netflix Business Model Analysis and SWOT Distributed: 23rd March, 2015 Last Edited: sixteenth January, 2018 Disclaimer: This paper has been presented by an understudy. This isn’t a case of the work composed by our expert paper scholars. You can see tests of our expert work here. Any feelings, discoveries, conclusions or suggestions communicated in this material are those of the writers and don’t really mirror the perspectives of UK Essays. 1 Introduction Netflix is the world’s biggest online motion picture rental administration with more than 6.3 million individuals and a gathering of in excess of 75,000 titles. They are known for both their astounding client benefit and their advantageous and easy to use interface on their honor winning site. Despite the fact that Netflix has gotten numerous reactions, it has constantly developed and flourished in the film rental market. New innovation has empowered Netflix to give brilliant spilling recordings specifically to their supporters’ PCs. This administration is being taken off finished the initial a half year of 2007, complimentary, to Netflix’s present supporters. So as to keep up its unrivaled position in the in home recorded amusement, Netflix must enter the Video On Demand (VOD) advertise quickly. By entering the VOD showcase through offering spilling recordings, Netflix will have the capacity to separate itself from its rivals, and decrease the probability of value rivalry. Offering a film gushing administration instead of a motion picture downloading administration will additionally help it in separating itself. For the short run, Netflix needs to consolidate the administration of spilling motion pictures to supplement its DVD rental administration. Over the long haul, after the ubiquity of gushing motion pictures has developed and the details of this administration are settled, Netflix can isolate the DVD rental and spilling films administrations, offering two unique arrangements of plans. Seeking after this system is indispensable to Netflix’s future, in light of the fact that as new developments in innovation end up prevalent, the DVD-rental subset of the home film market will contract, while the downloading and spilling of motion pictures will in the end come to overwhelm the larger part of this market. Subsequently, the right usage of Netflix’s entrance into the VOD showcase, will fill in as an extension methodology, helping Netflix in its advancement from a DVD rental support of a wholesaler of computerized diversion. 2 A Closer Look at Netflix’s History Reed Hastings and Marc Randolph established Netflix in 1997. DVDs were a moderately new innovation, with not as much as a thousand titles accessible at the time, yet Hastings and Randolph trusted it could supplant the VHS design. The organization started working in April 1998, offering 7-day rentals for about $6. Netflix, alongside Magic Disk, DVD Express, and Reel.com, were the initial couple of organizations to lease DVDs via mail. Netflix separated itself by spending intensely in advancements. It made organizations with organizations offering the most indispensable integral great, a DVD player. It offered free rentals with the buy of DVD players from Toshiba and Pioneer and PCs with DVD drives from HP and Apple. Be that as it may, Netflix was in coordinate rivalry with Amazon.com in offering DVDs so they went to a trade off in December 1998: Netflix would quit offering DVDs in return for being vigorously advanced on Amazon’s website. Netflix started to collaborate with online motion picture data suppliers and advanced more highlights on its site to draw in more clients. In September 1999, it started the Marquee Program, offering 4 DVDs rentals for every month with no late charges or due dates for a month to month membership fee. In February 2000, it presented CineMatch, a program that assesses the rental examples of clients, distinguishing which motion pictures clients of comparative tastes would enjoy. The two projects were exceptionally famous and soon Netflix did not lease singular DVDs, depending completely on the Marquee Program. Proceeding with its forceful showcasing and systems administration battle, Netflix marked an arrangement with significant DVD produc-ers, for example, Warner Home Video and Columbia Tri-Star. In return at less expensive costs on expansive amounts of DVDs, the motion picture studios got a bit of the rental receipts. As the achievement of Netflix caught the eye of the media, contenders started to react. In the mid year of 2002, Blockbuster began its own particular boundless rentals and no late expense membership design and purchased out an online DVD rental organization. Wal-Mart and Columbia House likewise endeavored to gather huge volumes of DVD titles to contend with Netflix. Notwithstanding, Netflix as of now had a strong solid footing in the market, battling off these real contenders. In re-sponse, it declared the opening of more circulation offices. Five years after its introduction, Netflix at long last started to create profits. On January 16, 2007 Netflix issued an official statement with respect to “Another Feature Will Be Included in Subscribers’ Monthly Membership at no Extra Charge.” For each dollar a client pays for their membership, they will have the capacity to see one hour of spilling video from a determination of around 1,000 films and TV arrangement on their PCs. Netflix likewise reported that they intend to extend the innovation to achieve “each Internet-associated screen, from phones to PCs to plasma screens”. 3 SWOT Analysis 3.1 Strengths Section timing Netflix entered the market for DVD rentals when there were couple of different rivals in the market, enabling them to set up their image name and picture for giving an interesting administration. They were the first to offer DVD rental via mail and this enabled them to offer a more noteworthy assortment of DVDs to shoppers when contrasted with their rivals at the time, as DVDs were moderately new to the market. Joined with its effective plan of action, Netflix’s initial passage has enabled it to keep up a high relative piece of the pie in the online DVD rental industry. Comprehends shortcomings of contenders: Customer Satisfaction From the begin, Netflix comprehended what chafed numerous video rental store clients: late charges. Typically in the wake of leasing and viewing a motion picture from a store, for example, Blockbuster, the client needs to hurry to return the motion picture on the ensuing day (before midnight) or pay a late expense tantamount to the cost of the rental. Despite the fact that Blockbuster gets an expected 18% of its aggregate income from late expenses, it leaves the client irritated, baffled, and unsatisfied. Then again, Netflix gives the client a chance to keep the DVD until the point when the client needs to see the following one in their line, enabling the fredom to restore the film at one’s convenience. Arranged associations with numerous accomplices and even potential contenders From the earliest starting point of its entrance into the market, Netflix comprehended the significance of making accomplice ships with the motion picture industry, the hardware business, and retailers. Netflix’s name was spread broadly through advancements with integral items, for example, DVD players and motion picture sites. When it considered Amazon.com to be a contender, it quit pitching DVDs to stop every one of the pressures in return for being advanced on their site. Also, quality administration has empowered Netflix to remain above water notwithstanding the coming of intense contenders like Wal-Mart. Not exclusively was Reed Hastings ready to fight off Wal-Mart’s endeavor to bankrupt Netflix, he could persuade Wal-Mart to urge clients to change to Netflix after the Wal-Mart benefit fell through. By remaining solid however helpful, Netflix wound up benefitting from numerous dangers. Honor winning site Netflix’s site flaunts numerous highlights. Netflix’s CineMatch executes a honor winning calculation that can foresee with shockingly reliable precision what films somebody would favor given their past rental history, arranged future rentals, and evaluations of motion pictures they’ve found in the past. Moreover, they’re continually attempting to enhance the CineMatch program: Netflix is putting forth a prize of $1 million for a superior algorithm. Netflix’s vast membership base has permitted a little sort of system externality to come to fruition. More Netflix supporters implies more individuals rate films, compose audits for motion pictures, and prescribe motion pictures to each other. This additionally helps calibrate the exactness of the CineMatch program. Novel and substantial determination of DVDs Netflix has the biggest and most different gathering of DVDs out of any contender. They have more than 75,000 titles, including outside movies and autonomous movies that are generally not conveyed by different wholesalers, for example, Blockbuster Video and Wal-Mart. Remote movies, for example, those from India’s “Bollywood” are especially effective at drawing in client attention. This determination of motion pictures takes advantage of the underserved populace of purchasers who are exclusively with Netflix in light of the fact that the special titles Netflix brings to the table can’t be found for lease somewhere else in the United States. 3.2 Weaknesses Like most physical rental organizations, Netflix regularly experiences difficulty sufficiently giving duplicates of new, famous motion pictures. Accordingly, a primary driver of client disappointment is Netflix’s powerlessness to totally fulfill the underlying scramble for another motion picture. Be that as it may, the organization knows it would be unrewarding over the long haul to purchase more duplicates just to serve the surge when a motion picture initially winds up accessible, in light of the fact that the duplicates won’t be leased with so much recurrence not long after the hurry. Clients have gotten on to the way that Netflix just buys a constrained amount of new discharges immediately, selecting to hold up half a month to purchase the main part of its supply at bring down expenses. While this may spare Netflix cash, it likewise tends to head out present and potential clients. At last, Netflix does not have an immediate association with any film studios so it must buy its whole media through the shopper market. One weakness of Netflix’s lease via mail plan of action is that clients need to pause (frequently for a few days) for the following motion picture on their line to arri>