Friday, 1 April 2011

Derivatives

Note: Just to sort out any confusion, I'm referring to the financial kind not those found in calculus.

My cousin and I have been curious as to what these are ever since seeing that Michael Moore doco 'Capitalism: A Love Story'. Now, whilst I don't really respect him as a film maker due to the incredibly biased nature of everything he makes, this doco got us thinking about the financial system in general and how it works. There's a hilarious scene where he asks people - including a Harvard Prof. of Economics - to explain what a derivative is, and even though (we can assume) they all know, they can't seem to be able to explain it. This set us off on our own quest to find out what they are exactly, once again wikipedia proved useful but it's hard to get an idea of what they are without being exposed to examples. In summary, they are a type of alternative investment and are generally traded in connection to an underlying asset in various ways. Now I want to know what you guys think of the financial system in general - is it too complicated/boring for the average Joe? Do you have any stocks of your own? Any other thoughts welcome also.

26 comments:

  1. Definitely way too complicated, I have a few shares here and there though. One you get used to it, its not too bad.

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  2. basically you have to be an evil mastermind to have a strong grasp of the whole system to benefit your self. also i agree that hes far too biased to enjoy.

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  3. Its very complicated, as Nepenthe said you got to get used to it for it to work out.

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  4. a lot of it is too complicated for even the pros, which is why the recent disasters took place. the irony of the whole thing is that these complicated systems usually make LESS money than keeping it simple, like index funds do.

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  5. I don't really care about it. It doesn't depend on us anyway.

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  6. If you understand it you're rich..

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  7. I dont think its too complicated, its just the financial system can be exploited/misused too often.

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  8. It sounds pretty complicated to me. Not gonna lie, I have no idea how it all works.

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  9. I'm not into stock trading, but if you know the trade you can make serious cash I think.

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  10. Great post

    Followed.
    bigunicorn.blogspot.com

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  11. way to complicated for my tiny brain!

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  12. "Random Political and Philosophical Ramblings"
    FUNFUNFUNFUN xD

    Just kidding, great read keeping it up!

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  13. Way too complicated for me, but I love your blog, keep it up!

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  14. That's an interesting point of view, but I do not understand it completely XD

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  15. damn i never thought about it till this post

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  16. My father told me that, should I choose to follow but one rule in money management, it should be the following: never, ever invest in shares. Those who win at that game strike it very rich indeed, but for most people, it is so risky an entreprise as to be almost a fool's alone. Invest in property for the purposes of rental instead.

    I would add a second money management rule, by the way, based on personal experience: never place a bet, even when the odds suggest that you cannot lose.

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  17. now i have to watch a michael moore documentary so i know what you're talking about haha.. i like the way he can get some conclusions across in his films but agree with you regarding his bias views as a film-maker

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  18. Derivatives is a step to far for me, if you get into trading try to keep it as simply as possible

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