Every day we find ourselves waking up to some new trend we have to catch up on; whether it’s a new pair of shoes, a new electronic device or new dance moves, they all come and go in the blink of an eye. Financial instruments are not an exception, and recently investible funds are the latest new comer. This new phenomenon is called “money nomad”.
What does the term money nomad mean? Simply put, it basically refers to the rapid money shift in the financial market. Then what caused this change? Why now? You may wonder. Change in properties creates a new flow. Consumer finance becoming nomad is largely due to two sudden changes in the conditions of the financial market: government’s policy of low interest and underground economy legalization.
The policy of low interest has lit the fire on consumer’s thirst for high rate of return, and on top of that, the government’s policy to legalize the underground market is changing the investment patterns of the wealthy. As a result, money nomad is spreading like wild fire in the finance market.
One of the changes money nomad has brought is new financial instruments rolling out in the market at a fast speed. Currently, the return rate of inherited fixed deposit is merely 2% and when considering the increase in prices, which is approximately 1.7%, it is more of storage rather than savings. On the other hand, new financial instruments are rolling out in the market every day. Since these products surpass the return rate of fixed deposits, the money flow of the wealthy has taken a turn.
Money nomad is no longer restricted by territorial borders. Stock market is the place where money nomads on the search for higher rate of return are most prevalent. Especially in the recent several months, money nomad has expanded to American real estate, Japanese funds and other foreign investment markets. Funds directly invested in foreign stock markets have increased 40% just this year. In a situation with commercial bank’s return interest rates leveling at 2% and no where to invest, National Tax Service and tax authorities tightened their grasp on the wealthy under the name of securing tax revenue. This in turn lead them to move their investment abroad; free from their grasp.
Recent movements have shown erosions of stock market traditions. While price of gold is dropping due to taxation by National Tax Service, there is a dramatic increase of investors searching for products like gold and silver. On the other hand, people looking for risky assets such as stocks and funds despite the ambiguous escalation of North Korean nuke tensions is also on the rise.
Money nomad is also evident in bond markets. In the current market, bonds of India, Republic of South Africa, Vietnam and other third world countries are pouring out. Not only that, stocks run out the minute the stock firms release the bonds. The main target is consumers unsure of low bank rates and anxious about unstable equity funds. Since the lowest requirement to become a member of emerging bonds amounts to several thousand dollars, only the wealthy can enjoy it.
It is interpreted that such changes started from the beginning of the year with enhancement of standards on aggregate taxation on financing income that sparked money move, which lead to money nomad.
According to experts, since money is sensitive people are likely to move in search for profit, and if the conditions of financial market are maintained there will be a greater expansion of money nomad. As investment products become diverse, investors are no longer tied down and investing freely. Now transferring foreign nation investment and assets is no longer unfamiliar to investors.
By Min Ho Jung (email@example.com)