What Does “FP” Mean When Betting?

The financial markets have been in a state of flux since late 2019 as more and more people are trying to find a way to stay invested. With the world trying to find its footing, many terms are being tossed around that the general public may not be familiar with. One of these terms is the “Fiscal Plus”, also known as the “Pandora’s Box”. The definition of this obscure phrase is, “a financial product that represents equity in a public company with guaranteed profit participation and dividend payments.”

What does that mean in plain English? Let’s dive in and try to make sense of this new financial phenomenon. 

The Meaning Of “FP”

The most notable aspect of the FP (“Fiscal Plus”) is its abbreviation. It’s not a widely-used term, but you’ll see it on Twitter a lot as people try to keep track of their favorite companies while keeping abreast of the news.

The reason why FP is rare is because it’s fairly complicated to create a product like this. For starters, you need to find a way to pay out high dividends while also satisfying the “needy” investors who are clamoring for income. You can’t do that without running up massive debts and you can’t afford to do that without taking on a lot of risk. That’s why the FP fund is only available to a select group of investors who can stomach the volatility that comes with such a high-risk, high-return investment.

Why “Fiscal Plus”? The “Fiscal Plus” label comes from the U.S. Govt’s S​ocial​Security​Administration’s​​(SSA) use​​of​​it​​in​​1931. It was initially designed for use by the federal government in making its payroll determinations. This led to the creation of the federal “Fiscal Year” which begins on the first of October and ends on the 30th of September of the following year. So, what does that have to do with stock market investments? A lot!

Here’s the deal: The SSA uses the “Fiscal Year” [b]baseball[/b]  season for making its annual calculations. So, for example, if you purchase a “Fiscal Year 2021” share in a company that reports in April 2021, you’ll find that you’re eligible to collect your dividends during the 2021 season (October 2021 through September 2021).

If a company’s fiscal year starts in October, then its next public filing will be in October 2021. That’s key because all public companies have to disclose key financial information about their businesses. This includes the payment of dividends. So, by knowing the annual filing date, you can ensure you’ll be able to collect your dividends in the right season.

Dividends Are The Lifeblood Of Every Stock Market Investment

One of the most recognizable features of the FP fund is its guaranteed income stream. Investors put money into this fund expecting to see their principal returned with an additional stream of income. For the typical stock market investor, this income would come in the form of dividends. So, it makes sense that the FP fund would be characterized by its focus on paying high dividends.

The reason why dividends are such an integral part of every stock market investment is because it’s fairly easy for dividend-paying companies to grow their payouts. For example, let’s say a company has an annual dividend of $1.00 per share and it has 100,000 shares outstanding. Its shareholders would expect their dividends to be paid out once per year (on the 1st of December).

If, however, a company’s financial performance sours and it incurs extra costs that it can’t cover, then its ability to pay out high dividends may be in jeopardy. This is why most stock market investments are characterized by their sensitivity to fluctuations in the business-to-consumer (B2C) component of the economy. As an investor, you don’t want to put all your eggs in one basket and you certainly don’t want to be overexposed to a single company. Hence, the importance of having a diverse portfolio.

What’s Next For The Dow?

Since the late 2019[/b]  recession[/b], large-cap stocks have underperformed small-cap stocks and most other major indices. In the year 2020 alone, the Dow[/b]  Jones Industrial Average(DJIA) decreased by 26% while the S&P 500 decreased by 18% and the Nasdaq Composite decreased by 14%.

Looking ahead, the worst may be over for the stock market. Based on key economic indicators such as the rate of job creation and the performance of the broad consumer confidence indicators, the Federal Reserve may raise interest rates in May and June of this year. Higher interest rates tend to boost the value of stocks and other fixed-income investments. So, as a general rule of thumb, higher rates mean higher returns.

The bottom line? If you want to play the long game, it’s crucial to understand what FP means and why you should be paying attention to it. Right now, the outlook for the Dow[/b]  is positive as investors anticipate a bounce back in the economy following the COVID-19 pandemics. So, keep your eyes open for the FP fund as this may be one of the few opportunities you have to make a significant return on your investment.