Whenever a person or a corporation or a government entity spends some money to purchase an asset (movable, immovable or otherwise) of any kind with an intention to make profit in the future such activity is referred as investment. Investments can be for long term and short term. Certain investment carries risk while the others do not. Similarly some investments guarantee returns while the others do not. When you have money to invest you must analyze many factors and then take a decision.
Investment is a vital activity in financial planning. Investment is important for many reasons. Firstly most of them generate greater revenue when compared with savings though the fact remains that certain investment doesn't necessarily give you returns. Investments can appreciate your asset value improve your bank balance and may be of a great recourse to start a business or take care of oneself in the old age. You must properly learn to invest money from the loans.
Sources to Invest
There are many options available for investment. You can choose to put your money in government or private sector. Similarly you can also invest in properties like land and building or in bonds and other financi al instruments that yield interest.Your locality may have specific sources for micro cap investing money. Information pertaining to this can be had from the local market. If you wish to learn to invest money you must get to know the ways to invest money, and the place to invest money or where to invest money. You must be able to answer the following questions effectively:
How to invest money
Reasons to invest money
Sources for Investing:
Some of the sources for investing in the Market are as follows
Real Estates
When a person or a group of persons or a business entity buys building and landed properties with an intention to sell them in the future at high prices or to rent the property for business and commercial purpose or to engage in business at a later stage it is referred as real estate investment. Investing in real estates involves lot of risks and at the sa me time it happens to be lucrative if one is able to strike the right deal.The prices of real estates depend on many factors both internal and external. Some of the external and internal factors which influence the real estate market are government regulation, economic factors like price and demand. Some of the internal factors include the current trend of real estate market and competitors. Access eager real estate investors and start flipping houses online now.
Gold
This is another important commodity for investment. The price for gold depends mainly on the demand in your country. The quantity of oil that your country can produce or supply or posses at a particular time also decides the price. Gold prices can also decline drastically or increase all on a sudden. However they are not as risky as investing in the stock market.
Mutual Funds
Mutual funds are collective investments undertaken by commercial entities. They collect funds fro m individual and institutional investors and invest them in various stock options. The returns and risks are shared according to t he individual contribution in the total sum. Mutual funds are also less risky when compared with stock markets. Lesser risks and service of financial experts with regards to investing in stock market has contributed to the popularity of mutual funds and today it remains to be a financial instrument highly demanded in the market. Even if you have little money to invest you can choose this scheme.
Sunday, August 24, 2008
Whenever a person or a corporation or a government entity spends some money to purchase an asset (movable, immovable or otherwise) of any kind with an intention to make profit in the future such activity is referred as investment. Investments can be for long term and short term. Certain investment carries risk while the others do not. Similarly some investments guarantee returns while the others do not. When you have money to invest you must analyze many factors and then take a decision.
Investment is a vital activity in financial planning. Investment is important for many reasons. Firstly most of them generate greater revenue when compared with savings though the fact remains that certain investment doesn't necessarily give you returns. Investments can appreciate your asset value improve your bank balance and may be of a great recourse to start a business or take care of oneself in the old age. You must properly learn to invest money from the loans.
Sources to Invest
There are many options available for investment. You can choose to put your money in government or private sector. Similarly you can also invest in properties like land and building or in bonds and other financi al instruments that yield interest.Your locality may have specific sources for micro cap investing money. Information pertaining to this can be had from the local market. If you wish to learn to invest money you must get to know the ways to invest money, and the place to invest money or where to invest money. You must be able to answer the following questions effectively:
How to invest money
Reasons to invest money
Sources for Investing:
Some of the sources for investing in the Market are as follows
Real Estates
When a person or a group of persons or a business entity buys building and landed properties with an intention to sell them in the future at high prices or to rent the property for business and commercial purpose or to engage in business at a later stage it is referred as real estate investment. Investing in real estates involves lot of risks and at the sa me time it happens to be lucrative if one is able to strike the right deal.The prices of real estates depend on many factors both internal and external. Some of the external and internal factors which influence the real estate market are government regulation, economic factors like price and demand. Some of the internal factors include the current trend of real estate market and competitors. Access eager real estate investors and start flipping houses online now.
Gold
This is another important commodity for investment. The price for gold depends mainly on the demand in your country. The quantity of oil that your country can produce or supply or posses at a particular time also decides the price. Gold prices can also decline drastically or increase all on a sudden. However they are not as risky as investing in the stock market.
Mutual Funds
Mutual funds are collective investments undertaken by commercial entities. They collect funds fro m individual and institutional investors and invest them in various stock options. The returns and risks are shared according to t he individual contribution in the total sum. Mutual funds are also less risky when compared with stock markets. Lesser risks and service of financial experts with regards to investing in stock market has contributed to the popularity of mutual funds and today it remains to be a financial instrument highly demanded in the market. Even if you have little money to invest you can choose this scheme.
Investment is a vital activity in financial planning. Investment is important for many reasons. Firstly most of them generate greater revenue when compared with savings though the fact remains that certain investment doesn't necessarily give you returns. Investments can appreciate your asset value improve your bank balance and may be of a great recourse to start a business or take care of oneself in the old age. You must properly learn to invest money from the loans.
Sources to Invest
There are many options available for investment. You can choose to put your money in government or private sector. Similarly you can also invest in properties like land and building or in bonds and other financi al instruments that yield interest.Your locality may have specific sources for micro cap investing money. Information pertaining to this can be had from the local market. If you wish to learn to invest money you must get to know the ways to invest money, and the place to invest money or where to invest money. You must be able to answer the following questions effectively:
How to invest money
Reasons to invest money
Sources for Investing:
Some of the sources for investing in the Market are as follows
Real Estates
When a person or a group of persons or a business entity buys building and landed properties with an intention to sell them in the future at high prices or to rent the property for business and commercial purpose or to engage in business at a later stage it is referred as real estate investment. Investing in real estates involves lot of risks and at the sa me time it happens to be lucrative if one is able to strike the right deal.The prices of real estates depend on many factors both internal and external. Some of the external and internal factors which influence the real estate market are government regulation, economic factors like price and demand. Some of the internal factors include the current trend of real estate market and competitors. Access eager real estate investors and start flipping houses online now.
Gold
This is another important commodity for investment. The price for gold depends mainly on the demand in your country. The quantity of oil that your country can produce or supply or posses at a particular time also decides the price. Gold prices can also decline drastically or increase all on a sudden. However they are not as risky as investing in the stock market.
Mutual Funds
Mutual funds are collective investments undertaken by commercial entities. They collect funds fro m individual and institutional investors and invest them in various stock options. The returns and risks are shared according to t he individual contribution in the total sum. Mutual funds are also less risky when compared with stock markets. Lesser risks and service of financial experts with regards to investing in stock market has contributed to the popularity of mutual funds and today it remains to be a financial instrument highly demanded in the market. Even if you have little money to invest you can choose this scheme.
Saturday, August 23, 2008
Comodity markets?
A market that transacts business with commodities of all nature referred as commodity markets. Commodity market was initially meant only for agricultural products and that too in the local market. Industrializations, globalizations, technological advancements, increasing demand from consumers and intense competition from other players has paved way for commodity markets to cross boundaries and break barriers with regards to the commodity traded.
Commodity markets deal in the trade of commodities like gold, cotton, crude oil, orange juice etc. Many items both perishable and non perishable, finished goods, raw materials and semi finished goods will be traded in this market at the international level. Commodity market does not necessarily require you to buy or sell the commodities but you can even exchange them.
Commodity market works on certain principles. Firstly the trading has to be done only for standard products. Secondly the transaction takes place through a future contract. According to this contract the commodities will be sold or bought on a future date. However the price at which they are sold will be the price agreed during the contract.Similarly commodity marketing also makes use of another type of contract called spot contract. In this contract the goods are to be transferred as soon as the contract is made. However it has also been argued that the purpose of a spot contract is to exercise a future contact in due course of time. Some of the commodities investing market are commodity food market, commodity petroleum market and commodity fund investing.
Investing in Commodities
Commodity investing was initially received well only by a few sectors. Commodities investing were first restricted to the trade and exchange of commodities meant for regular and day to day use. However the awareness in the subsequent stages has brought all sectors into the manifold of commodity investing and has enabled speedy movements, transfer and transaction of goods and services. The following are the benefits of investing in commodities market:
Reduced Risks
As an investor your chances of risks are very less if you choose to invest in commodity. Therefore the gains from commodity investing will be helpful for you to balance other losses due to other financial instruments in your portfolio. The chances of risks are lower because commodity investing primarily deals with diverse items. Moreover when the contracts are entered for a future date at the current time you can exercise reasonable care and see to it that the chances of risks are reduced or nil.
Helps to Fix Price Easily
The performance of commodity market can be monitored by analyzing the performance of bond and share market because in most cases a commodity market will perform well when the others don't perform and vice versa. It is therefore possible to easily predict the prices and make the contracts by considering the ups and downs in other markets. A prerequisite for this is that the assets in the commodity market should not be correlated with the stock and bond market.
Commodity markets deal in the trade of commodities like gold, cotton, crude oil, orange juice etc. Many items both perishable and non perishable, finished goods, raw materials and semi finished goods will be traded in this market at the international level. Commodity market does not necessarily require you to buy or sell the commodities but you can even exchange them.
Commodity market works on certain principles. Firstly the trading has to be done only for standard products. Secondly the transaction takes place through a future contract. According to this contract the commodities will be sold or bought on a future date. However the price at which they are sold will be the price agreed during the contract.Similarly commodity marketing also makes use of another type of contract called spot contract. In this contract the goods are to be transferred as soon as the contract is made. However it has also been argued that the purpose of a spot contract is to exercise a future contact in due course of time. Some of the commodities investing market are commodity food market, commodity petroleum market and commodity fund investing.
Investing in Commodities
Commodity investing was initially received well only by a few sectors. Commodities investing were first restricted to the trade and exchange of commodities meant for regular and day to day use. However the awareness in the subsequent stages has brought all sectors into the manifold of commodity investing and has enabled speedy movements, transfer and transaction of goods and services. The following are the benefits of investing in commodities market:
Reduced Risks
As an investor your chances of risks are very less if you choose to invest in commodity. Therefore the gains from commodity investing will be helpful for you to balance other losses due to other financial instruments in your portfolio. The chances of risks are lower because commodity investing primarily deals with diverse items. Moreover when the contracts are entered for a future date at the current time you can exercise reasonable care and see to it that the chances of risks are reduced or nil.
Helps to Fix Price Easily
The performance of commodity market can be monitored by analyzing the performance of bond and share market because in most cases a commodity market will perform well when the others don't perform and vice versa. It is therefore possible to easily predict the prices and make the contracts by considering the ups and downs in other markets. A prerequisite for this is that the assets in the commodity market should not be correlated with the stock and bond market.
Thursday, August 21, 2008
how to do stock market research?
As you enter the world of stock trading, you gradually realize that you cannot survive, much less succeed, here unless you do a serious stock market research.
Stock market research is a highly intricate process and requires lots of time, expertise and experience. you've to learn to do significant and analytical research in order to study price movement of various stocks. While significant research involves studying the financial documents of the company whose stock you're interested in, the technical research involves analyzing the charts and graphs that try to predict the stock movement within a specific time frame.
All this work requires lots of time, attention and perseverance, which isn't every one's cup of tea. Most stock traders do a part of the research themselves and also receive expert's guidance from their stock broker as well.
It must be clearly understood that the job of your broker isn't limited to just executing your orders instantly. He also provides you the appropriate and efficient research facilities and tools through research section of his site that enable you to take important trading decisions fast and efficiently.
Some of these facilities include latest stock market price quotes and charts, news headline, symbol finder, stock screener, market scanner and so on.
When you think of trading a particular stock, first of all you have to find its trading symbol. This symbol identifies the stock. You enter the symbol on the relevant page of the site and get its price latest to the second. You can find whether the price of the stock is going up or down and also by what percentage it's doing so. The interface provides the opening price of the stock on that day, the high and the low levels the price reached, its bid price and ask price, the 52-week highest and the lowest price, the average trade volume and so on. You may also see a graph showing the price movement of the stock in course of the trading day. All this information is of crucial importance for an investor and even slightly wrong information can play havoc with trading prospects.
News headlines are another cardinal feature of the significant stock market research. The latest news flashes point to the overall market scenario of the trade and industry at local, regional, national and international levels. The news flashes provide every piece of information that may be necessary in formulating your trading decisions. The newsflashes contain information about the important companies whose stocks may appear interesting to the investors. You get to know the opinions of important government functionaries about the trade and economy of the country. for example, your anxiety about the effects of inflation on the country economy may be reduced by the news flashed on 3rd June, 2008 at 8.49 a.m that said: Fed Talk: Bernanke Sees Inflation Moderating Next Year.
The newsflashes too are updated by seconds.
Yet another important tool which may be called by any name, say stock screener, provides information about hot stocks in various industrial sectors. You can get the required information in three simple steps in a matter of seconds. You have to choose the name of the industry from the pull down list, then choose the sector and click on the View Results button to see the position of the stocks under the chosen sector. You also find the names of the most active stocks on a particular day.
If you're interested in investing in ETFs, you can seek out ETF Center on the relevant page of the site. You can get a snapshot of the overall ETF investment scenario. Here too you can get the latest price of a particular ETF, the percentage change in price whether it's going up or down along with the total trade volume at a particular time on any working day. The page also contains the open price, last price, day change, day high and low, 52-week high and low price position, average daily volume, shares outstanding, premium/ discount amount, premium/discount percentage and so on. This information is followed by the daily performance chart of the fund. The page also provides the dividend payment details. The portfolio data contains information about the average P/E, average P/B, average market cap, average turn over and so on.
The latest to the second information can be provided only if the site of the broker is backed by the latest state-of-the-art technology.
Stock market research is a highly intricate process and requires lots of time, expertise and experience. you've to learn to do significant and analytical research in order to study price movement of various stocks. While significant research involves studying the financial documents of the company whose stock you're interested in, the technical research involves analyzing the charts and graphs that try to predict the stock movement within a specific time frame.
All this work requires lots of time, attention and perseverance, which isn't every one's cup of tea. Most stock traders do a part of the research themselves and also receive expert's guidance from their stock broker as well.
It must be clearly understood that the job of your broker isn't limited to just executing your orders instantly. He also provides you the appropriate and efficient research facilities and tools through research section of his site that enable you to take important trading decisions fast and efficiently.
Some of these facilities include latest stock market price quotes and charts, news headline, symbol finder, stock screener, market scanner and so on.
When you think of trading a particular stock, first of all you have to find its trading symbol. This symbol identifies the stock. You enter the symbol on the relevant page of the site and get its price latest to the second. You can find whether the price of the stock is going up or down and also by what percentage it's doing so. The interface provides the opening price of the stock on that day, the high and the low levels the price reached, its bid price and ask price, the 52-week highest and the lowest price, the average trade volume and so on. You may also see a graph showing the price movement of the stock in course of the trading day. All this information is of crucial importance for an investor and even slightly wrong information can play havoc with trading prospects.
News headlines are another cardinal feature of the significant stock market research. The latest news flashes point to the overall market scenario of the trade and industry at local, regional, national and international levels. The news flashes provide every piece of information that may be necessary in formulating your trading decisions. The newsflashes contain information about the important companies whose stocks may appear interesting to the investors. You get to know the opinions of important government functionaries about the trade and economy of the country. for example, your anxiety about the effects of inflation on the country economy may be reduced by the news flashed on 3rd June, 2008 at 8.49 a.m that said: Fed Talk: Bernanke Sees Inflation Moderating Next Year.
The newsflashes too are updated by seconds.
Yet another important tool which may be called by any name, say stock screener, provides information about hot stocks in various industrial sectors. You can get the required information in three simple steps in a matter of seconds. You have to choose the name of the industry from the pull down list, then choose the sector and click on the View Results button to see the position of the stocks under the chosen sector. You also find the names of the most active stocks on a particular day.
If you're interested in investing in ETFs, you can seek out ETF Center on the relevant page of the site. You can get a snapshot of the overall ETF investment scenario. Here too you can get the latest price of a particular ETF, the percentage change in price whether it's going up or down along with the total trade volume at a particular time on any working day. The page also contains the open price, last price, day change, day high and low, 52-week high and low price position, average daily volume, shares outstanding, premium/ discount amount, premium/discount percentage and so on. This information is followed by the daily performance chart of the fund. The page also provides the dividend payment details. The portfolio data contains information about the average P/E, average P/B, average market cap, average turn over and so on.
The latest to the second information can be provided only if the site of the broker is backed by the latest state-of-the-art technology.
Wednesday, August 20, 2008
Creating a succesful portfolio
Is your mutual fund not providing the type of performance you're looking for? you're not alone. According to statics over a ten year period from April 30th, 1995 to April 30th, 2005 78.6% of active mutual fund managers failed to beat the S&P 500? That means that if you invested in mutual funds during this time period your fund had only a 20% chance of outperforming the S&P 500. These managers are supposed to be the so called experts in the stock market, yet they can't even beat the performance of an index that measures general marketing conditions?
There is an age old saying, if you want something done right do it yourself and this saying certainly applies to the stock market. With just a little research in your spare time, you can create your own portfolio that can trounce the pathetic performance of these mutual funds and grow your money at a rate you would be proud of.
As of May 30th, 2007, the S&P five hundred over a five year period is up over 42%. That is an average growth rate of 8.4% a year. If you can create a portfolio that can exceed 8.4% a year yourself, you'll not only be outperforming the S&P 500, but you'll also be outperforming most of the mutual fund managers. So how do you build your own portfolio so you can fire your mutual fund? Here are some tips:
Tip 1 - don't fight the indexes. The three general indexes that measure market performance are the Dow Jones Industrial average, the Standard & Poor five hundred Index and the NASDAQ composite index. Take a look at a one year chart for these indexes. What direction is the chart moving? If the indexes are downward, monitor your current positions cautiously, sell and take profits when appropriate and don't buy into any new positions until the general market is headed back up. Three out of every four stocks follow the general market trend. attempting to find winners in a downward market is like attempting to swim upstream. It can be done, but the odds are against you.
Tip two - Change is necessary. The best performing stocks perform well because there is a change that takes place that causes the increase in price. for example, Apple's stock is up over 50% from one year ago. What change took place almost a year ago that is driving such a large increase in stock value? seek out a change in products, a change in financial performance, a change in management or a change in the industry.
Tip three - Show me the money. How the company is performing financially is one of the key fundamentals to driving stock price. If the company is consistently growing sales revenues, net profits and corporate earnings at a high rate quarterly and annually, that is a clear sign that you may have a winner on your hands.
So make absolutely sure you consider these three tips if you want to build a portfolio that will make your mutual fund manager jealous. Doing so will allow you to be able to fire your mutual fund!
There is an age old saying, if you want something done right do it yourself and this saying certainly applies to the stock market. With just a little research in your spare time, you can create your own portfolio that can trounce the pathetic performance of these mutual funds and grow your money at a rate you would be proud of.
As of May 30th, 2007, the S&P five hundred over a five year period is up over 42%. That is an average growth rate of 8.4% a year. If you can create a portfolio that can exceed 8.4% a year yourself, you'll not only be outperforming the S&P 500, but you'll also be outperforming most of the mutual fund managers. So how do you build your own portfolio so you can fire your mutual fund? Here are some tips:
Tip 1 - don't fight the indexes. The three general indexes that measure market performance are the Dow Jones Industrial average, the Standard & Poor five hundred Index and the NASDAQ composite index. Take a look at a one year chart for these indexes. What direction is the chart moving? If the indexes are downward, monitor your current positions cautiously, sell and take profits when appropriate and don't buy into any new positions until the general market is headed back up. Three out of every four stocks follow the general market trend. attempting to find winners in a downward market is like attempting to swim upstream. It can be done, but the odds are against you.
Tip two - Change is necessary. The best performing stocks perform well because there is a change that takes place that causes the increase in price. for example, Apple's stock is up over 50% from one year ago. What change took place almost a year ago that is driving such a large increase in stock value? seek out a change in products, a change in financial performance, a change in management or a change in the industry.
Tip three - Show me the money. How the company is performing financially is one of the key fundamentals to driving stock price. If the company is consistently growing sales revenues, net profits and corporate earnings at a high rate quarterly and annually, that is a clear sign that you may have a winner on your hands.
So make absolutely sure you consider these three tips if you want to build a portfolio that will make your mutual fund manager jealous. Doing so will allow you to be able to fire your mutual fund!
Tuesday, August 19, 2008
Advantages of using a stock broker as a new investor.
If you're new to the world of stock trading and investments, you likely realize that there is tremendous pressure in the financial world today. New investment opportunities are being discovered every day that can potentially bring wealth and prosperity to your portfolio. Also, online stock investing has opened the door wide for overseas stock trading, giving you more investment opportunities than ever. As a new investor, all these can be overwhelming. So, how do you make wise decisions concerning your finances? How do you manage and invest your money while protecting your assets? As a new investor, a stock broker may be your answer. Continue reading to discover some lucrative benefits of using a stock broker as a new investor.
What is a Stock Broker?
A stock broker is someone who buys and sells stocks for an investor. Stocks, also called equities, are simply shares of ownership in a particular company. If you own five hundred shares in a company that are worth $2.00 per share, you actually have $1,000 in equity. Your profits are decidedby how much you pay for the equities initially, the commissions paid to your broker, and how much the equities are worth when you sell or trade them. A broker is licensed and regulated by the federal government or an overseas authority, depending on where they're located. Stock brokers receive a commission when buying or selling stocks. This is how they earn a profit. they're also advisors, recommending which stocks to buy or which to avoid.
Recommending a Venture
Stock brokers can assist you by recommending ventures in stock market trading or investing. A venture is a business decision or investment that has the potential to earn profits. You invest initial capital in hopes to earn more profits in return. One benefit of using a stock broker is he/she can recommend ventures based on their research. You might not have the knowledge or time to research the stock market. A stock broker does this for you. It's a full-time job for them, so they're able to recommend ventures that look promising. They can help you discover hidden treasures in the market you would not find on your own.
Managing Your Portfolio
Your stock portfolio shows your initial capital, profits or losses, a record of past stock trades, etc. A portfolio reveals if you're experiencing prosperity or misfortune. Either way, you should always be aware of your financial standing. A stock broker helps by managing your portfolio and keeping it up-to-date so you'll always know where you stand.
Helping you Learn the Ropes of Investing
A stock broker can help you learn the ropes of investing if you're new to stock trading. There are terms and legalities you should be familiar with before you venture to trade stocks on your own. A stock broker will advise you, educate you and guide you through the stock exchange process. This is very beneficial if you decide to trade stocks on your own later.
Overseas Stock Investments
Trading overseas has become commonplace in today's world of online technology. A stock broker who is familiar with overseas trading can help you expand your investment range to stocks around the world. Every day, people are reporting how they made their fortune in overseas stock investing. It's a real way to gain wealth with the right stock investments in place. A stock broker can help you expand to this market easily because they comprehend how the different currencies are used as well as how and where to invest overseas.
Using an Online Stock Broker
The days of high stock broker commissions are gone. Online stock brokers often charge minimal commissions because of their low overhead costs. Even overseas investments can easily be made with the click of a mouse. you've the benefit of working with a stock broker directly from your home instead of visiting an office or calling the broker. This saves both time and money for you and the broker.
Managing Mutual or Equity Funds
A stock broker can also help you manage your mutual funds, or equity funds. These are funds that are invested in a variety of stocks, thus, spreading your capital among more then one companies - not only one. Investment opportunities in mutual funds can often result in long-term profits. Many investors use these to build a retirement fund. The benefit of using an experienced stock broker is they've been watching different equity funds for years and know the long-term patterns of these investments. You can benefit from their years of observation, and avoid long-term losses.
There are many other benefits of using a stock broker as an investment and financial advisor if you're new to stock trading. don't miss investment opportunities that could bring wealth and prosperity in the near future!
What is a Stock Broker?
A stock broker is someone who buys and sells stocks for an investor. Stocks, also called equities, are simply shares of ownership in a particular company. If you own five hundred shares in a company that are worth $2.00 per share, you actually have $1,000 in equity. Your profits are decidedby how much you pay for the equities initially, the commissions paid to your broker, and how much the equities are worth when you sell or trade them. A broker is licensed and regulated by the federal government or an overseas authority, depending on where they're located. Stock brokers receive a commission when buying or selling stocks. This is how they earn a profit. they're also advisors, recommending which stocks to buy or which to avoid.
Recommending a Venture
Stock brokers can assist you by recommending ventures in stock market trading or investing. A venture is a business decision or investment that has the potential to earn profits. You invest initial capital in hopes to earn more profits in return. One benefit of using a stock broker is he/she can recommend ventures based on their research. You might not have the knowledge or time to research the stock market. A stock broker does this for you. It's a full-time job for them, so they're able to recommend ventures that look promising. They can help you discover hidden treasures in the market you would not find on your own.
Managing Your Portfolio
Your stock portfolio shows your initial capital, profits or losses, a record of past stock trades, etc. A portfolio reveals if you're experiencing prosperity or misfortune. Either way, you should always be aware of your financial standing. A stock broker helps by managing your portfolio and keeping it up-to-date so you'll always know where you stand.
Helping you Learn the Ropes of Investing
A stock broker can help you learn the ropes of investing if you're new to stock trading. There are terms and legalities you should be familiar with before you venture to trade stocks on your own. A stock broker will advise you, educate you and guide you through the stock exchange process. This is very beneficial if you decide to trade stocks on your own later.
Overseas Stock Investments
Trading overseas has become commonplace in today's world of online technology. A stock broker who is familiar with overseas trading can help you expand your investment range to stocks around the world. Every day, people are reporting how they made their fortune in overseas stock investing. It's a real way to gain wealth with the right stock investments in place. A stock broker can help you expand to this market easily because they comprehend how the different currencies are used as well as how and where to invest overseas.
Using an Online Stock Broker
The days of high stock broker commissions are gone. Online stock brokers often charge minimal commissions because of their low overhead costs. Even overseas investments can easily be made with the click of a mouse. you've the benefit of working with a stock broker directly from your home instead of visiting an office or calling the broker. This saves both time and money for you and the broker.
Managing Mutual or Equity Funds
A stock broker can also help you manage your mutual funds, or equity funds. These are funds that are invested in a variety of stocks, thus, spreading your capital among more then one companies - not only one. Investment opportunities in mutual funds can often result in long-term profits. Many investors use these to build a retirement fund. The benefit of using an experienced stock broker is they've been watching different equity funds for years and know the long-term patterns of these investments. You can benefit from their years of observation, and avoid long-term losses.
There are many other benefits of using a stock broker as an investment and financial advisor if you're new to stock trading. don't miss investment opportunities that could bring wealth and prosperity in the near future!
Mutual funds that act like hedge funds.
Today we take a look at mutual funds that are not structured like typical mutual funds, but act more like hedge funds for managing risk in your portfolio.
Today we take a look at mutual funds that are not structured like typical mutual funds, that is, funds that don't invest exclusively in stocks and bonds. These can be powerful additions to the risk management of our investment portfolio. Appropriate use of these mutual funds can be quite effective in providing both diversification and hedging of your investment portfolio. According to the Securities and Exchange Commission, there are several types of hedge funds. However, one of the more conservative strategies is the Long/Short fund. Long / Short Funds: Long/Short which includes sector and market neutral/relative value funds. These funds try to exploit perceived anomalies in the prices of securities. Long/short equity is the most frequently used strategy among hedge funds. Arbitrage Funds: Another of the lower risk strategies is Risk/Merger Arbitrage. These funds attempt to profit from pending merger transactions by, for example, taking a long position in the stock of the company to be acquired in a merger, leverage buyout or takeover and simultaneously taking a short position in the stock of the acquiring company. Since these approaches to hedging are fairly conservative, they are ones that would be most appropriate in managing portfolio risk. Since most of these have a low correlation to the overall market some investment advisors even recommend using these mutual funds as alternatives to bond funds in your portfolio. Morningstar has even added a category called Long/Short to its listing of mutual funds. Morningstar has arbitrage mutual funds fall into that same category. There are many new entrants into this field. While there may be several of the newer funds that are excellent offerings, the most straightforward way to judge the risk management performance of these funds is to look at their history during at least some part of the most recent bear market (2000 2002). Some example mutual funds that fared reasonably well in the last bear market include: Merger Fund (MERFX): This fund has been around for over 10 years. The basic approach is to capture the spread between the share price of companies that might be acquired and the proposed purchase price. This is done by buying the shares of the target firms of deals and occasionally shorting the stocks of the acquiring firm. This fund did fairly well during the bear market, although it had only fair performance in 2005. Schwab Hedged Equity Fund (SWHIX): A clone of its older sibling (SWHEX) that has significantly lower minimum investment, its managed by a group that has a long history of success in the small cap stock arena. The volatility of this fund is well below the market, and its returns have been good for a long/short fund. Gateway Fund (GATEX): This fund has been around for years. It has a unique approach of holding large cap stocks with high dividend yields and selling covered calls for extra income, while holding put options to guard against a market downturn. Once again did reasonable well in the bear market years. Calamos Market Neutral (CVSIX): One of the older offerings in the long/short group, it has a good track record that extends back through the 2000-2002 bear market. This fund utilizes a convertible arbitrage approach to target an 8-10% long term annual return. (This one has a sales load.) Hussman Strategic Growth (HSGFX): This is a hard one to categorize. John Hussman runs the fund, and buys stocks based on his valuation models, and then hedges against market risk by synthesizing a short position in a couple of the major indices with short call options. The hedge varies based on his appraisal of current market conditions. This is not your typical mutual fund, but over the last several years has had a very low drawdown, with reasonable returns. As you can see, the universe of mutual funds that adopt the best strategies of hedge funds is increasing. These funds are a powerful tool in building a diversified, low risk portfolio, hedging away some of the market risk while keeping a reasonable return for your investments. But keep in mind that while all these fall into Morningstars category of long/short funds, they each have unique approaches to the concept of hedging. So before you invest in any of them be sure you understand the specifics of each approach to ensure it is a good fit for your portfolio.
Today we take a look at mutual funds that are not structured like typical mutual funds, that is, funds that don't invest exclusively in stocks and bonds. These can be powerful additions to the risk management of our investment portfolio. Appropriate use of these mutual funds can be quite effective in providing both diversification and hedging of your investment portfolio. According to the Securities and Exchange Commission, there are several types of hedge funds. However, one of the more conservative strategies is the Long/Short fund. Long / Short Funds: Long/Short which includes sector and market neutral/relative value funds. These funds try to exploit perceived anomalies in the prices of securities. Long/short equity is the most frequently used strategy among hedge funds. Arbitrage Funds: Another of the lower risk strategies is Risk/Merger Arbitrage. These funds attempt to profit from pending merger transactions by, for example, taking a long position in the stock of the company to be acquired in a merger, leverage buyout or takeover and simultaneously taking a short position in the stock of the acquiring company. Since these approaches to hedging are fairly conservative, they are ones that would be most appropriate in managing portfolio risk. Since most of these have a low correlation to the overall market some investment advisors even recommend using these mutual funds as alternatives to bond funds in your portfolio. Morningstar has even added a category called Long/Short to its listing of mutual funds. Morningstar has arbitrage mutual funds fall into that same category. There are many new entrants into this field. While there may be several of the newer funds that are excellent offerings, the most straightforward way to judge the risk management performance of these funds is to look at their history during at least some part of the most recent bear market (2000 2002). Some example mutual funds that fared reasonably well in the last bear market include: Merger Fund (MERFX): This fund has been around for over 10 years. The basic approach is to capture the spread between the share price of companies that might be acquired and the proposed purchase price. This is done by buying the shares of the target firms of deals and occasionally shorting the stocks of the acquiring firm. This fund did fairly well during the bear market, although it had only fair performance in 2005. Schwab Hedged Equity Fund (SWHIX): A clone of its older sibling (SWHEX) that has significantly lower minimum investment, its managed by a group that has a long history of success in the small cap stock arena. The volatility of this fund is well below the market, and its returns have been good for a long/short fund. Gateway Fund (GATEX): This fund has been around for years. It has a unique approach of holding large cap stocks with high dividend yields and selling covered calls for extra income, while holding put options to guard against a market downturn. Once again did reasonable well in the bear market years. Calamos Market Neutral (CVSIX): One of the older offerings in the long/short group, it has a good track record that extends back through the 2000-2002 bear market. This fund utilizes a convertible arbitrage approach to target an 8-10% long term annual return. (This one has a sales load.) Hussman Strategic Growth (HSGFX): This is a hard one to categorize. John Hussman runs the fund, and buys stocks based on his valuation models, and then hedges against market risk by synthesizing a short position in a couple of the major indices with short call options. The hedge varies based on his appraisal of current market conditions. This is not your typical mutual fund, but over the last several years has had a very low drawdown, with reasonable returns. As you can see, the universe of mutual funds that adopt the best strategies of hedge funds is increasing. These funds are a powerful tool in building a diversified, low risk portfolio, hedging away some of the market risk while keeping a reasonable return for your investments. But keep in mind that while all these fall into Morningstars category of long/short funds, they each have unique approaches to the concept of hedging. So before you invest in any of them be sure you understand the specifics of each approach to ensure it is a good fit for your portfolio.
Monday, August 18, 2008
hedgie?
Nobody seems to like hedge fund managers much, and the public seems to enjoy stories about their mishaps. Are they really as brash as the stereotype suggests?
Nobody seems to like hedge fund managers much. Is it simply because they make a lot of money? Is it envy? Jealousy? Or are they really as brash as the stereotype suggests? The past month has seen a rash of unflattering incidents involving hedgies. There was the London manager Bertrand de Pallieres, who was so busy shorting stocks that he didn't notice for three months that his £80,000 Maserati had been towed away. A New York hedgie, John Devaney, was treated with mockery, rather than sympathy, when a trading downturn forced him to put his helicopter and yacht up for sale . Then this week, the New York Post reported that a Manhattan hedge fund manager, Stuart Sugarman, had been assaulted in a case of "gym rage" for war-whooping too annoyingly during a spin class . Allegedly, Sugarman ignored pleas to stop shouting "you go, girl" and "great song!". He needed back surgery after a classmate hurled him at a wall, bike and all. A certain intensity seems to be necessary in people who make their living by going long or short. Ari Kiev, a psychiatrist whose book Hedge Fund Masters studies the industry's players, says they tend to have specific personality traits. "Clearly, you want someone that's goal directed, someone who's able to set targets. Someone who's disciplined, able to be patient and able to synthesize the work of others in order to get a variant view," he says. Brains simply aren't enough, according to Kiev: "There are a lot of very smart analysts who understand stocks but who don't really have the same appetite for risk, appetite for pain." A ruthless streak is possibly an advantage. A natural disaster, for example, is a buying opportunity - within days of the 2004 tsunami, for example, some global funds were exploring buying opportunities in Sri Lankan construction. Even in their own backyard, hedge funds aren't overwhelmingly popular. The leafy town of Greenwich, Connecticut is America's hedge fund capital with at least 380 funds managing $100bn. Greenwich's endless row of boutiques - Tiffany, Saks, Ralph Lauren and LaCoste to name a few - speaks volumes about the money being generated by the industry. But local people have certain reservations. Mary Ann Morrison, president of Greenwich's chamber of commerce, says funds don't show much interest in community affairs. "For over a century, Greenwich has been one of the most upscale places in the north-east. It's always attracted old money," she says. "Hedge funds are changing the make-up of the business community." Although individual fund managers are sometimes generous, the funds aren't into community activism: "They're occupying class 'A' business space but that doesn't mean they're getting involved in the way their predecessors did." There are, of course, exceptions. The social event of the year in Greenwich is the Bruce Museum's annual Renaissance Ball - which this year was themed on the "jewels of India". With 500 guests, the black-tie event raised as much as $800,000. In Britain, there is the annual Hedgestock music festival which donates all its proceeds (reportedly nearly £1m annually) to the Teenage Cancer Trust. Unlike most rock concerts, it has a Moet & Chandon champagne tent and is promoted, only half jokingly, as "a festival of networking". When asked about their poor public image, hedge fund managers tend to answer with a shrug. David Friedland, president of the US Hedge Fund Association, says: "If a hedge fund manager's been successful, good luck to them if they want to spend their money on a private jet." Criticism, he says, is water off a ducks back: "Although hedge funds are bad-mouthed and bashed by everybody, sophisticated investors, pension funds and high net worth individuals all use hedge funds very heavily." In an attempt to shed the industry's earnest demeanor, Andrew Baker, deputy chief chief executive of Britain's Alternative Investment Management Association, reaches for a musical comparison. Why, he asks, do the least responsible participants get the most attention? "If you were a country and western singer and I was always comparing you with a picture of Pete Doherty, eventually you'd get quite annoyed," says Baker. "Hedge funds are not all like Pete Doherty. Some are highly leveraged, some are not." It would be idiotic, of course, for anybody to be gleeful at a downturn in hedge funds' performance. The losers aren't always obvious - but they are plentiful. When Australia's Basis Capital declared one of its funds bankrupt this week, it was revealed that one of the investors with burnt fingers was a pension fund for teachers in the state of Victoria. Yet the scale of the rewards for success do inspire eye-rolling. According to Trader Monthly magazine, 93 of the world's 100 most successful financiers were hedge fund managers last year. Members of this elite earned an average of £120m and five of them took home more than £500m. Unions in America are becoming more inventive in tapping into popular discontent at such rewards - particularly when tax breaks accentuate financiers' riches. A demonstration was staged in the Hamptons this week by an apparently new organisation called SHAME - the Southampton Alliance for Monied Estates. Calling for sympathizers to rally around the KKR private equity boss Henry Kravis to console him for the market's downturn, SHAME claimed to represent "working families behind the buyouts" who were campaigning for more tax relief for billionaires. It was, of course, a spoof set up by the SEIU, a 1.9 million-strong union and ardent critic of the excessive spoils of financial tycoons.
Nobody seems to like hedge fund managers much. Is it simply because they make a lot of money? Is it envy? Jealousy? Or are they really as brash as the stereotype suggests? The past month has seen a rash of unflattering incidents involving hedgies. There was the London manager Bertrand de Pallieres, who was so busy shorting stocks that he didn't notice for three months that his £80,000 Maserati had been towed away. A New York hedgie, John Devaney, was treated with mockery, rather than sympathy, when a trading downturn forced him to put his helicopter and yacht up for sale . Then this week, the New York Post reported that a Manhattan hedge fund manager, Stuart Sugarman, had been assaulted in a case of "gym rage" for war-whooping too annoyingly during a spin class . Allegedly, Sugarman ignored pleas to stop shouting "you go, girl" and "great song!". He needed back surgery after a classmate hurled him at a wall, bike and all. A certain intensity seems to be necessary in people who make their living by going long or short. Ari Kiev, a psychiatrist whose book Hedge Fund Masters studies the industry's players, says they tend to have specific personality traits. "Clearly, you want someone that's goal directed, someone who's able to set targets. Someone who's disciplined, able to be patient and able to synthesize the work of others in order to get a variant view," he says. Brains simply aren't enough, according to Kiev: "There are a lot of very smart analysts who understand stocks but who don't really have the same appetite for risk, appetite for pain." A ruthless streak is possibly an advantage. A natural disaster, for example, is a buying opportunity - within days of the 2004 tsunami, for example, some global funds were exploring buying opportunities in Sri Lankan construction. Even in their own backyard, hedge funds aren't overwhelmingly popular. The leafy town of Greenwich, Connecticut is America's hedge fund capital with at least 380 funds managing $100bn. Greenwich's endless row of boutiques - Tiffany, Saks, Ralph Lauren and LaCoste to name a few - speaks volumes about the money being generated by the industry. But local people have certain reservations. Mary Ann Morrison, president of Greenwich's chamber of commerce, says funds don't show much interest in community affairs. "For over a century, Greenwich has been one of the most upscale places in the north-east. It's always attracted old money," she says. "Hedge funds are changing the make-up of the business community." Although individual fund managers are sometimes generous, the funds aren't into community activism: "They're occupying class 'A' business space but that doesn't mean they're getting involved in the way their predecessors did." There are, of course, exceptions. The social event of the year in Greenwich is the Bruce Museum's annual Renaissance Ball - which this year was themed on the "jewels of India". With 500 guests, the black-tie event raised as much as $800,000. In Britain, there is the annual Hedgestock music festival which donates all its proceeds (reportedly nearly £1m annually) to the Teenage Cancer Trust. Unlike most rock concerts, it has a Moet & Chandon champagne tent and is promoted, only half jokingly, as "a festival of networking". When asked about their poor public image, hedge fund managers tend to answer with a shrug. David Friedland, president of the US Hedge Fund Association, says: "If a hedge fund manager's been successful, good luck to them if they want to spend their money on a private jet." Criticism, he says, is water off a ducks back: "Although hedge funds are bad-mouthed and bashed by everybody, sophisticated investors, pension funds and high net worth individuals all use hedge funds very heavily." In an attempt to shed the industry's earnest demeanor, Andrew Baker, deputy chief chief executive of Britain's Alternative Investment Management Association, reaches for a musical comparison. Why, he asks, do the least responsible participants get the most attention? "If you were a country and western singer and I was always comparing you with a picture of Pete Doherty, eventually you'd get quite annoyed," says Baker. "Hedge funds are not all like Pete Doherty. Some are highly leveraged, some are not." It would be idiotic, of course, for anybody to be gleeful at a downturn in hedge funds' performance. The losers aren't always obvious - but they are plentiful. When Australia's Basis Capital declared one of its funds bankrupt this week, it was revealed that one of the investors with burnt fingers was a pension fund for teachers in the state of Victoria. Yet the scale of the rewards for success do inspire eye-rolling. According to Trader Monthly magazine, 93 of the world's 100 most successful financiers were hedge fund managers last year. Members of this elite earned an average of £120m and five of them took home more than £500m. Unions in America are becoming more inventive in tapping into popular discontent at such rewards - particularly when tax breaks accentuate financiers' riches. A demonstration was staged in the Hamptons this week by an apparently new organisation called SHAME - the Southampton Alliance for Monied Estates. Calling for sympathizers to rally around the KKR private equity boss Henry Kravis to console him for the market's downturn, SHAME claimed to represent "working families behind the buyouts" who were campaigning for more tax relief for billionaires. It was, of course, a spoof set up by the SEIU, a 1.9 million-strong union and ardent critic of the excessive spoils of financial tycoons.
Sunday, August 17, 2008
If bear sterns doesnt know, who knows?
As the hedge fund world becomes bigger and bigger as more and more hot money seeks the elusive alpha of maximum performance, it is becoming apparent that more and more newspaper space will be devoted to hedge funds, and private equity. Recent news has taken us into the inner sanctum of Bear Stearns, truly a dominant investment firm in the world today. It might be argued that Bear Stearns is the best managed Wall Street firm in existence. Some might say Goldman Sach’s. In any event Bear Stearns would have to be on the short list. Investment firms for almost a decade sat by and watched hedge funds form, and amass vast investment capital pools while successfully charging 2% management fees, and 20% of the profits. Some of these hedge funds in a few years, have grown to possess capital bases equal to that of investment banking firms that have been around for generations. Taking some of the risks that were involved to achieve this performance is now coming home to roost. Bear Stearns is the latest firm to stub its toe in the hedge fund industry. The firm is FAMOUS for quantifying and judging RISK before making its bets. This time however it seems that Bear Stearns threw its usual caution to the wind in embracing the formation of two hedge funds over the last year or so. The second hedge fund was considered a more highly-leveraged version of Bear’s High –Grade structured Credit Strategies fund which was formed last year. Both funds were managed by Ralph Cioffi, who up until recent events took hold, had the reputation of being a MASTER at this game, and the game is the subprime mortgage bond business. Most people are not aware of it but Bear Stearns is the finest fixed income trading firm on the planet bar none, and this has been true for several generations. This makes recent events even more perplexing to understand. Jimmy Cayne who is Bear’s CEO is embarrassed at the very least, and certainly upset enough that there will be major changes in the leadership of the units responsible for the pain being inflected on the firm’s reputation. This should not have happened at Bear Stearns, that’s the point. Actions Taken and Implications Mr. Cayne has made the decision to inject $3.2 billion of Bear Stearns capital into a bail-out of the older fund. Bear is also negotiating with the banks that put up the credit facility for the other fund, the highly leveraged High-Grade Enhanced Leveraged fund. What Bear is trying to prevent is the forced sale of the debt obligations underlying the fund’s investments. These issues trade by appointment as they say, which means they rarely trade at all. Bear knows the Street smells blood, and will take advantage of any weakness that Bear shows. So what are the implications of this latest hedge fund debacle? It clearly shows that the most sophisticated investors on the planet who put their money into hedge funds may in fact have NO IDEA what they are investing in. Instead, they are betting on the institutional reputation of the firms standing in back of the hedge funds. In this case nobody knew more about this market segment than Bear Stearns, yet they caught in a terrible position. This is not Cayne’s fault, but as CEO, it is always his responsibility. I believe him to be the finest Wall Street executive of his generation. Nevertheless, his underlings certainly let him down, and they are among the highest paid people in the world today. Some of these industry veterans are drawing $10 million dollar annual incomes. Let the investor beware is the rule of the day, especially when it comes to hedge funds. But Wait – There’s More The average hedge fund uses about six to one leverage in order to obtain the performance success we have become accustomed to seeing in the hedge fund world. Investors in Bear Stearns’ fund called Enhanced Leverage put up about $638 million of their own money. The fund was then able to borrow about 10 times that amount. They used repo-financing and a credit facility at the Barclay’s Bank. Enhanced Leverage then went out and invested about $11.5 billion in both bonds and various and assorted bank debts on the long side. On the short side, they had about $4.5 billion through credit default swaps. These transactions were originated on the ABX Index, all of which were tied into subprime mortgage bonds. I know you are asking how it all came undone. What happened is that the underlying bonds of the whole market segment are what you could call the subprime market came undone. Back in February, this hurt Bear’s two funds. The funds and the hedges laid on by Bear went under water in March simultaneously. The hedges should have performed when the market worsened, and they didn’t. That was the killer. The hedges did not do what they were supposed to do. In late May, Bear knew they had to do something. What Bear chose to do was close down the redemption process. In other words, not allow any investors to withdraw their remaining funds, which would create a run on the hedge fund. This is similar to Franklin Roosevelt closing down the banks in 1933, to prevent a run on the banks from taking place. The banks who lent the money to the Bear Stearns sponsored funds quickly began selling down the securities in the funds in an attempt to back into some kind of positive equity balance. This was all the result of margin calls brought about the funds’ poorly performing, and now distressed investments. Bear finally agreed to a bail-out of one of the funds injecting $3 plus billion dollars into the fund. The firm as of now will not rescue the other fund, known as Enhanced Leverage. In our opinion, Bear will not be the last firm to experience problems with hedge funds, and investors are in for a further rude awakening as the hedge fund industry continues along its under-regulated path of seeking maximum investment performance. Many hedge funds are overextending, and frankly have no idea as to their actual open positions in the financial world. Bear and nobody is better than Bear says it will be another week or two before it knows the extent of the losses of its investors in these two funds. If that is true of the best managed risk taking firm in the world today, how much confidence can you have in the hundreds of other hedge funds out there that are poorly managed compared to the legendary Bear Stearns.? The answer is you’d better sleep with your pants on, if you think your money is safe in the hedge fund world. You think you’re sleeping on a nice warm bed. What you don’t realize is that the bed is sitting on a railroad track with a 100 mile per hour train bearing down on you. The problem with hedge funds is the leverage. Six to one is normal, and then you get the ones that go crazy and start approaching 10 to 1 leverage in the race for performance. It’s great when the market is on your side, but when the market goes against you; these entities literally go out of business. Warren Buffett has always talked about being able to sleep at night with your investments. He also talks about what would happen if you wound up in a coma, and woke up 10 years later? Would the investments you made ten years ago still be good, or not? Would you like to wake up from a coma, owning hedge fund investments for the previous ten years, maybe yes, maybe no, but as an investor, you better be able to answer that question? For a fuller version of this article please visit our website.
Saturday, August 16, 2008
A beginners guide to stock investment
Investing in stocks can prove to be a very profitable thing for you. However you may require learning the ins and outs of stock market before you invest your valuable cash. The stock market functions much like a public sale. it's an auction-based marketplace, with an agent acting as an intermediary who checks buyers and sellers of stocks. The price of a stock is evaluated by how much he buyer wants to pay and how little the seller is willing to put up for sale. The stock prices you watch on the Internet or in your local newspaper are from the last stock trades of the previous day. This type of information also informs you what the best rates are that buyers will pay for a share, in addition to the best price a seller will have. The stock rates are continually varying - going up and down by as little as cents or as much as a few bucks.
The good thing is that common stocks have exceeded nearly all other assets. Statistics have revealed that common stocks have an average annual return of approx. 14% after the end of World War II, even though there have been years when the market has decreased 20% or more. These decreases are difficult to manage, but you have to comprehend that the market has gone back each time and has gone on to bring in even greater returns in time.
Majority of financial advisors will advise you that you should not invest a lot in the stock market if you need cash back in a shorter period of time. However, investing a little in reliable companies can be gainful. The benefit of long-term investing is saving on taxes. If you hold on to your stocks, or sell at a higher price than you paid, you must pay capital gains on the earnings. It you possess a stock for less than a year; your short-term capital gain tax rate is nearly equivalent to your federal tax bracket.
Let's consider investing in a nationally renowned startup airline company such as Baltia Air Lines, which has prearranged a three-year lease of its Boeing seven hundred forty-seven aircraft. In addition to this, the company has leased space at JFK International Airport in New York, Terminal 4, for its base of operations. Baltia Air Lines plans to set up its initial route network by adding additional airplanes and non-stop routes from JFK to Riga, Moscow, Kiev and Minsk. The sustained affluence of Southwest Airlines® and the recent success of JetBlue® demonstrate the rewarding and expanding market for new U.S. niche carriers such as Baltia Air Lines, an ultimate choice for making your investments.
The good thing is that common stocks have exceeded nearly all other assets. Statistics have revealed that common stocks have an average annual return of approx. 14% after the end of World War II, even though there have been years when the market has decreased 20% or more. These decreases are difficult to manage, but you have to comprehend that the market has gone back each time and has gone on to bring in even greater returns in time.
Majority of financial advisors will advise you that you should not invest a lot in the stock market if you need cash back in a shorter period of time. However, investing a little in reliable companies can be gainful. The benefit of long-term investing is saving on taxes. If you hold on to your stocks, or sell at a higher price than you paid, you must pay capital gains on the earnings. It you possess a stock for less than a year; your short-term capital gain tax rate is nearly equivalent to your federal tax bracket.
Let's consider investing in a nationally renowned startup airline company such as Baltia Air Lines, which has prearranged a three-year lease of its Boeing seven hundred forty-seven aircraft. In addition to this, the company has leased space at JFK International Airport in New York, Terminal 4, for its base of operations. Baltia Air Lines plans to set up its initial route network by adding additional airplanes and non-stop routes from JFK to Riga, Moscow, Kiev and Minsk. The sustained affluence of Southwest Airlines® and the recent success of JetBlue® demonstrate the rewarding and expanding market for new U.S. niche carriers such as Baltia Air Lines, an ultimate choice for making your investments.
Thursday, July 24, 2008
best 25 stocks 2008
On last month's 12th FORBES cruise for investors--aboard the majestic Crystal Serenity, which sailed from the Pacific to the Caribbean through the Panama Canal--guests got these 2008 stock picks from our expert panel.
Ken Fisher is the founder and CEO of Fisher Investments, which manages $46 billion across 20,000-plus private accounts. Fisher said: "Most see a global recession or slowdown in 2008. I don't, not with strong earnings yields relative to low Treasury yields around the world today. Before others figure out the good news, you'll want to be in on these economic turnaround stocks:--Flextronics International (nasdaq: FLEX - news - people ) (FLEX, $11.53) --Manpower (nyse: MAN - news - people ) (MAN, $57.18) --Allianz (nyse: AZ - news - people ) (AZ, $20.16) --Cascade (nyse: CAE - news - people ) (CAE, $46.80) --Union Pacific (nyse: UNP - news - people ) (UNP, $128.96).
Brian Wesbury is the chief economist for First Trust Advisors, which manages $36 billion for private and institutional accounts. Wesbury said: "Our model shows U.S. stocks to be 25% undervalued even when we use a higher 6% yield for the ten-year Treasury bond." (As this column went to press, the yield was 4.1%.) Wesbury thinks the U.S. and the global economy are in a long boom, fueled by tech-led productivity, easy money and tax competition. He likes chip manufacturers and aerospace parts suppliers:--Sigma Designs (nasdaq: SIGM - news - people ) (SIGM, $62.71) --Nvidia (NVDA, $33.28) --Precision Castparts (nyse: PCP - news - people ) (PCP, $138.39) --Parker Hannifin (nyse: PH - news - people ) (PH, $75.06) --Hasbro (nyse: HAS - news - people ) (HAS, $25.84).
Stephen Biggar is the global director of equity research for Standard & Poor's. He recommended any of the 149 five-star stocks within the 1,550 companies covered by Standard & Poor's. Pressed to name just five stocks, Biggar offered us this broad midcap mix:--Carlisle Companies (nyse: CSL - news - people ) (CSL (other-otc: CMXHF.PK - news - people ), $37.62) --CVS Caremark (CVS, $39.13) --Hologic (nasdaq: HOLX - news - people ) (HOLX, $65.08) --Manitowoc Company (nyse: MTW - news - people ) (MTW, $45.90) --Triumph Group (nyse: TGI - news - people ) (TGI, $75.55).
Charles Payne is CEO of Wall Street Strategies, a firm that develops stock selection services for professional traders and institutional investors. Payne is a frequent guest market analyst on Fox News and Fox Business News. He shared these picks:--Diana Shipping (DSX, $29.29) --MEMC Electronic Materials (nyse: WFR - news - people ) (WFR, $83.42) --Evergreen Solar (nasdaq: ESLR - news - people ) (ESLR, $15.02) --VimpelCom (VIP, $35.74) --Guess (GES, $40.10).
Vahan Janjigian is Vice President and Executive Director of the Forbes Investors Advisory Institute. He is the editor of the Forbes Growth Investor and the Special Situation Survey, investment newsletters that have produced five-year annualized returns of 15.3% and 26.6%, respectively, according to the independent Hulbert Financial Digest. Janjigian is also the host of MoneyMasters with Vahan Janjigian, an Internet video program available on Forbes.com and iTunes, and is the coauthor and editor of the Forbes Stock Market Course, as well. Although Janjigian is an economic and market bear, he likes these stocks:--Johnson & Johnson (nyse: JNJ - news - people ) (JNJ, $67.55) --DRS Technologies (nyse: DRS - news - people ) (DRS, $55.31) --Rock-Tenn Company, Class A shares (RKT, $24.50) --Trinity Industries (nyse: TRN - news - people ) (TRN, $26.07) --Avnet (nyse: AVT - news - people ) (AVT, $34.75).
And for You Bears
Disagree with the bullish forecasts given above? Think bad mortgages will torpedo the economy and stocks? Here are some down-market defensive strategies shared during our investor cruise by longtime FORBES columnist Gary Shilling:
--Short home builders. Whoa! Haven’t the home-builder stocks already fallen hard? Not far enough, says Shilling. Home builders trade at book value today but sold for half of book in 1991.
--Don’t just short home builders; short (or sell) mortgage lenders and mortgage insurers, too.
--Sell any residential real estate or land you don’t intend to keep for the long haul. Take small losses, sure to grow larger soon.
--Short or sell companies that make big-ticket consumer items— like cars.
--Short sub-AA-rated CDOs backed by subprime mortgages.
--Get rid of junk bonds.
--Sell or avoid most commercial real estate.
--Sell or short commodities, including oil. Why? The U.S. recession will damage the global economy and suppress demand for commodities. Shilling’s favorite short: copper.
--Short (or sell) emerging-market stocks.
--Short (or sell) emerging-market bonds.
--Sell U.S. stocks in general.
--Buy the U.S. dollar.
Ken Fisher is the founder and CEO of Fisher Investments, which manages $46 billion across 20,000-plus private accounts. Fisher said: "Most see a global recession or slowdown in 2008. I don't, not with strong earnings yields relative to low Treasury yields around the world today. Before others figure out the good news, you'll want to be in on these economic turnaround stocks:--Flextronics International (nasdaq: FLEX - news - people ) (FLEX, $11.53) --Manpower (nyse: MAN - news - people ) (MAN, $57.18) --Allianz (nyse: AZ - news - people ) (AZ, $20.16) --Cascade (nyse: CAE - news - people ) (CAE, $46.80) --Union Pacific (nyse: UNP - news - people ) (UNP, $128.96).
Brian Wesbury is the chief economist for First Trust Advisors, which manages $36 billion for private and institutional accounts. Wesbury said: "Our model shows U.S. stocks to be 25% undervalued even when we use a higher 6% yield for the ten-year Treasury bond." (As this column went to press, the yield was 4.1%.) Wesbury thinks the U.S. and the global economy are in a long boom, fueled by tech-led productivity, easy money and tax competition. He likes chip manufacturers and aerospace parts suppliers:--Sigma Designs (nasdaq: SIGM - news - people ) (SIGM, $62.71) --Nvidia (NVDA, $33.28) --Precision Castparts (nyse: PCP - news - people ) (PCP, $138.39) --Parker Hannifin (nyse: PH - news - people ) (PH, $75.06) --Hasbro (nyse: HAS - news - people ) (HAS, $25.84).
Stephen Biggar is the global director of equity research for Standard & Poor's. He recommended any of the 149 five-star stocks within the 1,550 companies covered by Standard & Poor's. Pressed to name just five stocks, Biggar offered us this broad midcap mix:--Carlisle Companies (nyse: CSL - news - people ) (CSL (other-otc: CMXHF.PK - news - people ), $37.62) --CVS Caremark (CVS, $39.13) --Hologic (nasdaq: HOLX - news - people ) (HOLX, $65.08) --Manitowoc Company (nyse: MTW - news - people ) (MTW, $45.90) --Triumph Group (nyse: TGI - news - people ) (TGI, $75.55).
Charles Payne is CEO of Wall Street Strategies, a firm that develops stock selection services for professional traders and institutional investors. Payne is a frequent guest market analyst on Fox News and Fox Business News. He shared these picks:--Diana Shipping (DSX, $29.29) --MEMC Electronic Materials (nyse: WFR - news - people ) (WFR, $83.42) --Evergreen Solar (nasdaq: ESLR - news - people ) (ESLR, $15.02) --VimpelCom (VIP, $35.74) --Guess (GES, $40.10).
Vahan Janjigian is Vice President and Executive Director of the Forbes Investors Advisory Institute. He is the editor of the Forbes Growth Investor and the Special Situation Survey, investment newsletters that have produced five-year annualized returns of 15.3% and 26.6%, respectively, according to the independent Hulbert Financial Digest. Janjigian is also the host of MoneyMasters with Vahan Janjigian, an Internet video program available on Forbes.com and iTunes, and is the coauthor and editor of the Forbes Stock Market Course, as well. Although Janjigian is an economic and market bear, he likes these stocks:--Johnson & Johnson (nyse: JNJ - news - people ) (JNJ, $67.55) --DRS Technologies (nyse: DRS - news - people ) (DRS, $55.31) --Rock-Tenn Company, Class A shares (RKT, $24.50) --Trinity Industries (nyse: TRN - news - people ) (TRN, $26.07) --Avnet (nyse: AVT - news - people ) (AVT, $34.75).
And for You Bears
Disagree with the bullish forecasts given above? Think bad mortgages will torpedo the economy and stocks? Here are some down-market defensive strategies shared during our investor cruise by longtime FORBES columnist Gary Shilling:
--Short home builders. Whoa! Haven’t the home-builder stocks already fallen hard? Not far enough, says Shilling. Home builders trade at book value today but sold for half of book in 1991.
--Don’t just short home builders; short (or sell) mortgage lenders and mortgage insurers, too.
--Sell any residential real estate or land you don’t intend to keep for the long haul. Take small losses, sure to grow larger soon.
--Short or sell companies that make big-ticket consumer items— like cars.
--Short sub-AA-rated CDOs backed by subprime mortgages.
--Get rid of junk bonds.
--Sell or avoid most commercial real estate.
--Sell or short commodities, including oil. Why? The U.S. recession will damage the global economy and suppress demand for commodities. Shilling’s favorite short: copper.
--Short (or sell) emerging-market stocks.
--Short (or sell) emerging-market bonds.
--Sell U.S. stocks in general.
--Buy the U.S. dollar.
Best stock 2008
I'll make this simple. Apple (Nasdaq: AAPL) is 2008's best stock because it wallops rival electronics retailers in generating sales per square foot:
Company
Retail Revenue (mil)
Square Feet, Retail (mil)
Sales Per Square Foot
Apple
$4,115
1.5
$2,743.33
Best Buy
$32,222
33.3
$967.63
Circuit City
$11,860
17.6
$675.01 Sources: SEC filings, The Motley Fool estimates.
Impressive, yes? I'll say.
I should point out that these numbers are anything but perfect. Apple's retail revenue includes its small but growing international operation. Not so for Best Buy (NYSE: BBY) and Circuit City (NYSE: CC). Apple also operates on a different fiscal calendar than its electronics-retailing peers.
Still, look at that footprint. With just 1.5 million square feet, spread out across roughly 200 stores around the globe, Apple -- the 30-year-old Mac daddy -- is but a baby when it comes to retailing.
Not for long, though. That 4-T black turtleneck you bought little Stevie for Christmas is already ripping at the seams. Apple plans 40 new stores in 2008, many of which will be planted overseas. Mexico, too, if the rumors are true.
Apple: Netflix killer?Apple can still make billions from retailing. But there's also big money waiting in other areas of its business -- video rentals, for example.
Last week, major media outlets reported that Apple had inked a deal with News Corp. to make video rentals available via iTunes. If true, it would put instant pressure on Netflix (Nasdaq: NFLX) to do more with its fledging "Watch Now" free service.
But the news may be bigger than any single deal. Thanks to Hulu, Watch Now, the SlingBox, and TiVo, we've become accustomed to getting programming any time, anywhere, in whatever form we want. You can be sure that Apple CEO Steve Jobs is keenly aware of this, and that iTunes video rentals are on the way. If News Corp. doesn't provide the content, someone else will.
Apple: Palm killer?Then there's the iPhone. The numbers are staggering. Roughly 1.4 million have already sold, which, by my math, will bring in at least $700 million in new revenue for Apple.
But that's a conservative estimate. I'm assuming just $399 per phone, plus $100 for Apple's referral deal with AT&T. We know that many iPhones sold for $600. We also have press reports stating that Apple reaps $18 a month from Ma Bell for each iPhone activated, or $432 over a two-year period.
Do the math with me: 1.4 million multiplied by $831 per iPhone is ... (key-punching sounds) ... $1.16 billion. Apple may have created a billion-dollar business ... in six freakin' months.
It makes me wonder: How can Palm (Nasdaq: PALM) be so slow when the market is moving so fast?
Apple: Windows killer?Finally, let's talk Leopard. No, not the cat; the operating system. The new Mac OS is already a winner, having sold more than 2 million copies in its first weekend of release.
Reviews in my copy of Macworld don't offer breathless praise for the OS, but there's plenty to like, including a very useful new feature called "Time Machine." You select the hard drive you'd like to back up, and the destination for your archived data, and Leopard takes care of the rest.
Elegant system software engineering like this is commonplace for Apple. Before there were retail stores, the iEmpire and its devotees -- yours truly included -- thought superior design would ultimately draw customers away from Microsoft (Nasdaq: MSFT) and Windows. Never happened.
But here's the thing: It still could. Retail stores are as much a showroom for the Mac OS, the iPod, and the iPhone as they are a sales depot. Researcher IDC says that Apple's share of the domestic PC market is climbing as a result.
What's more, with chips from Intel (Nasdaq: INTC), Macs now handle PC programs pretty well. For example, a software application called Crossover allows you to run PC software in the Mac OS without a copy of Windows present. Talk about a rebellion in the making.
Fly the pirate flagNotice the pattern here, Fool. Apple is disrupting every business it enters, and in most cases, doing so successfully. Think about how extraordinary that is. All Microsoft had to do was disrupt the PC business once to unleash billions in market value.
How much more will Apple unleash when it disrupts two? Three? Four? You get the picture. Apple, like so many rebel stocks before it, is a misunderstood multibagger in the making. $200 a share is just the beginning.
But that's my take. If you agree, head over to CAPS to rate Apple "outperform." If not, rate it "underperform." Our editors will tally your votes and, next week, reveal your choice for the best stock of the New Year.
Company
Retail Revenue (mil)
Square Feet, Retail (mil)
Sales Per Square Foot
Apple
$4,115
1.5
$2,743.33
Best Buy
$32,222
33.3
$967.63
Circuit City
$11,860
17.6
$675.01 Sources: SEC filings, The Motley Fool estimates.
Impressive, yes? I'll say.
I should point out that these numbers are anything but perfect. Apple's retail revenue includes its small but growing international operation. Not so for Best Buy (NYSE: BBY) and Circuit City (NYSE: CC). Apple also operates on a different fiscal calendar than its electronics-retailing peers.
Still, look at that footprint. With just 1.5 million square feet, spread out across roughly 200 stores around the globe, Apple -- the 30-year-old Mac daddy -- is but a baby when it comes to retailing.
Not for long, though. That 4-T black turtleneck you bought little Stevie for Christmas is already ripping at the seams. Apple plans 40 new stores in 2008, many of which will be planted overseas. Mexico, too, if the rumors are true.
Apple: Netflix killer?Apple can still make billions from retailing. But there's also big money waiting in other areas of its business -- video rentals, for example.
Last week, major media outlets reported that Apple had inked a deal with News Corp. to make video rentals available via iTunes. If true, it would put instant pressure on Netflix (Nasdaq: NFLX) to do more with its fledging "Watch Now" free service.
But the news may be bigger than any single deal. Thanks to Hulu, Watch Now, the SlingBox, and TiVo, we've become accustomed to getting programming any time, anywhere, in whatever form we want. You can be sure that Apple CEO Steve Jobs is keenly aware of this, and that iTunes video rentals are on the way. If News Corp. doesn't provide the content, someone else will.
Apple: Palm killer?Then there's the iPhone. The numbers are staggering. Roughly 1.4 million have already sold, which, by my math, will bring in at least $700 million in new revenue for Apple.
But that's a conservative estimate. I'm assuming just $399 per phone, plus $100 for Apple's referral deal with AT&T. We know that many iPhones sold for $600. We also have press reports stating that Apple reaps $18 a month from Ma Bell for each iPhone activated, or $432 over a two-year period.
Do the math with me: 1.4 million multiplied by $831 per iPhone is ... (key-punching sounds) ... $1.16 billion. Apple may have created a billion-dollar business ... in six freakin' months.
It makes me wonder: How can Palm (Nasdaq: PALM) be so slow when the market is moving so fast?
Apple: Windows killer?Finally, let's talk Leopard. No, not the cat; the operating system. The new Mac OS is already a winner, having sold more than 2 million copies in its first weekend of release.
Reviews in my copy of Macworld don't offer breathless praise for the OS, but there's plenty to like, including a very useful new feature called "Time Machine." You select the hard drive you'd like to back up, and the destination for your archived data, and Leopard takes care of the rest.
Elegant system software engineering like this is commonplace for Apple. Before there were retail stores, the iEmpire and its devotees -- yours truly included -- thought superior design would ultimately draw customers away from Microsoft (Nasdaq: MSFT) and Windows. Never happened.
But here's the thing: It still could. Retail stores are as much a showroom for the Mac OS, the iPod, and the iPhone as they are a sales depot. Researcher IDC says that Apple's share of the domestic PC market is climbing as a result.
What's more, with chips from Intel (Nasdaq: INTC), Macs now handle PC programs pretty well. For example, a software application called Crossover allows you to run PC software in the Mac OS without a copy of Windows present. Talk about a rebellion in the making.
Fly the pirate flagNotice the pattern here, Fool. Apple is disrupting every business it enters, and in most cases, doing so successfully. Think about how extraordinary that is. All Microsoft had to do was disrupt the PC business once to unleash billions in market value.
How much more will Apple unleash when it disrupts two? Three? Four? You get the picture. Apple, like so many rebel stocks before it, is a misunderstood multibagger in the making. $200 a share is just the beginning.
But that's my take. If you agree, head over to CAPS to rate Apple "outperform." If not, rate it "underperform." Our editors will tally your votes and, next week, reveal your choice for the best stock of the New Year.
What do Value Investors Look for in Stocks?
What factors should you consider when evaluating a value stock? Before we answer that question, maybe we should briefly define value investing.
Value investing is finding a stock that is selling at a discount to its intrinsic value or companies that the market has undervalued for some reason unrelated to its economic fundamentals.
Benjamin Graham pioneered the value-investing concept and recognized the biggest flaw in the strategy: deciding what a company’s intrinsic value is.
Margin of Safety For this reason he always counseled for a margin of safety that provided room should your calculation of the intrinsic value be off.
This is important because the key to successful value investing is buying at the correct price. Graham’s strategy called for a strict discipline on price, which included his margin of safety.
If he could not buy the stock at that price, he would pass.
Many modern stock pickers scoff at the rigidity of his system, yet Graham and his pupils, such as Warren Buffett, have made fortunes sticking to the strategy.
Financial Statistics Here are some of the financial statistics value investors study, historical and forward:
price to book ratios
price to sales ratios
price to earnings ratios
price to cash flow ratios For an explanation of these ratios, see Tools of Financial Analysis.
The value investor will look for these ratios to be below the S&P 500 benchmarks for a company’s industry group.
However, let’s be clear. Value investors are not looking for companies on the way to bankruptcy. They are looking for companies that have been beaten up by the market for no real fault of their own.
One of the ways you can make sure the company is on solid footing is to look at its financials.
Debt Ratios Look in particular at its debt ratios (debt levels should be low) and look for good cash flow. A company with manageable debt and good cash flow is worth getting to know better, regardless of how the market is treating the stock.
How does a good company become a value stock? Several things can happen.
The company may not have a glamorous product. Some products just don’t get much attention, but still must be produced, for example, those orange barrels you see on highway construction sites.
The growth prospects for the stock may not be high relative to other opportunities in the market. During the dot.com stock frenzy of the late 1990s, almost any stock that wasn’t high tech became a value stock in comparison.
If a stock is selling at below $15 - $20, some investors think there must be something wrong with the company. This is an irrational response, but it happens.
Conclusion Successful value investing depends on identifying a stock that is trading under the intrinsic value of the company and buying with a margin of safety in case you have misjudged the intrinsic value.
Value investing is finding a stock that is selling at a discount to its intrinsic value or companies that the market has undervalued for some reason unrelated to its economic fundamentals.
Benjamin Graham pioneered the value-investing concept and recognized the biggest flaw in the strategy: deciding what a company’s intrinsic value is.
Margin of Safety For this reason he always counseled for a margin of safety that provided room should your calculation of the intrinsic value be off.
This is important because the key to successful value investing is buying at the correct price. Graham’s strategy called for a strict discipline on price, which included his margin of safety.
If he could not buy the stock at that price, he would pass.
Many modern stock pickers scoff at the rigidity of his system, yet Graham and his pupils, such as Warren Buffett, have made fortunes sticking to the strategy.
Financial Statistics Here are some of the financial statistics value investors study, historical and forward:
price to book ratios
price to sales ratios
price to earnings ratios
price to cash flow ratios For an explanation of these ratios, see Tools of Financial Analysis.
The value investor will look for these ratios to be below the S&P 500 benchmarks for a company’s industry group.
However, let’s be clear. Value investors are not looking for companies on the way to bankruptcy. They are looking for companies that have been beaten up by the market for no real fault of their own.
One of the ways you can make sure the company is on solid footing is to look at its financials.
Debt Ratios Look in particular at its debt ratios (debt levels should be low) and look for good cash flow. A company with manageable debt and good cash flow is worth getting to know better, regardless of how the market is treating the stock.
How does a good company become a value stock? Several things can happen.
The company may not have a glamorous product. Some products just don’t get much attention, but still must be produced, for example, those orange barrels you see on highway construction sites.
The growth prospects for the stock may not be high relative to other opportunities in the market. During the dot.com stock frenzy of the late 1990s, almost any stock that wasn’t high tech became a value stock in comparison.
If a stock is selling at below $15 - $20, some investors think there must be something wrong with the company. This is an irrational response, but it happens.
Conclusion Successful value investing depends on identifying a stock that is trading under the intrinsic value of the company and buying with a margin of safety in case you have misjudged the intrinsic value.
Supply and Demand Drive Stock Prices
What can stock investors learn from the credit crisis and the declining values in the housing market?
Aside from the damage caused to stock prices thanks to billions in write downs by major financial services companies, the falling values in the housing market is a good reminder of how supply and demand work.
When you read that home prices are tumbling (after years of rising) in major metropolitan markets, you have to ask why.
Has something changed that makes those houses worth less than a year before?
Markets Change The houses haven’t changed, but the market has. In many major cities, the supply of real estate has been behind the demand.
This created and sustained a sellers’ market, which means if there are more buyers than desirable properties prices will rise.
Those properties are no less desirable than they were a year ago, however the credit crisis has reduced the number of potential buyers.
Tougher lending standards may prevent some from qualifying, while others are just nervous about buying property that may continue to decline in value.
Sellers and Buyers The result is there are now more sellers than buyers, which reverses the relationship. With fewer potential buyers in the market, prices will drop as homeowners compete for the sale.
A note about the buyer-seller relationship: In free markets, you must have a willing buyer and a willing seller. When I say there are more sellers than buyers, I mean that sellers are forced to provide incentives to convert reluctant prospects into buyers.
They do this primarily by lowering the price. A prospect is then converted to a buyer.
This seems simple and obvious, but it is how markets work.
In the stock market, the basic principles of supply and demand are the same.
Attractive Stocks When a stock is attractive for whatever reason (great fundamentals, lock on its market, new patent, and so on), there tend to be more buyers than sellers.
Sellers may be coaxed into parting with their stock by a higher price.
For a stock that is out of favor, prospects must be wooed with lower prices to convert them into buyers.
Supply and demand make sense, but what doesn’t always make sense is what causes investors to favor one stock over another.
However, it ultimately comes down to matching willing sellers and willing buyers at a price both agree on for the sale.
Aside from the damage caused to stock prices thanks to billions in write downs by major financial services companies, the falling values in the housing market is a good reminder of how supply and demand work.
When you read that home prices are tumbling (after years of rising) in major metropolitan markets, you have to ask why.
Has something changed that makes those houses worth less than a year before?
Markets Change The houses haven’t changed, but the market has. In many major cities, the supply of real estate has been behind the demand.
This created and sustained a sellers’ market, which means if there are more buyers than desirable properties prices will rise.
Those properties are no less desirable than they were a year ago, however the credit crisis has reduced the number of potential buyers.
Tougher lending standards may prevent some from qualifying, while others are just nervous about buying property that may continue to decline in value.
Sellers and Buyers The result is there are now more sellers than buyers, which reverses the relationship. With fewer potential buyers in the market, prices will drop as homeowners compete for the sale.
A note about the buyer-seller relationship: In free markets, you must have a willing buyer and a willing seller. When I say there are more sellers than buyers, I mean that sellers are forced to provide incentives to convert reluctant prospects into buyers.
They do this primarily by lowering the price. A prospect is then converted to a buyer.
This seems simple and obvious, but it is how markets work.
In the stock market, the basic principles of supply and demand are the same.
Attractive Stocks When a stock is attractive for whatever reason (great fundamentals, lock on its market, new patent, and so on), there tend to be more buyers than sellers.
Sellers may be coaxed into parting with their stock by a higher price.
For a stock that is out of favor, prospects must be wooed with lower prices to convert them into buyers.
Supply and demand make sense, but what doesn’t always make sense is what causes investors to favor one stock over another.
However, it ultimately comes down to matching willing sellers and willing buyers at a price both agree on for the sale.
What is Best Investment you can Make Today?
What is the best investment you can make?
Here’s a hint: It will earn you a guaranteed return that will beat just about any stock on Wall Street.
This investment doesn’t require more than two minutes of research and you have everything you need to begin right now.
I’m not talking about a stock, bond or mutual fund, but an investment in lowering your personal debt.
High Interest DebtToo much high-interest credit card debt is never a good idea and considering the economy remains unstable, now is a good time to reduce those balances.
Start with your highest interest debt (probably a credit card). If you have been a good customer and your interest rate is more than 12 percent, ask the issuer to lower it.
If the issuer won’t give you a break, consider switching the balance to an existing card with a lower interest rate (don’t get a new card just to get a new rate).
Make up your mind to pay off all the high interest debt as soon as possible. This may mean giving up some luxury or skipping expensive presents until the job is done.
Try to avoid adding to any balances and pay as much as you can (at least three times the minimum payment).
Investment ProgramIf you have to slow your investment program (not your retirement account, such as a 401(k)), do so as long as the money goes to pay down your debt.
What about the guaranteed return? How is paying off debt going to earn you a return?
Consider it interest avoidance.
If you are paying 12 percent (or more) on your credit cards or other debt, you are unlikely to earn that level of return on a consistent basis.
So, for every dollar you don’t pay in interest on personal debt, you are effectively paying yourself.
Those unspent interest dollars can go to reduce your debt even more and, best of all, when you pay off your personal debt, the cash flow that you were paying to debtors is now yours to keep.
In any economy, but especially when things a slowing, cash is king and you will have more cash to do with as you please when you aren’t paying off your personal debt.
Once you get out of debt, put away all of your credit cards except one and pay of the balance each month.
Here’s a hint: It will earn you a guaranteed return that will beat just about any stock on Wall Street.
This investment doesn’t require more than two minutes of research and you have everything you need to begin right now.
I’m not talking about a stock, bond or mutual fund, but an investment in lowering your personal debt.
High Interest DebtToo much high-interest credit card debt is never a good idea and considering the economy remains unstable, now is a good time to reduce those balances.
Start with your highest interest debt (probably a credit card). If you have been a good customer and your interest rate is more than 12 percent, ask the issuer to lower it.
If the issuer won’t give you a break, consider switching the balance to an existing card with a lower interest rate (don’t get a new card just to get a new rate).
Make up your mind to pay off all the high interest debt as soon as possible. This may mean giving up some luxury or skipping expensive presents until the job is done.
Try to avoid adding to any balances and pay as much as you can (at least three times the minimum payment).
Investment ProgramIf you have to slow your investment program (not your retirement account, such as a 401(k)), do so as long as the money goes to pay down your debt.
What about the guaranteed return? How is paying off debt going to earn you a return?
Consider it interest avoidance.
If you are paying 12 percent (or more) on your credit cards or other debt, you are unlikely to earn that level of return on a consistent basis.
So, for every dollar you don’t pay in interest on personal debt, you are effectively paying yourself.
Those unspent interest dollars can go to reduce your debt even more and, best of all, when you pay off your personal debt, the cash flow that you were paying to debtors is now yours to keep.
In any economy, but especially when things a slowing, cash is king and you will have more cash to do with as you please when you aren’t paying off your personal debt.
Once you get out of debt, put away all of your credit cards except one and pay of the balance each month.
Expectations of High Returns May Lead to Disappointment
Did you buy a stock to turn $10,000 into the $30,000 you need for Junior’s next year in college?
If so, you’re not investing, you’re gambling, and, unless you are incredibly lucky, you will not meet your goal.
The expectation of a high return in a short time frame is not realistic. Do stocks every shoot up like rockets?
Risk
Yes, some do. However, you must understand that the market works on a rigid risk-reward basis. If there is little risk to the investor, there will be a lower potential reward.
Investments that offer an extremely high potential reward invariably come with a high level of risk.
For the investor, this means if you are after the big returns, you must be prepared to suffer more losses than rewards.
As an investment choice, stocks have historically returned 10 to 12 percent. Does that mean that every stock should return in that range?
Average
Not at all – that is simply an average. You need to assess the risk of investing in a particular stock before deciding what an acceptable return is.
An investment in a young high tech company should have a higher potential payout than putting your money in a “blue chip” company that posts modest growth and pays a regular dividend.
What would be the risk factor for a stock that could potentially triple in price over a short period? The answer is very high – in fact, so high that the odds of it succeeding would be very slim.
There is no safe (or legal) way to earn a very high return on your money over a short period.
Conclusion
Investing in stocks is best done as a long-term effort, which allows your money to grow and permits time for course corrections and adjustments.
If so, you’re not investing, you’re gambling, and, unless you are incredibly lucky, you will not meet your goal.
The expectation of a high return in a short time frame is not realistic. Do stocks every shoot up like rockets?
Risk
Yes, some do. However, you must understand that the market works on a rigid risk-reward basis. If there is little risk to the investor, there will be a lower potential reward.
Investments that offer an extremely high potential reward invariably come with a high level of risk.
For the investor, this means if you are after the big returns, you must be prepared to suffer more losses than rewards.
As an investment choice, stocks have historically returned 10 to 12 percent. Does that mean that every stock should return in that range?
Average
Not at all – that is simply an average. You need to assess the risk of investing in a particular stock before deciding what an acceptable return is.
An investment in a young high tech company should have a higher potential payout than putting your money in a “blue chip” company that posts modest growth and pays a regular dividend.
What would be the risk factor for a stock that could potentially triple in price over a short period? The answer is very high – in fact, so high that the odds of it succeeding would be very slim.
There is no safe (or legal) way to earn a very high return on your money over a short period.
Conclusion
Investing in stocks is best done as a long-term effort, which allows your money to grow and permits time for course corrections and adjustments.
Tuesday, July 22, 2008
Benefits of ownning commonstock
What Are the Benefits of Owning Common Stock?
News channels, the internet and even newspapers are always bombarding us with common stock prices, telling the world if a determined share went up or down. But, what is common stock? Is the only kind of stock that exists in the market? Or are there other ones? And which one is the best for investing? Let's find out more the true common stock definition and how they can improve your future.What Is Common Stock?
Common stock is the most basic kind of stock that a company can emit. Owning common stock from a company means that the stockowner owns a piece of the company. This ownership can be executed through his voting rights: one share, one vote. Proprietors of common stock can choose the members of the board and even decide determined policies.Besides the voting rights, there are occasions in which common stock owners have pre-emptive rights. These rights permit common stock owners the possibility of owning the same percentage of the company in case the organizations emits new stock. So, any common stock owner can buy, if he chooses to do so, an additional percentage of stock in order to maintain his level of ownership of the corporation.
Finally, common stock owners can receive dividends for their shares. If the board of directors approves common stock dividends, a determined amount of money is distributed among the thousands of people who have bought common stock. For example, let's say that the board of directors decided to pay $0.01 per share and that a determined individual owns 10,000 shares. That means that he will receive dividends for $100.
What Is The Difference Between Common Stock And Preferred Stock?
Besides common stock, there is another type of shares that is called preferred stock. The difference between common and preferred stock is that preferred stock has additional benefits. Maybe the most important one is that the dividends obtained by a company are distributed, first, among owners of preferred stock.But, there is an additional plus. In case the company goes through a process of insolvency or bankruptcy, the first stockowners who are going to receive a payment for their shares are the ones who own preferred stock. Meanwhile, common stock owners have to wait until the end and hope that there is some money left for them (which, in the majority of cases, doesn't happen). In this case, common stock prices won't be enough to save the capital that has been invested by the shareholder.
The second big difference is that the dividends paid by preferred stock are much bigger than the ones paid by common stock. Preferred stock owners receive pre-defined payments, while common stock owners depend on the decision of the board of directors. As a consequence, preferred stock owners can use their shares as a fixed-income security.
There are many kinds of preferred stock. For example, there is the Convertible Preferred Stock. In this kind of stock, the stock owner has the option of converting his preferred stock into common stock at a determined price. Another type of preferred stock is the Perpetual Preferred Stock, where the owner of the stock hasn't a set date for receiving their invested capital. The dividends on this type of preferred stock simply accumulate over each other until the board of directors makes a decision.
Benefits of ownning commonstock
What Are the Benefits of Owning Common Stock?
News channels, the internet and even newspapers are always bombarding us with common stock prices, telling the world if a determined share went up or down. But, what is common stock? Is the only kind of stock that exists in the market? Or are there other ones? And which one is the best for investing? Let's find out more the true common stock definition and how they can improve your future.What Is Common Stock?
Common stock is the most basic kind of stock that a company can emit. Owning common stock from a company means that the stockowner owns a piece of the company. This ownership can be executed through his voting rights: one share, one vote. Proprietors of common stock can choose the members of the board and even decide determined policies.Besides the voting rights, there are occasions in which common stock owners have pre-emptive rights. These rights permit common stock owners the possibility of owning the same percentage of the company in case the organizations emits new stock. So, any common stock owner can buy, if he chooses to do so, an additional percentage of stock in order to maintain his level of ownership of the corporation.
Finally, common stock owners can receive dividends for their shares. If the board of directors approves common stock dividends, a determined amount of money is distributed among the thousands of people who have bought common stock. For example, let's say that the board of directors decided to pay $0.01 per share and that a determined individual owns 10,000 shares. That means that he will receive dividends for $100.
What Is The Difference Between Common Stock And Preferred Stock?
Besides common stock, there is another type of shares that is called preferred stock. The difference between common and preferred stock is that preferred stock has additional benefits. Maybe the most important one is that the dividends obtained by a company are distributed, first, among owners of preferred stock.But, there is an additional plus. In case the company goes through a process of insolvency or bankruptcy, the first stockowners who are going to receive a payment for their shares are the ones who own preferred stock. Meanwhile, common stock owners have to wait until the end and hope that there is some money left for them (which, in the majority of cases, doesn't happen). In this case, common stock prices won't be enough to save the capital that has been invested by the shareholder.
The second big difference is that the dividends paid by preferred stock are much bigger than the ones paid by common stock. Preferred stock owners receive pre-defined payments, while common stock owners depend on the decision of the board of directors. As a consequence, preferred stock owners can use their shares as a fixed-income security.
There are many kinds of preferred stock. For example, there is the Convertible Preferred Stock. In this kind of stock, the stock owner has the option of converting his preferred stock into common stock at a determined price. Another type of preferred stock is the Perpetual Preferred Stock, where the owner of the stock hasn't a set date for receiving their invested capital. The dividends on this type of preferred stock simply accumulate over each other until the board of directors makes a decision.
How To Do A Stock Market Research
If you have been considering investing in stocks, you have likely heard a lot about stock market research. In fact, the most common advice that new investors are given is that they need to do stock market and investment research. This article throws light on:
It is not enough to just find a share to buy, however. You will also want to find out as about a company before you actually buy shares from the company. This is because when you buy shares in a company, you buy part ownership of the company. The company's reputation, business practices, and reliability can dramatically affect your investment portfolio and your profits. Luckily, there are a few ways that you can determine whether a company is worth investing in
Finding the Company
Find out about the company by reading news items about the company and by reading the company profile online. Also visit the company's web site to read about the company.
Consider the Company's Size
A larger company may be more stable, especially today, when larger companies tend to outsmart smaller companies easily. A large company such as IBM or Corel, for example, can buy computer start-ups. If you want to invest in the long term, a smaller amount of shares from larger companies may make sense. If you want a fast turn-around and faster profits and are willing to take some risk, a smaller company may be right for you.
Consider the Company's History
How long a company has been in business is a reflection of its overall stability. Consider that the majority of new businesses close within a year and consider that companies with a long history have withstood market depressions in the past also experience dealing with problems and so may overcome them in the future as well. A company with a history as a publicly owned company has also been satisfying investors long enough to stay in business. A company's history of profits, popularity, and market consistency is not a sure indicator of future success, but it is generally a good guide.
Consider the Company's Product or Service
A company that offers a good or unique product or service is likely to create demand which might result in decent profits. When considering a company's product or service, be sure to consider market position as well. Is the company a leader in the industry? In general, companies offering quality products that lead the market are promise great profits.
Consider the Company's Earnings
A company should enjoy consistent growth in terms of earnings. These earnings should not only offer you good dividends, but should also be enough to reinvest in the company for future growth.
How to Increase Earning Per Share
Once you have some shares in a company, you will of course want to make as great a profit as possible from the investment. In general, there are not many things that you can do to increase share price - after all, share prices are determined largely by exchange and by market demand. There are ways that you can increase your earnings on each share that you have. Some of them are as follows:
Invest for the Long Term
If you buy shares only to sell them as soon as their price increases, you stand to lose money on long-term increases in price. Most investors suggest that you plan to keep your shares for a long time to let them accrue value.
Invest Wisely
If you choose shares haphazardly, you are unlikely to profit them. Never buy in a panic or in a rush. Instead, consider all your purchases carefully well in advance.
At Least Consider Compounding Your Investment
If you want to get wealthy from shares, you need to compound your investment. This means that when you get your dividends; reinvest them in more shares rather than spending. Over time, reinvesting has been proven to dramatically increase profits.
Invest Regularly
You will make a lot more money by regularly investing just $1000 than investing $10 000 once or twice in your life. The more you invest, the more you stand to profit.
How To Find the Right Stock Market To Do Trade With
If you are just starting to invest your money, one of the best investments you can make is quality expert advice. A full-service investment advisor can not only help you realize your investment goals, but they can also help you actually invest your money. A good investment professional can also help you avoid investment mistakes.
In general, you will want to select a market that has the stocks you want. If you want to invest in the tech sector, you will want to select a market that offers a good selection of these company stocks, for example. You will also want to select a market that offers you the size of companies you want.
- Which are the online sources for getting online stock quotes?
- What are the ways in which you can find whether a company is worth investing in?
- What are the factors that are capable of affecting your investment?
How to Find Share Price and What to Look In For a Company When Purchasing Shares
The first thing you will want to do in researching stocks is to look at stock prices and companies. You can easily find stock quotes in your newspaper or on the stock tickers available on the news and on online financial websites such as CNNMoney.com and Yahoo! Finance. The prices you see per share can tell you how many shares you can buy with your budget.It is not enough to just find a share to buy, however. You will also want to find out as about a company before you actually buy shares from the company. This is because when you buy shares in a company, you buy part ownership of the company. The company's reputation, business practices, and reliability can dramatically affect your investment portfolio and your profits. Luckily, there are a few ways that you can determine whether a company is worth investing in
Finding the Company
Find out about the company by reading news items about the company and by reading the company profile online. Also visit the company's web site to read about the company.
Consider the Company's Size
A larger company may be more stable, especially today, when larger companies tend to outsmart smaller companies easily. A large company such as IBM or Corel, for example, can buy computer start-ups. If you want to invest in the long term, a smaller amount of shares from larger companies may make sense. If you want a fast turn-around and faster profits and are willing to take some risk, a smaller company may be right for you.
Consider the Company's History
How long a company has been in business is a reflection of its overall stability. Consider that the majority of new businesses close within a year and consider that companies with a long history have withstood market depressions in the past also experience dealing with problems and so may overcome them in the future as well. A company with a history as a publicly owned company has also been satisfying investors long enough to stay in business. A company's history of profits, popularity, and market consistency is not a sure indicator of future success, but it is generally a good guide.
Consider the Company's Product or Service
A company that offers a good or unique product or service is likely to create demand which might result in decent profits. When considering a company's product or service, be sure to consider market position as well. Is the company a leader in the industry? In general, companies offering quality products that lead the market are promise great profits.
Consider the Company's Earnings
A company should enjoy consistent growth in terms of earnings. These earnings should not only offer you good dividends, but should also be enough to reinvest in the company for future growth.
How to Increase Earning Per Share
Once you have some shares in a company, you will of course want to make as great a profit as possible from the investment. In general, there are not many things that you can do to increase share price - after all, share prices are determined largely by exchange and by market demand. There are ways that you can increase your earnings on each share that you have. Some of them are as follows:
Invest for the Long Term
If you buy shares only to sell them as soon as their price increases, you stand to lose money on long-term increases in price. Most investors suggest that you plan to keep your shares for a long time to let them accrue value.
Invest Wisely
If you choose shares haphazardly, you are unlikely to profit them. Never buy in a panic or in a rush. Instead, consider all your purchases carefully well in advance.
At Least Consider Compounding Your Investment
If you want to get wealthy from shares, you need to compound your investment. This means that when you get your dividends; reinvest them in more shares rather than spending. Over time, reinvesting has been proven to dramatically increase profits.
Invest Regularly
You will make a lot more money by regularly investing just $1000 than investing $10 000 once or twice in your life. The more you invest, the more you stand to profit.
How To Find the Right Stock Market To Do Trade With
If you are just starting to invest your money, one of the best investments you can make is quality expert advice. A full-service investment advisor can not only help you realize your investment goals, but they can also help you actually invest your money. A good investment professional can also help you avoid investment mistakes.
In general, you will want to select a market that has the stocks you want. If you want to invest in the tech sector, you will want to select a market that offers a good selection of these company stocks, for example. You will also want to select a market that offers you the size of companies you want.
Monday, July 14, 2008
Is canada gtetting ready for the i60s?
One of the most efficient investment products for passive investors is the so-called index participation unit (IPU). IPUs are exchange-traded securities that represent a basket of stocks, which in turn replicates a specific underlying market index. IPUs trade on exchanges just like stocks, at a specific designated IPU-to-index ratio.
After some false starts in the United States, the first successful IPU saw its debut in March 1990. It was the Toronto Stock Exchange's Toronto Index Participation Shares (TIPS), based on the Toronto 35 Index. This early success was followed by another IPU, originally named HIPS and based on the TSE 100 Index. The products were subsequently renamed TIPS 35 and TIPS 100 respectively.
The TIPS structure has served as a prototype for subsequent IPUs, including SPDRs based on the Standard & Poor's 500 Composite, and WEBS based on individual Morgan Stanley Capital International indices.
Something NewA new Canadian IPU debuted in September 1999. Based on the S&P/TSE 60 Index, this new IPU--called iUnits S&P/TSE 60 Participation Units (or i60s)--trades on the Toronto Stock Exchange under the trading symbol XIU.
The S&P/TSE 60 share index, introduced Dec. 31, 1998, is a capitalization-weighted index comprised of 60 of Canada's largest companies, including the big five Canadian banks. The S&P/TSE 60 Index is scheduled to replace the Toronto 35 and TSE 100 indices over the next year or so.
In April 1999, the S&P/TSE Canadian Mid-cap and S&P Canadian Small-cap indices were introduced as well.
All of the TSE indices, including new and existing transitional ones, will be calculated and maintained by Standard & Poor's. Instead of a 100-company arbitrarily chosen and rounded index, the new S&P/TSE 60-share index is designed for institutional investors--since it contains stocks institutions actually want to invest in. The emphasis is on liquidity.1
A More Representative IndexAs a more representative index, it should foster more interest in derivatives trading.2 This is turn could mean improved liquidity for the Canadian index derivatives market.3 Furthermore, since the indices are managed by Standard & Poor's, it will mean the separation of the listing and indexing functions.
The i60s are almost identical to TIPS. It trades at approximately one-tenth the value of the S&P/TSE 60 Index. If, for example, the S&P/TSE 60 Index is quoted at 404.19, the IPU will trade at about $40.42.
Any tracking error (deviation of the IPU from one-tenth of the index), will reflect rounding effects due to index adjustments, accrued dividends, accrued management expenses and impending takeovers.
Like TIPS, the new IPU will collect dividends on the underlying companies as paid, but will pay quarterly dividends to unit-holders. The management expense ratio (MER) will be 17 basis points; thus there will be a small tracking error.
TIPS, in contrast, have covered their expenses through security lending and the dividend float--operating with virtually no expenses and maintaining a near perfect tracking record as a result. Nevertheless, 17 basis points is a competitive MER.
The new product will be RRSP-eligible. If the IPU is not approved by U.S. regulators for ownership by U.S. residents, Barclays intends to produce a U.S. version and list it on the American Stock Exchange.
What Happens Next?What will happen to the existing TIPS 35 and TIPS 100? There are three possibilities. First, the existing TIPS could be merged into the new S&P/TSE 60 Index. Since TIPS have historically had virtually no tracking error, and assuming that the new IPU is maintained in the same manner (except for the MER), such a merger could be performed in a perfectly seamless manner. Second, the Toronto Stock Exchange may choose to list and quote the Toronto 35 and TSE 100 indices for the indefinite future and allow the two TIPS products to continue to trade. Third, the TSE may choose to de-list the two TIPS products, as per the trust agreement, by selecting a specific date at which all TIPs are closed in a manner similar to the expiration of a cash-settled futures contract. Given the near zero tracking error of the product, this approach should work in an equitable manner.
Although i60s are almost identical to TIPS, there is an interesting difference. TIPS 35 and TIPS 100 are both based on passively-managed indices--i.e. inclusion in the index is subject to a set of specific inclusionary ranking rules that are not subject to interpretation. On the other hand, the S&P/TSE 60 is an actively-managed index. An S&P selection committee manages the inclusion of companies in the index using fundamental valuation criteria. The key criteria are size (assets and market capitalization), liquidity and sector leadership.
Only time will tell whether the active approach to index management will prevent Bre-X and YBM Magnex-type scandals passing through the analytic screen and making it into the index.
Endnotes1. Since there will be a single large cap index instead of both the Toronto 35 and TSE 100, liquidity will be consolidated.
2. The Montreal Exchange, to which all Canadian derivative trading will be transferred by Nov. 1999, unveiled its S&P/TSE 60 share index derivatives products in early September.
3. A number of index derivatives have been introduced and subsequently de-listed in Canada over the past 15 years. Canada's index derivative trading volume and open interest in both absolute and relative terms has been much smaller than expected, given the size of Canada's equity market.
Buying shares for the first time?
Got your first paycheck and can't wait to buy your first lot of shares?
Hold on!
Before you start investing in the stock market, you have to get certain basics in place.
Follow this checklist to ensure you are on track.
1. Get a broker
People like you and me cannot just go to a stock exchange and buy and sell shares.
Only the members of the stock exchange can. These members are called brokers and they buy and sell shares on our behalf.
So, if you want to start investing in shares, you can do it only through a broker.
Every stockbroker has to be registered with the Securities and Exchange Board of India, which is the stock market regulator.
You can either choose a broker (who is directly registered with SEBI) or a sub-broker (people licensed by brokers to work under them).
The Bombay Stock Exchange directory or the National Stock Exchange Web site will give you a list of brokers affiliated to them. Most of them entertain retail clients.
If you want an online broker, you can start by looking at the Web sites of some well-known online players: Sharekhan, Kotak Securities, ICICI Direct, 5paise and India Bulls.
2. Get a demat account
Gone are the days when shares were held as physical certificates.
Today, they are held in an electronic form in demat accounts.
Demat refers to a dematerialised account.
Let's say your portfolio of shares looks like this: 40 shares of Infosys [Get Quote], 25 of Wipro [Get Quote], 45 of HLL [Get Quote] and 100 of ACC.
They will show in your demat account. You don't have to possess any physical certificates showing you own these shares. They are all held electronically in your account.
Periodically, you will get a demat statement telling you what shares you have in your demat account.
How to get a demat account
To get a demat account, you will have to approach a Depository Participant.
A depository is a place where an investor's stocks are held in electronic form.
There are only two depositories in India -- the National Securities Depository Ltd and the Central Depository Services Ltd.
The depository has agents who are called Depository Participants. In India, there are over a hundred DPs.
Think of it like a bank. The head office, where all the technology rests and the details of all the accounts are held, is like the depository. The DPs are like the branches of banks that cater to individuals.
A broker, however, is not similar to a DP. A broker is a member of the stock exchange and he buys and sells shares for his clients and for himself. A DP, on the other hand, gives you an account where you can hold those shares.
To get a list of the registered DPs, visit the NSDL and CDSL Web sites.
3. Get a PAN
The taxman demands that you get yourself a Permanent Account Number.
This is a unique 10-digit alphanumeric number (AABPS1205E, for example) that identifies and tracks an individual in the taxman's database.
Almost every money transaction demands the use of a PAN. These include:
~ When you get a job
~ When you file an income tax return
~ When you open a bank account
~ When you deposit cash of Rs 50,000 or more in a bank
~ When you open a bank fixed deposit of Rs 50,000 or more
~ When you open a post office deposit of Rs 50,000 or more
~ When you buy/ sell shares and mutual funds
~ When you buy/ sell property
~ When you buy a vehicle
~ When you take a loan: home/ personal/ other
~ When you install a telephone (or buy a cell phone)
~ When you pay in cash to hotels and restaurants against bills for an amount exceeding Rs 25,000 at a time
~ You also need to mention it in every transaction you have with the tax officials.
If you are going through a tax consultant, you need not worry. He will supply you with Form 49A (the application form for the PAN number) and give you a list of the documents he needs.
However, if you believe in doing things on your own, the process is really not that tedious.
You could visit the official Web sites of the Income Tax department or UTI Investor Services Ltd or National Securities Depository Limited.
Download Form 49A from any of these sites and follow the instructions.
You should get your PAN in the form of a laminated card within a month.
4. Check if you need a UIN
This depends on how much you plan to invest.
The Unique Identification Number is the identification an investor needs to buy and sell shares or mutual fund units.
It is part of the Security and Exchange Board of India's attempt to create a database of all Market Participants and Investors, called MAPIN.
Who needs a UIN?
An investor who is involved in a single transaction of Rs 1,00,000 or more will have to quote his/ her UIN.
If you plan to be a prominent stock market player or a mutual fund investor and expect to deal with such huge amounts in the near future, you should get a UIN.
SEBI has appointed the National Securities Depositories Ltd that, in turn, has appointed Points Of Service agents. The NSDL Web site has a list of the POS agents.
Visit the office of a POS agent. Make sure you take an appointment before you go. As part of the application process, your fingerprints will be scanned and a photograph taken.
All you have to do is fill and submit an application form (there are separate forms for corporates and individuals). You can also download the form for an individual at the NSDL Web site.
Incidentally, the UIN is totally different from a PAN. The Permanent Account Number is an identification number for filing your income tax returns.
Now that you have all this in place, you're ready for the stock market. All the best!
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