Growth And Value What S The Difference

While the majority of American investors understand the importance of diversifying across growth and value investments, few are able to achieve a passing grade on a test of their knowledge of the differences between the two, according to a new American Century Investments survey.

Test your knowledge with the Growth & Value IQ quiz below:

1. Which best describes a growth stock?

a) Stock that offers guaranteed rate of growth tied to consumer price index.

b) Stock in a company specializing in agriculture, lumber, landscaping, and other organic products.

c) A stock in a company demonstrating better than average profit and earnings gains.

d) All of the above.

2. Which best describes a value stock?

a) Stock in fast-growing company specializing in high-value, low-cost products, like a discount retailer.

b) Stock in a company specializing in valuable goods, like precious metals and jewelry.

c) Stock that has a low price-to-book ratio.

d) All of the above.

3. Which statement is true?

a) Value stocks outperformed growth stocks between 1927 and 2001.

b) Smaller company value stocks outperformed larger company value stocks between 1927 and 2001.

c) Maintaining a portfolio with a combination of growth and value stocks generally is considered a prudent investment approach.

d) All of the above.

4. During periods of strong economic expansion, which fund generally performs better?

a) Growth.

b) Value.

c) Neither.

d) Both.

5. Generally speaking, value funds outpaced growth funds in 2000 and 2001.

a) True.

b) False.

6. Generally speaking, growth funds outpaced value funds during the 1990s.

a) True.

b) False.

7. Which type of fund is more likely to invest in stocks paying a significant dividend?

a) Growth.

b) Value.

c) Neither.

d) Both.

8. Higher price-to-earnings ratios normally would be associated with stocks in which type of mutual fund?

a) Growth.

b) Value.

c) Neither.

d) Both.

9. What kind of stock is described in this example: “Established baked-goods company with strong balance sheet and good cash flow experiencing temporary drop in reaction to changes in senior management.”

a) Growth.

b) Value.

c) Neither.

10. What kind of stock is described in this example: “Software company, enjoying steady sales increases, is in the process of rolling out an eagerly anticipated update to a popular software application.”

a) Growth.

b) Value.



Key: 1(c); 2(c); 3(d); 4(a); 5(a); 6(a); 7(b); 8(a); 9(b); 10(a). – NU

By: Samory Borry On 3:15 PM

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Stock Market Window Dressing The Art Of Looking Smart

As investors, and we all are investors these days, it is important that we understand the idiosyncrasies of the Stock Market pricing data we use to help us in our decision making efforts. On Wall Street, investing can be a minefield for those who don’t take the time to appreciate why securities prices are at the levels that appear on quarterly account statements. At least four times per year, security prices are more a function of institutional marketing practices than they are a reflection of the economic forces that we would like to think are their primary determining factors. Not even close… Around the end of every calendar quarter, we hear the financial media matter-of-factly report that Institutional Window Dressing Activities” are in full swing. But that is as far, and as deep, as it ever goes. What are they talking about, and just what does it mean to you as an investor?

There are at least three forms of Window Dressing, none of which should make you particularly happy and all of which should make you question the integrity of organizations that either authorize, implement, or condone their use. The better-known variety involves the culling from portfolios of stocks with significant losses and replacing them with shares of companies whose shares have been the most popular during recent months. Not only does this practice make the managers look smarter on reports sent to major clients, it also makes Mutual Fund performance numbers appear significantly more attractive to prospective “fund switchers”. On the sell side of the ledger, prices of the weakest performing stocks are pushed down even further. Obviously, all fund managements will take part in the ritual if they choose to survive. This form of window dressing is, by most definitions, neither investing nor speculating. But no one seems to care about the ethics, the legality, or the fact that this “Buy High, Sell Low” picture is being painted with your Mutual Fund palette.

A more subtle form of Window Dressing takes place throughout the calendar quarter, but is “unwound” before the portfolio’s Quarterly Reports reach the glossies. In this less prevalent (but even more fraudulent) variety, the managers invest in securities that are clearly out of sync with the fund’s published investment policy during a period when their particular specialty has fallen from grace with the gurus. For example, adding commodity ETFs, or popular emerging country issues to a Large Cap Value Fund, etc. Profits are taken before the Quarter Ends so that the fund’s holdings report remains uncompromised, but with enhanced quarterly results. A third form of Window Dressing is referred to as “survivorship”, but it impacts Mutual Fund investors alone while the others undermine the information used by (and the market performance of) individual security investors. You may want to research it.

I cannot understand why the media reports so superficially on these “business as usual” practices. Perhaps ninety percent of the price movement in the equity markets is the result of institutional trading, and institutional money managers seem to be more concerned with politics and marketing than they are with investing. They are trying to impress their major clients with their brilliance by reporting ownership of all the hot tickets and none of the major losers. At the same time, they are manipulating the performance statistics contained in their promotional materials. They have made “Buy High, Sell Low” the accepted investment strategy of the Mutual Fund industry. Meanwhile, individual security investors receive inaccurate signals and incur collateral losses by moving in the wrong direction.

From an analytical point of view, this quarterly market value reality (artificially created demand for some stocks and unwarranted weakness in others) throws almost any individual security or market sector statistic totally out of wack with the underlying company fundamentals. But it gets even more fuzzy, and not in the lovable sense. Just for the fun of it, think about the “demand pull” impact of an ever-growing list of ETFs. I don’t think that I’m alone in thinking that the real meaning of security prices has less and less to do with corporate economics than it does with the morning betting line on ETF ponies… the dot-coms of the new millennium. [Do you remember the "Circle of Gold" from the seventies? Isn't GLD, or IAU, about the same thing?]

As if all of these institutional forces weren’t enough, you need also consider the impact of tax code motivated transactions during the always-entertaining final quarter of the year. One would never suspect (after watching millions of CPA directed taxpayers gleefully lose billions of dollars) that the purpose of investing is to make money! The net impact of these (euphemistically labeled) “year end tax saving strategies” is pretty much the same as that of the Type One Window Dressing described above. But here’s an off-quarter buying opportunity that you really shouldn’t pass up. Simply put, get out there and buy the November 52-week lows, wait for the periodic and mysterious “January Effect” to be reported by the media with eyes wide shut amazement, and pocket some easy profits.

There just may not be a method to actually decipher the true value of a share of common stock. Is market price a function of company fundamentals, artificial demand for “derivative” securities, or various forms of Institutional Window Dressing? But this is a condition that can be used to great financial advantage. With security prices less closely related to those old fashioned fundamental issues such as dividends, projected profits, and unfunded pension liabilities and perhaps more closely related to artificial demand factors, the only operational alternative appears to be trading! Buy the downtrodden (but still fundamentally investment grade) issues and take your profits on those that have risen to inappropriately high levels based on basic measures of quality… and try to get it done before the big players do. To over simplify, a recipe for success would involve shopping for investment grade stocks at bargain prices, allowing them to simmer until a reasonable, pre-defined, profit target is reached, and seasoning the portfolio brew with the discipline to actually implement the profit taking plan.

Yeah, I do miss the days when there were just stocks and bonds, but maybe I’m just a bit too old fashioned. Interesting place Wall Street…

By: Samory Borry On 3:13 PM

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Profitable Trading System

After you have found a profitable trading system that you already back-tested, how can you be sure that this system will produce the same gains in future?

Nobody can predict the future, your system can easily make losses in next years or can be no tradable.

There are some tests you must do before accepting a trading system, these tests swill show the robustness of your system and when passing these tests, it will be more likely to show gain in future.

Test 1 : Make sure that you put liquidity rule, that your entry and exit prices are realizable.

Test 2: Examine again your trading systems and your rules (This is very important).

I made dozen of trading systems that showed great results but after more examination, it showed that i cannot follow them in real life.

Check if there is one stock that made very big gain, the system will maybe become no profitable without this stock.

Test 3: Change twice or 3 times the date of begin for the simulation, if it still show good results then it has passed the test 3.

Test 4: Change values of some parameters or variables you have in your trading system rules, you must change one value and then back-test, change another and then back-test…

If the results are not affected very badly then it passed the test 4.

Test 5: Try to restrict the system from buying 20% or more of stocks you previously bought when doing the back-test. Then re-run the back-test. To pass this test, system must show pretty the same results as before.

Test 6: Equity chart must have a good look, check some statistic values like sharpe ratio, sortino ratio, standard deviation, maximum drawdown, average day for gains recovery…

It depends on the risk you are willing to take but choose only systems that have : higher sharpe ratio, higher sortino ratio, lower standard deviation, lower maximum drawdown…

Exclude systems that have very big max drawdown, standard deviation and average day for gains recovery.

The must important factor i think is average day for gains recovery.

Its the average number of day that you must wait until your equity value will goes back to the same level before the drawdown happen.

Big values will let you wait for long times before recovering gains and for sure many traders will abandon their trading system, and that’s the worse thing that can happen to a trader because just after that, the system will show excellent results. (That’s always happen)

Theses tests are very restrictive and you will reject maybe all your trading systems, but when trading you will put your money, real money, so i think you must be very selective to make all chance in your side.

By: Samory Borry On 3:11 PM

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How the Stock Market Saved My Life

Most people know the stock market to be a rough and challenging world but in reality it is a savior. For many people the only experience they have with the stock market is staying away from it but I guarantee you that you can make money as long as you put in a little bit of effort. What most people don't understand about the stock market is that it isn't the most experienced that are making the most money, it is the people who take the time to do the proper research.

Why the stock market saved my life

A while back I went making a lot of money every month to making nothing because of the changes in the internet and my local businesses but the stock market was the only thing that was still there I could adjust quickly enough to make money that very day. What I learned from the stock market is to trade when others are trading and take a firm position.

What did this mean for me

What this meant was while so many people where looking at the casino business from afar I wanted to get up close and dive right into my favorite stocks. I chose to buy 2 different casino stocks that own more than 6 hotels and casinos in Las Vegas because I knew that the Las Vegas tourists would be flocking the city very soon.

What happened next

The next thing I knew I was sitting on more than $5,000 of pure profit from my 2 stocks and that was only within 4 weeks of buying them. The thing about this money was that I traded the stocks over and over again until I got as much money as I could out and now I am just holding the stocks as a long term gain.

The stock market is more than just a way to make money, it is my savior because I know there is nothing else out there that can make me that much money that fast without doing anything. Do you know of anything that will make you $5,000 in less than 1 month without doing anything? Probably not and that is why the stock market should be there in case you need it too.

By: Samory Borry On 11:41 AM

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Real Forex Traders Learn To Like Losses

As a forex trader you have to learn how to take losses. Period. Don’t be a crybaby. Learn how to take losses.

Learning how to take losses is one of the most important lessons you must learn if you want to survive as a trader. Nobody is 100% right all the time.

Losses are inevitable. Even Michael Jordan and Tiger Woods lose sometimes and they’re considered the best in their field.

There will be trading streaks where you’ll have a number of successful consecutive trades, but that will eventually come to an end you will take a loss.

As that point it’s very important not to lose your head, you must remain in control of yourself. Don’t have a cow man.

Take a break. Calm down and relax. Take a chill pill dude.

Until you’ve regained a clear mind and an ability to think logically again, stay out of the market.

Don’t whine about your loss and never carry a prejudice against a loss.

The key to manage losses is to cut them quickly before a small loss becomes a large one.

I repeat. The key to manage losses is to cut them quickly before a small loss becomes a large one.

Never ever think that you will never lose. That’s just ludicrous. Losses are just like profits, it’s all part of the trader’s universe.

Losses are unavoidable. Get over the loss and move on to the next trade.

By: Samory Borry On 12:33 AM

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Forex Currency Trading

You can develop into a better and more profitable trader by applying some of the more imperative forex currency trading rules consistently with an appropriate amount of discipline. There are few principles that can help to perk up your chances of success if they are understood, practiced, and implemented in your trading on a regular basis and these rules have been learned in the trenches, mostly through testing and scrutinizing the common mistakes nearly every trader makes when starting out in the forex currency trading business. The first step is to set up and apply specific goals and objectives.

The majority of forex traders who often find themselves on the losing end of a trade make the same common and recurring mistakes. Most forex traders don’t have a clear direction, never take the time to develop a sound business plan and lack a formal written strategy for putting a well thought out plan in place. In forex currency trading, the primary goal is clearly to make money, but it’s important to have goals that are not strictly money related as well. Your personal objectives and ambitions should be very specific and measurable to you, but they should include the characteristics that are needed for the trading.

Having a clear-cut idea of what you want to accomplish in your trading and the precise time frame you want to achieve it, make your efforts more focused. In order to establish a track record of winning trades, you need to develop discipline and a personal forex currency trading system that makes sense for you. The spread generally referred to as the bid/ask spread is what brokers charge instead commission fees. Forex brokers are typically linked with large banks due to the large amount of capital that is required to operate in the forex market. Leverage is a ratio of total capital available to actual capital which is the amount of money a broker will lend you for trading. Finally you should select a trading account that fits your budget.

Basic Forex trading strategy begins with fundamental and technical analysis. Fundamental analysis is mainly used to anticipate and better understand long-term trends in the currency market. Technical analysis is widely used to examine the forex because it identifies and measures sustained trends. Successful traders use a combination to make more accurate predictions. Once you have the knowledge of how the forex currency trading works open a demo account and paper trade to practice until you have what it takes to make a consistent profit. It’s important to take the time to build, test and implement a sound trading plan before you put capital at risk.

By: Samory Borry On 12:30 AM

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Currency Rates You Have To Know The Trends If You Expect To Earn On Forex

Currency rates and the differential between countries and over time is the meat of the foreign exchange game. They are constantly changing and the better your ability to predict these changes the more money you are going to make over time in this market. So naturally a few tips in this area are worth their weight in gold.

So what are some of the things that should be learned when attempting to understand the changes in currency rates? What affects currency and the perception of their value up against the currency of any number of other countries? I make no guarantees in this article but hope to point you in a few worthwhile directions so that you can understand and therefore profit in this goldmine of a market.

Before I start I want to mention the potential for profit if you understand and are willing to put some time into mastering the factors involved in the changing currency rates. Perhaps the most important thing to understand is that thought this market has been around for a long time relatively few people are taking advantage of it. The market is not saturated and therefore there is a lot more room to compete and be at the top of the game. Why is this? For one thing it just has never been as flashy as the stock market. Part of this is how things have played out in the media and in our economy. Industry is for some reason valued more than the overall economy and the public’s perception of striking it rich is stronger in the stock market. It is true that the potential to strike instant riches is greater in the stock market with new companies forming and old ones failing far faster than countries are forming and failing. However the potential for constant and predictable gain is more in forex.

Why? Well for several reasons. One the currency rates, or in other words the value of a currency is dependent on something that is far easier to evaluate and predict. The chief operator in this game is the overall economy of that country, which is far more stable and predictable than the ability of a company to earn a profit in the cutthroat world of business. You can judge with far more accuracy how a current event or change in leadership is going to affect an economy globally than you can how a company will perform.

The main reason for this is the information differential that there is more information available on current events and the lives and values of governmental leaders than there are on private companies. This is due to the concentration of the media in this area and the fact that it is more important for a company to be private in order to not give an advantage to their competition.

So in order to be good in the currency rates game you have to read your newspaper and have a general idea of the public and global perception of an event and a government and how these things will affect the economy of a country. Something that we do almost every day anyway.

By: Samory Borry On 12:25 AM

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Free Stock Picks: A Proper Perspective

Remember the good old days of investing? Days when you would call your stockbroker, ask his advice and then invest accordingly? Those days are long gone thanks to the Internet and self-directed investing apps. Today a good many investors rely more on free stock picks than sound advice from investment professionals.

Do not misunderstand; free stock picks have their place - just like advice from paid professionals. However, any investor able to think for himself uses every investment resource with proper caution. No single source of advice or information is foolproof, nor should it be trusted without question. That includes free stock picks.

Why They're Good

The good thing about free picks, and particularly U.S. stock picks, is the fact that there are so many experienced people out there doing the legwork for you. That means the investors writing the daily stock articles will be right from time to time. They also have some market insight that the casual investor lacks, providing them a better glimpse into the future of a given stock.

Free picks are useful inasmuch as they give you more information to work with. A good strategy is to take picks from several different analysts and compare them against one another. If all of them generally agree on a specific stock, that's something to seriously consider when making investment decisions. If they are all over the board regarding another, it tells you to stay away.

Why They're Not Good

The problem with free stock picks it that the analysts offering them have no real incentive to make sure they are as accurate as possible. They can advise according to any criteria they set for the day; criteria that can include, among other things, whether or not their favorite team won the game last night. Casual investors rarely track the records of those offering U.S. stock picks for free, so they do not really know how well an analyst performs over the long haul.

That said, the number one rule of investing in stocks is to pay attention to long-term performance. Making good money off the stock market is a pursuit that is generally not achieved overnight. So when investors don't know the historic performance of a stock analyst, they also don't know if the analyst picks are worth anything.

What It Means to You

Self-directed investing is a great opportunity to take advantage of what the stock market has to offer. By all means, take into consideration the U.S. stock picks offered by analysts for free. Nevertheless, do your own homework on any stock you think you are interested in purchasing.

At the end of the day, self-directed investing comes down to the casual investor learning and understanding for himself. Free stock picks are just one tool in that process. As long as they are viewed with the proper perspective, such picks can be helpful. But if an investor bases his entire strategy on what analysts are putting out for free, he is just asking to lose his shirt.

By: Samory Borry On 5:42 AM

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Penny Stocks Explained

A "penny stock" isn't a literal term, but compared to the prices of higher stocks, it may seem like a bargain. Common stocks that cost less than $5 are usually called penny stocks, and while they have a lower individual price, investing in small stocks can be just as risky as any of the higher priced variety, if not more so in some cases. There are some misconceptions about penny stocks that should be cleared up:

·Penny stocks are not a "get rich quick" stock.

·Penny shares are not a guaranteed profit.

·Not every tiny stock is a bargain.

With that in mind, let's look at how to invest in penny stocks for the absolute beginner.

Getting Started

The first step is to do your research. There are a lot of stories about penny shares helping investors to get rich overnight, but you need to figure out what makes the most sense to you. There are brokers that actually specialize in handling penny stocks. These brokers may be able to point you toward some stocks to watch, but do your own research before you make an investment through the brokerage. Learn how to read the company financial statement.

Also, think about investing in a small stock that is listed on the NASDAQ. If you have absolutely no experience in investing in the stock exchange, then these are the stocks that are going to have the most "security," although it is still not a sure thing. Stocks that have been de-listed are usually indicative of a company that is going through some financial turmoil, and what you want is something that is a little more stable, whether you're investing in tiny stocks or larger offerings.

Keep Researching

After you've made your investment, stay on the lookout for other good tiny stocks and how they're performing on the market. Because penny stocks should account for 1/10th of your investment portfolio or less, these aren't going to be your prime performers. Instead, they're a way to diversify your investment strategy and get in on some unique and affordable investment opportunities. The more research that you do on the subject, the easier it'll be to find the best penny shares for your investment strategy.

Awesome penny shares aren't usually obvious to the new investor. Your broker can most likely point you toward some options that are worth considering if you want to get the best bang for your buck.

By: Samory Borry On 5:33 AM

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Stock Market Investing Is Not Trading

There is a huge difference between investing and trading in the stock market. Although both involve owning stock, the effect on for market participants is very different. As an educator for investors, I get annoyed at all the people who talk about investing and then discuss or teach only short-term trading.

First, the time involved to trade requires much more time than investing. Short-term trading is a full-time job. Day trading requires you to be at your computer screen during market hours. It is very difficult to hold another job that pays the bills while you do short-term trading. Even if you are swing trading, it is still very time intensive. However, with my investing I monitor my holdings for about 20 minutes per week.

Next, trading is extremely time-consuming and difficult to learn in the first place -- it is the hardest thing I have ever done in my life. Many successful day and swing traders took 3-5 years of at least full-time work and study to learn. I have heard of people doing it faster than that, but that is the exception and not the rule. Whereas you can learn to be an advanced investor in a few weeks in my courses. In 30 minutes you can learn a technique that offers 5-50% a few times a year when a special situation presents itself.

Next, the money involved to learn. Trading is a very high-risk, low-odds-of-success activity. The vast majority of traders lose some or all of the money in their accounts trying to get good at it. (If you don't believe me, look it up on Google. There is plenty of research supporting this claim, including the Johnson report, the Hieronymous study, and the Odean study.) I have listened to several successful traders blow out several large accounts before finally getting it right.

On the other hand, owning stocks for the long-term has a built-in likelihood of making a profit -- stock prices typically go up over time. There are ways to lose money investing, and there are ways to make more than buy and hold (I have spent the past 25 years researching what those strategies are), but even if you do not know them, the odds are with you at least for the long-term.

The essential problem with short-term trading is that you must first determine the direction of short-term stock prices, which can be very volatile over brief periods of time, then make a big enough profit to cover commissions and all the other times when you guess wrong. Believe me, it is not easy to do.

In the end, most Americans need to learn how to invest, not to trade. Make sure you go to the right place to learn better investing strategies.

By: Samory Borry On 5:30 AM

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Basic Trading Rules for Beginners

There are six basic rules that set the foundation for successful investing and trading in the stock market. Use the simulator and be reluctant to trade live in the market, don't trade too often, stay with a trading style that works for you, develop your own trading style, listen to your inner voice, and trust yourself.

1. Endeavor to have at least a 75% paper trade success rate on a simulator before you start trading live in the market. Most traders make good profits then turn right around and lose the profits because they are too eager to trade. Be reluctant to trade. Trade only when you are completely confident and comfortable. Do not trade because you have an electric bill to pay. Pressure of that sort will make you go with an emotional decision rather than a logical one. If you take a big loss, well you MUST go back to paper trading on the simulator. Don't cheat yourself and think it is okay to just ignore the problem. Something went wrong and you need to redirect your discipline and skills.

2. Most Traders trade too often. Traders are so obsessed with making money that they throw their hard earned profits away on weak trades or weak market days. The less trading you do, the more you will base your selections on only the best. This will create higher returns since you will have fewer losses.

3. Once you have a trading style and strategy that works for you, don't change it until it stops working. Don't fix what isn't broken and don't chase fads. Those traders who try to take short cuts to wealth are the ones that lose in the end. Wealth takes time, and it takes effort, and CONTROL. Most people who win the lottery lose all of it in less than a year because they haven't learned how to control that kind of money. Ask yourself if you are ready emotionally for larger profits. Do the financial self-worth test once in a while. Making money isn't the problem, it's learning how to manage it.

4. Do not compare yourself to other traders. You are an individual and you can develop your own unique trading style that is yours alone, and focus on trading successfully every time.

5. Pay attention to small details, maintain focus, and ignore the constant noise of the market and other traders. If you spend too much time listening to the media, news, and other traders, you will lose your ability to hear your inner voice. The Traders who say, "I knew I should have done this or that, but I didn't" have lost the ability to listen to their inner voice.

6. The most important lesson is to trust yourself and your ability to do this job. People sabotage their own dreams and goals all the time and never realize it.

By: Samory Borry On 7:33 AM

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What To Save Money For?

I have heard so many times the phrase "I don't have to save money, I live for the moment". Well, this is the wrong idea to live by and I will explain why.

One of the key habits of the successful people and basically all wealthy people, is that they save the money they get. They do not let the money they acquire, in one way or another, to slip from their hands while buying things that they do not need. Don't get me wrong, you may say "Well, what about the expensive cars and eight bedroom homes they have? Is that how they save money?", but you are missing a key point here and it is - if they earn 100$, they would spend only 50%. So in my opinion for one million you have, you can spend some part of it, but not all of it.

Unfortunately many people don't do it at all. They will get their paycheck and spend it right away. They do not control their budget and they wonder where it all go later on. Money is money - if you cannot manage your financials, don't expect something to change in the future. Your salary may increase, but the costs will increase either and you will accomplish nothing.

So let's go straight to the topic - What To Save Money For? You can save them for, here are the basics:

• Investing
• Starting a business
• Something unusual happens and you need cash
• Not to fall in debt

The first two things can change drastically your life, but if you do not have the required amount when the opportunity suddenly appears... well you got the point.

If you find yourself ready to learn this useful habit you may ask right now what to do? I will suggest one simple basic thing which probably you heard before. Save 20% or more each month. Put that amount in a bank account or an investment plan and do it constantly. You may not become a millionaire, but you will learn one must have habit. And one good habit always leads to another. It is very important to save that money immediately after you got that paycheck. Force yourself to do it, you may not realize it right now, but saving is so important to financial independence.

Personally from all of the people I know, the ones who do not save are the ones in a bad financial positions. The others implemented this habit in their lives and it made a difference to them. Try for yourself if you are not doing it already. Don't ask yourself the best thing to do the next time, do not complain about your situation, because you are the only person who can change it. So why don't you start right away?

By: Samory Borry On 7:29 AM

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Toying Around With Investment Ideas

So you've decided to secure your future by investing your hard-earned money in something you're not exactly sure of yet. Investment is a wise move if you want to guarantee the financial success of your future. It may be a little challenging at present, since majority of your money will go some place where you have no access to for a long time.

Investment involves risks and what makes it different from gambling or speculation is that investment involves a long-term outlook. Gambling is just sort term. Sure, you could earn hundreds of thousands in a matter of minutes but if you lose, you'll easily lose the same amount, if not bigger, faster. With investment, you have many avenues to explore and choosing the right one is such big of a risk that it needs weeks or even months of studying and preparation.

One concept you need to familiarize yourself with is implied volatility. Basically, implied volatility is the assumption of a stock's future unpredictability based on the price of its stock options. Volatility means instability and the higher the stock prices, the more unstable it becomes. As stock prices decrease, the less unstable it will be. Implied volatility is an indicator of what traders expect in stock prices. Low volatility translates to stock prices remaining stable and unchanged in the next few days and vice versa.

While implied volatility is one of the criteria to consider in choosing investment ideas, it shouldn't be the only factor to think about. Financial experts constantly predict money-making investment ideas and if you are planning to invest thousands of dollars, you should definitely try to catch up before you end up wasting your life savings on stocks that will be worthless in just a year or two. For instance, top experts expect this year to be a good idea to invest in high quality companies, meaning corporations backed with strong finances and visible growth in earnings.

Investing in China as an emerging market seems to be a wise move too and if you want to invest in gold, don't let anyone stop you. Merrill Lynch predicts that gold will rise around 20% higher before the year ends, being priced at around $2400/ounce by the end of next year. Also explore other precious metals such as silver and platinum as these are also expected to increase in value in the upcoming months. Real estate, on the other hand, is nothing to be worried about anymore. It seems that the industry has become more stable and mortgage rates are said to be at historic lows. Consumers are starting to invest in real estate more and houses no longer takes months or years to get sold. Finally, technology is always an area where investment is most likely to produce positive results.

If you are still unsure, you can always test financial strategies prior to executing your investment plans. It's your money and you've worked years to save that amount for yourself. Doing proper research is the least you can do to really secure your future and make sure that those dollars will be invested in stable industries or markets.

By: Samory Borry On 7:21 AM

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Financial Statements: Demystifying the Basics

Some things in life appear more difficult than they actually are. Analyzing a company's financial performance is simply one of them. Many a time we come across people who completely depend on others for their investment decisions, which can have far serious implications. Though it seems like an uphill task to many, company analysis is actually no rocket science. A little understanding of the fundamentals and an elementary logic is all it takes to identify the potential of the companies.

Firstly, you should be aware of the business of the company you have invested your money in or intend to invest. Its history, vision, products and services and its business model will give you necessary details regarding the functioning of the company. A thorough study of its introduction in the annual report, company's website and of course the internet will easily furnish you loads of information. So, if you are unable to grasp the way the company operates or its growth prospects, it is better to stay away from the stock. Herd mentality is definitely not advisable for a long-term investment.

Once you have a sound understanding of the company's operations and revenue earning methodology, turn to its financial statements. Again, this can be easily accessed from the company's website. There are three financial statements which are the Comprehensive Income statement, Balance Sheet and Cash Flow.

The Income Statement shows the revenue earned for the period, the expenses incurred for earning the revenue and the resultant after meeting statutory obligations is known as the net profit/ retained earnings or loss. It is on this amount that the company declares a dividend to the shareholders. The comparative analysis with past period statement helps you to analyze how the company is performing. The most important areas of focus in the statement are the ratio between net profit and sales (also known as the net margin) as well the gross profit and sales (also known as the gross profit margin). The higher they are, the better it is. Furthermore, other areas that deserve a check are the direct cost components, which imply the major costs driving the business. This will differ for each company, according to the industry it operates.

Then it's the Balance Sheet, which is a statement of the sources and application of funds as on the last day of the period. As a rule of thumb, the sources of funds must be equal to the application. You can ascertain the financial position of the company by examining various ratios like the Debt-Equity ratio and Debt-Asset ratio. A high proportion of debt implies that the company is financing its growth by borrowing aggressively. This is only justified if the revenue of the company also shows a significant growth. More debt also implies increased interest expense, thus the quantum of growth in revenue should be more than that of interest, or else it will lessen the earnings. Also, this ratio depends on the sector which the company belongs to. Manufacturing companies usually are more leveraged than service oriented companies. Meanwhile, the ratio between the current assets and current liabilities, ascertains the liquidity of the company.

The last one is the Cash Flow Statement. Showing the movement of cash for the period, this statement is divided into three sections which are cash from operating activities, cash from investing activities and cash from financing activities. You can very easily comprehend the cash positioning of the company with respect to the three main activities. The strong company derives more cash flow from operations than from investment or financing activities. The operational cash is the direct indication of the organic growth of the company.

Lastly, it is imperative to compare the financials of the target company with other companies in the same industry. Only then will you have a lucid idea about the performance of the company. Whether the change in financials is due to industry related factors or specific to the company can be easily determined.

While, there are other parameters to judge the overall performance of the company, a strong hold on its financial performance is the first and major step in this direction. By unearthing the stories behind these numbers you can truly empower yourself to judge the prospects of your portfolio.

By: Samory Borry On 7:15 AM

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