Year: 2019

  • Gold In India Is High But Tracking Global Signals

    Gold In India Is High But Tracking Global Signals

    2 min read

    Gold In India Is High But Tracking Global Signals

    The gold in the Indian market continued its rise with an over 1% surge today, September 16.

    October gold futures values on the MCX were trading higher by Rs 491.00 or 1.31% at Rs. 38015.00 per 10gm. The silver also climbed in price by 2.4% or Rs. 1100 to Rs. 46,856 per kg. 

    The notable increases in domestic gold price is a consequence of dropping of the rupee. It is to 71.62 per US dollar today. India imports most of its gold demand, and decrease in the price of rupee caused gold to be so expensive in the Indian markets. 

    The additional value of gold comes from the unstable geopolitical situation in the Middle-East. 

    Gold was trading higher at 1.6% ($1,512) in Singapore and silver was trading higher at 3.2%  ($17.9938) per ounce. Earlier this month, gold prices hit a 6-year high of over $ 1550 per ounce in the global market. 

    Gold could go up in the next week because some traders are buying it feeling uncertainty because of the attack on Saudi Arabian oil facilities during the last weekend. It is the so-called “safe-haven” buying. Gold traders are also interested in Wednesday’s Fed interest rate and further monetary policy. 

    Anyway, the gold price is higher than ever and precious in India which is phenomena per se. So, it deserves some explanation.

    Why is gold so valuable in India?

    Gold is valuable as a store of value and as a raw material for jewelry and electronic industry. Did you know that a lot of Indian nationals like to hold gold more than money in the banks?

    That habit has its opposing side too. Indian banks have fewer funds to lend. That’s why the credits are more expensive and companies are not so enthusiastic to invest, therefore. And there is that tricky situation, a classical Catch 22.

    When there are not enough investments and economic activity, the value of deposits and savings will be low. In turn, the borrowing, which is supposed to fund new investments and economic activity will be low, thus they will stay low. Because of these conditions wages, GDP and employment will stagnate. And also, there is a great possibility for domestic currency to go lower and become weaker. It can be, at the same time, a great possibility to grow export. But gold is our subject now.

    India is the biggest gold importer in the world. But the Indian government set limitations to importing gold. That caused another problem. There is great consumer demand but less supply. Hence, the price of gold goes up.

    The weaker currency has many consequences. 

    The inflation could be higher and the capacity for repayment foreign debt could be lower.

    The rupee has proceeded to decrease due to different circumstances. Besides the gold demand, the reduced growth expectations have led to a fall in the equities markets. Foreign investors had to buy rupee to be able to invest in the market and now they are selling the rupee to cash out. This is extremely strong pressure on the rupee. It looks like the fundamental changes needed in the Indian economy.

    You would like to know Who are the most successful investors in India?

  • Investing With Just $100 Per Month

    Investing With Just $100 Per Month

    How to start Investing with just $100 per month
    You don’t believe it’s possible? Well, you should read this post.

    By Guy Avtalyon

    Ok, you have an extra $100 each month and you are enthusiastic about investing but you don’t how it works? Also, you are worried if $100 is enough? Investing with just $100 per month is possible, of course. 

    You don’t need thousands of dollars or euros or whatever to become an investor and get into investment. Traders-Paradise found several possibilities for investing with just $100 per month. 

    Reasonably, you will not make a ton of profit off a $100 investment, but the crucial thing is really getting started. $100 may not appear important, but you can make it expand into more.

    This is where it gets a bit more difficult.

    One of the hugest problems with investing a small sum is that brokerage fees can be expensive. For example, if you want to buy some stock that can cost you up to $20 with some brokerage and your investment easilly may become $80 worth. Yes, there is a simpler way and cheaper brokerage. 

    There is one way that will cost you less. Just use some investment app. Most of them will charge you a $1 per month fee. The great thing about investment apps is that you can easily pick the simple portfolios related to your goals, interests, and ideas about investing. 

    The app will do the rest.

    Honestly,  when it comes to investing, time is more significant than the sum. Let’s say you are in your 18s. With an interest rate of 7%, you could end with almost $50,000 after 20 years by investing with just $100 per month.

    It’s never too start investing, but why should you waste your time and miss the opportunity to get the wealth.

    Savings account

    The best place for you to start with $100 per month is to set it in a savings account. That will be more an emergency fund than investing with current interest rates. But it will provide you to get into more serious investments because you will build a safety net. You will not capture great returns but you will be safe even if you lose your current job. At least by putting $100 every month on your savings account you will have several months of breath if such an incident appears. 

    Hold it as the source to something bigger. Wise investing can turn your $100 into a great future and you have to begin around.

    The time frame will make an immense variance in how you should invest. So, suppose you want to invest in stocks.

    Stock investing with just $100 per month

     

     If you have $100 that you’re able to load every month, you should think to invest in individual stocks. I already mentioned that will cost you 20% of your investment and you may think it is too expensive. But think again. The misconception is that you need a lot of money to be able to invest in a stock. Investing with just $100 per month is quite good for the start.

    Let’s debunk the theories.

    For beginners, if you’re ready to do your homework and buy around amid brokers, you will find a great potential. For instance, you can find a broker with bare-bones $5 commission and without minimum deposit terms. What you have to think about is that low-cost brokers may charge you some additional costs, for example, inactivity fees or additional costs connected with buying stocks trading below $2 per share. 

    But, if you buy individual stocks you are entering the long run. Yes, it is possible to find a good stock for investing with just $100 if you have a long investment horizon. You will hold your stock for years. If you trade them you will pay 10% commission for every buying or selling, that’s true. If you don’t like to pay commissions every month you can make savings of $300 or $400 and buy stocks every 3 or 4 months, you don’t need to buy stocks every month. In this way, you can lessen your cumulative commission charges.

    Certificates Of Deposit or CD

    Of course, there is an alternative to investing in stocks. You can invest in CDs. This simple way. All you have to do is to loan your money to the bank and collect the interest on it. CDs range in time from 3 months to 10 years. The point is, the longer you invest, the higher interest you will catch.

    Moreover, the CD is penalty-free. That gives you the possibility to withdraw your money if you want and without penalty. But read everything you have to sign, some CDs have penalties. Some banks can charge you if you withdraw your money before the maturity of the contract. 

    Another solution for your investing with just $100 per month is peer-to-peer (P2P) loans.

    The cool thing with this type of investment is that you can decide not only how much you want to invest but also, how your investment will be used. You may choose one particular investment from the different loans, also, you can determine an interest rate and loan period. As an investor, you will get your money back according to repayment plans.

    Index funds are a good choice for investing with just $100 per month

    Some companies don’t have a minimum balance requirement for index funds. So you can invest $100 in a class of stocks. The primary index fund tracks the S&P 500, but you can find numerous other. Index funds are good because they give the diversification of your investment portfolio. Some stocks will rise in value, some will drop, but the final result is that you will profit.

    What do you want wit that $100? Do you want to improve your current financial situation, or maybe you want your capital to grow? You have to figure out that.

    If your finances are in good health, then there is no excuse to delay investing.

    Start building your wealth. Don’t worry if you have just $100. It is enough to start, it will turn into more! But if you don’t begin investing, you will never have that chance to earn. The day when you will think how smart you were when invested $100 is so close. So, simply start investing with just $100 per month.

  • How To Profit By Investing In Bad Companies

    How To Profit By Investing In Bad Companies

    2 min read

    Profit By Investing In Bad Companies

    You don’t believe it is possible. Profit by investing in bad companies sounds pretty stupid and naive. But it is possible.

    To be more precise, sometimes it is possible to make notable investment returns by buying the stocks with minimum chances. The key is to recognize the companies which will grow in the future.

    There is some math behind. The point is to make a difference between business and stocks.

    Let’s be more clear!

    For example, you have some money aside and want to invest in some cheap stocks. But you find two similar companies in the same industry, say gold. 

    Company ABC is a large one. Gold is currently at $100, its exploration and other costs are $60, that is a $40 profit. Not bad. 

    Company XYZ is a disastrous business. It’s exploration and other costs of $90, which is only $10 in profit at the current gold price of $100.

    Which one to choose?

    The logical answer would be ABC but the wrong one.

    Let’s assume the hypothetical situation.

    The price of gold suddenly rise in the market, and the current it is $300, for example. 

    Let’s see the numbers for those companies.

     

    Company ABC offers $240 in profit. 

    $300 gold price – $60 in expenses = $240 profit

    Company XYZ offers $210 in profit 

    $300 gold price – $90 in costs = $210

     

    But here is where the math has the greatest influence.

    Company ABC earns more money for any reason, its profit rose 600% from $40 to $240. But, compare it with company XYZ which grew its profit 2,100%. 

    Moreover, there is a phenomenon

    It is very reasonable to assume that company XYZ will experience a multiple expansion, meaning added increase. The possible final result: company XYZs stock price is raising exponentially more, much more than the stock price of company ABC.

    What to say? Company ABC is maybe a healthier business, but company XYZ is better as a market choice. 

    How is possible to profit by investing in bad companies?

    This is recognized as operating leverage. 

    Operating leverage describes a company’s level of fixed costs in comparison to its revenue. Companies with high operating leverage have large fixed expenses. They are obliged to cover them as first. If fixed expenses are exceeded, the revenue will fall. Such a situation may cause great difficulties for the company, from large cuts to lower profits, even bankruptcy.

    You can find companies with high operating leverage in almost all sectors and industries. Gold miners, airlines, crude oil companies, are some examples. Actually, you may find these companies where the business has enormous changes in revenue. You will notice enormous profitability fluctuations. That comes because fixed costs can’t always adapt as quickly as the market value.

    But you have to know that investing in bad companies carry a lot of stress and risk. Investing in some of these companies can make you rich but it is almost impossible for them to provide you a constant profit.

    It’s easier to invest in some solid businesses with steady profit and dividend. You should avoid headaches.

    You would like to read How to Become A Trader or Investor in Just 10 Minutes

  • Margin Call – How to Profit From The Trade

    Margin Call – How to Profit From The Trade

    Margin Call - The Dangerous Behind
    Every second in your account you must have 25% of the total price of the stock you hold to cover the maintenance margin.

    By Guy Avtalyon

    A margin call is something that every trader would like to avoid.

    • Buying on margin means borrowing money from your broker to buy stocks.
    • There is no profit without the risk involved.

    Have you ever seen a better movie than Margin Call? A movie about the Financial Crisis? It just crossed my mind when I started to write this. 

    Okay, never mind. The subject of this article is a margin call in the stock market. 

    Let’s start from the beginning.

    What turns around and around the stock market is a risk. I know that is the major problem for most of you. How to take the risk? Because the risk has its bright and dark side and you know that. For example, you are trading some stock without guarantees that it will perform well. 

    The identical risk that boosts stock prices one day can lower them tomorrow. Yes, the identical. Pretty scary. 

    But here we come to the bright side of the margin call. For investors who want to profit a lot and quickly nothing is better than buying on margin.

    Buying on margin means borrowing money from your broker to buy stocks. Basically, it’s a loan from your broker. 

    How “buying on margin” works?

    You can borrow from your broker up to 50% of the price of a stock. 

    For example, when the stock price is $20,000 you will pay $10,000 and your broker will lend you the rest which is another $10,000. 

    Let’s look at the possible scenarios. 

    Assume the stock price grows at $24,000. The return on your investment will be 40%. You invested $20,000, but you have to give back to your broker $10,000 and you will end with $14,000 in your hands. But you invested yours $10,000 so you will have $4,000 of profit. This is good and you can be happy because you made a profit.

     

    But things may go in another direction. 

    Assume the stock price went down at $16,000. You will end up with a 40% loss on your investment. Even more, you have to give back the borrowed money to your broker increased by charges, fees, and interest on the loan, of course. 

    Buying on margin may be extremely risky. You may lose your entire investment. But you may lose more because of something known as a margin call. 

    Every second you must have an adequate amount in your account to cover the maintenance margin. That amount is 25% of the total price of the stock you hold. 

    What can happen if you don’t have enough cash in your account? Your broker will issue a margin call. That means, your broker is demanding you to cover the difference with more deposit and reach that 25% maintenance level.

    Let’s go back to our example and situation when things went wrong. What will happen if the stock price drop at $12,000? Your loss is $8,000 and now you have only $2,000 in your account. The rule is that you MUST have 25% and $2,000 is not enough to cover that. So, you lost $8,000 and at the same time, you have to deposit an additional $500 in your margin account to stay in the market. Also, you have to pay back the money to your broker.

    Is margin call dangerous to investors? 

     

    It can be extremely dangerous. In our example the missing deposit is small as the money invested isn’t big, but you can count how it is an enormous loss when the value of the investment is $200,000, $500,000, or million dollars.

    The most frightful detail about margin call for you as new investors is that your broker has no obligation by law to warn you that your margin account is too low. So, what the broker will do?

    The broker will sell your stock and liquidate your assets if it is necessary. He or she needs to ensure the maintenance level in your margin account. Even more,  the broker can begin selling your stock even the margin call is issued. Such will not wait for you and will not give you a grace period. Damn, you are dealing with a un-patient broker. This is an extremely painful and dangerous situation. If you come up to this situation how will you earn your money back when the market turns in your favor. You have nothing to trade with.

    The other danger about margin call is that you do not have an influence on which stock your broker may sell. Of course, the broker will choose the best players to cover fast and smooth the maintenance margin. 

    Moreover, the brokerage may change the rules and issue the margin call based on them. You will not have even zero chances to delay paying the margin call.

    How to avoid the potential risk of a margin call

    First, stay away if you don’t have enough experience in trading. Second, open some other account for an emergency with enough money to cover the margin call.

    I can understand that you are willing to enter the market as a big player. At least to earn a big profit. Nothing is bad with that. Everyone wants the same. Just keep these things on your mind when you want to trade on margin. Buying on margin is an extremely exciting method, risky but with great potential to profit.

    If you are 100% sure that you have a great player in your hands, and don’t have enough money to buy it, do it. Borrow from your broker.  Sometimes, a great risk will bring a great profit. In the end, there is no profit without the risk involved.

  • Payment Card and Prophecy by George Orwell

    Payment Card and Prophecy by George Orwell

    Payment Card and Prophecy by George Orwell
    The payment card will make payments easier, it is more convenient than cash but has drawbacks too

    by Gorica Gligorijevic

    Cash or payment card? About this topic, most of us have been speculating on this very issue, but until now mainly from a philosophical point of view.

    The current world seems to many like a dystopia. It’s a tale of the darkest times. Whose dystopia? Which writer best envisioned this time of confusion and dysfunction? Two classics from the 20th century. Aldous Huxley’s “Brave New World” and George Orwell’s  “1984”.

    “A squat grey building of only thirty-four stories,” starts “Brave New World”. 

    “It was a bright cold day in April, and the clocks were striking thirteen,”  “1984” opens.

    What horrible openings! Scary! 

    Both writers wrote about how future governments will operate with a lot of energy spent in seeking to encourage economic consumption.

    What we have today?

    We, together, protect and transmit our secret lives through surveys and social media.

    We are sharing our personal data on which we all commonly depend. And we are doing that so easily.

    Do you feel the importance of this change in our own lives?

    It will be more clear when explained on the example of credit cards or loans.

    Payment Card – The customer is always right

    For example, loan review. 

    From this review, the police, and not just the police, can see: do you drink Coca-Cola or Pepsi Cola, what kind of bread are you eating, what beer you drink, what brand and what size of shoes you wear, what size underwear you are buying, where you were five months ago when you have paid a hotel for the other two people and who they are.

    Scary enough? Who was right? Oh, how predictive was Orwell!

    In some countries, cash payments are canceled, only payment cards are used. That’s the reality. We can go a step further. The government, for “justified reasons”, declares the Regulation: for certain cardholders, daily payment from a card is limited to $500. The other group of owners has a limit of $2,000 daily, while the third group has unlimited card payments. Everything is a nice and computer programmed, based on the personal data of the cardholder and done by the push of a button.

    Cards and chips

    According to the banks’ published data, in the last year, 2018, they have reported record revenues. Of course, by having no limits on making trades with our money.

    It is already known that some of the largest companies are implanting chips in their workers. They put the chip into a part of the body and thus, instead of the cards, they control the arrival (check-in) and departure (check-out). And when you reach your retirement they activate your check-out. 

    Or, for example, Sweden. They have a state program to put chips into citizens. One chip for everything. To take your money on the ATM, to unlock your home, to pay in the store, to make an appointment with the doctor. Even more, with that one chip, you can start your car, use public transportation, make payments in restaurants, buy medications. What a wonderful world!

     

    You are happy! When it will be possible for the whole world?

    Bad experiences with payment card

    Recently, I visited Holland. For a personal reason, I carried the cash. Actually, my payment card was stolen and I had to take this trip before solving the problem with it. Holland is an extraordinary country and I like to travel there. People are relaxed, easy-going and natural (maybe sometimes too natural), everything is full of brightly colored flowers, the buildings are brightly painted too. Public transportation is one of the best in the World, the food is really good especially cheeses, meat has a special taste as much as vegetables. In one word, wonderful! But…

    The first problem arose at the airport. When I tried to find a taxi with a driver who will take the cash. No luck. When I tried to purchase a ticket for the public transportation, the problem was the same. My cash was useless. I had to call my friend to come and pay for everything I needed. Well, I was never so close to anyone like my friend those 10 or 12 days, how long I was in Holland. He would pay with his credit card, and I had to reimburse him with my cash to cover my purchases.

    Payment card yes but cash rules

    It was accidentally that several days after my visit to Holland I was watching some movie, a contemporary one. No one would understand, even me, why I was so happy when I saw in one scene, that in the front of some store was written: Cash only!

    What I want to say, in some countries the law limits how much money you may have in cash. It announces a total cancellation of cash payments.

    And if the rule is to make payments only through credit cards, it is obvious that someone wants to control you. 

    Do we have the liberty to choose the way we want to make payments? 

    Yes, it is more comfortable to have one or a few payment cards in the pocket. But, how to say, no one asked us would we like more than one card, one chip or hands full of cash. And credit cards are not always the best solutions, nor are the chips.

    For example, you have money in the bank and a payment card in your pocket or the chip under your thumb’s skin. And for some reason such as natural disasters, riots, power failure, or simply by someone’s order, or even by mistake, by pushing the button in the bank you cannot pay for anything. And you are out of your home and your environment, who will pay your food and water, who will and how accept your card?

    It’s complete and total control and slavery of a human. Orwell’s “1984” is a fairytale of this.

    Do you have similar experiences? It would be nice to share with others.

  • How Long To Hold Stock?

    How Long To Hold Stock?

    How Long To Hold Stock?
    Patience is golden, but even being a golden rule of stock investing, it isn’t enough, there is more.

    By Guy Avtalyon

    Yes, you are asking the right question, because many stock investors ask: “How long to hold stock?” There are some possible answers.
    You may hold your stock until it provides you a profit, or break your stop-loss rule, or you may hold your stock forever.

    Actually, there’s no general rule that fits all stocks when the holding periods are in the question. So many variables can influence how long to hold stock.

    The decision to hold stocks for the long term or the short term is individual. It depends on your poverty, expectations, or advisor.  Several factors are involved in your personal decision especially if you have a winner in hand. The right question is: Will the winner be an excellent moneymaker in the future and how long?

    How long to hold stock

    A lot of factors will influence your decision.

     

    First of all, the time you enter the market is important. If it is during a bull market you have to know two things. First, the usual bull market cycle will last from two to four years and you’ll be able to earn the majority of your profit during the first or second year. In simpler words, you have to wait until your stock rises up to 20 – 25% from buying price, that is the point where the profit can be taken. If your stock increase over 20% in the first 3 weeks or in a shorter period, hold it at least 8 weeks. After that period you have to examine the stock’s charts to check if your stock keeping up well. When you get this confirmation from the charts and the market is increasing too, there are a lot of chances that this trend will continue. You can expect the new breakouts and the value of your stock will rise more.

    For genuine market winners, the average time from breakout to top will be from 12 to 18 months.

    This looks like a pretty simple answer, but is it the right one? 

    What if your stock starts a downtrend and you see you can be stuck in a losing trade for a long time? That is why you must have settled rules before you enter a trade.

    How to determine how long to hold a stock

    The best way to determine how long to hold a stock is to do that based on your trading rules.

    Before you purchase any stock you have to define what profit do you want to make. The next will be your ability to forecast how much your stock could decrease. Will your strategy provide you a bigger gain than loss? Is the stock in its downtrend, bottoming, or up-trend? You have to determine the largest possible loss you can afford.

    Traders-Paradise has one suggestion for you.

    The gain has to be minimum 1,5 to 2 times bigger than loss. There more variables you have to consider. For example, how much will you earn when sell your stock? 

    The golden rule in stock holding

    Let us examine one possible scenario. You have bought the stock and you are 20% in profit after the first week. You predicted the worst scenario as a loss of 10%. In this case, your reward is at 2 to 1.

    What you have to do? Should you sell?  Well, the brief answer is No.

    The right answer is that you should hold a stock for a longer time if you have, for example, a medium-term horizon. You have to hold your stock for several weeks or even months.

    Hold the stock as long as you want to make a notable gain from a stock price move. Some traders would advise you to hold a stock something between two and 10 months to get the best reward. You have to be very blessed to develop a great profit overnight.

    The average high-profit trade is 30% and the hold time is about 45 days. Also, the average drawdown is -11% to -15%. That is the statistics.

    Patience is golden

    You must be patient with a stock. Stocks need time to give you the profit you want. Long-term investments have made incredible profits.

    Anyway, you must be careful because stocks can drop suddenly. To avoid a catastrophe you have to limit your loss but don’t place your stop-loss order at 5%. Usually, a stock may pull back 10-15%, and very soon after that, a profitable move happens.

  • When To Buy Sell or Hold On The Stock

    When To Buy Sell or Hold On The Stock

    When to buy, sell or hold on the stock
    The enter or exit the investment must be in line with your investment plan.

    by Guy Avtalyon

    Beginners in the stock market are usually enthusiastic, but do they know when to buy, sell, or hold on to stocks to gain maximum growth and limit loss? 

    There are no guarantees for stock’s price, they can go up or down driven by various circumstances. So how to know when to buy, sell, or hold on stock?

    No one can tell you about one specific, the best strategy, good for everyone. But advanced traders follow some “rules of thumb” when they examine their investment movements. They are establishing entry and exit points and evaluating fundamental factors. But they had to learn some universal systems at first and after that, they were able to choose the one or a few that suit them the best.

    Examine Entry and Exit Points

    An entry point is the price level where the trader buys an investment or “enters the position”. The exit point is a price where you sell or “exit”. 

    If you want to avoid the wrong decisions and if you want to know when to buy, sell, or hold on the stock you have to define your entry and exit points. That means you must have a clear strategy to lower the risk and enhance your return. In other words, you have to set the right entry point to maximize winnings. 

    Also, it is extremely important to define where to set a stop loss. This point is worth in case the stock price starts to drop. Yes, some traders will wait for the dropping price to grow, but that may be dangerous in case the stock value continues to decline. This is especially important for short-term traders with the idea to buy and sell in a short time. 

    Traders usually practice stop and limit orders to maintain the balance between gains and losses. 

    The point is to have more winning trades, right? 

     

    To avoid permanent watching the charts and price changes you can set stop or limit order. That will provide you to enter or exit the investment according to your investment plan. 

    A limit or stop order means that you decide how much stock you want to buy at a specific price or when it peaks a specific price. So, you can place a limit or stop order for a higher or lower price than the current market price. The market price is the prevailing price of the stock.

    Stop and limit orders act separately but associate to the trader’s action in the same way. They enable traders to not have to continually watch price movements, but traders have various goals with these orders. 

    For example, when setting a limit order, the intent is to buy or sell a stock at a defined price. To be more clear, if a stock’s value is $85, and you want to buy it, you may set a buy limit order at $80 if you think it is your best entry point. 

    Thus, if you want to sell the stock, you may place a sell limit order of $90 if it is your projected or planned exit point.

    Stop order is a defensive strategy to lower losses. 

    To secure your investment, in case the stock continues increasing in value, you may set a stop order at a point a lot bellow the current price. But if you expect that stock to be trading below, you may try to minimize your losses with a higher-stop order that will be close to the current price or just a bit under the current price. 

    Stop and limit orders are created to trigger when the pre-arranged price is reached. If you set a limit order at $90, the stock will be sold immediately when the stock increases, and $90 is touched. Or vice versa, if you set a stop order below the current price, the stock will be sold when the price drops and it reaches that price. 

    I hope the point is clear, the trader with the limit order wants to sell when the price rises, and the trader who placed the stop order wants to sell when the price drops. 

    Why is important to know when to buy, sell, or hold on the stock?

    There is some risk involved in limit orders. A limit order “guarantees the limit price or better” but on the other side,  what if it never gets filled?

    A stop order means an exit from the stock position if the price drops, after your stock scores the stop you’ve set. In that case, your stop order becomes a market order and there are many competitors waiting to be filled. Hence, you don’t have a guarantee that your order will be filled at the specific price you placed. In some cases, you may end up selling the stock significantly below that level. 

    Moreover, if you have a sell stop at $90 and the price falls to $40, your order will be triggered at $60, which is a good thing. But things could go in the wrong way too. For example, if you purchased a stock at $80 and placed a stop at $75, the stock might go down to $70 and be sold, of course, but it can jump back to $90. 

    When to buy stock?

    In investing, it is important to determine what a stock is worth. Will it rise up to the estimated value? Set a range at which you would like to buy a stock. That might be helpful. Will you pay that amount for a particular stock? Be honest while giving the answer.

    If you don’t know the price target range, you will be in trouble with determining when to buy a stock.

    Also, you have to know about the financial health of a company. It is possible through the company’s financial statements that have a treasure of information. 

    You have to pay attention to the company’s revenue, for example, or how it relates to its past reviews. Are the company’s sales growing or shrinking? Read the company’s guidance for revenue or sales, which reveals how it expects to perform in the future.

    Cash flow is important too because it will provide you information about a company’s liquidity. A very good sign is when more money is coming into the company than it spends. It is a positive cash flow.

    Further, a stock might be undervalued. So, you must estimate a company’s upcoming prospects. Compare it with current reports. In this way, you will find a possible price target. If the current stock price is lower, buy it.

    When to sell the stock?

    Whenever the expected price is bigger than the current stock price, you have a chance to earn.

    The size of the return depends on how much of a discount a stock trades related to its expected value. Also, it is related to how much time the market needs to update its expectations. The higher the stock price discount and the sooner the market corrects its expectations, the higher the return.

    You can sell your stock when it hits its expected value,  or a more winning stock arises, or you change your expectations.

    When to hold the stock

    You have to know that it can take time for a stock to reach its real value. Any stock price forecasting is actually simple guessing.

    Your stock may need several years for a stock to reach close to a price targeted. If you are sure your stock will grow, hold it 3 to 5 years. Very often, you will profit more. It is essential to know when to buy, sell, or hold on the stock if you want a profit.

  • China Will Take Your Money

    China Will Take Your Money

    2 min read

    foreign investments in China

    No, China will not take your money away but will accept it after having removed quotas for foreign institutional investments and consequently limits for their clients.

    Almost 20 years after first opening its capital markets to foreign investments, on Tuesday, September 10 Chinese State Administration for Foreign Exchange (SAFE) has announced the removal of $300 billion caps on foreign investments under its Qualified Foreign Institutional Investment (QFII) scheme. 

    Foreign investments in China

    Similar cap for renminbi-denominated RQFII scheme has also been removed. Combined with last week’s lowering of reserve requirement ratios by China’s central bank, this move is aimed at increasing the liquidity of Chinese financial markets. Changes to QFII and RQFII schemes will greatly simplify the investment procedures for foreign companies by removing the application for quotas process. “[F]oreign institutional investors with corresponding qualifications will only need to go through registration procedure” according to the SAFE statement.

    This move is being lauded as a great improvement to the convenience of foreign investors’ participation in Chinese financial markets, and effort to make China’s bond and stock markets more widely accepted by international markets. 

    Analysts cautions

    Many analysts are cautioning that this move will not cause a flood of off-shore investments, pointing out to the fact that only $111 billions of QFII cap was used to date. The figure which stayed, for all intents and purposes, unchanged since the cap was increased from $150 billion. According to Adrian Zuercher, head of the asset allocation for the Asia Pacific at UBS Wealth Management, “cap was an important roadblock for institutional investors which has now been removed.”

    It must be said that this move is a continuation of efforts to remove red tape and ease foreign investments in financial markets. The process which started last year by removing the lock-in periods under QFII and RQFII schemes, and allowing investors to repatriate their funds at any time. Previously, funds which could be repatriated in one go were subject to very severe limits, which was a considerable obstacle for many institutional investors. With cases of repatriation approval process taking up to four months.

    Positive or negative

    This development comes in the atmosphere of uncertainty surrounding the US-China trade negotiations and trade war. Some analysts see it as a positive which underscores the fact that trade war has positive effects on China by accelerating its reform agenda more than was expected. Reforms geared toward giving overseas investors the same access to markets as to local players. Part of it was last January’s license approval to rating agency S&P Global for operating in China, the first such license granted to a foreign agency.

    Separately, the Chinese government is allowing foreign banks and insurers to take a controlling stake in their joint ventures. Till today, JP Morgan, UBS Group, and Nomura Holdings have won approval, while Goldman Sachs and DBS Group are currently waiting on it. Also last week Deutsche Bank and BNP Paribas were given regulatory approval for underwriting debt in China.

    Stabilizing effect on the Chinese economy

    These moves serve the purpose of opening China’s financial markets to foreign investment. But, most likely, will also have a stabilizing effect on the Chinese economy in the state of the trade war with the US. Having in mind global trade tensions and the US imposed tariffs having a draining effect on China’s foreign currency reserves, this move could strengthen China’s balance of payment by providing an inflow of foreign currency.

    You might be interested: Asian Stock Markets Perform Careful Increases

  • Should you buy a stock because of its dividend?

    Should you buy a stock because of its dividend?

    3 min read

    Should you buy a stock because of its dividend?

    Never buy a stock because of its dividend. A dividend shouldn’t be a reason to invest in a poor business. Most important is the performance of the business. That will drive a stock’s return and the company will be able to pay a dividend. So, you must pay attention to the business as a whole, the company’s plans, its goals, even to management and how they treat their employees. 

    Dividend stocks are recognized as safe investments, that is true. They are the highest valued companies. They have grown their dividends during the past 20 years and these are usually held as safe businesses. 

    But, just because a firm is providing dividends doesn’t mean it is a trustworthy investment. You have to learn how to avoid pitfalls that may arise, at first glance, with good dividends.

    Executives can use the dividends to pacify nervous and fidgety investors when the stock price isn’t running as they are expecting. You must know how the management is handling the dividends in a company’s strategy, for example. If you notice a lack of growth, stay away. Such a business isn’t good to invest in, even if it provides good dividends.

    Do you know what has happened in 2008?

    A great stock’s dividend yields were forced to unnaturally high levels due to stock price drops. The dividend yields seemed fascinating, but as the economic crisis developed, the profits fell. That caused the numerous dividend plans to be canceled entirely. The best example is the banks’ stocks in 2008. 

    They were paying great dividends but whenever dividend is paid the stock value instantly falls by an equal amount. That’s the point. And you may ask if the bankers knew that? Of course, they did. 

    Let me explain you something.

    buy a stock because of its dividend

    Very often, the chief purpose why some company pays dividends is because the executives can’t discover some solid growth possibilities within their own company to invest its earned profits in. 

    Hence, the company allows extra earnings to stockholders by paying dividends. But this is good, you may say. Yes, but…

    When a company gives a dividend equivalent to its profits, that is a sign that they are not able to find investment opportunity within their own business that would give greater return. If such a company stays for a long time in a similar situation, the growth will be slow. And at some point in time, they will stop paying dividends and the stock price will decrease to worthless.

    That’s the secret. So when you ask yourself should you buy a stock because of its dividend, be careful and have a bigger picture in mind.

    You should buy a stock because the company is paying attention to the development, research, infrastructure… Things that will increase your profit as the stock price is going up. 

    Now, can you answer me, should you buy a stock just because of its dividend?

    Of course not.

    Moreover, dividend-yielding stocks are taxable income.

    A dividend is a delivery of a part of a company’s earnings to stockholders. It can be done in cash, stocks, or other assets. It is a bonus to investors.

    Yes, many investors see dividends as the main point of stock holding. They want to hold the stock long-term and the dividends are an addon to income. Nothing is problematic in that. But buying a stock just because of dividend is very wrong.

    Dividends are an indication that the company is doing well, dividends are not bad. It has profits to share, more cash than it demands and it can give it to its stockholders. And a stock’s price may rise quickly after a dividend is paid.

    And there is a catch, on the ex-dividend day, the stock’s value will surely drop. The value of the stock will drop by a sum almost the same to the amount paid in dividends. 

    When you want to buy some stock do it because you believe in business or you think the value will rise. Don’t do it only because of a dividend.

    You would like to know THIS