Tag: Shares

All shares related articles are found here. Educative, informative and written clearly.

  • The Average Daily Trading Volume How to Calculate

    (Updated October 2021)

    A stock’s daily trading volume shows the number of shares that are traded per day. Traders have to calculate if the volume is high or low.

    The average daily trading volume represents an average number of stocks or other assets and securities traded in one single day. Also, it is an average number of stocks traded over a particular time frame. 

    To calculate this you will need to know the number of shares traded over a particular time, for example, 20 days. The calculation is quite simple, just divide the number of shares by the number of trading in a specified period. Daily volume is the total number of shares traded in one day. 

    Trading activity is connected to a stock’s liquidity. When we say the average daily trading volume of a stock is high, that means the stock is easy to trade and has very high liquidity. Hence, the average daily trading volume has a great impact on the stock price. For example, if trading volume is low, the stock is cheaper because there are not too many traders or investors ready to buy it. Some traders and investors favor higher average daily trading volume because the higher volume provides them to easily enter the position. When the stock has a low average trading volume it is more difficult to enter or exit the position at the price you want.

    How to calculate the average daily trading volume

    As you expected, it is quite simple. All you have to do is to add up trading volumes during the past days for a particular period and divide that number by the number of days you observe. It is usual to calculate ADTV (Average Daily Trading Volume) for 20 or 30 days but you can calculate it for any period if you like. For example, sum the average daily trading volumes for the last 30 days and divide it by 30. The number you will get is a 30-day average daily trading volume.

    Since the average daily trading volume has a great impact on the stock price it is important to know how many transactions were on a particular share. The same share can be traded many times, back and forth and the volume is counted on each trade, each transaction. For example, let’s say that 100 shares of a hypothetical company were purchased, and sold after a while, and re-purchased, and re-sold. What is the volume? We had 4 transactions on 100 shares, right? So, the volume in this particular case would be expressed as 400 shares, not 800 or 100. This is just a hypothetical example even though the same 100 shares could be traded many more times.

    How to find the volume on a chart?

    Thanks to existing trading platforms it is easy since each will display it. Just look at the bottom of the price chart and you’ll notice a vertical bar. That bar indicates a positive or negative change in quantity over the charting time period. That is the trading volume.
    For example (if you don’t like too much noise in your charts), you will use 10-minutes charts. Hence, the vertical bar will display you the trading volume for every 10-minutes interval. 

    Also, you will notice that these bars are displayed in two colors, red and green. Red will show you net selling volume, and green bars will let you know the net buying volume.
    You can measure the volume with a moving average, also. It will show you when the volume is approximately thin or heavy.

    Average Daily Trading Volume

    What is an average daily trading volume for a great stock?

    Are you looking for the $2 stock with an average daily volume of 90,000 shares per day? It won’t be easy. Sorry!

    The stocks that traded thinly are very risky and changeable. To put this simple, we have a limited number of shares in the market. Any large buying might influence the stock price skyrocketing. The same happens when traders and investors start to sell, the stock price will fall. Both scenarios are not beneficial for investors. So, you must be extremely careful when trading stocks with daily trading volume below 400.000 shares. You can be sure it is a thinly traded stock even if it is cheap as much as $2. The stocks with low prices carry higher risks. For example, penny stocks.

    Here we came to the dollar volume. While the daily trading volume shows how many shares traded per day, the dollar volume shows the value of the shares traded. To calculate this you have to multiply the daily trading volume by the price per share.

    For example, if our hypothetical company has a total trading volume of 300.000 shares at $2, what would be the dollar volume? The dollar volume would be $600.000. This is a good metric to uncover if some stock has sufficient liquidity to support a position.

    To decrease the risks, it is better to trade stocks with a minimum dollar volume in the range from $20 million to $25 million. Look at the institutional traders, they prefer a stock with daily dollar volume in the millions.

    Understanding Average Daily Trading Volume

    Average daily trading volume can rise or drop enormously. These changes explain how traders value the stock. When the average daily trading is low you have to look at that stock as extremely volatile. But, the opposite is with higher volume. Such stock is better to trade because it has smaller spreads and it is less volatile. To repeat, the stock with higher trading volume is less volatile because traders have to make many and many trades to influence the price. Also, when the average trading volume is high, trades are executed easily.

    This is a helpful tool if you want to analyze the price movement of any liquid stock. Increasing volume can verify the breakout. Hence, a decrease in volume means the breakout is going to fail.

    The trading volume is a very important measure.

    It will rise along with the stock price’s rise. So, you can use it to confirm the stock price changes, no matter if it goes up or down. When we notice that some stock is rising in volume but there are not enough traders to support that rise and push it more, the price will pullback. 

    Pullback with low volume may support the price finally move in the trend direction. How does it work? Let’s say the stock price is in the uptrend. So, it is normal the volume to rise along with a strong rising price. But if traders are not interested in that stock, the volume is low and the stock will pullback. In case the price begins to rise again, the volume will follow that rise. For smart traders, it is a good time to enter the position because they have confirmation of the uptrend from the price and the volume both. But be careful and do smart trading. If the volume goes a lot over average, that can unveil the maximum of the price progress. That usually means there will be no further rise in price. All interested in that stock already made as many trades as they wanted and there is no one more willing to push the stock price to go up further. That often causes price reversal. 

    Bottom line

    The average daily trading volume shows the entire amount of stocks that change hands during one trading day. This can be applied to shares, options contracts, indexes or the whole stock market. Daily volume is related to the period of time. It is very important to understand that when counting volume per day or any other period each transaction has to be counted once, meaning each buy/sell execution. To clarify this, if we have a situation in which one trader is selling 500 shares and the other one is buying them, we cannot say the volume is 1.000, it is 500. Anyway, this is an important metric that will show you if some stock is easy or difficult to trade.

  • Procter & Gamble shares jump over analysts estimates

    Procter & Gamble shares jump over analysts estimates

    3 min read

    Procter & Gamble shares jump over analysts estimates

     

    Procter & Gamble shares recovered Tuesday. Its earnings exceeded expectations after removing out the influence of the charge. So, this company is looking for fiscal 2020 with more optimism. Procter & Gamble shares have risen nearly 44% over the past year.

    The company reported earnings per share $1.10 and expected revenue at $17.09 billion.

    Wall Street expectations were different, analysts predicted P&G earnings per share at $1.05 and expected revenue at $16.86 billion.

    P&G reported a fiscal net loss in the fourth quarter of $5.24 billion. It is $2.12 per share. Also, they reported the net income of $1.89 billion, or 72 cents per share, for the previous year. 

    Procter & Gamble problems

    The main cause of the loss for the quarter ended June 30 was the one-time cost to write down the value of Gillette. The company $8 billion write-downs of its Gillette brand.

    Keep out details, P&G gained $1.10 per share, defeating the $1.05 per share which was the experts’ expectations. 

    Net sales grew 4% to $17.09 billion, beating predictions of $16.86 billion.

    The sales volume of the Gillette brand dropped during the quarter. The same had happened to Braun and the Art of Shaving brands. 

    Organic sales increased

    Procter & Gamble shares jump over analysts estimates

    But its organic sales had a positive result because of the price rises, it increased by 7% over the quarter. Expanded sales in developed countries helped too, Tide and Ariel are very popular in those days. 

    G&B health-care and beauty products, line SK-II and Olay, also performed well.

    The organic sales of Pepto-Bismol and Crest toothpaste jumped up to 10%. Also, the other health care products like Vicks and ZzzQuil increased in the sale.

    And, what is interesting, its laundry and dishwasher brands reported sales increase of 10% in the quarter.

    The forecasts

    The company stated it awaits fiscal 2020 revenue growth by range 3% to 4%. This adds a small negative influence from foreign currency. Wall Street was predicting fiscal 2020 revenue of $69.76 billion, up 3.5% from this year.

    Also, Wall Street prediction is earnings per share to rise by 4% to 9%. 

    “Our guidance range brackets current market growth with a bias toward continued share growth, while still expecting a strong competitive response,” CFO Jon Moeller told analysts on the call, reported CNBC.

    The company stated that its current forecast for commodities, foreign currency, transportation, etc. is supposed to end in a “modest net benefit” to earnings growth in fiscal 2020.

    Experts were predicting that the company’s adjusted earnings next fiscal year would rise by 5.1% to $4.75 per share.

    The beginning and the future

    Procter & Gamble was founded as a family business in 1837. It was kind of the family uniting after they married two sisters  Olivia and Elizabeth Norris. Both William Procter and James Gamble were immigrants. 

    Candlemaker Procter, born in England, and soapmaker Gamble, born in Ireland. Of course, the company with their last names was selling candles and soaps at the beginning. 

    Fun fact: They were sponsors of radio shows all around the US. That’s how the phrase “soap operas” was born. From Ohio all over the world.

    Today it is one of the biggest companies on the globe. 

     

    Procter & Gamble shares jump over analysts estimates

     

    How did they come to this?

    They operated very smartly, they bought various brands all over the world. Gillette, Old Spice, Max Factor, Crest, Pampers, Ariel, Tide. That is a smart diversification.

    This company is employing more than 120,000 people all over the world and own more than 80 brands. 

    Should you buy their stock? OMG, for sure!

  • Cannabis VS Bitcoin Both Are the Two “Sexiest” Plays.

    Cannabis VS Bitcoin Both Are the Two “Sexiest” Plays.

    Cannabis VS Bitcoin
    Cannabis stocks just like bitcoin stock can be hot investment choice these days

    By Guy Avtalyon

    If you have a dilemma in selecting the stocks, cannabis vs bitcoin, this exactly you have to read. Cannabis shares are a temporary hum. Wait! Didn’t they say exactly the same about Bitcoin?

    Traditional Wall Street and media gatekeepers are late.

    The fact is that Bitcoin lacks a time-tested business model and fundamental backing, and it pays no dividend. The other fact, marijuana is illegal in almost every country, putting the business model in jeopardy.

    Pot stocks are more tangible speculative investments, traded and regulated on recognized stock exchanges, but still subject to a variety of market and regulatory risks. We know that advisors can caution their clients on the risks of investing in cannabis stocks, and the risks are there at current merits. It was the same in the case of Bitcoin.

    Cannabis industry

    But the cannabis industry may offer trace to the future of Bitcoin. Because despite their different paths, the crypto and cannabis are siblings. Why? Just spend a few minutes on Reddit pages committed to trading, Bitcoin, and cannabis and you will see similarities of the group. According to TD Ameritrade Inc., trading in pot stocks is superiorly done by millennial-aged males. The stats for crypto look almost the same.

    We are witnessing an explosion of interest in cryptocurrencies, cannabis stocks, and ETFs. And particularly from millennials. What do younger clients need? They love technology. They want to be educated investors, that’s why they are in need of education. They’re younger in their investing and trading careers. But they know what they want. They want to trade 100 shares of stocks at the table in the restaurant using some bot. They don’t want to miss the boat.

    Cannabis vs Bitcoin

    If you’re a  long-term investor type who’s not at all interested in trading, then you’re on the right track to becoming a wealthy investor over the long term. Sticking with such a reasonable investment strategy can be tough, however,  especially if you constantly hear about how a friend of a friend of yours got rich overnight by investing in Bitcoin or Canopy Growth (TSX:WEED) (NYSE:CGC) stock.

    You can ignore the hype, as it has nothing to do with you. It’s difficult to tell the difference between a bubble and an actual paradigm shift that could lead to massive riches over the near term.

    Today, cannabis stocks and Bitcoin are the two “sexiest” plays.

    While the word “bubble” has been thrown by some experts, other equally qualified, are on the other side and are thinking “opportunity of a lifetime.” Being on the right side isn’t a matter of how clever you are. You can find a lot of examples of how some very smart guy has fallen as a victim on the wrong side of the “sexy play” of his time.

    When it comes to subjects like the rapidly emerging rising cannabis market or blockchain-based cryptocurrencies, it’s hard to know what you’re dealing with as an investor. Nobody really knows how much new entities will act in the public markets over a long period. Attempts to make comparisons to events that happened in the past can make some sense but can’t help a lot.

    Neither cryptocurrencies nor cannabis are suitable for conservative investors. It is for visionaries, for those who can perceive the future and recognize the chances. Set a limit and stay within it.

    There are many people in the crypto industry believing in a bright future. As well as there are supporters of the legalization of cannabis. Technology companies, for example, SinglePoint and POSaBIT, are working to create a payment method for dispensaries and consumers using bitcoin. Recently, some cryptos emerge specifically for cannabis transactions.
    This isn’t the first time that stocks in a hot niche have risen. We all know what happened with bitcoin stock a year ago. The companies specializing in the crypto have had fantastic gains.

    Some investors never look back at overhyped fields once they aren’t trending, but investors who invested hard-earned money into most popular stocks usually learn the harder way what results can be.

    Currently, a limited number of marijuana stocks is accessible to most investors. We’ve seen some massive moves in marijuana stocks. Those gains stem from the fact that investors who want to invest in marijuana have limited options available to them.

    Why cannabis vs bitcoin?

    The same case we already saw with many Bitcoin stocks.

    In 2017, the top-performing Bitcoin stocks have less liquidity than many others. They stood very low on that list. But it reversed. In 2018, bitcoin declined in its volatility.
    Of course, speaking about cannabis stocks we can expect winners, but we can’t be sure where to expect. Maybe cannabis investors could learn something from the bitcoin incredible boost in the past. Perhaps the same could occur. Sometimes, success may occur in unexpected places. As an investor in cannabis stocks, just be ready to see the secondary effects. Try to recognize how they can influence the companies that are not always obviously related.

    Investors want to get rich from cannabis stocks, but past investing crazes and experience with cryptos have often left people wishing they hadn’t fallen for the allure of these markets. You can avoid repeating those mistakes and improve your chances of being successful with your investments in the long run. Just get more knowledge, learn permanent, test, and measure everything twice.

     

  • What is Mutual Fund Investment?

    What is Mutual Fund Investment?

    What is Mutual Fund Investment?
    Can mutual funds give you better returns, are they safer investment choice, what are types of mutual funds? Read all here.

    By Guy Avtalyon

    A mutual fund is a company that puts together money from many people and invests it in stocks, bonds, or other assets. The investment portfolio of a mutual fund is a combination of stocks, bonds, and other assets. When an investor acquires shares of the fund becomes the owner of the part of these holdings.

    Mutual funds investment can give you a better return in a much safer way

    The performance of mutual funds depends mainly on the fund manager who manages the fund on your behalf. Making the decision based on knowledge, picking a well-performing fund manager is utterly important to your success. For all of that, you should need some basic information on mutual fund investment.

    OK, you own the mutual funds comprising a collection of stocks and bonds. That is your upper hand.

    Why? First of all, it allows you to buy in with notably less money than it would take to purchase the same portfolio of stocks/bonds on your own. Second, you spread the risks out there among a group of investors if something goes wrong.

    How the mutual fund portfolio is structured

    It isn’t one single stock or bond of one sector alone. Therefore you can reduce your risks of losing your money to a greater extent. Always keep in mind that you may be the worst loser in the stock market due to a periodical deep cut in share prices. True is, there is no full-proof method or strategy that is completely safe and without risks. That’s the fact. But, mutual funds have lower risks than many other investment options. This makes them suitable for novices, traders who lack proper knowledge and skills in the investment market.

    Mutual funds often have much better rates of return than the average savings account at the local bank.

    Besides that, you may have minimum risks in this type of investment compared to other more risky ventures.

    Even more, if you have some idea of which sectors are performing well, you are at an advantageous position of choosing a good sectoral fund. But be cautious, you should select a well-rated company. Diversification is the key to a healthy portfolio and mutual funds will help you get a diversified portfolio.

    This is one of the safest ways to invest your money in the long term if you are young enough and in no hurry for retirement because the most mutual funds do not have the high payoffs that many investors seek to include for their retirement planning.

    What are the main types of mutual funds?

    Essentially, there are three types of mutual funds with some variations on each:

    Money market mutual funds are an open-ended mutual fund. These types of funds invest in short-term debt securities. This is regarded as safe as bank deposits yet providing a higher yield. These funds are great for long-term investors. This slow and stable access to investing is better than leaving your money in an interest-paying savings account.

    Equity funds that may provide slow growth over time with some income along the way.

    Fixed income funds are created to provide a current income. This is great for those who have retired or for investors who are extremely conservative.

    Besides this, you need to have certain basic knowledge about diversifying your portfolio of rated mutual funds. That can give you an attractive return with the highest safety. In a roar bull market, investing in Diversified Equity Fund is the best option (60% of the total fund), then comes Balanced Fund (20%), followed by Midcap Fund (10%), Small-cap Fund (5%) and Liquid Fund (5%). If you’re a conservative trader, you may opt-in Debt Fund. But if you’re optimistic, you can go for index funds as a systematic investment plan. Index Fund can deliver you a very profitable return in a bull market. Why? Because index fund includes highly rated performing stocks with diversified sectors and reliable.

    One of the benefits of investing in a mutual fund is that offers professional investment management and potential diversification

    Ways to earn money by investing in a mutual fund:

    Dividend Payments. A fund earns income from dividends on stock or interest on bonds. The fund pays the shareholders almost all the income, lower for expenses.

    Capital Gains Distributions. The price of the securities in a fund may grow. By selling a security that has increased in price, the fund has a capital gain. At the end of the year, the fund shares the capital gains, lessen by any capital losses, to investors.

    Increased NAV. When the market value of a fund’s portfolio rises, the value of the fund and its shares increases also. If the NAV is higher the value of shareholders’ investments will be higher too. NAV is calculated by adding up the current value of all the stocks, bonds, and other securities, including cash, in its portfolio. Then, subtract the manager’s salary and other expenses, and then divide that result by the fund’s total number of shares.

    All funds carry some level of risk. It is possible to lose some or all of the money you invest. The reason is obvious, the mutual fund holds securities that can decrease in value. Dividends or interest payments are also changing along with changes in market conditions.

    A fund’s past performance is not important because past performance does not predict future returns. But past performance will never tell anything about the future performances but can tell you how volatile or stable a fund has been in the past. If you find a fund had more volatility, that is a sign that there are higher investment risks.

    Every mutual fund must file a prospectus and regular shareholder reports, that’s by the law. Read the prospectus and the shareholder reports before you invest. Also, the investment portfolios of mutual funds are managed by investment advisers. You should always check that the investment adviser is registered before investing.

  • How To Choose An Asset To Invest In

    How To Choose An Asset To Invest In

    How To Know Which Asset To Invest
    You don’t need to be an excellent asset picker to build your wealth. Just avoid get-rich-quickly schemes.

    By Guy Avtalyon

    How to choose an asset? Don’t pick only one, or form the same asset class, mix them.

    The main asset classes are:

    1. a) Shares/stocks (also known as equities).
    2. b) Bonds (also known as fixed-interest stocks or debt).
    3. c) Property.
    4. d) Commodities.
    5. e) Cash and cash equivalents.

    What are the best assets to invest in?

    (the return criteria is based off trying to generate $10,000 a year in passive income)
    1) Certificates of Deposit (CDs).
    2) Fixed Income / Bonds.
    3) Physical Real Estate.
    4) Peer-to-Peer Lending (P2P)
    5) Dividend Investing.
    6) Private Equity Investing.
    7) Creating Your Own Products.
    8) Real Estate Crowdsourcing.

    Decide which asset to invest among these

    Let’s say like this, investing is about laying out money today expecting to get more money back in the future. This is best achieved by acquiring productive assets. Productive assets are investments that internally throw off surplus money from some sort of activity. To be clear, if you buy a painting, it isn’t a productive asset. After 200 years you’ll still own the painting, which may or may not be worth more or less money. But, if you buy an apartment building you’ll not only have the building but all of the cash it produced from rent over that century.

    How to choose an asset suitable for you?

    First of all, never invest all your money into one asset. You should mix them. The right asset mix should help balance risk with your expected rate of return on your investments, fit your tolerance for risk, let you get your money when you need it, help provide the growth you need to reach your goals, and change as your needs and goals change over time. When you know all of these you’ll know how to choose an asset to invest in.

    • Shares (also known as equities) – Shares are bought through a stockbroker. The easiest way to buy or sell shares is through an online broker. Some execution-only is maybe the best choice. Execution-only indicates the broker will take your order and execute it without giving you any advice. Many execution-only brokers provide lots of information and research about shares but this does not include advice. So, if you want to use some service like this one you’ll have to take full responsibility for your investment. If you do need advice you’ll have to find a stockbroker offering either an advisory or discretionary service. With a discretionary service, you authorize the broker to buy and sell shares on your behalf, but you’ll have to pre-arrange the limits. If you choose an advisory service, the broker will need your permission before taking any action regarding your trade.
    • Bonds (also known as fixed-interest stocks). These represent a form of IOU issued by governments and companies when they want to borrow money from investors. They pay a fixed level of interest, with higher-risk borrowers paying more in interest than lower-risk borrowers.
    • Property. The property has a good record in providing a financial return that beats inflation, no matter residential or commercial it is. As an investor, you can buy shares in property development or real estate investment companies. Also, you can buy real ‘bricks and mortar’. Funds generally focus on commercial property, but some buy into the residential property as well.
    • Commodities. You can find a huge variety of commodities traded on global markets: oil and gas; precious metals such as gold and silver; industrial metals such as copper and iron; and ‘soft’ agricultural commodities such as wheat, rice, and soya. It is almost the same as shares and bonds. Commodity prices can rise and fall in answer to supply and demand
    • Cash. It may be a bit strange that cash is considered to be an asset class because the whole reason for investing in the first place is to grow your money faster than if it was left in the bank. But you must have in your mind that cash provides a useful benchmark for all the investment. Finally, investments that don’t beat cash have failed. Cash also provides a safe shelter for funds when markets are bumpy or overvalued. For example, some funds trade in currencies to increase their returns from cash in periods the interest rates are low.
      Being a skillful asset picker isn’t actually necessary to grow your capital. Many people get in trouble particularly when they think of investing as a way to get rich quickly.

    Your path to success as an investor or trader is not likely to hinge on whatever hot stock your friend thinks you should buy ASAP.  Your success depends more on how smart a portfolio you put together, as well as how you progressively modify or rebalance it over time. And also, knowing how to choose an asset that will generate you nice returns.

    Well, how do you invest intelligently, if slowly? You have to respect some basic principles.

    Why do you want to start investing?

    The main argument for putting your money in anything is to avoid losing your wealth during inflation. In your checking account, cash will still be there in 40 years, if you don’t touch any of it. But you won’t be able to buy anything.

    Other crucial reasons might include growing substantial enough savings for retirement and earn enough cash for buying a home. For those kinds of goals, you might want assets with higher returns and therefore you’ll have to take on higher risk.

    Also, the very important question is when should you begin investing?

    You might already know, but you need to be investing in old age. If you start investing in your early ages you will have many advantages as an investor. Just to name a two: you have more time for your money to grow and more time for market downturns to correct themselves.

    How to choose an asset?

    Each type of productive asset has its own characteristics and pros and cons. Here is a quick rundown of some of the potential investments you might make as you start your journey:

    Business Equity – If you own equity in a business, you are qualified to a share of the profit or losses caused by a company’s activity.  Whether you are acquiring a small business completely or buying shares through the purchase of stock on the stock market. Business equity has historically been the most rewarding asset class for investors. It is wise to observe that a good business is a gift that keeps on giving.

    Fixed Income Securities – When you buy fixed-income security, you are really lending money to the bond issuer in exchange for interest income. There are billions of ways you can do it, from buying certificates of deposit and money markets to corporate bonds, tax-free municipal bonds, etc.

    Real Estate – This is maybe the oldest and most easily understood asset class that you as investors may think about. There are several ways to make money investing in real estate but it typically comes with developing a property and selling it for a profit or owning something and letting others use it in exchange for rent.

    Intangible Property and Rights – When it is done properly you can create things out of the air that goes on to print money for you. Adorable! Intangible property includes everything from trademarks and patents to music royalties and copyrights.

    Farmland or Other Commodity-Producing Goods – It often involves real estate. Investments in commodity-producing activities are fundamentally different in that you are either producing or extracting something from the ground or nature for what you hope is a profit. For instance, if oil is discovered on your land, you can extract it and earn money from the sales. If you grow wheat, you can sell it and earn cash under any weather. But the risks are remarkable: hail, flood, drought can and have caused folks to go bankrupt by investing in this asset class. But also it can make big rewards.

    That is exactly how to choose an asset to invest in.

     

  • What is Growth Investing and How To Pick a Stock?

    What is Growth Investing and How To Pick a Stock?

    What is growth investing
    Here is how to recognize the best growth investment stocks and how to execute this investment strategy

    By Guy Avtalyon

    Growth investing is an investment strategy which investors use to find stocks with higher earnings growth prospects. It doesn’t matter how high their prices are. These stocks usually have low dividend yields. Also, they have higher volatility and limited downside protection. Moreover, they are highly sensitive to changes in interest rates. The companies with stocks that trade at high valuation levels usually have a high P/E ratio, high P/B, and P/S ratio.

    Growth investing is focused on capital appreciation. Growth investors invest only in companies that have above-median growth. Even if the stock price looks expensive and metrics like price-to-earnings or price-to-book ratios, confirm that. The growth investing strategy is in contrast with value investing.

    This investing strategy’s focus is on a company that has a track record of high or rising growth. For example, a company has a stock price that has rise year after year over 3 or 4 years. Such stock is a target of growth investors. But the timeline shouldn’t be so long. Even if a stock rise at price every week for 3 weeks in a row growth investors will be interested in that stock.

    Growth investing doesn’t consider direct research or fundamentals only. Very often it may be a response to the market sentiment.

    For example, if you drive BMW and your friends also drive a BMW car. And say, the stock has gone up every month for the last six months. Then you know that the overall market sentiment is good. And the sentiment of the consumers is also a good and valuable metric for growth investors.

    So, you would buy BMW stock if you support the growth investing viewpoint.

    Who are growth investors?

    Some famous investors such as Warren Buffett have stated that there is no theoretical difference between the concepts of value and growth (“Growth and Value Investing are joined at the hip”).

    That’s because the growth is always a component in the calculation of value. It is constituting a variable whose importance can range from a little too vast. And whose impact can be both negative as well as positive?

    Buffet’s opinion in one sentence is: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”.

    But the real father of growth investing is Thomas Rowe Price, Jr. who worked and promoted growth investing through his company T. Rowe Price. He founded this company in 1937 and today is a publicly-traded multinational investment firm.

    How to execute a growth investment strategy?

    The following businesses are suitable for growth investing:

    • Emerging markets
    • Recovery shares
    • Blue chips
    • Internet and technology stock
    • Smaller companies
    • Special Situations

     

    What is the main issue with growth investing? It is the fear you are buying at the top of the growth curve. One way to avoid this is to look for long-term growth patterns.

    Don’t look at growth surges that last one week, or one month or several months. If you really found a solid company, it should have a history of solid growth. And be able to demonstrate an upward trend in their share price over many years.

    But, Most investors do not relly on growth investing alone. They look at other indicators that can support a pattern for future growth. Let’s take the BMW as an example again.

    If they are bringing out new lines of the car, expanding to different countries then it is clear that BMW is targeting growth as a strategy for the company. So, you may own a good stock if you are using a growth investing strategy.
    This strategy is most effective in the long run. It isn’t suitable for short-term investors for obvious reasons. Growth companies need time to grow.
    Every investor should ask this question: Why is growth investing?
    The possible answer could be because you want a long-term financial stability and wealth accumulation. And you’ll be right.

    How to identify stocks for growth investing?

    Growth investment involves picking essentially strong stocks. These stocks have a promising future compared to other stocks in their sector and will have an edge in terms of returns in the long-term. While choosing stock for growth investing, it is important to ensure some essential factors such as the revenue model, cash inflow, growth prospects with respect to the economy, the company’s executive board, market, competition, etc. Researching would let you know if a stock suits the growth investing strategy or not. It is easy to get an insight when you study the company’s balance sheets and reading up more about its history, endeavors, and goals from its website or some other sources. Before taking the final call on your growth investment, it is very important to ensure whether the asset fits the criteria of optimal returns.

    Here are a few parameters that could be helpful in analyzing whether a stock is a growth stock or not:

    Return on Equity: This means the profit-making potential of the company. It is calculated by dividing the net income of the company with the total equity of the shareholders.

    Increase in Earning per Share (EPS): An increased EPS ensures better growth prospects. Hence, it is very important for you to analyze if the EPS is increasing or not over the observed time.

    Projected Earnings: It gives an insight into the company’s expected growth and can act as a good indicator of growth investment.

    What are the picks for growth investing?

    Small-Cap Stocks: Companies that lie in the suit of small-cap are those that are in their initial growth stages. This makes them more promising in growth prospects, the affordability of the stocks is higher. This enables you to buy a bigger lot of their shares and make a decent investment.

    Technology and Healthcare Stocks: These companies could be a good pick for growth investing. They are a kind of revolutionary innovations, which increases the scope of their growth prospects. The fact they are exceptionally well in the market because they target a wider audience, thus resulting in exponential growth. They stand by the characteristics of growth in the investment.

    Speculative Investments: Even speculative stocks could bring in a fortune in terms of growth investing as they come at a higher risk. If you are choosing a speculative investment, make sure to practice caution and invest only your surplus funds with due diligence.

    The great influence in shaping this investment style had Phil Fisher, whose 1958 book “Common Stocks and Uncommon Profits” is still today a reference for identifying growth companies and we highly recommend this book.

     

  • Earn a million! How and what you can do?

    Earn a million! How and what you can do?

    2 min read

    How to earn $1 million? 1

    If you earn a million dollars that will change your life for sure. But how to earn a million? Is that amount enough for some changes?

    On some point in life, everyone asks themselves how much money would dramatically change their life.

    It can be a tricky question but also a subject of serious consideration.

    We all know some story about lottery winners and how much money they got and how fast they spent all. Easy come, easy go, some may say.

    Million would change someone’s life.  Several million everyone’s. Remember, everyone’s.

    Most people won’t see a small part of that money in their lifetimes. Some of us play the lottery and have a hope that one day the luck will hit us. That a dream and there is nothing bad in having dreams.

    But what can we do in reality? How much money would you consider “life-changing”? This question is worthy of economic consideration. 

    If you suddenly earn $1 million more economists say not as much as you might think.

    You have to pay taxes on it and for sure you have some loans and outstanding debts to pay off. Speaking about me, if I were to win $1 million tomorrow, I’d definitely still keep working at my current job. One million bucks are not enough to change my entire life. Or anyone else’s. Maybe I’d spend a little bit of a vacation, and then I’d put the large amount of it in savings.

    Actually, it isn’t so hard to earn millions

    But let’s take a look at how much money is needed for a month of decent living.

    Most of us are spending as little as possible and saving as much as possible. But this isn’t the point. Point is to set realistic goals and understand your own financial position.

    How to earn $1 million?Start with this number. Do you know what your life costs right now? Do you have a mortgage or you pay rent? How much do you spend on essentials, from food to clothes to insurance to annual fees, every month? And don’t forget to account for inflation over the long term.

    Then you have to figure out how much it will cost you to get out of debts, from balances carried on personal credit cards to car payments to student loans. The first number figure that would change your life is the amount it would cost you to pay off all debt on depreciating assets. That’s your first number.

    But your debt on depreciating assets isn’t an investment. Your car for sure will not get more worthy over time. It will not increase its value. That why this kind of debt is classified as bad debt.

    Let’s go further to earn a million

    Now, you have to figure what is the amount of money that you would need to pay off all debts on appreciating assets. It’s classified as good debt, because underlying assets like house or land, tend to increase in value over time.

    But you’d still probably have to work to maintain your lifestyle. The third number is the amount it will take to produce little more than you need every year without touching the principal of your investment. That’s the third number.

    Anyway, you need at least $50,000 a year to maintain your lifestyle. You go out to eat, take a vacation, buy new shoes, and pay your property taxes.

    How much capital do you need to invest to generate $50,000 every year after taxes and inflation?

    How to earn $1 million? 2Let’s say you don’t want a risky investment, so you rather stay away from stocks. If you put your money in bonds, you might get a more stable return. If you looked for municipal bonds, you probably wouldn’t have to pay federal or state taxes. Suppose you can find a good portfolio of municipal bonds paying a 4% annual return. That’s an acceptable rate and a safe investment and probably even avoids taxes. For that $50,000 you need a principal amount of $1.25 million dollars. 

    Let’s say you can save an extra $15,000 per year if you pay off debt on depreciating assets in one leap and $18,000 per year on appreciating assets. And you have no debt for the next 40 years. WOW, you would have $1,320,000.

    A million is a lot of money, but it’s also not an unreasonable amount of money.

    It’s not lottery jackpot money. If you work hard, save well, and invest well, that amount is within your reach during your lifetime.

    To make things clear, it is so fun to have dreams. But this doesn’t have to stay as a dream. 

    Creating a million dollars in one shot to do everything may never happen. But what you can do? You can make progress onto all three goals. You are the one that has the power to change your life and your financial future.

    But where is dramatic life change? Stop watching movies.

    Risk Disclosure (read carefully!)

  • Costa Coffee sold to Coca Cola!

    Costa Coffee sold to Coca Cola!

    1 min read

    Costa Coffee sold to Coca Cola!

    Whitbread, a leisure group taking in coffee shops and hotels, said earlier this year it would spin off Costa Coffee and list it as a separate entity, following pressure from activist investor Elliott.

    Whitbread has agreed to sell Britain’s biggest coffee chain to Coca-Cola in a £3.9bn deal. On Friday the company said a sale of the business is now “in the best interests of shareholders”.

    Whitbread’s stock rose more than 18% in early trading on Friday.

    Leisure group Whitbread says sale ‘in best interests of shareholders’.

    Profit of this deal will be used to pay down debt and increase the pension fund. Whitbread said it intends to return a majority of net cash proceeds to shareholders.

    Earlier this year it was reported that Whitbread has been got close to a potential buyout of Costa Coffee.

    The company said the sale of the coffee chain will allow it to focus on its Premier Inn hotels business.

    Hospitality group Whitbread is cutting hundreds of management roles, two months after confirming plans to spin off its Costa Coffee business, The UK Independent revealed earlier in July.

    The company will let at least 250 managers go as part of a restructuring of its restaurant business, which is held under the Premier Inn brand.

    Employees were told about the redundancies but were given no further detail at that time.

    But on Friday everything became clear.

    Workers have been concerned that job cuts were appearing since the Costa spin-off was announced, and feel that the process has not been handled well by Whitbread, according to a source close to the company.

    Chief executive Alison Brittain said: “This transaction is great news for shareholders as it recognizes the strategic value we have developed in the Costa brand and its international growth potential, and accelerates the realization of value for shareholders in cash. This combination will ensure new product development, continued growth in the UK and more rapid expansion overseas.”

    Whitbread bought Costa Coffee, which is now the UK’s biggest coffee chain, for just ÂŁ19m in 1995. when it had only 39 shops and now has more than 2,400 UK coffee shops, as well as some 1,400 outlets in 31 overseas markets. Costa Express has 8,237 vending machines worldwide.

    Costa Coffee sold to Coca Cola! 2For Coca-Cola, the transaction represents a leap into the global coffee market, where it has little presence, allowing it to diversify away from fizzy and sugary drinks, which have declined in popularity among increasingly health-conscious consumers.

    Coca-Cola chief executive James Quincey told investors on a conference call that Costa was “a winning company that can go global”.

    He admits that retail sales were a new area for Coca-Cola, but said Costa already had “a strong management team” and that Coca-Cola intended to “make it attractive for them to stay”

    Think the Coca-Cola dividend, its stocks provide a remarkable wealth to investors like Warren Buffett.

    Risk Disclosure (read carefully!)

  • How To Start Trading?

    How To Start Trading?

    How To Start Trading?
    Trading the stock market is easy if you know how to start.

    By Guy Avtalyon

    How to start trading? First of all, never do it on your own. Ask to be advised by some experts. It is always best to access a financial advisor who will tell you how you should invest or trade, established in your financial situation, and risk appetite. Talk to others who invest.
    Read books, journals, and newspapers for recommendations. You can talk to your stockbroker for advice but don’t listen to everything he says.
    Always take a second opinion as brokers might have vested interests. In the beginning, it is best to go for known brands and big companies that have a good business status.

    What do you need to know before you start trading?

    Without knowledge, you may feel lost. Let’s make clear the basics because you’ve decided to join the crazy world of trading stocks and shares.
    You have to know that shareholders usually have a right to vote at company conferences.

    Of course, if you own just one of the three billion Facebook shares don’t expect Mark Zuckerberg to listen to your ideas!
    Another thing you need to know is that a company’s shares are indivisible.

    You cannot buy fewer than one share.

    Shares were pieces of paper that shareholders kept in a safe but since the ‘90s, this all changed to virtual shares. Before you start trading stocks, you have to buy them! You can do this in many different but easy ways.

    Some companies allow you to buy their shares directly from them but If you can’t purchase the shares directly or you’re not sure which company to invest in, ask your bank. Also, banks offer an online trading service connected to your existing accounts.

    Ask your bank to see if this option is possible. If your bank doesn’t offer a trading service, you can buy shares through a brokerage company. You can find many of trusty brokerages, just do a search. But be cautious. Never pick the first you find, read some reviews, ask around, visit forums.

    Brokers buy and sell securities in exchange for a commission. You can set up a simple brokerage account online or hire a so-called ‘full-service broker’ who will trade stocks on your behalf. They can be a consultant or advisor for you. This will cost a little more but it is worth it because you know nothing about shares or stocks or trading or investing.

    How to start trading?

    So, you want to start trading  stocks or CFDs, but you have always remembered three things:

    1. Never invest more money than you can afford to lose. With shares and CFDs, there is a risk of losing all the money you have invested.
    2. Follow your head, not your heart. Your heart will always pull you towards certain stocks. Stop and think. Only invest in companies that seem able to grow their profits, despite your emotions.
    3. Never invest your savings in just one company. ‘Never put all your eggs in one basket,’ as the mantra goes. Place your investments across many different companies.

    This way, you’ll significantly decrease the risk of loss, and increase the chance to multiply your investment.

    When you set up your online broker account, simply take the leap and make your first trade.

    Start with small, 1, 10, or 20 shares that will serve its purpose and bring you in the game.

    If trading with real capital isn’t viable, start with a simulator for virtual trading. Numbers of different online brokers offer virtual trading for practicing and learning.

    It’s too easy to lose money in a stock exchange, so start with a virtual where the money is virtual, but the stocks, stock prices, are real. Maybe the best way is to start your trading journey with virtual money, understand how they are performing, recognize when you can sell them, is it the right time, etc.

    Before you start putting your real money, you would learn the tricks of the trade with virtual money. Take it slow. You’ll need time to understand everything. Not even the most experienced traders know everything. Most important for beginners in trading is to have a trading plan, trading strategy, and to stick to them. Also, never forget to keep up your trading journal. That is an amazing tool. Add to it all your entries, exits, price of assets you trade, at which price you bought it, and at which you sold it. That will provide you a full picture of how successful your trades were. Do it with virtual trading in a demo account, also.Â