The moment you decide to trade, take an oath to do it in the best way possible, not compromising on quality. Remember, that trade selection and prior planning are the two faces of a coin. Your success is half achieved through a proper planning, than by hours of trading of anything that comes handy, which is completely incomprehensible.
Each trade has a proper style, which you must follow to reach the perfection. It involves proper management: planning, organizing, delegating, directing, and controlling.
You will not be able to plan properly, if you are not organized. Make handy your trading software, data and proper equipment. Your own well-being is also not to be done away with. It is said in trade that, there is only the winner or the loser; there is no place for the mediocre. To be the champion you need to have discipline, self-control and a willingness to train extensively. You have to give your leisure to the over charts, studying, thinking, planning and to practicing your trading and the trade selection.
This extensive study involves the study of charts. You have to record the organized and pictures data on the charts in your mind that will intrigue you to ask the questions continually as, "How does what I see in front of me relate to the supply and demand for the underlying?" or "Is what I am seeing on the chart even related to supply and demand, or is what I am seeing related to an engineered move by some insider or market mover?" As soon as you realize the fact that supply and demand do not always solely move or fail prices, it is better. Markets are maneuvered three fourth.
But the charts reflect something else than the price patterns, as the response to the world happenings, rumors, government reports and many more. The most common thing to be overlooked is the engineering from and by the insiders, the market movers and by commercials holding large inventories. You must train yourself to analyze these things from the charts. For instance, the price patterns on your charts will help you to recognize between true and false breakouts. The pioneer trader will master trading the trend and will get the best out of it. If prices are rising, the trend is up. If prices are falling, the trend is down. The tips and tricks are equally important for you to follow and it is promising to maintain and update a collection of the techniques. To be a master trader, you can not but help practicing the recognition of blockage areas, trend identification and high possibility breakouts. Though a genius never achieves perfection, yet it is always advisable to improve your performance.
Tuesday, March 9, 2010
Saturday, February 27, 2010
Capitalize?
The term “capitalize” means registering the quantity of an entity in a balance sheet account against the income statement. Capitalizing can be different in different companies depending on their turnovers. But a big company would not do that. Moreover, in case of leased equipment, if it is a disguised purchase and not a rental agreement, then the lease should be capitalized. A process whereby anticipated future income is converted to one lump sum capital value. A Capitalization Rate is divided into the expected periodic income to derive a capital value for the expected income
There are basic differences between capitalization and depreciation.
Capitalization refers to adding the sum to the balance sheet. Suppose, a house is constructed after taking loans, then some interests of it will be added to its cost, which in total with the cost will be shown as an asset on your balance sheet.
Whereas, depreciation is the reduced amount registered on the balance sheet. It refers to the systematic allocation of the price of an asset from the balance sheet and reporting it as depreciation expense on the income statement. In short, capitalization refers to the addition and depreciation refers to the subtraction of an amount from the balance sheet.
Though not distinctly different, following types of capitalization are predominant.
• Mega cap: it includes the companies, whose market capital is over $200 billion. The most publicly traded companies like the Exxon are the leaders, which is not applicable to the majority of companies.
• Big/large cap: their market capital is between $10 billion and $200 billion. The well noted companies like the Microsoft, Wal-Mart, General Electric and IBM fall into this category. The large capital stocks are considered to be steady and safe. These stocks are also known as blue chips.
• Mid cap: the companies under this category are considered to be more unstable than the mega and large capital companies. A considerable part of this capital is characterized by the Growth Stocks. Some of the companies under this category are on the verge of becoming the industrial leaders.
• Small cap: the comparatively new and young companies having the capital between $300 million to $2 billion. They offer the possibility of greater capital increase but leaving the risk factor.
• Micro cap: The companies primarily consist of penny stocks ranging between $50 million to $300 million. They have equal upward and downward potential and thus are risk prone. You should do a lot of research before venturing into this position.
• Nano cap: capitals below $50 million are the indicator of this category. This is the riskiest of the categories and offer for very meager gain. The stocks normally trade on the pink sheets or OTCBB.
This categorization does vary with the variation in the actual market.
There are basic differences between capitalization and depreciation.
Capitalization refers to adding the sum to the balance sheet. Suppose, a house is constructed after taking loans, then some interests of it will be added to its cost, which in total with the cost will be shown as an asset on your balance sheet.
Whereas, depreciation is the reduced amount registered on the balance sheet. It refers to the systematic allocation of the price of an asset from the balance sheet and reporting it as depreciation expense on the income statement. In short, capitalization refers to the addition and depreciation refers to the subtraction of an amount from the balance sheet.
Though not distinctly different, following types of capitalization are predominant.
• Mega cap: it includes the companies, whose market capital is over $200 billion. The most publicly traded companies like the Exxon are the leaders, which is not applicable to the majority of companies.
• Big/large cap: their market capital is between $10 billion and $200 billion. The well noted companies like the Microsoft, Wal-Mart, General Electric and IBM fall into this category. The large capital stocks are considered to be steady and safe. These stocks are also known as blue chips.
• Mid cap: the companies under this category are considered to be more unstable than the mega and large capital companies. A considerable part of this capital is characterized by the Growth Stocks. Some of the companies under this category are on the verge of becoming the industrial leaders.
• Small cap: the comparatively new and young companies having the capital between $300 million to $2 billion. They offer the possibility of greater capital increase but leaving the risk factor.
• Micro cap: The companies primarily consist of penny stocks ranging between $50 million to $300 million. They have equal upward and downward potential and thus are risk prone. You should do a lot of research before venturing into this position.
• Nano cap: capitals below $50 million are the indicator of this category. This is the riskiest of the categories and offer for very meager gain. The stocks normally trade on the pink sheets or OTCBB.
This categorization does vary with the variation in the actual market.
Monday, August 24, 2009
Real Estate in Lebanon
Beirut, the erstwhile “pearl of the orient” and the capital of Lebanon, is the 28th most expensive city in the world. Real estate in Lebanon has been the third most successful sector after banking and tourism, and has gone through significant ups and downs. Towards the end of the previous century, real estate was significantly transfusing blood in the Lebanese economy with its overall overhauling program. But, as it chiefly addressed the upper class and the gulf investors, the demand for small and middle class construction programs remained unnoticed. As a result, Beirut observed a serious inflation and a recession that had weakened the economy considerably. Liquidity vanished from the market and the home owners had to face a serious trouble to sell their apartments at a much lower price than its original.
But from a few years, the picture has started to be reverse. As against the traditional practice of family ownership of the construction industries, a recent trend of professional holding is being noticed. The country has also started to attract international investors again. Market surveys and researches are increasingly done before starting any construction, which was not a usual practice before.
Lebanon, contrary to some its neighboring countries have two additional advantages to attract foreign investments. One, its wonderful seaside position and two, its pro Christian environment are conducive for the European and American investors. Lebanese banking laws are more close to the international banking rules and regulations than those of its neighbors. Apart from the Beirut central district, the adjoining Sodeco, Hamra, Verdun and Tabaris are also enjoying the benefits of the resurrected economy. Beirut Central District and Linord are the two chief construction projects that have been decided to be deployed at the earliest.
While the plush Dubai could not take the blow of the economic downturn, this small state has effectively passed it over. According to the General Manager of the Lebanese real estate giant Solidere, this has been possible because, the Lebanese real estate business has chiefly involved the local people in both purchase and sale. Year 2007 saw the sale of over 4.1 billion dollars of property, as the Investment Development Authority of Lebanon’s statistics suggests. And in the last year, a 40% increase was seen in the real estate price due to huge demand for buying them. Land for construction is very scarce in Lebanon and this added to the price hike. This is a striking contrast with the scenario of the region, which has faced 50% fall down in the real estate price. Lebanese real estate prices are dependent on the developers because the general financial trend is positive, being the liquidity, debt and the balance sheet all are in positive condition.
But from a few years, the picture has started to be reverse. As against the traditional practice of family ownership of the construction industries, a recent trend of professional holding is being noticed. The country has also started to attract international investors again. Market surveys and researches are increasingly done before starting any construction, which was not a usual practice before.
Lebanon, contrary to some its neighboring countries have two additional advantages to attract foreign investments. One, its wonderful seaside position and two, its pro Christian environment are conducive for the European and American investors. Lebanese banking laws are more close to the international banking rules and regulations than those of its neighbors. Apart from the Beirut central district, the adjoining Sodeco, Hamra, Verdun and Tabaris are also enjoying the benefits of the resurrected economy. Beirut Central District and Linord are the two chief construction projects that have been decided to be deployed at the earliest.
While the plush Dubai could not take the blow of the economic downturn, this small state has effectively passed it over. According to the General Manager of the Lebanese real estate giant Solidere, this has been possible because, the Lebanese real estate business has chiefly involved the local people in both purchase and sale. Year 2007 saw the sale of over 4.1 billion dollars of property, as the Investment Development Authority of Lebanon’s statistics suggests. And in the last year, a 40% increase was seen in the real estate price due to huge demand for buying them. Land for construction is very scarce in Lebanon and this added to the price hike. This is a striking contrast with the scenario of the region, which has faced 50% fall down in the real estate price. Lebanese real estate prices are dependent on the developers because the general financial trend is positive, being the liquidity, debt and the balance sheet all are in positive condition.
Monday, August 17, 2009
What is the Role of Banque du Liban and its Governor in the Lebanese Financial Stability?
Banque du Liban, better known as BDL, is Lebanon’s central bank and Riyad Salame is the current Governor of it. In 2005, Salame was entitled as the best central bank Governor in the Middle East by Europe’s leading business magazine ‘Euromoney’, for his appreciable performance in stabilizing the economy of Lebanon.
According to Dr. Salame, the financial model of Lebanon is so powerful that it can withstand any form of financial crisis. The following principles are the basis of this financial model-
Stability of currency: Since the past fifteen years, the currency of Lebanon (called Lebanese Pound) has been completely stable in spite of some political and social unrest.
Rapid growth of banks: The sound growth of banking sectors resulted in the extension of credit confidently.
Strict monitoring: The strict monitoring ensured the transparency in banking sector and enhanced the public trust. For this reason, the deposits in the Lebanese banks are currently worth of more than three times than the local economy.
Payment by the state: The Government paid back the debts which in turn, increased the credibility of Lebanon in the global market.
Salame said that they limited the range of credit that a bank could provide of their deposit. They fixed the limit up to 70% but international banks exceeded 100% of their deposits. Adding to that, dependence on interbank was lesser in Lebanon than in other foreign countries.
He noticed that bankruptcy could affect the global financial system negatively as it reduced the credibility of the banking sectors in global market. The price hike of oil collapsed the financial leverages. As a result, jobs and assets of countless people throughout the world were lost. He suggested a possible solution could be to extend the credit in stead of just mere speculation.
Dr. Salame stated, “There are problems in the Lebanese economy, yet its financial system has grown significantly and has been able to withstand the financial crisis.”
The problem of Lebanese economy was the rapid growth of public debt. Security was also another important factor. Having these drawbacks, Lebanon succeeded to achieve an economic growth of almost 8% in 2008 and expecting more than 4% in 2009. The prudent policies of BDL headed by Salame himself played a vital role behind it. The banks loaned up to 85% of the size of economy. The provision of huge credit helped the whole nation to weather the global economic downfall successfully. The public debt was reduced as some Lebanese institutions and CBL bought a large fraction of total debt. In this way, the country risk was reduced by 2-3%. He opined that the new Islamic banks would help to develop the economy considerably. Salame was in favor of introducing a global currency because a stable currency contributes a lot to strengthen the national economy.
The economy of Lebanon is a true example of that.
According to Dr. Salame, the financial model of Lebanon is so powerful that it can withstand any form of financial crisis. The following principles are the basis of this financial model-
Stability of currency: Since the past fifteen years, the currency of Lebanon (called Lebanese Pound) has been completely stable in spite of some political and social unrest.
Rapid growth of banks: The sound growth of banking sectors resulted in the extension of credit confidently.
Strict monitoring: The strict monitoring ensured the transparency in banking sector and enhanced the public trust. For this reason, the deposits in the Lebanese banks are currently worth of more than three times than the local economy.
Payment by the state: The Government paid back the debts which in turn, increased the credibility of Lebanon in the global market.
Salame said that they limited the range of credit that a bank could provide of their deposit. They fixed the limit up to 70% but international banks exceeded 100% of their deposits. Adding to that, dependence on interbank was lesser in Lebanon than in other foreign countries.
He noticed that bankruptcy could affect the global financial system negatively as it reduced the credibility of the banking sectors in global market. The price hike of oil collapsed the financial leverages. As a result, jobs and assets of countless people throughout the world were lost. He suggested a possible solution could be to extend the credit in stead of just mere speculation.
Dr. Salame stated, “There are problems in the Lebanese economy, yet its financial system has grown significantly and has been able to withstand the financial crisis.”
The problem of Lebanese economy was the rapid growth of public debt. Security was also another important factor. Having these drawbacks, Lebanon succeeded to achieve an economic growth of almost 8% in 2008 and expecting more than 4% in 2009. The prudent policies of BDL headed by Salame himself played a vital role behind it. The banks loaned up to 85% of the size of economy. The provision of huge credit helped the whole nation to weather the global economic downfall successfully. The public debt was reduced as some Lebanese institutions and CBL bought a large fraction of total debt. In this way, the country risk was reduced by 2-3%. He opined that the new Islamic banks would help to develop the economy considerably. Salame was in favor of introducing a global currency because a stable currency contributes a lot to strengthen the national economy.
The economy of Lebanon is a true example of that.
Sunday, August 16, 2009
How stable is the Lebanese Financial Market?
The global recession has affected more or less the economy of all leading nations of this planet. During this global crisis, the economy of Lebanon has shown a prominent rigidity to weather it successfully. The domestic economy of Lebanon didn’t have any direct openings to the affected financial global market or products. As a result, it hasn’t undergone any considerable impact of current global crisis.
Two main challenges that Lebanon faced were- the huge amount of public debt and the large financial requirement of the contemporary Government. But the smart and prudent economical policies helped the country to overcome the external effects. These meticulous policies covered three aspects:
- A prudent policy of interest rate,
- Utilization of primary surpluses,
- Stringent supervision of Economy.
The primary surpluses considerably have been reducing the ratio of debt to GDP by approximately 20% for last three years. The Government has retained an optimized rate of interest for backing the continuation of deposit inflow, transformation of dollar into Lebanese pound (or dedollarization). The government has also emphasized on the empowerment of the country’s external position among the leading nations. A strict supervision of economy protected the domestic banks from interacting with the outer global markets, affected international banks and foreign productions.
Still there are some challenges that demand the immediate attention of Government like boosting the international reserves, proper fiscal consolidation (as it lowers the monetary stabilization cost) and powerful donor support.
The above stated policies contributed a lot to retain confidence in the economy of Lebanon even during this acute recession. The deposit inflows haven’t been affected except the initial pause. The rate of transformation from dollar to Lebanese pound has grown gradually. The banking services have passed through the global crisis with ease. The BDL (Central Bank) has succeeded to acquire international reserves without facing much difficulty. During the Lehman failure, Eurobond spreads reached a peak level but have been come down astonishingly after that.
The high rate of currency transformation has stabilized the local currency and the economic growth of Lebanon is still continuing remarkably despite the struggle of the leading nations to overcome the impact of the global recession.
Two main challenges that Lebanon faced were- the huge amount of public debt and the large financial requirement of the contemporary Government. But the smart and prudent economical policies helped the country to overcome the external effects. These meticulous policies covered three aspects:
- A prudent policy of interest rate,
- Utilization of primary surpluses,
- Stringent supervision of Economy.
The primary surpluses considerably have been reducing the ratio of debt to GDP by approximately 20% for last three years. The Government has retained an optimized rate of interest for backing the continuation of deposit inflow, transformation of dollar into Lebanese pound (or dedollarization). The government has also emphasized on the empowerment of the country’s external position among the leading nations. A strict supervision of economy protected the domestic banks from interacting with the outer global markets, affected international banks and foreign productions.
Still there are some challenges that demand the immediate attention of Government like boosting the international reserves, proper fiscal consolidation (as it lowers the monetary stabilization cost) and powerful donor support.
The above stated policies contributed a lot to retain confidence in the economy of Lebanon even during this acute recession. The deposit inflows haven’t been affected except the initial pause. The rate of transformation from dollar to Lebanese pound has grown gradually. The banking services have passed through the global crisis with ease. The BDL (Central Bank) has succeeded to acquire international reserves without facing much difficulty. During the Lehman failure, Eurobond spreads reached a peak level but have been come down astonishingly after that.
The high rate of currency transformation has stabilized the local currency and the economic growth of Lebanon is still continuing remarkably despite the struggle of the leading nations to overcome the impact of the global recession.
Wednesday, June 10, 2009
When do you achieve Trading Perfection?
The moment you decide to trade, take an oath to trade in the best way possible, not compromising on quality. Remember, that trade selection and prior planning are the two faces of a coin. Your success is half achieved through a proper planning, than by hours of trading of anything that comes handy, which is completely incomprehensible. Each trade has a proper style, which you must follow to reach the perfection. It involves proper management: planning, organizing, delegating, directing, and controlling.
You will not be able to plan properly, if you are not organized. Make handy your trading software, data and proper equipment. Your own well-being is also not to be done away with. It is said in trade that, there is only the winner or the loser; there is no place for the mediocre. To be the champion you need to have discipline, self-control and a willingness to train extensively. You have to give your leisure to the over charts, studying, thinking, planning and to practicing your trading and the trade selection.
This extensive study involves the study of charts. You have to record the organized and picturised data on the charts in your mind that will intrigue you to ask the questions continually as, "How does what I see in front of me relate to the supply and demand for the underlying?" or "Is what I am seeing on the chart even related to supply and demand, or is what I am seeing related to an engineered move by some insider or market mover?" As soon as you realize the fact that supply and demand do not always solely move or fail prices, it is better. Markets are maneuvered three fourth.
But the charts reflect something else than the price patterns, as the response to the world happenings, rumours, govt reports and many more. The commonest thing to be overlooked by most is the engineering from and by the insiders, the market movers and by commercials holding large inventories. You must train yourself to analyze these things from the charts. For instance, the price patterns on your charts will help you to recognize between true and false breakouts. The pioneer trader will master trading the trend and will get the best out of it. If prices are rising, the trend is up. If prices are falling, the trend is down. The tips and tricks are equally important for you to follow and it is promising to maintain and update a collection of the techniques. To be a master trader, you can not but help practicing the recognition of blockage areas, trend identification and high possibility breakouts. Though a genius never achieves perfection, yet it is always advisable to improve your performance.
You will not be able to plan properly, if you are not organized. Make handy your trading software, data and proper equipment. Your own well-being is also not to be done away with. It is said in trade that, there is only the winner or the loser; there is no place for the mediocre. To be the champion you need to have discipline, self-control and a willingness to train extensively. You have to give your leisure to the over charts, studying, thinking, planning and to practicing your trading and the trade selection.
This extensive study involves the study of charts. You have to record the organized and picturised data on the charts in your mind that will intrigue you to ask the questions continually as, "How does what I see in front of me relate to the supply and demand for the underlying?" or "Is what I am seeing on the chart even related to supply and demand, or is what I am seeing related to an engineered move by some insider or market mover?" As soon as you realize the fact that supply and demand do not always solely move or fail prices, it is better. Markets are maneuvered three fourth.
But the charts reflect something else than the price patterns, as the response to the world happenings, rumours, govt reports and many more. The commonest thing to be overlooked by most is the engineering from and by the insiders, the market movers and by commercials holding large inventories. You must train yourself to analyze these things from the charts. For instance, the price patterns on your charts will help you to recognize between true and false breakouts. The pioneer trader will master trading the trend and will get the best out of it. If prices are rising, the trend is up. If prices are falling, the trend is down. The tips and tricks are equally important for you to follow and it is promising to maintain and update a collection of the techniques. To be a master trader, you can not but help practicing the recognition of blockage areas, trend identification and high possibility breakouts. Though a genius never achieves perfection, yet it is always advisable to improve your performance.
Thursday, April 23, 2009
When should you stop trading on a Demo Account?
The demo account is an account which is funded virtually, but acts as a real one. All the costs and dealings are the replica of the actual business. If you want to open a demo account, you will get ready help from any Forex brokers. They would provide you with a guidance kit to create it. To proceed, you have to fill up an online form with the help of your chosen broker and after following some simple steps; your demo account would be ready. The virtual fund depending on the brokers can range from $50,000 to $100,000.
It would be helpful for you, if you retune the balance amount of the demo account according to your actual trading amount, as it is not gambling. You will also have to learn the tactics of the trading platform, which is different with different brokers. When they offer for different orders, you will have to be attuned with the facts of placing market orders accurately, setting up targets, preventing loss and other nuances. You must have the answers to the following questions: Are contingent orders available? One cancels other(OCO)? How far from market price can you place limit buy/sell order? and more. These also vary and must be well-researched before investing, as the lack of the knowledge has led to huge amount of losses.
But, don’t worry. You have the option to practice it with your demo. Before you start, get acquainted with the technical expertise that the trading software requires. You should also know whether the policy offers for system integration, automated trading, news feed and back testing capabilities. As the softwares are getting more intricate and are offering unnecessary features, you have to be clear about your real need before opting for them.
A common mistake is mostly done by the traders, that they forget about the demo after starting the real account. One more important question is, whether to keep the demo alive, and the answer is yes. You should keep it so as long as possible; whether or not you have to re-register it after every 30 days, as some of them expire after that. Don’t forget to check its health regularly by the brokers.
This is required because trading is something that mandates regular updating of the trader’s awareness. Be it a tool launched by your broker, a new approach or a new system; first give it a try in your demo. And the most interesting part of it is, it is available free of cost.
Open a Demo Account and start practicing for FREE!!
It would be helpful for you, if you retune the balance amount of the demo account according to your actual trading amount, as it is not gambling. You will also have to learn the tactics of the trading platform, which is different with different brokers. When they offer for different orders, you will have to be attuned with the facts of placing market orders accurately, setting up targets, preventing loss and other nuances. You must have the answers to the following questions: Are contingent orders available? One cancels other(OCO)? How far from market price can you place limit buy/sell order? and more. These also vary and must be well-researched before investing, as the lack of the knowledge has led to huge amount of losses.
But, don’t worry. You have the option to practice it with your demo. Before you start, get acquainted with the technical expertise that the trading software requires. You should also know whether the policy offers for system integration, automated trading, news feed and back testing capabilities. As the softwares are getting more intricate and are offering unnecessary features, you have to be clear about your real need before opting for them.
A common mistake is mostly done by the traders, that they forget about the demo after starting the real account. One more important question is, whether to keep the demo alive, and the answer is yes. You should keep it so as long as possible; whether or not you have to re-register it after every 30 days, as some of them expire after that. Don’t forget to check its health regularly by the brokers.
This is required because trading is something that mandates regular updating of the trader’s awareness. Be it a tool launched by your broker, a new approach or a new system; first give it a try in your demo. And the most interesting part of it is, it is available free of cost.
Open a Demo Account and start practicing for FREE!!
Wednesday, April 8, 2009
Oil? Is it a good investment?
Oil is an essential commodity that is required in various sectors and industries from consumers to factories to automobiles to airplanes. Hence, when you invest in oil, your investment should be safe. But like all investments, you need to keep two things in mind. Your investment objectives and your risk tolerance. Once you know these, you can then select accordingly. There is one thumb rule to be considered with all investments. When you want greater returns, you need to take a bigger risk.
One of the best ways to make money from the stock market is to invest in oil. Anytime is a good time to invest in oil. Even today is a good time to invest in oil. There are a couple of things you need to understand first, though. You need to understand the supply and demand of oil. You also need to understand how this supply and demand affects the price of crude oil per barrel. The key factor that you need to take into account before investing in oil involves making a decision. This decision is simple. You need to decide whether the price of oil per barrel is rising or falling.
It requires a know how of the oil production process. You also need to know the oil production statistics. So whenever the price of oil is down, it is good to invest in oil. Oil is a Great investment choice! Oil is in perpetual demand. Oil can be used for your car. But, more importantly, it is also used in plastic production. Plastics are used in almost all spheres of life. Countries like Russia and China are getting more and more industrialized. This means that the demand for oil in these countries has increased exponentially. Like in any market, your gain or loss depends on how much you are ready to invest.
The easiest and safest decision to take is to invest in the big oil companies. These companies have been around for years. Hence they have the necessary equipment and the required infrastructure to drill oil. One thing you may need to consider is the equity size, there are a large number of shareholders in such companies. Since the number of shareholders is large, you need to invest more money. The profits these companies make is substantial. But at the same time, the profit is divided among the large number of shareholders.
One of the best ways to make money from the stock market is to invest in oil. Anytime is a good time to invest in oil. Even today is a good time to invest in oil. There are a couple of things you need to understand first, though. You need to understand the supply and demand of oil. You also need to understand how this supply and demand affects the price of crude oil per barrel. The key factor that you need to take into account before investing in oil involves making a decision. This decision is simple. You need to decide whether the price of oil per barrel is rising or falling.
It requires a know how of the oil production process. You also need to know the oil production statistics. So whenever the price of oil is down, it is good to invest in oil. Oil is a Great investment choice! Oil is in perpetual demand. Oil can be used for your car. But, more importantly, it is also used in plastic production. Plastics are used in almost all spheres of life. Countries like Russia and China are getting more and more industrialized. This means that the demand for oil in these countries has increased exponentially. Like in any market, your gain or loss depends on how much you are ready to invest.
The easiest and safest decision to take is to invest in the big oil companies. These companies have been around for years. Hence they have the necessary equipment and the required infrastructure to drill oil. One thing you may need to consider is the equity size, there are a large number of shareholders in such companies. Since the number of shareholders is large, you need to invest more money. The profits these companies make is substantial. But at the same time, the profit is divided among the large number of shareholders.
Monday, April 6, 2009
Gold in 2009.
Gold is one of the surest forms of investment. It is a form of investment which you can retain as tangible assets and then sell it at a later stage. The prediction is that gold will climb into 4 digits in the first quarter of the year and remain that way for the rest of the year. This holds true for the American Market. The demand for investment in Gold leapt at a blistering pace in 2008. Asia is the No. 1 market for gold. It is predicted that in 2009 also the demand for gold will remain very high.
However in the US and Europe in 2009 the gold investments will reduce. The premiums charged have increased. This holds true for gold coins as well as small bars. You would expect that gold will be a great investment in 2009. The U.S. dollar is predicted to remain under pressure. This is because the Federal Reserve will assume a more accommodative monetary policy. This is in comparison to the other key central banks. Gold still continues to be a safe asset.
Although the rate of returns that gold provides has slowed down, it has shown relatively lesser percentage decreases compared to the other assets. Where other investments have shown extreme volatility in the current financial crisis, gold remains to be a stable and safe option in 2009. Some predict that Gold is the Trade of the Year in 2009. Gold still manages to retain itself at the mean.
Gold still remains the best hedge against inflation. Gold is also a very attractive investment in the current financial crises.
In the current market scenario, you should remain neutral on Gold investments. You should continue to build on it in your portfolio. This is till the time when the markets stabilize a bit. Now comes the question of investing in gold.
Other than jewelry, you can also invest in Gold ETFs (Exchange Traded Fund). The return for Gold in 2009 alone has already been 6%! Because of lower inflation and deflation, the input costs for gold have reduced. This in turn also provides operative cash flows. The share prices of gold mining companies are at twice the gold price.
However in the US and Europe in 2009 the gold investments will reduce. The premiums charged have increased. This holds true for gold coins as well as small bars. You would expect that gold will be a great investment in 2009. The U.S. dollar is predicted to remain under pressure. This is because the Federal Reserve will assume a more accommodative monetary policy. This is in comparison to the other key central banks. Gold still continues to be a safe asset.
Although the rate of returns that gold provides has slowed down, it has shown relatively lesser percentage decreases compared to the other assets. Where other investments have shown extreme volatility in the current financial crisis, gold remains to be a stable and safe option in 2009. Some predict that Gold is the Trade of the Year in 2009. Gold still manages to retain itself at the mean.
Gold still remains the best hedge against inflation. Gold is also a very attractive investment in the current financial crises.
In the current market scenario, you should remain neutral on Gold investments. You should continue to build on it in your portfolio. This is till the time when the markets stabilize a bit. Now comes the question of investing in gold.
Other than jewelry, you can also invest in Gold ETFs (Exchange Traded Fund). The return for Gold in 2009 alone has already been 6%! Because of lower inflation and deflation, the input costs for gold have reduced. This in turn also provides operative cash flows. The share prices of gold mining companies are at twice the gold price.
Saturday, April 4, 2009
What is Short Selling & How does it Work?
Short selling is also known as shorting. When the seller shares a share that he/she does not own it is known as short selling. To be more specific it is when the seller sells a share or a security that he/she does not own, but has promised to deliver it. This is in complete contrast with the process of selling long. This means exactly the opposite. This involves the purchasing of a security whose price is expected to rise. Whenever you sell a stock short, your broker is the one who lends it to you.
There are several sources that a broker can get it from. It can come from the shares the broker already owns, it can be a share from one of the other customers of the same firm, or it can also be from some other brokerage firm. Once the shares are sold, the amount is credited to your account. Once the money is credited to your account, you must buy back exactly the same number of shares. This is known as covering. These shares are then returned to your broker. If the price of the said stock drops, what you have done is bought back the same share at a lower price. Thus you end up making a net profit.
However, if the price of the share rises, then you have made a loss. This is because you sold at a higher price, hoping to cover your sale at a lower price, and that did not happen. In most cases you can keep a short held stock for as long as you want to. But in case the person who has lent the shares to you wants the shares back, then you have to sell the shares back to the lender. In such cases a brokerage firm cannot sell what it does not have. So you have few options. You need to arrange the shares from somewhere to return them to the lender. Or you need to cover. This is referred to as being called away. You don't have the stock anymore since you sold it. So, you also need to surrender to the lender any of the dividends or rights that may be related to the said shares. You also need to open a Margin account for short selling, the broker or brokerage house will insist you put a certain amount of money and only then you can trade, they will be using that as a back–up for contingencies.
Let us take an example. Company X is performing very badly. The prices are dropping. You buy shares at a price of $10. Then the share value drops to $8. Now you short sell the shares and make a net profit of $2 per share. But if the price goes up to $11, you make a loss of $1 per share.
There are several sources that a broker can get it from. It can come from the shares the broker already owns, it can be a share from one of the other customers of the same firm, or it can also be from some other brokerage firm. Once the shares are sold, the amount is credited to your account. Once the money is credited to your account, you must buy back exactly the same number of shares. This is known as covering. These shares are then returned to your broker. If the price of the said stock drops, what you have done is bought back the same share at a lower price. Thus you end up making a net profit.
However, if the price of the share rises, then you have made a loss. This is because you sold at a higher price, hoping to cover your sale at a lower price, and that did not happen. In most cases you can keep a short held stock for as long as you want to. But in case the person who has lent the shares to you wants the shares back, then you have to sell the shares back to the lender. In such cases a brokerage firm cannot sell what it does not have. So you have few options. You need to arrange the shares from somewhere to return them to the lender. Or you need to cover. This is referred to as being called away. You don't have the stock anymore since you sold it. So, you also need to surrender to the lender any of the dividends or rights that may be related to the said shares. You also need to open a Margin account for short selling, the broker or brokerage house will insist you put a certain amount of money and only then you can trade, they will be using that as a back–up for contingencies.
Let us take an example. Company X is performing very badly. The prices are dropping. You buy shares at a price of $10. Then the share value drops to $8. Now you short sell the shares and make a net profit of $2 per share. But if the price goes up to $11, you make a loss of $1 per share.
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