Important Facts about Stocks

Key Ratios

Common stock usually entitles the owner the right to vote at shareholder meetings and to receive dividends that the company has declared. Owners of preferred stock receive dividends before common shareholders and have priority in the event a company goes bankrupt and is liquidated.

Return on Assets (ROA).
An indicator of how profitable a company is relative to its total assets. Calculated by dividing a company’s annual earnings by its total assets, ROA is displayed as a percentage.
Return on Equity (ROE).
A measure of a corporation’s profitability that reveals how much profit a company generates with the money shareholders have invested. Calculated by dividing a company’s net income by its shareholder’s equity. The ROE is useful for comparing the profitability of a company to that of other firms in the same industry.
Price/Earnings (P/E) Ratioo.
It compares a company’s stock price to a future or recent level of earnings per share. When looking at a stock’s P/E multiple, investors should compare it with the range of P/Es that same stock has been valued at in the past and with P/Es of other stocks of similar companies.
Current Ratio.
This ratio is especially critical for companies having financial difficulties. For many industrial companies, a ratio in which current assets are at least 1.5 times current liabilities suggests the ability to meet short-term obligations.
Long Term Debt to Total Capital.
Obtained from the balance sheet, this ratio is used to estimate a company’s financial strength. Companies capitalized with 50 % debt (a debt to equity ratio of 1:1) or more might be over leveraged; heavy interest payments could limit growth of future earnings and restrict available financing for maintenance or expansion. For firms such as utility companies, however, a large proportion of debt, or financial leverage, is typically less of a concern than for other types of companies because utility companies have an adequate and relatively predictable stream of income and cash flow to cover interest expenses.
Price-to-Booked Ratio.
This valuation ratio reveals the value set by the stock market on a company’s assets. If a company’s assets are carried on its books at far below their actual current value while another company’s assets are overstated, a comparison of the two companies’ price-to-book ratios will be distorted.

Owners of preferred stock receive dividends before common shareholders and have priority in the event a company goes bankrupt and is liquidated.

Common Stock & Preferred Stock.

When looking at a stock’s P/E multiple, investors should compare it with the range of P/Es that same stock has been valued at in the past and with P/Es of other stocks of similar companies. For firms such as utility companies, however, a large proportion of debt, or financial leverage, is typically less of a concern than for other types of companies because utility companies have an adequate and relatively predictable stream of income and cash flow to cover interest expenses.
If a company’s assets are carried on its books at far below their actual current value while another company’s assets are overstated, a comparison of the two companies’ price-to-book ratios will be distorted.

A proxy statement is a document containing the information that a company is required by the SEC to provide to shareholders so they can make informed decisions about matters that will be brought up at an annual shareholder meeting. Since it is difficult for shareholders of all geographical regions to attend the meeting in person, the proxy statement gives a shareholder the right, not the obligation, to participate in a vote to elect directors or approve certain corporate decisions. After carefully reading the statement to gain an understanding of the issues, shareholders can vote via the Internet, telephone or by mail.

Financial ratios provide ways to quantify a company’s operating success and financial well-being. The ratios for a given company don’t mean much by themselves, but they are very revealing when compared with the company’s historical ratios and with the ratios of comparable companies in the same industry.

Because provisions in the tax laws allow dividends that they receive from preferred stock to be largely tax-exempt, Preferred stock is largely owned by corporations and institutions. In contrast, dividends on preferred stock received by individual investors are fully taxable. Since most of the demand for preferred shares comes from tax-advantaged buyers, who receive a higher after-tax yield, such stock is typically less attractive than other forms of investments for individuals.
Dividends & Dividend Yield.

The ratios for a given company don’t mean much by themselves, but they are very revealing when compared with the company’s historical ratios and with the ratios of comparable companies in the same industry.

As mentioned in the previous section, a dividend is the portion of a corporation’s earnings that is paid to stockholders. Please note that if the stock was purchased on or after the ex-dividend date (the first day the stock trades without the dividend), then you will not be entitled to receive this dividend payment.

To compute a stock’s dividend yield, divide the amount of the annual dividend by the current price per share. If a stock is priced at $10 a share and the annual dividend is $0.50 a share, the dividend yield is $0.50/$10.00, or 5 %.
Proxy Statement.

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What are Stocks?

The value of a stock depends on whether its shareholders want to hold it or sell it, and on how much other investors are willing to pay for it. If a company is doing well or investors have confidence in the company’s future, the stock’s value may go up. Through 1994, stock prices, as measured by the S&P 500 (an index based on the stock of 500 large companies), rose in 16 of the previous 20 years. Shares in a company can lose and depreciate value if the company is poorly managed, underperforms, or the stock simply draws no interest from investors. Here’s a stock tip, check the beta value (a measurement of risk) of each stock before making a decision.

Stock investing, on the other hand, can potentially deliver much higher returns because they are a riskier investment. Shares in a company can lose and depreciate value if the company is poorly managed, underperforms, or the stock simply draws no interest from investors. Here’s a stock tip, check the beta value (a measurement of risk) of each stock before making a decision.
Purchasing Stocks

Known as shares or equity, a stock is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s earnings and assets. Today, millions of people in the U.S. own stock in publicly traded companies or in equity mutual funds that invest in stocks.

The long-term value of stock market investments tends to grow with the economy. Through 1994, stock prices, as measured by the S&P 500 (an index based on the stock of 500 large companies), rose in 16 of the previous 20 years. Holders of common stock can receive dividends, which averaged more than 4 % annually based on their investments’ market value.
The Risk of Investing in Stocks

Investors see a capital gain as the stocks in which they invest rise in its value. Investors can also profit by receiving dividends, which is the portion of a corporation’s earnings that is paid to stockholders.

The value of a stock depends on whether its shareholders want to hold it or sell it, and on how much other investors are willing to pay for it. If a company is doing well or investors have confidence in the company’s future, the stock’s value may go up.
Benefits of Investing in Stocks

A typical Investor would usually buy stocks through an online or traditional brokerage firm. Known as broker/dealers, these are investment firms that are licensed to buy and sell securities by the Securities and Exchange Commission (SEC). Investors may also buy stock directly from the company that issues it through a dividend reinvestment plan (DRIP).

Investment Types Word Circle Concept with great terms such as stocks, bonds, savings and more.

Stocks, Bonds, & Mutual Funds

Stocks, Bonds, & Mutual Funds

When it concerns investing your cash for retirement, mutual funds are, more times than not, the way to go. You may discover that writers continually talk about these funds if you have checked out a number of personal financing posts. Still, they commonly fail to describe the fundamental property behind mutual funds; so many investors have a limited idea of what they are.

Starting Steps

Before you can completely understand mutual funds, you have to have a standard knowledge of stocks, bonds, and other important terms. Though these are simple explanations of these vital terms, they will be adequate for the sake of understanding.

Stocks

Since they give you the opportunity to hold shares in a business’s ownership, stocks are interesting. Companies that provide stocks are commonly referred to as “public” companies because their ownership is consisted of many public entities. If you want some examples of these business, you might look at Pepsi, Microsoft, or perhaps IBM. Stocks are extremely popular as the most traded bit of ownership that is traded on the open market.

Bonds

With bonds, you aren’t directly investing your cash into a public company. Instead, you are lending your own cash to the government for their individual use over a length of time. With this type of financial investment, you will get not only the primary investment back, however also a set amount of interest. Rates for this kind of investment are smaller sized, but these are safer financial investments.

Besides bonds and stocks, there are a lot of other kinds of investments that individuals need to think about. As pointed out in the past, shared funds are popular among financiers that like a safe option. They are popular for those individuals who don’t have a terrific concept of how to direct their own investment profile.

Shared Funds

He will make the option of deciding which particular stocks and bonds to invest in within the mutual fund specific niche. Mutual fund investors really hold shares in the shared fund itself, as opposed to being individual investors of the different stocks.

A lot of financiers like mutual funds due to the fact that of the reality that they are very effective investments. Historically, shared funds have actually been some of the safest financial investment alternatives on the market, as they are specifically created to fit the needs of safe minded financiers.

When compared to stocks and bonds, mutual funds are a safe, reliable method to invest money. As the marketplace as ended up being so volatile recently, it is very important to have a portfolio that includes both these safe options and other riskier financial investment bundles.

A mutual fund permits a bunch of financiers to use their investment dollars together to accomplish the desired goal. He will make the choice of deciding which certain stocks and bonds to invest in within the mutual fund niche. Shared fund financiers really hold shares in the shared fund itself, as opposed to being individual shareholders of the different stocks.

The majority of investors like mutual funds and stocks because of the reality that they are very effective investments. Historically, shared funds have been some of the safest investment options on the market, as they are particularly designed to fit the needs of safe minded investors.

Trading Foreign Exchange,stocks, Commodity Futures, Options and other Over-the-Counter Products on Margin Carries a High level of Risk and May Not Be Suitable For All Investors.


Crystal Global on Financial Chart

Acquainting Commonly Made use of Stock Market Terminologies

The stock market is a fantastic arena for individuals to invest with certain amount of risk, however, for numerous newbies, all the pressure of stock trading may trigger a lot of confusion, specifically if you are not familiar with the many terms and techniques made use of for arrangements.

If you are a beginner in the stocks game, make certain that you familiarize and educate yourself well on stock trading understanding. You can naturally, begin by expanding your vocabulary. Here are a couple of terms that you might need to familiarize:


Stock

Stocks are probably the most important and typical items traded in the stock market. These are in fact shares of certain companies, which are openly offered and traded.

Whenever individuals buy a part of stock in a particular business, this implies that they get a share of ownership and investing in that certain business. Through this, a stockholder is bringing specific rights towards the business such as a vote in investor conferences along with his/her monetary share from the company’s incomes.

Broker

A stockbroker is the person who deals with the real trading of stocks. She or he does the arrangements to get and sell the stocks in behalf of the financiers and the business involved. The many numerous types of brokers might include full-service, online, auto-trade and discount brokers.

Bull Market

A booming market is a market that materializes a continuous increase in the value of its stocks as well as a stable growth. Usually, with this type of market, financiers get an optimistic attitude and may want to get more rather than offer stocks.

Bearishness

Bearishness generally define considerable losses and declines in a specific market. With this type of behavior among stocks, many financiers would generally want to sell more of their stocks and may be pessimistic about investing.

Dividends

Dividends are added or incentive payments given to stockholders after a profitable quarter. With this sum of cash, lots of people might commonly reinvest on more shares of stock, which enables people to earn so much.

Futures

Futures, just like stocks, are also traded in the market. You can make from these, if in time, the real price of commodities end up being greater than what you paid for the futures.

Day Trader

A day trader is the person who buys and sells stocks strongly in one day. Typically, he or she does this for numerous times every day in order to make quite a few small profits within the day.

Trading on Margin

Trading on margin may be similar to trading stocks with using obtained money. Through this, you can acquire shares of stock for only a portion of the actual cost. The remainder of the cost can be paid upon the real sale of the particular stock, or on a later date.

These terms are just a few of the most frequently made use of language in stock trading. And upon experiencing them, you may definitely have the impression of how daunting the stock market can get. With the lots of complex terminologies and techniques, you may easily get backtracked if you do not understand sufficient about exactly what you are dealing with.

Remember that if you are new at doing business in this arena, make sure that you take the extra mile to find out more about more terms as well as techniques on how you can very well take full advantage of revenue. A little hard work will certainly get you far, and among nowadays you will realize how all this can settle.

If you are a beginner in the stocks video game, make sure that you acquaint and educate yourself well on stock trading knowledge. Futures, simply like stocks, are likewise traded in the market. Trading on margin might be similar to trading stocks with the usage of borrowed cash. These terms are just a few of the most typically made use of language in stock trading. And upon encountering them, you might certainly have the impression of how daunting the stock market can get.


Trading Foreign Exchange, stock,Commodity Futures, Options and other Over-the-Counter Products on Margin Carries a High level of Risk and May Not Be Suitable For All Investors

Bank of England MPC Comments After November Rate Decision

November 5, 2015 — 7:01 AM EST

The following is the text of the Bank of England Monetary Policy Committee comments following the November rate decision:
MONETARY POLICY SUMMARY

The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy in order to meet the 2% inflation target and in a way that helps to sustain growth and employment. At its meeting ending on 4 November 2015, the MPC voted by a majority of 8-1 to maintain Bank Rate at 0.5%. The Committee voted unanimously to maintain the stock of purchased assets financed by the issuance of central bank reserves at Stg 375 billion, and so to reinvest the Stg 6.3 billion of cash flows associated with the redemption of the December 2015 gilt held in the Asset Purchase Facility.

In September, twelve-month CPI inflation stood at -0.1%, slightly over 2 percentage points below the inflation target. Around four fifths of the deviation from the target reflects falls in energy, food and other imported goods prices, with the remainder reflecting subdued domestic cost growth. The combined weakness in domestic costs and imported goods prices is evident in subdued measures of core inflation, which are currently around 1%.

The outlook for inflation reflects the balance between persistent drags from factors such as sterling and world export prices, and prospective further increases in domestic cost growth. The MPC’s objective is to return inflation to target sustainably; that is, without an overshoot once persistent disinflationary forces ultimately wane. Given these considerations, the MPC intends to set monetary policy to ensure that growth is sufficient to absorb remaining spare capacity in a manner that returns inflation to the target in around two years and keeps it there in the absence of further shocks.

The outlook for global growth has weakened since the August Inflation Report. Many emerging market economies have slowed markedly and the Committee has downgraded its assessment of their medium-term growth prospects. While growth in advanced economies has continued and broadened, the Committee nonetheless expects the overall pace of UK-weighted global growth to be more modest than had been expected in August. There remain downside risks to this outlook, including that of a more abrupt slowdown in emerging economies.

Domestic momentum remains resilient. Consumer confidence is firm, real income growth this year is expected to be the strongest since the crisis, and investment intentions remain robust. As a result, domestic demand growth has been solid despite the fiscal consolidation. Although it has moderated, growth is projected to pick up a little towards the middle of next year, as a tighter labour market and stronger productivity support real incomes and consumption, and as accommodative credit conditions encourage strong investment and a pickup in the housing market. The Committee judges the risks to domestic demand to be broadly balanced.

Robust private domestic demand is expected to produce sufficient momentum to eliminate the margin of spare capacity over the next year. Domestic cost pressures are expected to build as a result of a pickup in wage growth relative to productivity growth. CPI inflation is nonetheless expected to remain below 1% until the second half of next year, reflecting the continuing drag from commodity and other imported goods prices. Beyond that, the dampening influence of sterling’s past appreciation on inflation is expected to be persistent, diminishing only slowly over the MPC’s forecast period. In this context, the MPC judges it appropriate to return inflation to the target in around two years.

Reflecting concerns about the global outlook, prices of risky assets have fallen since August. There have also been sizable declines in the yields on safe assets. These have had opposing effects in the forecast. The path for Bank Rate implied by market yields, on which the MPC’s projections are conditioned, has fallen and now embodies an even more gradual pace of tightening than at the time of the previous Report.

In the Committee’s judgement, the lower path for Bank Rate implied by market yields would provide more than adequate support to domestic demand to bring inflation to target even in the face of global weakness. In that case, the MPC’s best collective judgement is for the most likely path for inflation to exceed slightly the 2% target in two years and then rise a little further above it, reflecting modest excess demand. The MPC judges that the risks to this projection lie slightly to the downside in the first two years, reflecting global factors.

Underlying those projections are significant judgements in a number of areas, as described in the November Inflation Report. In any one of these areas, developments might easily turn out differently than assumed, with implications for the outlook for growth and inflation, and therefore for the appropriate stance of monetary policy. Reflecting that, there is a range of views among MPC members about the balance of risks to inflation relative to the best collective judgement presented in the November Report. At the Committee’s meeting ending on 4 November, the majority of MPC members judged it appropriate to leave the stance of monetary policy unchanged at present. Ian McCafferty preferred to increase Bank Rate by 25 basis points, given his view that the path of domestic costs was more likely to lead to inflation exceeding the target in the medium term than was embodied in the Committee’s collective November projections.

All members agree that, given the likely persistence of the headwinds weighing on the economy, when Bank Rate does begin to rise, it is expected to do so more gradually and to a lower level than in recent cycles. This guidance is an expectation, not a promise. The actual path Bank Rate will follow over the next few years will depend on the economic circumstances.

With an installment loan, you pay an agreed amount, which includes principal and interest, every month. Each payment reduces the balance of the loan until it is paid off. There is a fixed ending date, known as the term of the loan.

Unsecured loans are not backed by any collateral. You borrow money on the strength of your good credit and ability to repay alone.

When the Prime Rate is low, such as when the government is trying to stimulate the economy during a recession, you save on interest. If you need to borrow during a period of high interest, your payments will drop once the Prime Rate drops.

Fixed vs. Adjustable Interest Rate Loans

Installment and revolving describe the amount of time you have to pay back a loan. With a revolving loan, you have access to a continuous source of credit, up to your credit limit.

Essentially, there are two types of loans: unsecured loans and secured loans. Secured loans are loans in which you pledge some sort of collateral. When you took out the loan, the bank may repossess the collateral if you do not repay the loan according to the terms you agreed to.

Revolving vs. Installment Loans

Unsecured vs. secure Loans

Fixed interest is just that. You and the bank agree to a certain interest rate and it remains constant throughout the term of the loan. Fixed interest rates give you the stability of always knowing what your payment will be, so you can budget accordingly.

Types Of Loans

Student Loan (Stafford Loan) A loan for college expenses underwritten by the U.S. Government. The loan is granted to the student. Payment is deferred while the student is still in school.

Personal Loans: Unsecured or secured loans made for a fixed purpose.

Essentially, there are two types of loans: unsecured loans and secured loans. Secured loans are loans in which you pledge some sort of collateral. Home Equity Loan: A secured loan for a fixed amount in which the collateral is your home. Home Improvement Loan: A secured loan for a lump sum fixed amount in which the collateral is your home. Student Loan (Stafford Loan) A loan for college expenses underwritten by the U.S. Government.

Credit Cards: An unsecured loan which allows you a line of credit against which you may borrow by presenting a plastic card to the merchant from whom you are purchasing the item. You may make more than one purchase, up to your credit limit.

Mortgages: A secured loan in which the collateral is the real estate you buy.

Personal Line of Credit: Unsecured loans allowing you access to funds up to a fixed credit limit.

Home Improvement Loan: A secured loan for a lump sum fixed amount in which the collateral is your home. The interest on this loan may be tax deductible. (In some areas of the country, a home improvement loan “secured by the equity in your home” may not be available.

Home Equity Loan: A secured loan for a fixed amount in which the collateral is your home. In some cases, the interest on this loan may be tax deductible. See your accountant.

Home Equity Credit Line: A secured, revolving line of credit in which the collateral is your home. In some cases, the interest on this loan or a portion of it may be tax deductible. Consult a tax professional or your accountant.

Auto Loans: A secured loan in which the collateral is the vehicle you purchase.

Asset Allocation & Your Investment Plan – A Blueprint For Wealth

When we talk about asset allocation we refer to the various vehicles in which we invest our cash. It is advised that the largest chunk of your assets should fall into the security (approx 70 %) bucket and this includes assets such as cash, ISAs, pension funds, home of residence, safe bonds and government securities.

Your Investment Plan– The Most Important Thing To Create Before You Risk Even One Penny In The Markets.

One of my online businesses helps provide information and products to help other people set-up their own dot com businesses. One of the first things I advise my clients is to create a plan for their business. A plan puts all those thoughts in your head together, combines then with practical facts & figures and gives them a blueprint to get to exactly where they want to be in an efficient and structured way.

Before you decide to enter into stock investment it is worth drawing up a plan so that you can set your own rules about your asset allocation (and discover where you are right now). Ultimately, The 70/15/15 rule to asset allocation will depend upon the individual investor, their risk tolerance and their mindset. You can adjust the numbers to more closely match your attitude towards risk.

Many of the wealthiest people in the world owe their fortunes to different types of residual income– from bonds and stocks to investment trusts, real estate, commodities and more. In this chapter we’re going to discuss the importance of asset allocation– how you spread your assets into different types of products (from safe to speculative).

You’ve heard the motto, if you fail to plan, you plan to fail! This applies as much (if not more) to investments as it does to anything else in the world.

Many experts believe that the asset allocation proportions should vary according to the investors age. Those aged 40 or below may wish to employ a more aggressive strategy where only 40 % of assets are in security and 30 % are held each in speculative and buy/hold investments. Again, your personal circumstances, preference to risk and other influencing factors should be considered before arriving at your personal asset allocation numbers.

The next type of asset class is the “hold & buy” variety– these tend to be longer term investments that are generally safe. The buy & hold chunk of your total assets should include approximately 15 % of your entire assets.

We come to the speculative class of assets– these are higher risk products that you jump in and out of quickly for short term financial gains. These include stocks that you trade actively (jumping in and out within a few days/weeks), IPOs, futures & options, warrants and some of the more speculative mutual funds.

Here are just a small sample of things that your personal investment plan should highlight:

1. What amount of money you have available to invest and how this sum will be allocated within each different asset class.

2. How will you find suitable investments? Will you learn about them yourself or will you seek out professional advice (for example brokers or follow investment gurus).

3. When your investments turn against you, how you will cope psychologically. The market moves heavily on psychology and how you react to situations can be the difference between losing and winning.

4. A more detailed plan should be created for each investment outlining the reason for the investments, as well as an entry and exit strategy.

Remember – before you even look at an investment report, you MUST decide how your wealth will be allocated and then draw up a long term investment plan that’s right for you.

To try and start investing without a clear plan is asking for trouble.

Before you decide to enter into stock investment it is worth drawing up a plan so that you can set your own rules about your asset allocation (and discover where you are right now). Those aged 40 or below may wish to employ a more aggressive strategy where only 40 % of assets are in security and 30 % are held each in speculative and buy/hold investments.

It is advised that the largest chunk of your assets should fall into the security (approx 70 %) bucket and this includes assets such as cash, ISAs, pension funds, home of residence, safe bonds and government securities. The next type of asset class is the “hold & buy” variety– these tend to be longer term investments that are generally safe. The buy & hold chunk of your total assets should include approximately 15 % of your entire assets.
Trading Foreign Exchange,stocks, Commodity Futures, Options and other Over-the-Counter Products on Margin Carries a High level of Risk and May Not Be Suitable For All Investors.






Adjustable Rate Mortgages: This Home Mortgage Loan May Not Be For The Weak At Heart

“I am interested in a fixed mortgage rate.” I said.

“May I ask why that is?” The broker asked politely.

“Looking at your last ten years of history, you have done pretty well with the adjustable rate. May I suggest that we look at some adjustable rates, which are even less than the rate you’re paying and with caps you don’t have to worry about the interest rate hikes.

When he was done I explained to him that I recall the 18 % -19 % interest on mortgage loans in the early 1980’s that he seemed too young to remember. I pointed out that on a $100,000 loan, the 18 % interest is $1,500 per month on the mortgage interest alone. , if you have a $200,000 loan the interest alone would be a back-breaking payment of $3,000 per month.

Margin – This is the lender’s markup and where they make their profits. The margin is added to the index rate to determine your total interest rate.

There are also those older individuals who have suffered from some set back in life and do not enjoy a high credit score or do not have a very high income. Since a poor credit score increases the interest rate a bank offers to potential borrowers, a fixed rate may be too high for these individuals to consider.

“I don’t want to deal with the risk of rising interest rates. At my age, I can not afford the risk.”.

Let’s take a look at some terms that help you understand ARM better.

Periodic caps – The lenders may limit how much they can increase your loan within an adjustment period. Not all ARMs have periodic rate caps.

I heard the news about another interest rate hike and thought it was about time to look into refinancing my mortgage. I contacted my mortgage company.

I knew he thought I am out of my mind thinking about an 18 % mortgage interest rate in today’s environment. The gap in understanding wasn’t about fixed rate mortgages vs adjustable rate mortgages (ARM).

When lenders are considering your mortgage loan application, they look at what percentage of your income is available for repaying their loan. With an income of $5,000 per month, a $2,000 loan payment is 40 % of your income and a $1,000 payment is 20 % of your income.

ARM Indexes – These are benchmarks that lenders use to determine how much the mortgage should be adjusted. The more stable the index is the more stable your adjustable loan remains. When you are shopping around, consider both the margin and the index.

Negative Amortization – In most cases a portion of your payment goes toward paying down the principal and reducing your total debt. When the payment is not enough to even cover the interest due, the unpaid amount is added back to the loan and your total mortgage loan obligation is increased. In short, if this continues you may owe more than you started with.

To understand this gap, let’s look at the adjustable rate mortgages. This type of mortgage loan is usually lower than the fixed rate and the lower rate means lower payment that in turn means easier qualification.

As you compare loans, lenders and rates remember Henry Moore who said, “What’s important is finding out what works for you.”.

Overall caps- Mortgage lenders may also limit how much the interest rate can increase over the life of the loan. Overall caps have been required by law since 1987. Payment Caps – The maximum amount your monthly payment can increase at each adjustment.

.

At this point the broker took a breather so that I can say, “No thank you. He asked before launching into a lecture that had a mix of economy 101, budgeting 1, a dash of fortune telling and a totally unrealistic and healthy optimism of future trend in interest rates.

Interest Rate Caps – This is the maximum interest a lender can charge you.

Adjustment Period – Refers to the holding period in which your interest rate will not change. You will come across ARM figures like 5-1 that means your mortgage interest remains the same for five years and then it will adjust every year.






Adjustable mortgage rates appeal to young people with an innate optimism, hopes of increased income and the high possibility of moving to a different home in a short period of time. They need to look at what they can afford to pay and can not worry too much about the distant future. To them anything is better than renting which is absolute waste of money.

Negative amortization is the possible downside of the payment cap that keeps monthly payments from covering the cost of interest.

May I suggest that we look at some adjustable rates, which are even less than the rate you’re paying and with caps you don’t have to worry about the interest rate hikes. I knew he thought I am out of my mind thinking about an 18 % mortgage interest rate in today’s environment. The gap in understanding wasn’t about fixed rate mortgages vs adjustable rate mortgages (ARM). Adjustable mortgage rates appeal to young people with an innate optimism, hopes of increased income and the high possibility of moving to a different home in a short period of time. Overall caps- Mortgage lenders may also limit how much the interest rate can increase over the life of the loan.
Trading Foreign Exchange, Commodity Futures, Options and other Over-the-Counter Products on Margin Carries a High level of Risk and May Not Be Suitable For All Investors.


Forex Currency Trading Explained

FX or Forex, currency trading is the trading of one currency against another. In currency trading, these codes are often used to express which specific currencies make up a currency pair. Buying (“going long”) the currency pair implies buying the first, base currency and selling an equivalent amount of the second, quote currency (to pay for the base currency). A trader buys a currency pair if he/she believes the base currency will go up relative to the quote currency, or equivalently that the corresponding exchange rate will go up.

Forex trading in simplest terms is the buying of one currency and the selling of another. It is a 24-hour market enabling it to accommodate constant changing world currency exchange rates.

FOREX MARKET HOURS
At 7:00 pm Sunday, New York time, trading begins as markets open in Tokyo, Japan. By 4:00 am, the European markets are in full swing, and Asia has concluded their trading day.

Buying (“going long”) the currency pair implies buying the first, base currency and selling an equivalent amount of the second, quote currency (to pay for the base currency). It is not necessary to own the quote currency prior to selling, as it is sold short. A trader buys a currency pair if he/she believes the base currency will go up relative to the quote currency, or equivalently that the corresponding exchange rate will go up.

(one pip, with proper decimal placement/ currency exchange rate) x (Notional Amount).

SPOT FOREX.
Spot foreign exchange is always traded as one currency in relation to another. That is, buy and sell euros US dollars.

(.0001/.8942) x EUR 10,000 = EUR 1.1183.

Trading volume has been growing at a rate of 25 % per year since the mid-1980s and therefore it is not difficult to accept the notion that the currency options is the world \’s fastest growing industry. What used to require days to accomplish in Europe or Asia now only takes a few minutes. Needless to say, technology has changed everything and millions of Dollars are moved from one currency into another every second of every day by major banks through computers and for the average investor, with the touch of a phone.

EUR/USD: 1 pip = $1.00 (.8941 to.8942 is worth $1.00 per 10,000 Euros).

Using EUR/USD as an example, we have:.

The most commonly traded currency pair is EUR/USD.

Spread.
The spread is the difference between the price that you can sell currency at (Bid) and the price you can buy currency at (Ask). The spread on majors is usually 3 pips under normal market conditions.

CURRENCY TRADING: BUYING AND SELLING CURRENCIES.
All Forex trades result in the buying of one currency and the selling of another (currency trading), simultaneously.

GBP/USD: 1 pip = $1.00 (1.4765 to 1.4766 is worth $1.00 per 10,000 Pounds).

(.01/ 130.46) x USD 10,000 = $0.77 or 77 cents per pip.

All times are quoted in Eastern Standard Time (New York).

Currencies are traded for hedging and speculative purposes. Various market participants such as corporations, institutions, and individuals trade forex for one or both reasons.

Foreign exchange is the backbone of all international capital transactions. Compared to the slim profit margins rendered in other areas of commercial banking, huge profits are generally produced in a matter of minutes from minor currency options market movements. Some banks generate up to 60 % of their profits from trading currency aggressively.

Forex is the backbone of all international capital transactions. Compared to the slim profit margins rendered in other areas of commercial banking, huge profits are generally produced in a matter of minutes form minor currency market movements. Some banks generate 60 % of their profits from trading currency aggressively.

Corporate treasurers, private individuals and investors have currency exposures during the the regular course of business. The FXTrade Platform is an ideal platform to hedge any such exposure. An investor, who has bought a European stock and expects the EUR exchange rate to decline, can hedge his currency exposure by selling the EUR against the USD.

Trading volume has been growing at a rate of 25 % per year since the mid-1980s and therefore it is not difficult to accept the notion that the currency market is one of the world fastest growing industries. What used to require days to accomplish in Europe or Asia now oly takes a few minutes. Needless to say, technology has changed everything and millions of Dollars are moved from one currency into another every second of every day by major banks through computers and for the average investor, with the touch of a computer key.

USD/JPY: 1 pip = $.77 (i.e. a change from 130.45 to 130.46 is worth about $.77 per $10,000).

FOREX BASICS – What’s a PIP.
A “pip” is the smallest increment in any currency pair. In EUR/USD, a movement from.8951 to.8952 is one pip, so a pip is.0001. In USD/JPY, a movement from 130.45 to 130.46 is one pip, so a pip is.01.

The most commonly traded currencies are: USD, EUR, JPY, GBP, CHF, CAD and AUD.

Transactions in foreign currencies take place when one country’s currency is purchased (exchanged) with another country’s currency.

USD/CHF: 1 pip = $.59 (1.6855 to 1.6866 is worth $.59 per $10,000).

FOREX or The Foreign exchange rate market is an international market where various currency exchange transactions take place; this is in the shape of simultaneously buying one currency and selling another. The Forex system in operation today was established in the 1970s when free currency exchange rates were introduced, this period also saw the US Dollar overtake the British Pound as the benchmark currency.

An open trade or position is one in which a trader has either sold or bought one currency pair and has not sold or bought back an adequate amount of that currency pair to effectively close the trade. When a trader has an open trade or position, he/she stands to lose or profit from fluctuations in the price of that currency pair.

What does it mean to be “long” or “short” a currency?
Being long means buying a currency. Being short means selling a currency.
He or she buys US Dollars and sells Japanese Yen if a trader goes long USD/JPY. Buying a currency is synonymous with taking a long position in that currency. If he or she believes it will appreciate in value, a trader takes a long position in a currency.
He or she sells US Dollars and buys Japanese Yen if a trader goes short USD/JPY. Selling a currency is synonymous with shorting that currency. If he or she believes it will depreciate in value, a trader would short a currency.

Market Hours.
The spot Forex market is unique to any other market in the world; trading 24-hours a day. Somewhere around the world a financial center is open for business and banks and other institutions exchange currencies every hour of the day and night, only stopping briefly on the weekend. Foreign exchange markets follow the sun around the world, giving traders the flexibility of determining their trading day and the ability to take advantage of global economic events.

Forex Symbol Guide
Symbol Currency Pair Trading Terminology
GBP/USD British Pound/ US Dollar “Cable”.
EUR/USD Euro/ US Dollar “Euro”.
USD/JPY US Dollar/ Japanese Yen “Dollar Yen”.
USD/CHF US Dollar/ Swiss Franc “Dollar Swiss”, or “Swissy”.
USD/CAD US Dollar/ Canadian Dollar “Dollar Canada”.
AUD/USD Australian Dollar/ US Dollar “Aussie Dollar”.
EUR/GBP Euro/ British Pound “Euro Sterling”.
EUR/JPY Euro/ Japanese Yen “Euro Yen”.
EUR/CHF Euro/ Swiss Franc “Euro Swiss”.
GBP/CHF British Pound/ Swiss Franc “Sterling Swiss”.
GBP/JPY British Pound/ Japanese Yen “Sterling Yen”.
CHF/JPY Swiss Franc/ Japanese Yen “Swiss Yen”.
NZD/USD New Zealand Dollar/ US Dollar “New Zealand Dollar” or “Kiwi”.
USD/ZAR US Dollar/ South African Rand “Dollar Zar” or “South African Rand”.
GLD/USD Spot Gold “Gold”.
SLV/USD Spot Silver “Silver”.

FX or Forex, currency trading is the trading of one currency against another. In terms of trading volume, the currency exchange market is the world’s largest market, with daily trading volumes in excess of $1.5 trillion US dollars.

Using USD/JPY as an example, this yields:.

CALCULATING THE WORTH OF A PIP.
How much is one pip worth per 10,000 Dollars in USD/JPY? We will refer to the size, in this case 10,000 units of the base currency, as the “Notional Amount”.

Selling (“going short”) the currency pair implies selling the first, base currency, and buying the second, quote currency. A trader sells a currency pair if he/she believes the base currency will go down relative to the quote currency, or equivalently, that the quote currency will go up relative to the base currency.

Approximate pip values for the major currencies are as follows, per 10,000 units of the base currency:.

Currency markets are ideally suited for speculative trading. Unlike equity trading, where restrictions limit a trader’s ability to profit from a market down turn, there are no such constraints on currency trading. Currency traders can take advantage of both up and down trends thus increasing their profit potential.

CURRENCY PAIRS.
All currencies are assigned an International Standards Organization (ISO) code abbreviation. In currency trading, these codes are often used to express which specific currencies make up a currency pair. USD/JPY refers to two currencies: the US Dollar and the Japanese Yen.

We want the pip value in USD, so we then must multiply EUR 1.1183 x (EUR/USD exchange rate): EUR 1.1183 x. 8942 = $1.00.

This is in fact a phenomenon you will see with any currency in which the currency is quoted first (such as EUR/USD or GBP/USD): the pip value is always $1.00 per 10,000 currency units. This is why pip (or “tick”) values in currency futures, where the currency is quoted first, are always fixed.

Unlike trading on the stock market, the forex market is not conducted by a central exchange, but on the “interbank” market, which is thought of as an OTC (over the counter) market. This worldwide distribution of trading centres means that the forex market is a 24-hour market.

When one country’s currency is purchased (exchanged) with another country’s currency, transactions in foreign currencies take place. The price agreed upon or negotiated for the currency purchased is referred to as the foreign exchange rate. Major commercial banks in the money market centers throughout the world are responsible for the majority of foreign currencies sold and bought.
Trading Foreign Exchange, Commodity Futures, Options and other Over-the-Counter Products on Margin Carries a High level of Risk and May Not Be Suitable For All Investors.


Introduction To Options Trading, Part 1

Stocks provide you with tangible value, because they represent part ownership in the company. If the stock rises in value, you will gain a profit. Stocks, because they have tangible value, can be traded over public exchanges, or they can be used as collateral to borrow money.

The study of options can expand your perceptions about the range of possibilities. Most people are familiar with two forms of investment: equity and debt.

The best-known example of this is the purchase of stock in publicly listed companies, whose shares are sold through the stock exchanges. Each share of stock represents a portion of the total capital, or ownership, in the company.

Example

When you own a bond, you also own a tangible value, not in stock but in a contractual right with the lender. Like stocks, bonds can be used as collateral to borrow money. In the event an issuer goes broke, bondholders are usually repaid before stockholders as part of their contract, so bonds have that advantage over stocks.

Equity for Cash: You purchase 100 shares at $27 per share, and place $2,700 plus trading fees into your account. You receive notice that the purchase has been completed. This is an equity investment, and you are a stockholder in the corporation.

Example

Lending Your Money: You purchase a bond currently valued at $9,700 from the U.S. government. You invest your funds in the same manner as a stockholder, you have become a bondholder; this does not provide any equity interest to you. You are a lender and you own a debt instrument.

Equity and debt contain a tangible value that we can visualize and grasp. Stock ownership lasts as long as you continue to own the stock and can not be canceled unless the company goes broke; a bond has a contractual repayment schedule and ending date. There is no tangible value at all.

These attributes– lack of tangible value, worthlessness in the short term, and decline in value itself– make options seem far too risky for most people. Not all methods of investing in options are as risky as they might seem; some are quite conservative, because the features just mentioned can work to your advantage. In whatever way you might use options, the many strategies that can be applied make options one of the more interesting avenues for investors.

We’re talking about investing money in something with no tangible value, that will absolutely be worthless within a few months. To make this even more perplexing, imagine that the value of this intangible is certain to decline just because time passes by. To confuse the point even further, imagine that these attributes can be a disadvantage or an advantage, depending on how you decide to use these products.

Tip

When you own a bond, you also own a tangible value, not in stock but in a contractual right with the lender. Stock ownership lasts as long as you continue to own the stock and can not be canceled unless the company goes broke; a bond has a contractual repayment schedule and ending date.

The best-known example of this is the purchase of stock in publicly listed companies, whose shares are sold through the stock exchanges. Stocks provide you with tangible value, because they represent part ownership in the company. Stocks, because they have tangible value, can be traded over public exchanges, or they can be used as collateral to borrow money.

Option strategies range from high-risk to extremely conservative. The risk features on one end of the spectrum work to your advantage on the other. Options provide you with a rich variety of choices.
Trading Foreign Exchange, Commodity Futures, Options and other Over-the-Counter Products on Margin Carries a High level of Risk and May Not Be Suitable For All Investors.