How does one with a broken heart after losing a child or that of being a victim of domestic violence or that of being struck down with a disabling condition that was to affect the way they lived for the rest of their life - carry on, well let me tell you, heartache has to one of the most painful experiences a person could ever have to endure, however with counselling and medicinal treatment people are coping with loss and pain and putting their past behind them, however still never forgetting the misery in their life. Sharing your sorrows with another who is willing to give a shoulder to cry on is a positive way to release whatever you are feeling inside, never bottle up agonizing emotions because this can only cause more misery or encourage your health to deteriorate.
I would like to share with you this heartbreaking true story of a young girl very close to my heart that had her fair share of upset in her life. The heartache in her early years of womanhood was enough to put those to shame who complained over a headache.
June Bridget was her name, mother of two young children a boy and girl, it was not long after setting up home with her partner when he began to show his true colours. June Bridget suffered immense suffering caused by flying fists and kicks to the head. With being so young 20 years old, June found it hard to make that vital decision to get away from the mental and physical torture, why did she not leave, could it have been the punches had numbed her way of thinking or could it have been the elation felt after finding out she was pregnant again, as much as she loathed the beast she lived with, did not mean she would ever stop loving his kids.
Happiness prevailed for June after the birth of a baby girl a daughter Mary Ann, happiness was soon to be taken away from June when at three months old Mary Ann died a victim of cot death. Sadly it took the death of her beloved daughter that made her see sense and walk out of the abusive relationship, thanks to having many brothers her partner never followed through with his threats to come looking to harm her. One never really gets over the heartache involved with losing a baby but for the sake of her other two children June got her life back on track only to collapse with a brain haemorrhage of which took nine hours on an operating table to save her live. After months and months of treatment and being prescribed medication that she was to take for the rest of her life to help with her epileptic fits June carried on regardless trying to put everything behind herJune found happiness and had everything to live for when she met Rob who cared for her and her children. Both Rob and June sat down to plan their future together and thought a having a baby would be the icing on the cake to make their relationship a strong bonding one in closeness and into the bargain a little brother or sister for the other two much loved children who had taken to Rob from day one of their meeting. Heartache was to come to the fore once again for a girl that had suffered so much in such a short space of time in her life. It was eighteen months after her operation when Rob and June had an appointment with June’s doctor to clarify that she was well enough to carry another child. As they both approached the hospital entrance Rob collapsed at June’s feet only to be pronounced dead.
I ask you, how any person can suffer so much heartache in a period of over five years and carry on for the sake of others; however it was those others (family) that got June through the hard times, if you suffer heartache remember that your family are there for support.
June eventually found happiness when she married Benny. June and Benny accepted that they were never to have a child together but they were compensated by the way of grandchildren who helped fill the void in her life of her lost baby Mary Ann. I hold my hand up to a very brave niece of mine who has made me so proud. If you are one of these people who fly in gods face and fake an illness for attention or think the pain from a headache is disabling then think again. Heartache comes from a broken heart and believe me Junes heart was broken more times that you could ever imagine possible.
Wednesday, October 31, 2007
Sunday, October 28, 2007
Prospering with Mutual Funds: How anyone can “Afford” an Investment Advisor
“How to evaluate Load vs. No Load Mutual Funds.” (You can read that article on http://www.successful-investment.com/articles21.htm)
As the producer and I were working out the logistics of my appearance, she mentioned in passing that “most people can’t afford an investment advisor.”
While that wasn’t the time or place for me to discuss this, I realized that many people might have a similar misconception. Had conditions allowed, I would have pointed out the following to her.
There are only two ways an individual can invest in mutual funds: Selecting and investing themselves or using outside help. If they use outside help they’ll have a couple of choices again: A commissioned salesperson (broker, financial planner or Registered Representative) or a fee-based investment advisor. Most people don’t know the difference and often start with a broker who charges about 6% commission off the top to purchase a mutual fund. The fund is usually from a limited selection of fund families the broker has a relationship with. He, of course, would never recommend a no load fund or an exchange traded fund (ETF), since it is not in his best interest -- although it might be in yours.
Having a fee-based investment professional handling your portfolio will get you as close as possible to receiving advice that is based on nothing but the advisor’s best knowledge and evaluation of the market. They advise only what they consider top performing funds since sales commission is not a consideration and does not create any conflict of interest for them. But, how can you "afford" an advisor? First off, the advisor's fee is usually in the range of 1% to 3% per year depending on portfolio size. This amount is billed in advance on a pro-rated quarterly basis and charged directly to your investment account. This creates an initial savings right off the bat.Most fee-based advisors offer complete service as far as your portfolio is concerned. That means that they don’t simply “sell” you a mutual fund and disappear until you call again. Since investors evaluate advisors based on the performance of their portfolio, advisors are keenly interested in maximizing your bottom line. In the long run, your gain should outweigh their fee.
Many advisors utilize an investment discipline or methodology that keeps you not only invested during upswings in the market, but also in the appropriate funds for the current economic environment. For example, at one time, tech funds were hot. Now, generally, they're not. An advisor watching market trends could have been able to assist you in avoiding the bursting bubble. (In fact, my clients were advised to pull out of the market and into the safety of money markets in October, 2000, just before the market plummeted. What they didn't lose because of this will more than cover my fees for the rest of their lives!)
Most advisors don’t have lengthy agreements and you usually can cancel by giving 2 weeks notice. The advisor never has access to your money because he is affiliated with a custodian who handles the money, the monthly statements and fulfills the proper legal reporting requirements. With this arrangement an advisor can actually save you money. How?
1. The advisor will use only no load funds. Because of his affiliation with a custodian (often a major brokerage firm), he’ll have access to some 10,000 mutual funds, not just to one or two fund families as most commissioned brokers do. This allows him to pick the best available, which potentially means a higher return for his clients.
2. At times there are superior load funds available, especially in the international arena. I have used a couple of those in my own practice because they were available to me as “load waived funds” and my clients got the advantage without paying a sales commission.
3. Custodians many times also offer “Advisor only” funds. These are usually high performing mutual funds where the fund family wishes, for whatever reason, to deal only with investment professionals, so they set high minimum dollar requirements.
Such was the case in my practice during our most recent buy signal (4/29/03). I purchased the NAMCX fund, which was only available to advisors through my custodian. This fund rewarded us with a cool 47% over the following five months. Most independent investors would not have had access to such a fund on their own.Keep in mind that markets fluctuate and starting with an advisor in the middle of a downturn will not likely yield high profits at first. However, over time, an advisor will most likely produce results better than what you would reasonably expect yourself to do, even with the advisor's modest fee. Choosing the right advisor and watching how your portfolio performs with their advice will almost always prove that it doesn't cost you to have an investment advisor, it pays.
As the producer and I were working out the logistics of my appearance, she mentioned in passing that “most people can’t afford an investment advisor.”
While that wasn’t the time or place for me to discuss this, I realized that many people might have a similar misconception. Had conditions allowed, I would have pointed out the following to her.
There are only two ways an individual can invest in mutual funds: Selecting and investing themselves or using outside help. If they use outside help they’ll have a couple of choices again: A commissioned salesperson (broker, financial planner or Registered Representative) or a fee-based investment advisor. Most people don’t know the difference and often start with a broker who charges about 6% commission off the top to purchase a mutual fund. The fund is usually from a limited selection of fund families the broker has a relationship with. He, of course, would never recommend a no load fund or an exchange traded fund (ETF), since it is not in his best interest -- although it might be in yours.
Having a fee-based investment professional handling your portfolio will get you as close as possible to receiving advice that is based on nothing but the advisor’s best knowledge and evaluation of the market. They advise only what they consider top performing funds since sales commission is not a consideration and does not create any conflict of interest for them. But, how can you "afford" an advisor? First off, the advisor's fee is usually in the range of 1% to 3% per year depending on portfolio size. This amount is billed in advance on a pro-rated quarterly basis and charged directly to your investment account. This creates an initial savings right off the bat.Most fee-based advisors offer complete service as far as your portfolio is concerned. That means that they don’t simply “sell” you a mutual fund and disappear until you call again. Since investors evaluate advisors based on the performance of their portfolio, advisors are keenly interested in maximizing your bottom line. In the long run, your gain should outweigh their fee.
Many advisors utilize an investment discipline or methodology that keeps you not only invested during upswings in the market, but also in the appropriate funds for the current economic environment. For example, at one time, tech funds were hot. Now, generally, they're not. An advisor watching market trends could have been able to assist you in avoiding the bursting bubble. (In fact, my clients were advised to pull out of the market and into the safety of money markets in October, 2000, just before the market plummeted. What they didn't lose because of this will more than cover my fees for the rest of their lives!)
Most advisors don’t have lengthy agreements and you usually can cancel by giving 2 weeks notice. The advisor never has access to your money because he is affiliated with a custodian who handles the money, the monthly statements and fulfills the proper legal reporting requirements. With this arrangement an advisor can actually save you money. How?
1. The advisor will use only no load funds. Because of his affiliation with a custodian (often a major brokerage firm), he’ll have access to some 10,000 mutual funds, not just to one or two fund families as most commissioned brokers do. This allows him to pick the best available, which potentially means a higher return for his clients.
2. At times there are superior load funds available, especially in the international arena. I have used a couple of those in my own practice because they were available to me as “load waived funds” and my clients got the advantage without paying a sales commission.
3. Custodians many times also offer “Advisor only” funds. These are usually high performing mutual funds where the fund family wishes, for whatever reason, to deal only with investment professionals, so they set high minimum dollar requirements.
Such was the case in my practice during our most recent buy signal (4/29/03). I purchased the NAMCX fund, which was only available to advisors through my custodian. This fund rewarded us with a cool 47% over the following five months. Most independent investors would not have had access to such a fund on their own.Keep in mind that markets fluctuate and starting with an advisor in the middle of a downturn will not likely yield high profits at first. However, over time, an advisor will most likely produce results better than what you would reasonably expect yourself to do, even with the advisor's modest fee. Choosing the right advisor and watching how your portfolio performs with their advice will almost always prove that it doesn't cost you to have an investment advisor, it pays.
How to beat the mutual fund companies at their own game
You'd have had to be living on a desert island with no TV, newspaper or internet connection to have missed hearing about the great mutual fund scandal of 2003.
The issue was that some mutual fund companies allowed certain hedge funds to engage in after-hours trading, sometimes incorrectly referred to as market timing. Unfortunately, some companies have used the confusion about the term "market timing" to further their own cause. How?
They have used this issue to pretty much ban all forms of trading their funds, and some companies are imposing hefty short-term redemption fees—penalties for all intents and purposes—in the name of avoiding impropriety. But the real idea behind it all is: Buy our fund and never sell it!
These companies advocate a stubborn Buy & Hold philosophy despite the devastating effects that approach had on investors’ portfolios during the recent bear market. Performance is immaterial to them—they want your money in their fund whether it's going up or down.With all of the negative press over the months you'd think that mutual fund companies would have cleaned up their act and started giving more consideration to the individual investor. Not so.
This was brought home to me when a fund manager of an $800 million mutual fund called me to see what my plans were in respect to holding our positions with his fund (about $2 million). I explained my trend tracking methodology and he got very angry when he heard I would protect my clients' accumulated profits by selling his fund if it were to drop 7% off its highs.
His blustering made it quite clear that he did not like anyone managing for the benefit of their clients; he only cared about what was best for him and his company.
So, what can you do to prevent being taken advantage of? For one thing, do what your mutual fund company does — not what they tell you to do. Adopt a strategy for following trends, such as I do, and use the mutual fund manger’s superior stock picking ability to your advantage by buying and holding only as long as the fund is performing well.
Remember, the fund manager has one big disadvantage over you: He always “has to” be invested so that the public can purchase shares in his fund. You don’t! If market conditions dictate that you are better off in the safety of a money market account because we are in a severe downtrend, then you can take your money and run for cover. He can’t. He is constantly trying to adjust his portfolio to ever-changing economic conditions so that his potential losses are minimized. At the same time you are being told that his fund is the investment for all seasons. Don’t fall for it!
You as an individual investor are really in the driver’s seat. Unfortunately, you have probably been conditioned to think that Buy & Hope is a good investment strategy, when in fact it is a losing proposition.Bottom line is, use a well performing mutual fund during strong up trends and get over to the sidelines during trend reversals. (That's exactly what I did for my clients in October, 2001, and we retained the lion's share of their profits while Buy & Holders kept insisting the emperor was wearing new clothes.) Pretty soon you will feel that you are in charge of your financial destiny and any chosen mutual fund is merely a tool to bring you closer to your goals of maximizing your gain and minimizing your losses.
The issue was that some mutual fund companies allowed certain hedge funds to engage in after-hours trading, sometimes incorrectly referred to as market timing. Unfortunately, some companies have used the confusion about the term "market timing" to further their own cause. How?
They have used this issue to pretty much ban all forms of trading their funds, and some companies are imposing hefty short-term redemption fees—penalties for all intents and purposes—in the name of avoiding impropriety. But the real idea behind it all is: Buy our fund and never sell it!
These companies advocate a stubborn Buy & Hold philosophy despite the devastating effects that approach had on investors’ portfolios during the recent bear market. Performance is immaterial to them—they want your money in their fund whether it's going up or down.With all of the negative press over the months you'd think that mutual fund companies would have cleaned up their act and started giving more consideration to the individual investor. Not so.
This was brought home to me when a fund manager of an $800 million mutual fund called me to see what my plans were in respect to holding our positions with his fund (about $2 million). I explained my trend tracking methodology and he got very angry when he heard I would protect my clients' accumulated profits by selling his fund if it were to drop 7% off its highs.
His blustering made it quite clear that he did not like anyone managing for the benefit of their clients; he only cared about what was best for him and his company.
So, what can you do to prevent being taken advantage of? For one thing, do what your mutual fund company does — not what they tell you to do. Adopt a strategy for following trends, such as I do, and use the mutual fund manger’s superior stock picking ability to your advantage by buying and holding only as long as the fund is performing well.
Remember, the fund manager has one big disadvantage over you: He always “has to” be invested so that the public can purchase shares in his fund. You don’t! If market conditions dictate that you are better off in the safety of a money market account because we are in a severe downtrend, then you can take your money and run for cover. He can’t. He is constantly trying to adjust his portfolio to ever-changing economic conditions so that his potential losses are minimized. At the same time you are being told that his fund is the investment for all seasons. Don’t fall for it!
You as an individual investor are really in the driver’s seat. Unfortunately, you have probably been conditioned to think that Buy & Hope is a good investment strategy, when in fact it is a losing proposition.Bottom line is, use a well performing mutual fund during strong up trends and get over to the sidelines during trend reversals. (That's exactly what I did for my clients in October, 2001, and we retained the lion's share of their profits while Buy & Holders kept insisting the emperor was wearing new clothes.) Pretty soon you will feel that you are in charge of your financial destiny and any chosen mutual fund is merely a tool to bring you closer to your goals of maximizing your gain and minimizing your losses.
Thursday, October 25, 2007
Should You Choose Stocks Or Bonds
The difference between stocks and bonds isn't clear to those just starting in the wonderful world of investing. While stocks give investors part ownership of a company, bonds are loans made by investors to corporations or governments. Rather than benefiting from company profits the way that stock holders do, bond holders receive a fixed rate of return – a fixed interest rate. Bonds only last for so long and have a termination date called the date of maturity. Also, they can take decades to mature, whereas stock exchanges happen with lightning speed every day. If you are just looking to make a quick buck with high risk, go for stocks. In comparison, if you need stability, say, for a retirement, you might choose bonds.
1. Risks Versus Rewards
As hinted at earlier, stocks have a higher rate of risk whereas bonds are more secure. Of course to say bonds are safer than stocks doesn't automatically mean that you will always make money on bonds. A bond is an investment - and as such it may not be paid back. US government bonds are considered to be the safest type of bonds. Blue chip corporations (those with established performance records that span over many decades) are also very safe bond investments. Smaller corporations have a greater risk of defaulting on their bonds, but if the business goes bankrupt bond-holders are preferential creditors and will get compensated first.
2. Trading Bonds
Traditionally, bonds were the exclusive trading realm of huge corporations and banks. Not any more - even a savvy investor can begin trading bonds with as little as $5,000. Bonds bought and sold after the initial issues are quoted in increments of $100. A bond that is listed at 96 is selling for $96 per $100 face value.
3. Stocks Or Bonds?
Given what you have read so far, you might think that stocks are better for the short term and bonds for the long term, but the statistics do not lie. Bonds offer greater security and return on your investment than stocks, overall. The situation changes, however, when time spans of longer than 10 years are considered. The stock market has consistently outperformed bond investments by a large factor. This is because companies continue to increase in value and any short term fluctuations in the stock market become smoothed out. Overall, you should never put all your eggs in one basket - consider a bond as part of your portfolio to help cushion against market fluctuations. A mixture of investments is always the best choice.
1. Risks Versus Rewards
As hinted at earlier, stocks have a higher rate of risk whereas bonds are more secure. Of course to say bonds are safer than stocks doesn't automatically mean that you will always make money on bonds. A bond is an investment - and as such it may not be paid back. US government bonds are considered to be the safest type of bonds. Blue chip corporations (those with established performance records that span over many decades) are also very safe bond investments. Smaller corporations have a greater risk of defaulting on their bonds, but if the business goes bankrupt bond-holders are preferential creditors and will get compensated first.
2. Trading Bonds
Traditionally, bonds were the exclusive trading realm of huge corporations and banks. Not any more - even a savvy investor can begin trading bonds with as little as $5,000. Bonds bought and sold after the initial issues are quoted in increments of $100. A bond that is listed at 96 is selling for $96 per $100 face value.
3. Stocks Or Bonds?
Given what you have read so far, you might think that stocks are better for the short term and bonds for the long term, but the statistics do not lie. Bonds offer greater security and return on your investment than stocks, overall. The situation changes, however, when time spans of longer than 10 years are considered. The stock market has consistently outperformed bond investments by a large factor. This is because companies continue to increase in value and any short term fluctuations in the stock market become smoothed out. Overall, you should never put all your eggs in one basket - consider a bond as part of your portfolio to help cushion against market fluctuations. A mixture of investments is always the best choice.
The Role of the Business Model and Strategy for Business
People will always stress that having a well researched business plan is key before you start your business. Although creating a business plan is often an important step in the evolution of a business, particularly if you need financing or you are not experienced at running a business, it is not necessarily the essential first step. There are two key elements that should be completed prior to the business plan:
The business model
The strategy
What is a Business Model?
While the word model often stirs up images of mathematical formulas, a business model is in fact a story of how a business works. In general terms, a business model is the method of doing business by which a company can generate revenue. Both start-up ventures and established companies take new products and services to the market through a venture shaped by a specific business model. In their paper, The Role of the Business Model in Capturing Value from Innovation, Henry Chesbrough and Richard S. Rosenbloom outlined the six basic elements of a business model:
Articulate the value proposition – the value created to users by using the product
Identify the market segment – to whom and for what purpose is the product useful; specify how revenue is generated by the firm.
Define the value chain – the sequence of activities and information required to allow a company to design, produce, market, deliver and support its product or service.
Estimate the cost structure and profit potential – using the value chain and value proposition identified.
Describe the position of the firm with the value network – link suppliers, customers, complementors and competitors.
Formulate the competitive strategy – how will you gain and hold your competitive advantage over competitors or potential new entrants.
Joan Magretta in her article Why Business Models Matter took the concept of the business model a little further. Magretta suggests every business model needs to pass two critical tests, the narrative test and the numbers test. The narrative test must tell a good story and explain how the business works, who is the customer, what do they value and how a company can deliver value to the customer. The numbers test means your profit and loss assumptions must add up. At the most basic level, if your model doesn’t work, then your model has failed one of the two tests.
To begin the modeling process you need to articulate a value proposition on the product or service being provided. The model must then describe the target market. The customer will then value the product on its ability to reduce costs, solve a problem or create new solutions. A market focus is needed to identify what product attributes need to be targeted and how to resolve product trade-offs such as quality versus cost. You also need to identify how much to charge and how the customer will pay.
Think of business modeling as the managerial equivalent of the scientific method - you start with a hypothesis, which you then test in action and revise when necessary. The business model also plays a part of a planning tool by focusing managements on how all the elements and activities of the business work together as a whole. At the end of the day, the business model should be condensed onto one page consisting of: a diagram outlining how the business generates revenue, how cash flows through the business and how the product flows through the business and; a narrative describing the product/ service components, financial projections or other important elements not captured in the diagram.
Business Models and Strategy
It is important to note that completing a business model does not constitute strategic planning. Strategic planning factors in the one thing a business model doesn’t; competition.
What is strategy?
According to the Collins English Dictionary, strategy is “a particular long-term plan for success”. For our purposes, we will consider the essence of strategy as a formula for coping with the competition. Competitive strategy is about being different and the goal for a corporate strategy is to find a position in the industry where the company is unique and can defend itself against market forces. To do this the company must choose a set of activities that can deliver a unique mix of value.
Market Forces and Strategy
The determination of a strategy is rooted in determining how a company stacks up against basic market forces, how it can defend itself against these forces and how it can influence these forces. Fortunately, Michael E. Porter in his article How Competitive Forces Shape Strategy defined these market forces for us. Known as Porter’s 5 forces they consist of:
The industry – this is the jockeying for position among current competitors, this can consists of price competition, new product introduction or advertising slugfests.
The threat of new entrants - the seriousness of the threat of entry depends on the barriers to entry and reaction from existing companies. There are 6 major barriers to entry:
1) economies of scale
2) product differentiation
3) capital requirements
4) cost disadvantages independent of size
5) access to distribution channels
6) government policy.
A new company will generally have second thoughts about entering an industry if the incumbent has substantial resources to fight back, the incumbent seems likely to cut prices or industry growth is slow.
The threat of substitute products/services - substitutes can place a ceiling on prices that are charged and limit the potential of an industry.
The bargaining power of suppliers - suppliers can squeeze profitability by increasing prices or lowering the quality of the goods.
The bargaining power of buyers (customers) - customers can force down prices, demand better quality, more service or play competitors off on each other.
Once you assess how the market forces are affecting competition in your industry and their underlying causes, you can identify the underlying strength and weaknesses of your company, determine where it stands against each force and then determine a plan of action. Plans of action may include:
Positioning the company – match your strengths and weaknesses to the company’s industry, build defenses against competitive forces or find a position in the industry where forces are the weakest. You need to know your company’s capabilities and the causes of the competitive forces
Influencing the balance – take the offensive, for example innovative marketing can raise brand identification or differentiate the product.
Exploiting industry change – an evolution of an industry can bring changes in competition. For example, in an industry life-cycle growth rates change and/or product differentiation declines; anticipate shifts in the factors underlying these forces and respond to them.
The framework for analyzing the industry and developing a strategy provides the road map for answering the question “what is the potential of this business?”
Reconciling the Business Model and Strategy
I will use a short example to illustrate the difference between a business model and strategy. Although you may think that Wal-Mart pioneered a new business model on its road to success, the reality is that the model was really no different than the one Kmart was using at the time. But it was what Sam Walton chose to do differently than Kmart, such as focusing on small towns as opposed to large cities and everyday low prices, that was the real reason for his success. Although Sam Walton’s model was the same as Kmart's, his unique strategy made him a success.
The business model
The strategy
What is a Business Model?
While the word model often stirs up images of mathematical formulas, a business model is in fact a story of how a business works. In general terms, a business model is the method of doing business by which a company can generate revenue. Both start-up ventures and established companies take new products and services to the market through a venture shaped by a specific business model. In their paper, The Role of the Business Model in Capturing Value from Innovation, Henry Chesbrough and Richard S. Rosenbloom outlined the six basic elements of a business model:
Articulate the value proposition – the value created to users by using the product
Identify the market segment – to whom and for what purpose is the product useful; specify how revenue is generated by the firm.
Define the value chain – the sequence of activities and information required to allow a company to design, produce, market, deliver and support its product or service.
Estimate the cost structure and profit potential – using the value chain and value proposition identified.
Describe the position of the firm with the value network – link suppliers, customers, complementors and competitors.
Formulate the competitive strategy – how will you gain and hold your competitive advantage over competitors or potential new entrants.
Joan Magretta in her article Why Business Models Matter took the concept of the business model a little further. Magretta suggests every business model needs to pass two critical tests, the narrative test and the numbers test. The narrative test must tell a good story and explain how the business works, who is the customer, what do they value and how a company can deliver value to the customer. The numbers test means your profit and loss assumptions must add up. At the most basic level, if your model doesn’t work, then your model has failed one of the two tests.
To begin the modeling process you need to articulate a value proposition on the product or service being provided. The model must then describe the target market. The customer will then value the product on its ability to reduce costs, solve a problem or create new solutions. A market focus is needed to identify what product attributes need to be targeted and how to resolve product trade-offs such as quality versus cost. You also need to identify how much to charge and how the customer will pay.
Think of business modeling as the managerial equivalent of the scientific method - you start with a hypothesis, which you then test in action and revise when necessary. The business model also plays a part of a planning tool by focusing managements on how all the elements and activities of the business work together as a whole. At the end of the day, the business model should be condensed onto one page consisting of: a diagram outlining how the business generates revenue, how cash flows through the business and how the product flows through the business and; a narrative describing the product/ service components, financial projections or other important elements not captured in the diagram.
Business Models and Strategy
It is important to note that completing a business model does not constitute strategic planning. Strategic planning factors in the one thing a business model doesn’t; competition.
What is strategy?
According to the Collins English Dictionary, strategy is “a particular long-term plan for success”. For our purposes, we will consider the essence of strategy as a formula for coping with the competition. Competitive strategy is about being different and the goal for a corporate strategy is to find a position in the industry where the company is unique and can defend itself against market forces. To do this the company must choose a set of activities that can deliver a unique mix of value.
Market Forces and Strategy
The determination of a strategy is rooted in determining how a company stacks up against basic market forces, how it can defend itself against these forces and how it can influence these forces. Fortunately, Michael E. Porter in his article How Competitive Forces Shape Strategy defined these market forces for us. Known as Porter’s 5 forces they consist of:
The industry – this is the jockeying for position among current competitors, this can consists of price competition, new product introduction or advertising slugfests.
The threat of new entrants - the seriousness of the threat of entry depends on the barriers to entry and reaction from existing companies. There are 6 major barriers to entry:
1) economies of scale
2) product differentiation
3) capital requirements
4) cost disadvantages independent of size
5) access to distribution channels
6) government policy.
A new company will generally have second thoughts about entering an industry if the incumbent has substantial resources to fight back, the incumbent seems likely to cut prices or industry growth is slow.
The threat of substitute products/services - substitutes can place a ceiling on prices that are charged and limit the potential of an industry.
The bargaining power of suppliers - suppliers can squeeze profitability by increasing prices or lowering the quality of the goods.
The bargaining power of buyers (customers) - customers can force down prices, demand better quality, more service or play competitors off on each other.
Once you assess how the market forces are affecting competition in your industry and their underlying causes, you can identify the underlying strength and weaknesses of your company, determine where it stands against each force and then determine a plan of action. Plans of action may include:
Positioning the company – match your strengths and weaknesses to the company’s industry, build defenses against competitive forces or find a position in the industry where forces are the weakest. You need to know your company’s capabilities and the causes of the competitive forces
Influencing the balance – take the offensive, for example innovative marketing can raise brand identification or differentiate the product.
Exploiting industry change – an evolution of an industry can bring changes in competition. For example, in an industry life-cycle growth rates change and/or product differentiation declines; anticipate shifts in the factors underlying these forces and respond to them.
The framework for analyzing the industry and developing a strategy provides the road map for answering the question “what is the potential of this business?”
Reconciling the Business Model and Strategy
I will use a short example to illustrate the difference between a business model and strategy. Although you may think that Wal-Mart pioneered a new business model on its road to success, the reality is that the model was really no different than the one Kmart was using at the time. But it was what Sam Walton chose to do differently than Kmart, such as focusing on small towns as opposed to large cities and everyday low prices, that was the real reason for his success. Although Sam Walton’s model was the same as Kmart's, his unique strategy made him a success.
Choose A Model Of Excellence
Many of us dream about financial freedom and being able to live and work anywhere in the world. Very few however realize their dream. We know that the internet offers a world of opportunities for business and learning. The amount of information can, and does, overwhelm. Where does one begin?
My experience in the field of personal development goes back to 1988. More specifically, I was drawn to Neuro Linguistic Programming (NLP) and have been practicing NLP to create the type of results I want in my life. NLP is a study of excellence and how we use the language of the mind to consistently achieve the results we desire. Before we can actualize success in the physical world, we must develop the mindset for success. An empowering belief to hold is that people have all the necessary resources within themselves. Anything someone else can do, I can do too, as long as I know how they do it internally in their mind and externally in their behavior or actions. If you are going to put your effort into modeling someone, you might as well choose a model of excellence, rather than one of mediocrity.
Imagine yourself setting out to bake a cake for the first time. Imagine how hard it is, if you had to start everything from scratch, including finding a recipe, shopping for the ingredients, putting them together in the right sequence and then baking it, when you have never ever seen or tasted that type of cake before. What if you have an expert to give you simple, step-by-step instructions and all the necessary ingredients are laid out in front of you? There is also a finished product there so you know what the final excellent outcome looks, sounds, feels, smells and tastes like. You just have to do the work and may be make a few decisions here and there about optional ingredients, e.g. walnuts or choc chips. You have to believe that you can produce an excellent cake, then follow instructions and work through them.
Could it be that simple in affiliate marketing in the internet world too? Yes, and you must choose a model of excellence. Find an established expert, someone who has done the hard yards and knows exactly what works and what does not. Make sure the person consistently produces successful results over time, not just a flash in the pan. Check his/her track record. Select a proven, turn-key internet marketing system which you can follow easily and which also provides prompt support if you get stuck.
There are three elements which are crucial to the profitability of an internet based business: volume of targeted traffic, effective sales copy, and efficient product or service delivery. All three elements must be working highly effectively for it to succeed. That means you need to have a good marketing system to bring prospects to your website, useful content and sales copy to convert prospects to customers, and the means to accept payment and deliver the goods or services. If you were to start from scratch, you would to ensure all parts are developed in parallel and ready to work seamlessly together. The beauty of starting with a proven turn-key marketing system that is already linked to established products or services is that you can concentrate on learning and mastering the art of affiliate marketing, which is only one of the three elements. The other two are already taken care of. In this way, you can fast track your internet business towards being profitable and sustainable in a relatively short period of time. It makes the learning curve less steep and shorter.
What if you passionately wanted to create an internet business based on your own original ideas? If you do not know how to market it effectively on the internet, I would strongly recommend that you sign up for proven, turn-key affiliate marketing system because you will be learning by doing. It is like being taken through a worked example in a standard textbook, except that it is not simulation; you will be earning real money while you learn. Once you have mastered it, you can plug another business into the same system and fine tune it for your new business.
It is very important that you first master the model of excellence you have chosen to emulate, by following the instructions faithfully and be fully committed to it. If you are the type of person who loves to experiment or just want to do it your way, do that after you have mastered it and you have profits flowing in. Believe that if others can, so can you. Prepare the cake mixture as per instructions, bake it in the oven, and enjoy it. You really can have your cake and eat it too.
My experience in the field of personal development goes back to 1988. More specifically, I was drawn to Neuro Linguistic Programming (NLP) and have been practicing NLP to create the type of results I want in my life. NLP is a study of excellence and how we use the language of the mind to consistently achieve the results we desire. Before we can actualize success in the physical world, we must develop the mindset for success. An empowering belief to hold is that people have all the necessary resources within themselves. Anything someone else can do, I can do too, as long as I know how they do it internally in their mind and externally in their behavior or actions. If you are going to put your effort into modeling someone, you might as well choose a model of excellence, rather than one of mediocrity.
Imagine yourself setting out to bake a cake for the first time. Imagine how hard it is, if you had to start everything from scratch, including finding a recipe, shopping for the ingredients, putting them together in the right sequence and then baking it, when you have never ever seen or tasted that type of cake before. What if you have an expert to give you simple, step-by-step instructions and all the necessary ingredients are laid out in front of you? There is also a finished product there so you know what the final excellent outcome looks, sounds, feels, smells and tastes like. You just have to do the work and may be make a few decisions here and there about optional ingredients, e.g. walnuts or choc chips. You have to believe that you can produce an excellent cake, then follow instructions and work through them.
Could it be that simple in affiliate marketing in the internet world too? Yes, and you must choose a model of excellence. Find an established expert, someone who has done the hard yards and knows exactly what works and what does not. Make sure the person consistently produces successful results over time, not just a flash in the pan. Check his/her track record. Select a proven, turn-key internet marketing system which you can follow easily and which also provides prompt support if you get stuck.
There are three elements which are crucial to the profitability of an internet based business: volume of targeted traffic, effective sales copy, and efficient product or service delivery. All three elements must be working highly effectively for it to succeed. That means you need to have a good marketing system to bring prospects to your website, useful content and sales copy to convert prospects to customers, and the means to accept payment and deliver the goods or services. If you were to start from scratch, you would to ensure all parts are developed in parallel and ready to work seamlessly together. The beauty of starting with a proven turn-key marketing system that is already linked to established products or services is that you can concentrate on learning and mastering the art of affiliate marketing, which is only one of the three elements. The other two are already taken care of. In this way, you can fast track your internet business towards being profitable and sustainable in a relatively short period of time. It makes the learning curve less steep and shorter.
What if you passionately wanted to create an internet business based on your own original ideas? If you do not know how to market it effectively on the internet, I would strongly recommend that you sign up for proven, turn-key affiliate marketing system because you will be learning by doing. It is like being taken through a worked example in a standard textbook, except that it is not simulation; you will be earning real money while you learn. Once you have mastered it, you can plug another business into the same system and fine tune it for your new business.
It is very important that you first master the model of excellence you have chosen to emulate, by following the instructions faithfully and be fully committed to it. If you are the type of person who loves to experiment or just want to do it your way, do that after you have mastered it and you have profits flowing in. Believe that if others can, so can you. Prepare the cake mixture as per instructions, bake it in the oven, and enjoy it. You really can have your cake and eat it too.
Tuesday, October 23, 2007
Trading Tip 21: What You Need to Know about Currency Day Trading
The world currency market is not only one of the biggest trading markets around with a massive turn over of $3.6 trillion traded per day, it is also a market that travels fast and can be very exiting. One minute you can be flying high, the next minute you could already face a loss. There are ways however to increase your chances of making money with currency day trading.
What exactly is currency trading?
Online currency trading means dealing with exchange rates. In finance, the exchange rate (also known as the foreign-exchange rate, forex rate or FX rate) between two currencies specifies how much one currency is worth in terms of the other. For example an exchange rate of 120 Japanese yen (JPY, �) to the United States dollar (USD, $) means that JPY 120 is worth the same as USD 1. The currency trading market, also called "Foreign Exchange Market" or "FX Market", is one of the largest markets in the world. By some estimates, about 3 trillion USD worth of currency changes hands every day.
Advantages of Online Currency
Trading Online Currency Trading is appealing to many traders because of
- its trading volume,
- the extreme liquidity of the market,
- the large number of, and variety of, traders in the market,
- its geographical dispersion,
- its long trading hours
- 24 hours a day (except on weekends).
- the variety of factors that affect exchange rates.
Don't make these mistakes when trading currencies
Here are the top six reasons why traders lose money with online currency trading
1. Lack of a Trading Plan
2. Lack of Discipline to Follow the Plan
3. Failure to Control Emotions
4. Failure to Accept and Limit Losses
5. Lack of Commitment
6. Over-Trading
How to Make Money with Currency Day Trading
The easiest solution to avoid all these mistakes is using a currency trading system. Trading a system will eliminate almost all of the top reasons why traders lose money. Since it can be automated and places the trades for you, it will help you overcoming emotions and lack of discipline. It will get you out of a trade when you're losing, and it will take profits when you are winning. And as long as you don't override the system, it will automatically places the trades for you no matter what.
How to Find a Good Currency Trading System
Finding a good currency trading system is not easy. Experts estimate that only 10% of all available trading systems actually make money. �For every one profitable trading system that is �discovered� through back testing and optimization, there are nine others that lose money,� says Matthew Klein, CEO of Collective2.
Beginning Forex (Currency) Trading
Foreign exchange (forex) currency trading, the largest financial market in the world, requires a minimum of capital to invest and the profits can be substantial. Once you have learned the basics of forex, you�re on the way to making money through the simultaneous buying or selling of currencies. Forex trading is instantaneous; as soon as you click the mouse, it�s done. The most commonly traded currencies, easiest to liquidate, are the U.S. dollar, Japanese yen, British pound, Swiss Franc, the Canadian dollar, Australian dollar, and the Eurodollar.
Unlike the stock market, forex trading has no central exchange. With forex, you can make a profit whether the market is up or down vs. only making money when the stock market is on the rise. By taking the long position with a pair of currencies, the forex trader buys at one price and sells when it reaches a higher price. The other option for the forex trader is to go short by selling currencies, anticipating depreciation, and then buying back when the value falls. The forex trader can pick either direction, long or short, and if correct, he will generate a profit. You can also set up a certain point (limit order) based on the amount of profit you want to earn to automatically limit the order. In the same way, you can stop or close an order to automatically liquidate if the currency trade is going against you.
In general, the strength of a country�s economy determines the value of its currency. Other factors to take into consideration in forex trading are the political and social status of the country, interest and employment rates, and the overall stability of its government. You will learn to see patterns or trends as you become more familiar with the in�s and out�s of forex trading.
The Forex market is a 24-hour trading place, Sunday through Friday, giving you the option of trading at any time of the day or night. Unlike the stock market, it doesn�t close with the ringing of the bell. Forex online firms provide demos, guidance, and market news for the beginning investor. You can practice your skills in forex trading before actually investing real capital. Once you�ve learned the basics, a minimum investment is made, sometimes as low as $200.00. These �mini-trading� accounts are a good way to begin forex trading and often there is no commission attached to your trading. You don�t have to be a seasoned market analyst or economist to learn, enjoy, and make money with forex currency trading.
Unlike the stock market, forex trading has no central exchange. With forex, you can make a profit whether the market is up or down vs. only making money when the stock market is on the rise. By taking the long position with a pair of currencies, the forex trader buys at one price and sells when it reaches a higher price. The other option for the forex trader is to go short by selling currencies, anticipating depreciation, and then buying back when the value falls. The forex trader can pick either direction, long or short, and if correct, he will generate a profit. You can also set up a certain point (limit order) based on the amount of profit you want to earn to automatically limit the order. In the same way, you can stop or close an order to automatically liquidate if the currency trade is going against you.
In general, the strength of a country�s economy determines the value of its currency. Other factors to take into consideration in forex trading are the political and social status of the country, interest and employment rates, and the overall stability of its government. You will learn to see patterns or trends as you become more familiar with the in�s and out�s of forex trading.
The Forex market is a 24-hour trading place, Sunday through Friday, giving you the option of trading at any time of the day or night. Unlike the stock market, it doesn�t close with the ringing of the bell. Forex online firms provide demos, guidance, and market news for the beginning investor. You can practice your skills in forex trading before actually investing real capital. Once you�ve learned the basics, a minimum investment is made, sometimes as low as $200.00. These �mini-trading� accounts are a good way to begin forex trading and often there is no commission attached to your trading. You don�t have to be a seasoned market analyst or economist to learn, enjoy, and make money with forex currency trading.
Forex Trading System: How to Read a Forex Quote
Forex is an abbreviated name for "foreign exchange." The Forex market is a non-stop cash market where the currencies of nations are bought and sold, typically via brokers. For example, you buy Euros, paying with U.S. Dollars, or you sell Euros for Japanese Yen.
The value of your Forex investment increases or decreases because of changes in the currency exchange rate or Forex rate. These changes often result from economic and political factors, such as the price of oil or political unrest. To better understand how the exchange rate can affect the value of your Forex investment, this article shows you how to read a Forex quote.
Forex quotes are always expressed in pairs. In the following example, your "pair" of currencies are the U.S. Dollar (USD) and the Euro (EUR). The Forex quote, USD/EUR = 265.50, means that one U.S. dollar is equal to 265.50 Euros. The currency to the left of the / (USD in this case) is referred to as base currency and its value is always 1. The currency to the right of the / (EUR in this case) is referred to as the counter currency. In this example, one USD can buy 265.50 EUR, since it is the stronger of the two currencies.
Because the U.S. dollar is regarded as the central currency of the Forex market, it is always treated as the base currency in any Forex quote where it is one of the pairs. Incidentally, the U.S. Dollar is involved in nearly 90% of all Forex transactions.In this example, your "pair" of currencies are the Japanese Yen (JPY) and the Euro (EUR). The Forex quote, JPY/EUR= 175.10, means that one Japanese Yen is equal to 175.10 Euros. The currency to the left of the / (JPY in this case) is referred to as base currency and its value is 1. The currency to the right of the / (EUR in this case) is referred to as the counter currency. In this example, one JPY can buy 175.10 EUR, since it is the stronger of the two currencies.
The goal of any Forex trading system is to profit from foreign currency movements. This requires adequate training in basic Forex principles, such as performing a Technical Analysis, using Forex charts and Stop/Loss tools, and keeping up-to-date with economic and political events. In a sense, Forex training never ends.
The value of your Forex investment increases or decreases because of changes in the currency exchange rate or Forex rate. These changes often result from economic and political factors, such as the price of oil or political unrest. To better understand how the exchange rate can affect the value of your Forex investment, this article shows you how to read a Forex quote.
Forex quotes are always expressed in pairs. In the following example, your "pair" of currencies are the U.S. Dollar (USD) and the Euro (EUR). The Forex quote, USD/EUR = 265.50, means that one U.S. dollar is equal to 265.50 Euros. The currency to the left of the / (USD in this case) is referred to as base currency and its value is always 1. The currency to the right of the / (EUR in this case) is referred to as the counter currency. In this example, one USD can buy 265.50 EUR, since it is the stronger of the two currencies.
Because the U.S. dollar is regarded as the central currency of the Forex market, it is always treated as the base currency in any Forex quote where it is one of the pairs. Incidentally, the U.S. Dollar is involved in nearly 90% of all Forex transactions.In this example, your "pair" of currencies are the Japanese Yen (JPY) and the Euro (EUR). The Forex quote, JPY/EUR= 175.10, means that one Japanese Yen is equal to 175.10 Euros. The currency to the left of the / (JPY in this case) is referred to as base currency and its value is 1. The currency to the right of the / (EUR in this case) is referred to as the counter currency. In this example, one JPY can buy 175.10 EUR, since it is the stronger of the two currencies.
The goal of any Forex trading system is to profit from foreign currency movements. This requires adequate training in basic Forex principles, such as performing a Technical Analysis, using Forex charts and Stop/Loss tools, and keeping up-to-date with economic and political events. In a sense, Forex training never ends.
The Asian Financial Crisis of 1997
Prior to 1997, many economists referred to an Asian “economic miracle”. Countries such as Japan, South Korea, and Singapore had experienced extraordinary economic growth for several decades (although by 1990 growth had slowed in Japan). In 1997 an economic crisis hit Asia that led to a severe recession in several countries.
The crisis began in Thailand, Indonesia, and Malaysia. Although these countries had not experienced the same success as Japan or South Korea, they had been growing rapidly prior to the crisis. Their economies shared several characteristics:
1. Central to their economic growth was the exporting of labor-intensive manufacturing goods. This pattern had been very successful for Japan and South Korea.
2. To ensure a high price for their exports, and to encourage economic stability, these governments had pursued a policy of a fixed exchange rate pegged against the dollar.
3. These governments had managed to keep exchange rates very stable for several years.
4. Encouraged by high rates of return and an apparently stable currency, foreign banks and investors had issued a great deal of debt to Asian firms.
5. These loans allowed governments to finance significant budget deficits.
6. To defend their fixed exchange rate, these governments had to expend reserves of foreign currency to make up for the difference between supply and demand in exchange rate markets.
To maintain a fixed exchange rate, the government must constantly spend some of its reserves of foreign currency. Eventually, it is inevitable that the government will run out of reserves and will be unable to make up the difference between supply and demand. At this point, the government must abandon the fixed exchange rate and the currency will depreciate. This is known as a balance of payments crisis.
Balance of payments crises had been common before 1997. Latin America had suffered several and Europe had been hit in 1992. Although they produced significant macroeconomic effects, the results had never been as catastrophic as they would be in Asia.
It is not generally the case that reserves will dwindle down to zero before there is currency devaluation. Suppose that investors notice that the government is running low on reserves and that a devaluation will occur shortly. If investors hold on to the currency, they will lose out when it depreciates. They therefore will instigate a run on the currency before reserves reach zero. The government may not have enough reserves on hand to defend the fixed exchange rate and they will have to let the currency depreciate.
In June 1997, several large investors began to sell large quantities of Asian currencies. The governments held enough reserves to accommodate these sell-offs without creating a balance of payments crisis.
Many economists believe that other investors were not acting rationally. Instead of evaluating the actual strength of their investments in the Asian economies, the adopted a “herd mentality” and followed the lead of the original investors who disinvested in the Asian economies. The governments did not hold enough reserves to accommodate this sell off and several currencies collapsed.
Thailand was the fist country hit. It was forced to abandon it peg on 7/2/97. For the remainder of 1997, the baht fell by 33%.
Malaysia abandoned its fixed exchange rate on 8/17/97. For the remainder of 1997, the ringgit fell by 23.3%.
Indonesia abandoned its fixed exchange rate on 8/14/97. For the remainder of 1997, the rupiah fell by 40.4%.
The crisis began in Thailand, Indonesia, and Malaysia. Although these countries had not experienced the same success as Japan or South Korea, they had been growing rapidly prior to the crisis. Their economies shared several characteristics:
1. Central to their economic growth was the exporting of labor-intensive manufacturing goods. This pattern had been very successful for Japan and South Korea.
2. To ensure a high price for their exports, and to encourage economic stability, these governments had pursued a policy of a fixed exchange rate pegged against the dollar.
3. These governments had managed to keep exchange rates very stable for several years.
4. Encouraged by high rates of return and an apparently stable currency, foreign banks and investors had issued a great deal of debt to Asian firms.
5. These loans allowed governments to finance significant budget deficits.
6. To defend their fixed exchange rate, these governments had to expend reserves of foreign currency to make up for the difference between supply and demand in exchange rate markets.
To maintain a fixed exchange rate, the government must constantly spend some of its reserves of foreign currency. Eventually, it is inevitable that the government will run out of reserves and will be unable to make up the difference between supply and demand. At this point, the government must abandon the fixed exchange rate and the currency will depreciate. This is known as a balance of payments crisis.
Balance of payments crises had been common before 1997. Latin America had suffered several and Europe had been hit in 1992. Although they produced significant macroeconomic effects, the results had never been as catastrophic as they would be in Asia.
It is not generally the case that reserves will dwindle down to zero before there is currency devaluation. Suppose that investors notice that the government is running low on reserves and that a devaluation will occur shortly. If investors hold on to the currency, they will lose out when it depreciates. They therefore will instigate a run on the currency before reserves reach zero. The government may not have enough reserves on hand to defend the fixed exchange rate and they will have to let the currency depreciate.
In June 1997, several large investors began to sell large quantities of Asian currencies. The governments held enough reserves to accommodate these sell-offs without creating a balance of payments crisis.
Many economists believe that other investors were not acting rationally. Instead of evaluating the actual strength of their investments in the Asian economies, the adopted a “herd mentality” and followed the lead of the original investors who disinvested in the Asian economies. The governments did not hold enough reserves to accommodate this sell off and several currencies collapsed.
Thailand was the fist country hit. It was forced to abandon it peg on 7/2/97. For the remainder of 1997, the baht fell by 33%.
Malaysia abandoned its fixed exchange rate on 8/17/97. For the remainder of 1997, the ringgit fell by 23.3%.
Indonesia abandoned its fixed exchange rate on 8/14/97. For the remainder of 1997, the rupiah fell by 40.4%.
Thursday, October 18, 2007
Reasons to Fire Your Mutual Fund Company - Better, Cheaper, Less-risky Alternatives
As I have said many times in this series, active management would be palatable and worth the outsized fees charged by mutual fund companies if they consistently delivered superior performance compared to a pre-defined benchmark, but they do not. Less than forty percent of actively managed funds beat their benchmarks in any one year. Over several years, that percentage becomes infinitesimal. The point of this article is to outline the vehicles that enable you to get these results. While I admit that I am biased, I will attempt to be balanced in the discussion by explaining the drawbacks.
Separately Managed Accounts (SMA�s)
At First Sustainable, this is the vehicle we recommend for investors with $50,000 or more to invest. An SMA is an account that is set up by your investment advisor, which allows you to hold your own portfolio of well diversified instruments. The advisory makes its money by either charging a fee as a percentage of assets under management, a flat fee per year, or an hourly fee for the advisor�s time. Trading commissions are either nominal or free. Your adviser should take into account your needs and then arrive at a portfolio that is, for lack of a better term, the �YOU� Index.Benefits. I love this vehicle, and here is why:
1) Your portfolio is completely tailored to your needs. You do not need to study every prospectus that comes to your door to see if a fund�s strategy has changed without your knowledge. Periodic rebalancing is all that is required when your financial situation changes.
2) You and your adviser can be patient. Because the adviser is getting paid from assets under management, there is no incentive to churn your account, which as I�ve demonstrated, destroys portfolios.
3) At least with First Sustainable, you can buy fractional shares of individual equities, enabling your portfolio to be spread among dozens, if not hundreds, of instruments. This factor accounts for why this vehicle is only now catching on. Until technology enabled this feature, an SMA only made sense for the very wealthy.
4) The above factor means that you can still invest periodically without messing up your asset allocation. Before, indexing in an SMA was only good for investing a lump sum. Now, you can set up a disciplined savings program.
5) Because your turnover should be lessened, your annual tax bill should be decreased.
Drawbacks.
Your adviser will likely not have a published track record. Even if one was available, it would not necessarily be an adequate measure of your adviser�s competence. This account should be tailored to your specific needs, and thus, not comparable to anybody else�s portfolio, thereby making a comparison useless. At First Sustainable, we overcome this aspect by making available indexes that we subscribe to. These indexes do have track records and professional oversight.
What to Watch Out For.
Do not let your adviser place you in this account if he is going to, in turn, recommend vehicles that also have high expenses. For instance, paying the SMA fee for the privilege of getting placed in other actively managed funds is not a good deal, as you are paying twice. Advisory firms get paid twice this way, and it should be outlawed. Yet, this is a common practice among our less dutiful competitors. The ONLY time this would be an acceptable practice is if your portfolio is small enough that the adviser recommends VERY LOW COST index funds or ETF�s. Even then, you should insist on a reduced SMA fee.
Index Funds
As investors have awakened to all the drawbacks of active management, these funds have exploded in popularity. They are essentially mutual funds that attempt to mirror the performance of an index. The most common indexes are the S&P 500, Russell 3000, Dow Jones Industrials, and a Total Market Index comprising all of these indexes. However, there are dozens of indexes for which funds are created. It is important that you and your adviser are capable of assessing the suitability of this index for your situation.
Benefits.
1) These funds have the lowest expense ratios around. The largest funds have expense ratios in the .05 percent range (that is .0005). A typical actively managed fund charges 3500 percent more.
2) They offer instant diversificationThey require less research up front and less ongoing research.
3) They are ideal for investors who are just starting out with a small, disciplined savings plan.Because indexes do not have high turnover, they are usually more tax efficient than actively managed funds.Drawbacks. Not all index funds are created equally. First, some funds still claim to be low cost, but still charge well more than the stingiest funds. Many S&P 500 funds still get away with charging .
5 percent, or ten times what the largest funds charge. Second, most indexes are created on a market capitalization basis. This means that their weighting is based on the company�s total market value. This could lead to an overweighting of the high PE stocks that are most likely to retreat in a correction.
Exchange Traded Funds (ETF)
An ETF is a closed-end fund that is comprised of an index and trades like a stock on an exchange. Like their open-ended counterparts, there are dozens of alternative indexes than the most popular Spiders (S&P 500), Diamonds (Dow Jones Industrials), and QQQ (Nasdaq 100).
Benefits. Because they trade on an exchange, they are continuously priced. Most open ended funds are priced once a day. This allows an investor to take advantage of short term moves. Some (including me) would say this is a drawback.
Drawbacks. Closed end funds still carry an expense ratio. Theoretically, this should be less since the management company does not have to deal with inflows and outflows. The largest ETF�s are less expensive for the most part. The less famous ETF�s still carry a high expense ratio, which is not as well disclosed.
Separately Managed Accounts (SMA�s)
At First Sustainable, this is the vehicle we recommend for investors with $50,000 or more to invest. An SMA is an account that is set up by your investment advisor, which allows you to hold your own portfolio of well diversified instruments. The advisory makes its money by either charging a fee as a percentage of assets under management, a flat fee per year, or an hourly fee for the advisor�s time. Trading commissions are either nominal or free. Your adviser should take into account your needs and then arrive at a portfolio that is, for lack of a better term, the �YOU� Index.Benefits. I love this vehicle, and here is why:
1) Your portfolio is completely tailored to your needs. You do not need to study every prospectus that comes to your door to see if a fund�s strategy has changed without your knowledge. Periodic rebalancing is all that is required when your financial situation changes.
2) You and your adviser can be patient. Because the adviser is getting paid from assets under management, there is no incentive to churn your account, which as I�ve demonstrated, destroys portfolios.
3) At least with First Sustainable, you can buy fractional shares of individual equities, enabling your portfolio to be spread among dozens, if not hundreds, of instruments. This factor accounts for why this vehicle is only now catching on. Until technology enabled this feature, an SMA only made sense for the very wealthy.
4) The above factor means that you can still invest periodically without messing up your asset allocation. Before, indexing in an SMA was only good for investing a lump sum. Now, you can set up a disciplined savings program.
5) Because your turnover should be lessened, your annual tax bill should be decreased.
Drawbacks.
Your adviser will likely not have a published track record. Even if one was available, it would not necessarily be an adequate measure of your adviser�s competence. This account should be tailored to your specific needs, and thus, not comparable to anybody else�s portfolio, thereby making a comparison useless. At First Sustainable, we overcome this aspect by making available indexes that we subscribe to. These indexes do have track records and professional oversight.
What to Watch Out For.
Do not let your adviser place you in this account if he is going to, in turn, recommend vehicles that also have high expenses. For instance, paying the SMA fee for the privilege of getting placed in other actively managed funds is not a good deal, as you are paying twice. Advisory firms get paid twice this way, and it should be outlawed. Yet, this is a common practice among our less dutiful competitors. The ONLY time this would be an acceptable practice is if your portfolio is small enough that the adviser recommends VERY LOW COST index funds or ETF�s. Even then, you should insist on a reduced SMA fee.
Index Funds
As investors have awakened to all the drawbacks of active management, these funds have exploded in popularity. They are essentially mutual funds that attempt to mirror the performance of an index. The most common indexes are the S&P 500, Russell 3000, Dow Jones Industrials, and a Total Market Index comprising all of these indexes. However, there are dozens of indexes for which funds are created. It is important that you and your adviser are capable of assessing the suitability of this index for your situation.
Benefits.
1) These funds have the lowest expense ratios around. The largest funds have expense ratios in the .05 percent range (that is .0005). A typical actively managed fund charges 3500 percent more.
2) They offer instant diversificationThey require less research up front and less ongoing research.
3) They are ideal for investors who are just starting out with a small, disciplined savings plan.Because indexes do not have high turnover, they are usually more tax efficient than actively managed funds.Drawbacks. Not all index funds are created equally. First, some funds still claim to be low cost, but still charge well more than the stingiest funds. Many S&P 500 funds still get away with charging .
5 percent, or ten times what the largest funds charge. Second, most indexes are created on a market capitalization basis. This means that their weighting is based on the company�s total market value. This could lead to an overweighting of the high PE stocks that are most likely to retreat in a correction.
Exchange Traded Funds (ETF)
An ETF is a closed-end fund that is comprised of an index and trades like a stock on an exchange. Like their open-ended counterparts, there are dozens of alternative indexes than the most popular Spiders (S&P 500), Diamonds (Dow Jones Industrials), and QQQ (Nasdaq 100).
Benefits. Because they trade on an exchange, they are continuously priced. Most open ended funds are priced once a day. This allows an investor to take advantage of short term moves. Some (including me) would say this is a drawback.
Drawbacks. Closed end funds still carry an expense ratio. Theoretically, this should be less since the management company does not have to deal with inflows and outflows. The largest ETF�s are less expensive for the most part. The less famous ETF�s still carry a high expense ratio, which is not as well disclosed.
Tuesday, October 16, 2007
In Business Presentations Sometimes Less Is Morph
How many times in your business have you heard the question, “Can we do that?” Sometimes the answer is, “No that’s too technical”, or “We could if only…” With today’s technology you can make sophisticated, high-power multimedia presentations. A sweet little suite of audio/video software from AVnex Ltd (downloadable at www.audio4fun.com) might just enable the ‘yes’ answer you are looking for. While the products they market are primarily aimed at the younger demographic and their leisure activities, their software tools are really powerful audio and video editing suites disguised as fun software. The applications for businesses are almost endless.
Let’s say you have a new service you want to introduce to your current clients. It’s an easy appointment to make; they like you and they like your products and services, so of course, you will probably be able to get them to sit down long enough to make a persuasive presentation; but how will you do that? Will it be the same old PowerPoint silent, slow-moving slideshow, with your guy either reading a script or winging it, slide by slide? What if you had a professional voiceover to guide the viewer, to add that extra dimension of presentation? Well, AVnex offers a voice morphing program that can do that.
A morphing program has many different filters and effects that can be applied to an audio file or audio stream (read: live recording) to enhance and alter the output. In fact, you yourself can be the narrator, the great orator, representing the company and with your new voice, you can put the presentation over the top. Their Voice Changer Software Diamond 4.0 (detailed at www.audio4fun.com/voice-over.htm) comes with fun built-in voices like The Terminator, and Sexy Woman, and who knows, maybe they’d be appropriate for your application; however, the controls for this program are able to make less radical modifications to your voice, with rather astounding results. You can easily make subtle shifts in the timbre and pitch of your voice to add resonance and presence. You can add a filter to enrich the overall sound of your recordings. With the aid of a simple set of headphones and a mike you can, in real time, make adjustments to your ‘new’ voice. You can make it deeper or higher or older or younger, not by jamming the slides all the way over, but by the tiniest of adjustments, you can turn your own ordinary business voice into a polished narration. It all happens in real time, and you will be impressed with how different, how much better you can sound with just a few simple adjustments to the controls.
Once you have the audio down, you can easily combine it with the video. You can also, with software from AVnex, or even the built-in movie maker software in XP, create your videos and slide presentations with interesting transitions and effects, and import the narration you have created to go along perfectly with the visuals. Think about the impression you can make with a multimedia, high quality presentation with only a laptop and perhaps an LCD projector for equipment. You can also make these projects available for viewing by invitation on your corporate website. They make you look big, professional, sophisticated and cutting edge; just the perception that can lead to increased after-market activity for your company.
Think about this too; once you’ve prepared your creation in the right format, you can copy it to a memory stick, drop it in your pocket and walk into a meeting virtually empty-handed and still make a blowout presentation; just borrow one of their computers for the show. This way you can make the same creative impression one-to-one or to a room full of potential buyers, or conceivably the entire industry could view it on your website. Don’t ever underestimate the power of multimedia. We are a culture of commercials and marketing, and when it’s done right and presented professionally, it can make all the difference in your bottom line.
Ways to make big $$$ in Japan.
As you're probably already aware, Japan is a very unique place. No where else in the world will you find the same outrageous opportunities to make money that are open to just about anyone.
English Teaching.
The most common job for new foreigners is teaching English. Despite the thousands of English schools and 12 years of study at school, the English level in Japan remains at lower intermediate, ensuring strong demand for teachers. Every type of class and situation exists from Elementary schools right through to Flight Attendant Colleges. It can also be a great way into a previously non-existent position. I know of one teacher at a top Advertising agency who later became an English copywriter. He had no experience whatsoever in copywriting, they just liked him and enjoyed his lessons.
Acting/modeling/voice overs.
Without a doubt, the epicenter for entertainment work is Tokyo. There are around 60 major freelance agencies that offer all kinds of work to foreigners living in the area. It is not uncommon for first timers to walk into $1000 plus jobs, while their friends back home fight over $120 extras work. Experience is not expected - simply being foreign and having the right look is enough. In fact, most highly skilled dancers and actors would be appalled at how easy it is to get work and how the jobs are selected. Actual talent is very rarely considered - it is all about the look.In many ways, the entertainment scene in Tokyo is a big break and a way to escape the comfort zone and limitations of home. Many foreigners living in Japan, doing the work, return home to find their friends are just as broke as they were 5 years ago, fighting over the same tiny piece of the entertainment pie, hoping desperately for a break. They are not seeing that Tokyo is that break! Ewan McGregor, Edward Norton, Ashley Judd and Cameron Diaz are among some of the current stars to have worked in Japan.
Dancing/hostessing.
Japan was long considered one of the best places for working Dancer/hostess types in the world. Whilst it still can be very lucrative, the rules have changed regarding visas. Whereas once a 90 tourist visa was adequate, immigration crackdowns have led to the introduction of entertainment visas for all women employed in the industry. The Japanese culture remains one of meetings and drinking, and corporate types still prefer to do both in the company of attractive, polite, western women. In the past, women simply had to be attractive and turn up, now they need to be just as adept at being charming in order to make the big money.Wedding minister.The white wedding business is huge in Japan. It is the most popular type of ceremony from Sapporo to Okinawa and all those weddings create a demand for clean cut pastors to conduct the 20 minute ceremonies. In some cases, 20,000 yen for the 20 minute ceremony and performing 20-30 per month on the weekends is normal, making this one of the best ways to make yen. There are some properly ordained ministers out there, but for the most part, basic Japanese and rudimentary training is all it takes to move one man from the classroom to the pulpit.
Headhunting.
The Headhunting industry in Tokyo continues to flourish unabated. New companies emerge quarterly and are still able to bill fees of 30 - even 35% in some cases. Most of the "recruiters" start out teaching English and usually have very little in the way of professional experience. As English speakers though, they are considered to be experts in dealing with foreign companies, which is more than enough to qualify them for the job. Here you will find recruiters - both male and female making 6 figures when many would struggle to hold down simple jobs back home. This truly is an extraordinary opportunity open to anyone with some professionalism and knowledge of Japan.
Japanese language skills.
For teaching English and Headhunting, Japanese is almost not required at all. Speaking with the students in Japanese is strongly discouraged - they are there to learn English after all, and in Headhunting, 95% of the candidates need to be effective communicators in English. That leaves Wedding Ministers - the ceremony is read in Japanese, dancing/hostessing - where some basic Japanese will be looked upon favorably and Acting/modeling/voice overs, where in most cases there will already be a translator and the pronunciation of 10 words in Japanese is more important that speaking ability.
An active interest in Japanese culture and the language will assist in daily life, but for the people simply interested in Japan as a way to make as much money as possible, it is simply not required.
Monday, October 15, 2007
3 Biggest Time Wasters
Have you ever stopped and consider how much time you have during the day? How about during the week? How much of this time do you spend on activities and people that waste your valuable time? What are your time waster during the day? Sometimes we go through life surrounding ourselves with activities and people that take away our time. Once time is gone. It is gone forever. Only by realizing what and who takes away are time will we move forward to the next level.
Time wasters are poor decisions or not making a decision during our day. They cost time and also money. It is a vicious cycle. Poor decision making and being indecisive is like a tornado. It goes round and round. It destroys everything goals, dreams in your path. It becomes a habit. Look at you life right now. What were you doing 1 year ago? What were you doing 3 years ago? Does it look about the same? It is based on the decisions that you made.There are 3 biggest time wasters. Your ability to deal with them will determine where you will be in the next year.
1.Procrastination.
Procrastination is one of the biggest time waster of them all. You probably have heard or even know people that live their lives in quiet desperation and end up retiring poor. Have you meet people that go through life that find every reason or excuse not to do it today. They do it over and over. They make excuses day after day. Then one day their lives are OVER.
2.Not making decisions.
Not making decisions rob more time than you realize. It cost you money too. It can produce unnecessary tasks. Decision making requires courage and moving forward. When you are wishy-washy, you are unable to make decisions with family, kids, or careers. Nobody likes to follow someone that is indecisive not even kids.
3.Putting out fires and taking care of emergencies.
This is a huge time waster. When you are about to settle down to do a task or go to work. Something unexpected happens and pulls you away from that task or work. This sometimes rolls from minutes into hours and hours. The greatest leaders throughout our history thought ahead and determine all the things that maybe go wrong. Then they would plan in advance. If something did happen, they could move quickly or delegate it. They would get it done. Poor leaders trust in luck.Crisis will happen just don’t pitch a tent next time. Most valuable skill you can develop is a sense of urgency. Get on with it. Make things happen. It is the most powerful factor. It can move you forward no matter what situation we are in right now. Most important way to improve your decision making is you are not perfect. A not perfect decision made immediately goes far then not a decision at all. When fires do occur think before you act. Action without thinking leads to failure.
Just be objective. Live your life if it was your last day here on earth everyday!
Master Time Management with One Question
Time management advice is found in great abundance on the Internet. You can determine how to schedule your day, how to set your priorities, how to delegate, and how to tackle your to-do list.
As a service business owner, you face an enormous number of tasks and responsibilities each and every day. What I've come to realize in my years of self-employment that my most valuable asset isn't my contact database or my marketing materials or my business plan.
Most entrepreneurs are time-starved. It seems everyone wants a piece of you -- your clients, your family, your prospective customers, your friends, your employees or subcontractors. For most service business owners, there always seems to be too much stuff to fit into too little day.
The most valuable time management question that time-starved entrepreneurs need to ask themselves before agreeing to do something is, "How will this serve me?" A business coaching colleague asks the same question a little differently, "Is what I'm about to do going to increase the confusion/complexity in my life?" That's it -- pretty simple, isn't it? So, before I'm about to embark on joining a new organization or committee, or before I'm about to think of another sideline path for my business, I just ask myself this one simple question. The answer leads me to my next step.
Now, a word of caution here---don't get caught in the "but crack". If your answer is, "Well, yes, it'll be good for my business but it's.....", you've just fallen into the "but crack", which means that you've negated everything that came before the "but" in your thinking. If there's a "but" attached to your sentence, more than likely what you really need to do is the opposite of what you're saying.
So, in the example above, "Well, yes, it'll serve my business well but it's going to take the next 8 weekends to pull it off," it may not be the great opportunity you think if you already are concerned about the havoc it might bring to your life.What if you're unsure of how this opportunity/task/chance will serve you? How do you make that determination?
I borrow a page from life coach Cheryl Richardson's book, Take Time for Your Life, and create what she refers to as an "Absolute Yes List." This is your list of the top 5 priorities in your life. For most of us that would include spouse/significant other, family, work or business, hobby, volunteer effort, and yourself. You did remember to include yourself, didn't you?Remember, your time is your most valuable asset. If you don't create time for yourself and make that your #1 priority, I will guarantee you that no one else will do that for you. When I used to deliver my work/life balance speech to various women's professional organizations, I would have the participants create their "absolute yes" list and then take a survey of hands to see how many had included themselves on the list. Typically less than one-third of any group put themselves on their list, and less than 5% of that number listed themselves first.
If what you're considering doesn't fit on your "absolute yes" list, then it's an "absolute no." If it does match your top 5 priorities, then give it the, "How will this serve me?" test.Creating your list of your top 5 priorities and applying the "how will it serve me" question are the two best tools at your disposal as a service based business owner to regain control of your most valuable asset -- your time.
Here's The One Thing That Will Guarantee You Success
There is one thing that can make or break your journey to success.
As Samuel Johnson said: "Great works are performed not by strength, but by perseverance.
"Perseverance is the key to reaching your goal.Be honest: how many times have you given up in the past? Once? Ten times? Dozens of times? You are not alone! Each of us has at some time ended up feeling like we were fighting a losing battle and thrown down our sword.As you well know, giving up means admitting defeat. It means failure. No one likes to think about that, but it's true.
Have you ever asked yourself what might have happened if you'd continued on instead of quitting? Would you have been successful eventually? Did you give up too soon, or was your goal really not meant to happen?
Imagine running a marathon and getting mad because the finish line still hasn't appeared. So you sit down, take off your running shoes and brood. It sounds funny, but that's what many of us do when pursuing our goals. And in that little example is a hidden gem of wisdom: we give up because we can't SEE the finish line, so we mistakenly assume it doesn't exist. We throw our hands up in frustration and quit.
If you can change this one tendency, your life will never be the same.Perseverance literally means: to persist in spite of difficulties. It doesn't mean persist until you run into an obstacle, or persist until it becomes easier, or persist only when you feel like it. It means keep going no matter what. No matter how rocky the road becomes, you just keep moving forward.
What will determine your willingness to persevere? How badly you want your goal. If you're not willing to persist in spite of difficulties, then perhaps your goal isn't as important as you think it is. Perhaps it's not what you really want, after all. Only you know for sure.
If your goal is vitally important to you, you will do what it takes to achieve it no matter what obstacles you may encounter.Make the choice to succeed, moment by moment.When it comes right down to it, success is a choice, just like failure. It's not a choice you make just one time either; it's a constant, ongoing series of choices you will continue to make for the rest of your life. The results you get will be in direct proportion to the effort you give.
Your journey won't always be easy, but will it be worthwhile? Only you know for sure.
Thursday, October 11, 2007
Online Investment
Tips for new investors
Online Stock trading for new investors
Stock market operations are very insidious and difficult to understand. However, there are many investors who invest and gain from stock trading. Stock market is wonderful investment system, which can reap high profits and make you wealthy in a very less time. Well, if you look upon those who have earned loads of money with their smart investment plans and wondering what has been the secret. Here is the answer.
Stock market operations are very insidious and difficult to understand. However, there are many investors who invest and gain from stock trading. Stock market is wonderful investment system, which can reap high profits and make you wealthy in a very less time. Well, if you look upon those who have earned loads of money with their smart investment plans and wondering what has been the secret. Here is the answer.
Analyzing the market is very essential step before making any investment in the stock market. If you are new investor and are willing to invest in stock market, you need to first learn the working of the stock market and then carefully analyze which company has been rated down but that company is likely to move up on stock exchange scale. Stock brokers are of great help in such matters. Fluctuations are an integral part of the stock exchange; however, investors are unable to make a sound decision. Fluctuation and oscillations should be carefully analyzed to predict the forthcoming market trend, which will actually affect the investors’ decisions. One should try to be in contact of the stock brokers to get the right or rather the authentic information of the stock market conditions. It is often found that many investors end up facing loads of loss due to wrong interpretation and false information.
There is often dissatisfaction among investors because they feel that the brokerage fee is actually an obstruction in their investment plan. In such a case online stock trading is very good option this is not only easy but is less expensive as compared to the traditional stock marketing.
Online stock trading is a new opportunity for all stock market investors. It not just eliminates the mediators but it is easy. All you need to this to log in to the Internet account. An individual can sign in the account by paying a little price for the account registration. Online stock trading is best opportunity for people who are unable to invest in stock market because of the unavailability of funds.
There are many investor sites for small investors to enter the stock market trading and turn their dreams into reality. Although these websites are safe and easy to use, people must make sure that the place one is logging on for stock trading is a safe place. Since, these websites ask for few financial details, so you must have done a bit of research regarding the authenticity of the site.
While you are searching about the company, you must look for details. For example, the reputation of the trading host and the in-built security system of the company. These things are of topmost importance while you have planned for online stock trading. So, play with safe hands and then you will surely make loads of money.
So, what are you waiting for? Just log to Internet and set your eyes to the stock market trend and make sound investments for yourself.
7 Things Every Trader and Investor Should Know About the Market, But Usually Doesn
Anytime that you make a trade in the market, you need to know what you're up against. Knowing the following seven points will not only help you in your trades, it will put you in the right frame of mind in order to be successful trader for the long term, which is what we all desire, and what really counts.
1. Don't Throw Good Money After Bad - If you've got a losing stock, don't make excuses or say things like "now it's really become a bargain" or "it can only go up from here." Those arefamous last words. If you own an underperforming stock, sell it - today! Don't wait, and certainly do not add to your shares of that stock. That is a recipe for full-blown disaster. There's a reason that the stock you own is underperforming. That reason may not be obvious to you now, but eventually the reasons will come out. Your money can be put to much better use buying a stock that is in an uptrend and can make you money right now (see point #2).
2. Don't Buy Low and Sell High - We've heard this phrase all of our lives: "buy low and sell high." You can't go wrong with that advice, right? Actually, that's wrong, because buying low implies buying a stock that has been on a losing streak, or one that is underperforming. Those are usually the worst kind of stocks to buy. The best stocks to buy are those that have firmly established a definite uptrend. So a more appropriate phrase might be, "buy high and sell higher." Another piece of advice that goes along with this is as follows: don't try to pick the bottom. Let someone else try to figure out what the bottom is. It could be that the stock has a few more weeks to go before it completely bottoms out. No use wasting your money guessing on where that point might be.
3. Don't Swing for the Fences - Everyone wants to hit a home run once in a while, but making that your primary trading aim means you are risking your capital and your sanity. The only way to have long-term success in your trading career is by taking many small gains instead of a few big gains. Home runs are few and far between. They are a nice bonus when they happen, but don't expectthem every time. If a stock has made you some gains, take them. Don't get greedy or expect a doubling or tripling in price, because you could end up losing what you have already gained, and sometimes a lot more. Take your profits, and move on to the next stock.
4. Know the Best Times of the Day to Trade - The best times of the trading day are the opening and the closing. More specifically, these times are the first hour and a half (9:30 to 11:00 am) and the last hour and a half (2:30 to 4:00 pm) that the stock market is open. That is when there is the most price movement and the highest volume. This is also why the opening and closing price quotes are used in mapping out stock charts. The volume around midday generally dies down quite a bit for one major reason: too many traders, especially the big institutional players (the ones who can noticeably move the market) are out to lunch. Some may take earlier lunches, and some may take later lunches, but there are always big players who have gone to lunch during this time. The people who they have left in charge are usually younger associates with less experience who don't have much say in decision-making. So it's best to avoid both buying and selling during this period of the day, as any price movements could be false signals or fake-outs.
5. Do Not Buy or Sell Before the Market Open - Buying or selling a stock before the open (8:00-9:30 am), in what is known as a pre-market trade, is usually not recommended. During the pre-market period, there is a considerable lack of volume. As a result, a few small traders can quickly bid up the price of a stockto a fever pitch. If you try to buy this stock during this time, it will usually come back down after the market opens. Conversely, if you try to sell a stock pre-market, often times you would have sold for a better price if you have waited a minute or two (or five) after the opening bell. Because of the lack of volume, along with a real dearth of institutional investors, it's best to avoid pre-market trades altogether.
6. Sometimes No Trade is the Best Trade - When markets are falling and volatility is running rampant, staying "on the sidelines" in an all-cash position is often the best policy. Now it's true that opportunities do arise when market volatility starts going crazy, but this is not the time to be a hero. Wait out the storm. When there is blood in the streets, stay out of the way of the stampeding masses. Once the market sorts itself out, and volatility dies down, it becomes safe to get back in the market. That is also why you should never feel bad about getting your stops hit (getting "stopped out" of a trade). Those stops, which often indicate small losses, save you from much bigger losses later on, bigger losses which can stop you from trading altogether. In fact, what may appear as a small loss at first, may actually be a "gain" in your favor; for example, if you sell a stock for a $1 loss, but the stock then continues to lose another $5, you should not consider that trade as a loss.
7. Is Paying for Advice Advisable? - If you are not getting the results you hoped for in your trading, should you get professional assistance? Being human beings, we are all susceptible to the ebb and flow of our emotional states. One of the hardest things to do is to disengage your emotions when trading, whether those emotions involve fear (when your stocks are falling) or greed (when yourstocks are rising), or just the everyday emotions that stem from your personal life. If you can find a trusted and reliable stock-picking advisor, you are then able to bypass a lot of your own emotional baggage, and follow the lead of someone who is experienced in the discipline of trading. But be careful: Free advice is usually worth what you pay for it. However, you shouldn't have to pay thousands of dollars, either. Also, be wary of stockbrokers who are trying to sell you a sure thing: usually, it's stock that their company bought, and now must get rid of.
1. Don't Throw Good Money After Bad - If you've got a losing stock, don't make excuses or say things like "now it's really become a bargain" or "it can only go up from here." Those arefamous last words. If you own an underperforming stock, sell it - today! Don't wait, and certainly do not add to your shares of that stock. That is a recipe for full-blown disaster. There's a reason that the stock you own is underperforming. That reason may not be obvious to you now, but eventually the reasons will come out. Your money can be put to much better use buying a stock that is in an uptrend and can make you money right now (see point #2).
2. Don't Buy Low and Sell High - We've heard this phrase all of our lives: "buy low and sell high." You can't go wrong with that advice, right? Actually, that's wrong, because buying low implies buying a stock that has been on a losing streak, or one that is underperforming. Those are usually the worst kind of stocks to buy. The best stocks to buy are those that have firmly established a definite uptrend. So a more appropriate phrase might be, "buy high and sell higher." Another piece of advice that goes along with this is as follows: don't try to pick the bottom. Let someone else try to figure out what the bottom is. It could be that the stock has a few more weeks to go before it completely bottoms out. No use wasting your money guessing on where that point might be.
3. Don't Swing for the Fences - Everyone wants to hit a home run once in a while, but making that your primary trading aim means you are risking your capital and your sanity. The only way to have long-term success in your trading career is by taking many small gains instead of a few big gains. Home runs are few and far between. They are a nice bonus when they happen, but don't expectthem every time. If a stock has made you some gains, take them. Don't get greedy or expect a doubling or tripling in price, because you could end up losing what you have already gained, and sometimes a lot more. Take your profits, and move on to the next stock.
4. Know the Best Times of the Day to Trade - The best times of the trading day are the opening and the closing. More specifically, these times are the first hour and a half (9:30 to 11:00 am) and the last hour and a half (2:30 to 4:00 pm) that the stock market is open. That is when there is the most price movement and the highest volume. This is also why the opening and closing price quotes are used in mapping out stock charts. The volume around midday generally dies down quite a bit for one major reason: too many traders, especially the big institutional players (the ones who can noticeably move the market) are out to lunch. Some may take earlier lunches, and some may take later lunches, but there are always big players who have gone to lunch during this time. The people who they have left in charge are usually younger associates with less experience who don't have much say in decision-making. So it's best to avoid both buying and selling during this period of the day, as any price movements could be false signals or fake-outs.
5. Do Not Buy or Sell Before the Market Open - Buying or selling a stock before the open (8:00-9:30 am), in what is known as a pre-market trade, is usually not recommended. During the pre-market period, there is a considerable lack of volume. As a result, a few small traders can quickly bid up the price of a stockto a fever pitch. If you try to buy this stock during this time, it will usually come back down after the market opens. Conversely, if you try to sell a stock pre-market, often times you would have sold for a better price if you have waited a minute or two (or five) after the opening bell. Because of the lack of volume, along with a real dearth of institutional investors, it's best to avoid pre-market trades altogether.
6. Sometimes No Trade is the Best Trade - When markets are falling and volatility is running rampant, staying "on the sidelines" in an all-cash position is often the best policy. Now it's true that opportunities do arise when market volatility starts going crazy, but this is not the time to be a hero. Wait out the storm. When there is blood in the streets, stay out of the way of the stampeding masses. Once the market sorts itself out, and volatility dies down, it becomes safe to get back in the market. That is also why you should never feel bad about getting your stops hit (getting "stopped out" of a trade). Those stops, which often indicate small losses, save you from much bigger losses later on, bigger losses which can stop you from trading altogether. In fact, what may appear as a small loss at first, may actually be a "gain" in your favor; for example, if you sell a stock for a $1 loss, but the stock then continues to lose another $5, you should not consider that trade as a loss.
7. Is Paying for Advice Advisable? - If you are not getting the results you hoped for in your trading, should you get professional assistance? Being human beings, we are all susceptible to the ebb and flow of our emotional states. One of the hardest things to do is to disengage your emotions when trading, whether those emotions involve fear (when your stocks are falling) or greed (when yourstocks are rising), or just the everyday emotions that stem from your personal life. If you can find a trusted and reliable stock-picking advisor, you are then able to bypass a lot of your own emotional baggage, and follow the lead of someone who is experienced in the discipline of trading. But be careful: Free advice is usually worth what you pay for it. However, you shouldn't have to pay thousands of dollars, either. Also, be wary of stockbrokers who are trying to sell you a sure thing: usually, it's stock that their company bought, and now must get rid of.
Short Term Profits versus Sustainable Long Term Gains
It’s a market obsessed with making short-term returns. As a result, the past decade of what is perceived as ‘regeneration’ has been dominated by speculative investor bulk-buying, killing off any chance of creating vibrant communities resulting in a legacy of absentee owners, and an oversupply of one and two bedroom identikit apartments.
You can’t blame the house builders, developers or agents; after all, they represent the private sector which has to answer to shareholders who want to maximise annualised profit. But what about the next 20, 50 or 100 years? Is such a short-term approach really the best financial model? Does it create vibrant and healthy communities and great urban places? The answer to these questions has to be no.
Until we adopt a long-term approach to creating communities and vibrant places rather than an obsession with buildings and short-term profit, the property market will not deliver sustainable city living in line with the European approach. I believe the answer lies with the larger financial institutions and the public sector. Both can afford to think long-term, as they don’t answer to private shareholders. Currently, property only represents a small percentage of pension funds’ total investment. Traditionally, the financial institutions have avoided more exposure to property perceiving it to be volatile and management intensive. However, the city’s financial institutions are now starting to look at property as a long-term alternative for the creation of excellent returns. Morley, one of Europe’s largest property fund managers, set up The Igloo Regeneration Fund in 2002. This is the UK’s first urban regeneration fund investing for a commercial return in mixed use, environmentally sustainable, well-designed regeneration projects on the edge of the top 20 cities in the UK. The fund is managed by Morley on behalf of Norwich Union without pressure from shareholders.
The public sector is also starting to recognise that it can take a long-term approach to value creation and the generation of public benefit through quangos like Communities England (English Partnerships and the Housing Corporation) and British Waterways. For example, British Waterways established ISIS Waterside Regeneration at the 2002 Urban Summit held in Birmingham in order to use its assets to create long-term returns and sustainable new waterside destinations. ISIS is now revitalising more than 170 acres of land in seven towns and cities across the UK, designed to attract a wide range of occupiers, including families. Icknield Port Loop, one of the most significant regeneration opportunities this decade is one of these sites.
When the public sector take this long term approach, they often are faced with a dilemma given the need to cover short term costs, for example British Waterways are responsible for a 200 year old system that constantly needs to be maintained and suffers from years of under-investment. The current costs are more than British Waterways receive. British Waterways require consistent funding to be able to maintain the waterways for public benefit and as a catalyst for regeneration without having to sell off the family silver. Over the past weeks the national news has reported that it may be privatised; this would be a huge shame. British Waterways has the opportunity to continue to act as a force for good in regeneration, rather than being forced to dance to the tune of the shareholder.
We need to encourage the government and financial institutions to get behind the property market and set up more of these funds. We only need to look to northern Europe for an example of how this can work very successfully.In the UK, young people have a stark choice – 25 year mortgages are likely to be replaced by much longer terms and if the idea of creating huge debts for others to inherit is not attractive they are forced to rent average quality and poorly designed apartments from private, relatively unregulated landlord. If pension funds invest in well designed apartments built as part of a thriving community and well managed by responsible investors such as Morley, places with long-term value can be created, which occupants can then buy-in to as part of their pensions.
This will be a challenge, as we need to overcome the stigma of renting on a long-term basis. In addition, if pension funds do invest in developers like ISIS, which puts sustainability at the heart of its approach, there is an opportunity for large numbers to acknowledge and address the challenge of climate change. If there were more communities living in residential schemes like ISIS ones which have sustainability built-in to the very fabric of the development, then a critical mass could develop into combating the effects of climate change.An excellent case study of how the public sector can work with long-term funds, as I have described, is represented at Icknield Port Loop. Birmingham City Council, Advantage West Midlands and ISIS together with other key stakeholders are bringing forward plans to put this long-term approach to community and value creation into practice. It can’t come soon enough.
Better Trades and Stability Vs. Profitability
Previously Earlier, we began a to investigate the need for stability in our trading business. We agreed that an important purpose for stability was having a more or less consistent ability to pay our bills, enabling our trading business to survive. Additionally, we outlined a strategy which had the ability to maintain our initial value (our emergency money) and the potential for making profits as well. The strategy; a 'balanced' straddle; amounted to finding a stock whose price 'oscillated' above and below a particular value. If that value was also a strike price for that stock, then we could straddle it, buying puts and calls at that strike with several months before expiration. As the price moved up and down, the value of our calls and puts moved up and down inversely, keeping the total value of the position roughly the same. In this way, our 'emergency fund' was more or less kept intact. In this discussion, we see how to draw a profit from such a position. Stability Implies A Constant Value If I have a minimum of six months required cash on hand much of the 'production stress' is removed from me. That is, if a budget of $5,000 per month is required to support my household, then having around $30,000 cash on hand goes a long way toward making me feel secure financially ... for about six months! Whatever we decide to do with that money once we've accumulated it, we have to insure that the underlying value is not subject to erosion. To that extent, then, those strategies and/or trades set aside for our 'stable money' should more or less insure that what ever amount of money we begin with is available to us at any time in the event of a financial emergency. Let's continue with our SLAB example. If we buy a $55 put and a $55 call when the stock price is at or very near $55, we're buying AT the money options and should expect to pay around $5 or $6 for those options having expirations about 4-6 months hence. If we buy 10 contracts each, we have about $10,000 - $12,000 invested in the position. We need to be very sure that money will REMAIN more or less intact and available to us should we need it. To meet MY requirements for six months 'budget-in-the-bank', I'd need three such positions. I would certainly NEVER put ALL $30,000 into a single position! Owning a put and a call (at the same strike price & expiration month) is called a straddle, an inherently 'neutral' position. To understand how a 'neutral' position can provide the safety and stability you need, refer to the chart of Silicon Laboratories stock above. During the last week of January, you'll see the stock gapped up, touching $55 that day. We'll assume that we entered a $55 straddle at that point. Follow the chart as the stock moves down. If we paid say, $5 for the puts and calls, then we can reasonably expect their premium to change in value as the stock moves. For example, around February 2, the stock has fallen to around $50. Those puts we bought for around $5 are now worth around $9 or $10. However, the calls we bought for around $5 are now worth around $1. No matter, the POSITION value is still worth around $10,000, what we PAID for it! So, Though the stock has fallen significantly in value, our STABILITY money is still there, ready to be used in an emergency. In other words, we could close the position and take our initial investment back at ANY time we wanted or needed to do so. Continue to follow the stock price. Notice near the end of February, the stock price has risen to around $60. At that time, our calls have risen to be worth around $9 or $10 while our puts have fallen in value to around $1. Again, we see that our emergency money is STILL intact, despite an almost $10 oscillation in the value of the stock. We can continue to do that for as long as the stock oscillates ... AND our options haven't expired. Stability Induces Safety, Not Profits . . . Unless . . . Up to this point, we've learned about the importance of having some emergency cash set aside. Additionally, we've learned about how straddles work and we've seen how the strategy produces a 'safe-haven' for some of this stability cash. But wouldn't it be nice if we were to figure out a way to make this money produce a profit in addition to the stability. Well, strictly speaking, a neutral position will not produce a profit unless the stock moves violently and a long way in either direction. Closing the position at either such 'extreme' (up or down) can produce enough profit in the one option to more than pay for the remaining option. That requires volatility, a concept not closely tied to the idea of stability. The biggest benefit of these stable positions is that stability itself, not the lure of profits. That said, there IS a way to pull profits from these positions, and LOTS of it! However, it requires us to temporarily LEAVE the safety of neutrality by closing out one side of the straddle, remaining in a now "directional' trade. If you sense a bit of increased risk and danger here, you're absolutely correct. Keep in mind that we can ill afford to gamble with this money! We can chase profits in one of two ways; short term and/or medium term. We'll begin with the least time-intensive method; medium term next time in part V. See ya then! If you think that I might be of help to you in sharpening up your trading skills, please give me a call at my support line, toll free 1-800-206-3935! Make it a great day! Bob Eldridge
Consciously Be This One That You Are
Heart in motion is the movement of this "you" that you truly are, flowing through this mindbody that you find yourself flowing through. It is the beyondness of the alive and indescribable "that" - which gave birth to and informs everything with itself - moving through and incarnating into its own manifestation.
This one is true of you right here and right now. You can consciously "be" this one - and "be" this one you must for there is no other way of realizing this "you" of you; you will not realize "you" through your attempt to be who you think you are; you will not realize this "you" by thinking about it - because this is who "you" are.
To be who you already are is going to have you surrendering, letting go and leaving alone this activity of trying to be what you are not - this unconscious and veiled attempt to try and be who you think you are.
You will start being led out of this prison of your own making through attraction and attention. You are attracted to being happier than who you think you are can deliver. You are attracted to the freedom of your heart because you know yourself to be not living this clarity on a momentary and daily basis.
No matter how happy you think you can be it can never come anywhere close to the enrichment of the one that is already true of you - this "you" of you that is already flowing through the eyes of this mindbody that you find yourself so intimately involved with.
Of course, not realizing this one leaves you drowning in the ignorance of not seeing the sheer beauty of the heart that you are busily being distracted from noticing as being the "you" that you already are; it leaves you drowning in the inattention of what you are up to on a daily basis.
Consciously "be" this one that you are - by bringing your conscious attention to the finding of this "you" of you that is currently flowing through the eyes of this mindbody that you find yourself flowing through and stopping at and as this one - and open to the changelessness and endlessness of such a magnitude that it will simply transcend the level of mind that you currently suffer, or carry on as you are.
All realizers have come to recognise that they are not who they thought they were; that there is no one to become anything - enlightened, awakened or otherwise. Who you are already is - right here right now. It is currently flowing through your eyes. To be this one requires your surrendering and letting go of who you think you are. It is a huge relief to no longer have to perpetuate the struggle of trying to be who you think you are. It allows you to simply get on with being "that" which is already and always right here; to be what is already true of you; the being of this "you" of you that is flowing through your eyes - the seer, the heart of existence itself, the divine one; and "that" is immense joy, freedom and delightfulness - despite the continuing cycles of arising that the mindbody may be going through.
The one that you are is not wracked by desire, fear, doubt and guilt - it is completely and momentarily free of all these and of everything; it is freedom itself.
Wednesday, October 10, 2007
Economics and Decision Making.
How do individuals and businesses in society make decisions? From the viewpoint of an economist there are three basic assumptions. Rationality, maximization and costs & benefit analysis.
Rationality: Economists start by assuming that economic decision makers act in a rational manner. What this means is that decision makers act according to reason, rather than in any odd way. For instance, if a person wanted to increase his or her income, it is assumed that he or she would try to work longer hours, rather than shorter hours. Equally if there were two identical products of washing detergent on the supermarket shelf, one price at $5.00, the other on sale at $3.00, it is assumed the shopper would buy the cheaper packet.
Maximization: A second economic assumption is that economic decision-makers attempt to maximize. This means that they try to get the best out of any economic situation. If a person chooses to work for 38 hours a week instead of 40 hours, everything else being the same including the wage, then he or she will choose to maximize leisure time by working 38 hours. Equally, a business will prefer to earn as much profit as possible, rather than a lower profit as possible.
Costs and benefits: In order to decide what is biggest in any economic situation, a decision-maker has to asses the costs and benefits of any particular course of action. For example what would be the costs and benefits of a decision by workers to buy a factory that they worked for if it was about to close down? The costs would be the money they had to put up to buy the factory from its owners. However, costs could be even greater. If the factory started to make a loss, they could not only loose all their money they had put in the firm but may have to commit more money to keep it going. Another cost would be the lost opportunity to find a new job. The benefits would be that they would still be in a job. They would get a salary. What’s more if the company were successful, they
These costs and benefits relate to the individual workers who are making the decision about weather to buy the factory. The economic model of decision maker than assumes these workers would decide to support buying or not buying by weighing up these costs and benefits and making a rationale decision about how to maximize their individual utility. This is the basis of an economic decision making model.
Friday, October 5, 2007
Profitable Forex Trading Strategies
By far regarded as the largest and the busiest market, the Forex market has tremendous profit potential. The Forex currency market is a lot different from the stock market and you need to have a very good understanding about the way this market functions. Its not surprising that there's a lot being said and written about Forex currency trading. In fact, those who are keen on mastering Forex trading skills can actually take up a Forex trading course and get formal Forex education. Before you set out to trade in the Forex market or the Foreign Currency Exchange Market, you must make sure that you have done plenty of research, studied historical trends, analyzed existing trends, and worked out profitable Forex trading strategies that can boost your Forex trade.
There is no standard strategy that can be safely applied when it comes to Forex currency trading. Basically, what may work for one may not necessarily fit your trading needs and you must therefore devise your own strategies that can guarantee success in the long run. You need to first analyze the market using a technical analysis approach or the fundamental analysis approach to plan your moves. While technical analysis refers to forecasting future movement based on past performance, fundamental analysis refers to studying current accounts and impact of imports and exports on currency flow.
Understanding how volatile this market is, every experienced trader understands that it is not practically possible to generate profits from every trade. However, as you study this market closely, you will be able to work out better strategies that can minimize your risk levels.
Use surplus money for trading
This market is speculative and "timing a trade' is crucial. Even a slightest mistake can cost you a lot of money. So, make sure that you use only surplus money in order to save yourself from financial wreck. One of the biggest mistakes many traders do is staking all their money in a single trade. If you are not sure, go for margin trading to enjoy more leverage.
Do some market research
Consult your financial advisor or a Forex broker who can tell you the exact status of the Forex market. You need to understand whether current trend is upwards or downwards, is it strong or weak, and how long has this trend been going on or is a new trend in the making. A trade without prior market research can lead to financial disasters.
Decide the time frame for trading
As a smart Forex trader, you must have a time frame in mind beyond which you wont like to trade and also decide an approximate exit price. This gives you a proper perspective and helps you to plan your Forex trade more efficiently. You need to therefore decide whether you would like to go for long term trading or intra-day trading. This will help you to determine which approach you must adopt for research and analysis. For instance, for someone trading several times a day, a daily graph analysis will be useless and the trader will require thirty minute or hour graphs to plan his exit. Another important factor that you need to take into account is the time periods when different financial companies enter and exit the foreign exchange market in order to study the market trends.
Choosing the right time to trade Timing is everything when it comes to Forex trading and once you have understood the market trends you need to immediately plan an entry. Rely on technical analysis to time your move and predict market movements.
If you are not sure about which Forex trading strategy to use, find a good Forex broker who can handle your financial portfolio for you
There is no standard strategy that can be safely applied when it comes to Forex currency trading. Basically, what may work for one may not necessarily fit your trading needs and you must therefore devise your own strategies that can guarantee success in the long run. You need to first analyze the market using a technical analysis approach or the fundamental analysis approach to plan your moves. While technical analysis refers to forecasting future movement based on past performance, fundamental analysis refers to studying current accounts and impact of imports and exports on currency flow.
Understanding how volatile this market is, every experienced trader understands that it is not practically possible to generate profits from every trade. However, as you study this market closely, you will be able to work out better strategies that can minimize your risk levels.
Use surplus money for trading
This market is speculative and "timing a trade' is crucial. Even a slightest mistake can cost you a lot of money. So, make sure that you use only surplus money in order to save yourself from financial wreck. One of the biggest mistakes many traders do is staking all their money in a single trade. If you are not sure, go for margin trading to enjoy more leverage.
Do some market research
Consult your financial advisor or a Forex broker who can tell you the exact status of the Forex market. You need to understand whether current trend is upwards or downwards, is it strong or weak, and how long has this trend been going on or is a new trend in the making. A trade without prior market research can lead to financial disasters.
Decide the time frame for trading
As a smart Forex trader, you must have a time frame in mind beyond which you wont like to trade and also decide an approximate exit price. This gives you a proper perspective and helps you to plan your Forex trade more efficiently. You need to therefore decide whether you would like to go for long term trading or intra-day trading. This will help you to determine which approach you must adopt for research and analysis. For instance, for someone trading several times a day, a daily graph analysis will be useless and the trader will require thirty minute or hour graphs to plan his exit. Another important factor that you need to take into account is the time periods when different financial companies enter and exit the foreign exchange market in order to study the market trends.
Choosing the right time to trade Timing is everything when it comes to Forex trading and once you have understood the market trends you need to immediately plan an entry. Rely on technical analysis to time your move and predict market movements.
If you are not sure about which Forex trading strategy to use, find a good Forex broker who can handle your financial portfolio for you
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