Saturday, December 3, 2011

Profitability of Companies and Stock Investments

If you want to find profitable investments you have to analyse a lot securities and annual reports, also watch news on business portals as Bloomberg or others. But reading business news will not bring successful investment results without additional effort.

The first thing you have to understand about stocks and other investments is profitability. Profitability of stock is a results of gambling, if you want to measure real profitability, you have to focus on profitability ratios of companies.

Why profitability ratios are important? It is natural question, and you have to know that everything is important but anything cannot be interpreted without a context. The single profitability ratio will not provide for you all the necessary information. Because different profitability ratio will show you different information. There are two main kinds of company's profitability: profitability based on assets or equity (balance sheet ratios) or profitability based on some kind of profit (income statement ratios). Both directions are important but shows different things to us. At first you have to know that there are many types of profit: gross profit, EBITDA, EBIT, pretax profit, net profit, profit after minority, attributable to to shareholder or any other. All of these profits may show for you some profitability.

But now let's concentrate on the main ratios that are used in investment market by investment professionals. The mostly used ratios for profitability measurement are profit margin, EBITDA margin, ROA (return on assets)  and ROE (return on equity).
Profitability margins and company's EBITDA margins are the margins that based on ratios from income statement when ROE and ROA ratios are complex when data are used from income statement and balance sheet. All those ratios might be important.

The more company is profitable the better is for shareholder but in other hand when profitability is very high, there is no much potential left. If investor wants to invest in a stock that would have a lot of potential in the future he should look for companies that have low profitability. In that case the investor could expect for profitability to grow in future. That would give some potential for price increase. But profitability do not changes without any reason, there must be some conditions for turnaround of the company. If investor is sure about such conditions then maybe he should choose such companies for investment, but such investing in kind a risky one. Especially risky are investments in unprofitable companies with expectation for turnaround.

Tuesday, October 11, 2011

Investments in ETFs

There are many ways of investing in the stock market. One of these is through ETFs -Exchange Traded Fund. It is a group of funds that is traded like a share of stock on the stock market. This group of funds is of different forms and may include stocks, bonds, or currencies. It can be bought and sold during the operating hours of the stock market just like any stock, which mainly differentiates it from mutual funds. Also, the costs for trading Exchange Traded funds are lower compared to mutual funds.

There are different types of ETFs. Some of these are commodity, sector, industry, and global, just to name a few. Here we will discuss the last of the named types.

A global ETF, as the name implies, puts investments in different financial markets in the world. Contrast it with a commodities ETF which focuses investing in a certain commodity like oil, or with a sector ETF with a focus on just one sector like technology, or with an industry ETF with a focus on an industry like transportation.

There are advantages to investing in ETFs which make them appealing to both old and new investors. Global ETFs behave differently than local stock market conditions. So even if there is a decline in the local market, one may still gain in one’s investment abroad. Investing in Global ETFs, one can decide which country or countries to put money in. Also, one can choose the industry to put the investment in. Since the investment is diverse and in different regions, one’s portfolio is naturally improved and the risk of loss is lowered. Investing in Global ETFs also give traders the information on how local markets perform, thus getting a chance to determine the economic strength of a certain country. Hence, they may intend to open up more investments in that country and benefit from it.

There are also some disadvantages to investing in Global ETFs. If the country or countries where one’s investment lies depend to some degree to the prevailing market situations where one’s other investment are, then a negative situation in one may affect the other. Since Global ETFs diversify one’s investments, profits are lessened because one’s investments are scattered, as compared to putting a substantial amount of investment in just one industry. Also, economic and even political conditions beyond prediction or control can affect gains if these situations negatively affect market conditions.

ETFs are following some indices. Those indices might be of bonds or stocks. If ETFs are investing in bonds then you usually may see a possible yield (yield to maturity) that you may earn from investment in such ETFs.
When ETFs are investing in stocks, then you can now the main information about that market. For example, if fund is investing in dividend stocks, then you should pay attention to such ratios as yield of dividend, dividend  ratio and similar characteristics of high dividend paying stocks.

If index represents market of growth stocks, then you necessary have to look at price-to-earnings multiple and PEG ratio for stocks if possible. Such ratios are main for stock market and normally benchmark indices should give you that information. If those ratios are not provided, you can calculate them by yourself, but it may take a lot of time and going to be much more difficult.

Nevertheless, investing in Global ETFs is a safe practice since placing investments in different sectors and regions protect one from losses if a certain sector or region experiences some set back. Its gains outweigh its risks and investing in them is a favored investment form nowadays.

Global ETF provides for you good diversification, which can be the most important factor for modeling of good investment portfolio. ETFs allow you to invest in different asset classes as stocks, bonds, money market, real estate and other. You should take those benefits and use them as long as it give you an advantage.

Fees also are very important factor when investing in traded funds globally. Global investment is much easier with help of ETF and allows you to save a lot of money that you would spend for management, sales-load, administration, redemption and other fees that comes with regular mutual funds. But name of ETF does not guarantee for you low fees. Yes, it normal that ETF has much lower fees than investment funds, but not all ETFs have that low management fees. Some exotic funds make take higher fees than normal ETF.  To avoid that you simply should check on the Total Expense Ratio of the fund. If this one is ok, then you don’t have to worry about fees very much. But still should check trading and depository fees, because most probably you must pay those too. 

Monday, September 12, 2011

Real Estate Investments – Timing or Readiness?

As with all other types of investments, investing in real estate carries risks. So before venturing out on investing in real property, know the basic factors you will have to consider. The question really is not when is it the best time to have an investment in real property as it is to know how ready you are to actually do this type of investing.

You should decide first as to what type of property you wish to have as your investment. Is it a residential or a commercial real estate? Do you plan to build and sell, or to build and lease? Once you know your choice, then it’s time to go on to other factors that investment strategies for beginners should consider.

Determine if you will have enough capital to sustain the investment. In the first place, you might find yourself going to lenders to finance this venture. They will then consider your age, as this will be a factor on the number of years you are to pay the loan. Your financial obligations too, like your dependents and other loans or debts you are obliged to pay, are considered.

Before delving deeper into investing in real estate, it may be good to do some research on the web about current news and issues relating to it. Armed with this knowledge, you should be in a better position to make decisions about this investment.

Location is paramount if it is real estate investment that you are going into. It is advisable to work with real estate brokers as they can advise you on the suitable locations for your investment. For example, if it is a residential real estate that you intend to get, and you plan to rent the property, the place should be just a stone’s throw away from basic amenities. This includes schools, hospitals, transportation, and shopping districts. Families with children also account for the prevalence of crime in determining a place to rent, as it is a concern for parent’s that their kids be safe.

Investing in real estate can be lucrative if done with proper planning and insight from others experienced in the field. You should expect to gain from investing in real property especially if you are renting the property. The money earned here, ideally, should be able to pay for your loan, if one is taken, while you’re still earning from it.

Remember, investing in real estate (property) is not so much about proper timing as it is about being ready for this type of investment.

Friday, August 26, 2011

How to Invest

The field of investment is quite tricky. Majority of the people who have tried their hands in this field often ended up losing more than they can actually afford or, even worse, going bust in the process. For this reason, you have to ensure that you gear yourself with the different skills that you need to do well out of your investing career. Make sure that you keep the following tips in mind as you try your hands in the challenging yet ultimately rewarding field of investing. 

First and foremost, you have to see to it that you do not take on the field of investment with a blind eye. As with other profitable field, you have to see to it that you learn the different techniques that you need to find out which options present the best chances of giving you money without requiring you to face a high risk environment. Make sure that you deal only with the best options and that you avoid high risk investments like the plague, especially if you are only starting out in the field. It is better to be safe than to be sorry, and the same thing holds true with investing. 

Make sure that you take well-calculated risks. If you were to make a killing out of the field of investment, it will be impossible for you to avoid having to take certain risks regularly. As long as you remain intelligent and level-headed about the type of hazards that you face, you should be able to go past these hurdles and make a good amount of profit with your investment instruments

With this said, investing would require you to gather the skills that you need not only to assess the risks that you are faced with, but also to mitigate them as well. Get the help of a professional broker if you are not entirely sure that you will be able to go about this task effectively. However, it is imperative that you avoid taking these pieces of advice blindly, and that you make a conscious effort to follow the pointers that will actually work for the kind of trading style that you are working under.

Sunday, August 14, 2011

Advantages and Disadvantages of Investing

Investing is a way of utilizing your money over a certain business venture or an enterprise in order to gain money return or for better profitability.

There are several types of investments.  Its type depends on how the investing has been made.  Some may invest on buying a certain property of high appreciating value like a house or a real estate.  Investing may be done by acquiring a share of stock from a certain company.  It can also be referred to the human education which can be utilized in the future. 

Investing require a thorough study on where you should be putting your money.  Keep in mind that when you invest, there should be a money back guarantee to avoid turning your investments in to gambling or just speculations.

A number of advantages and disadvantages may be linked to investing.  These are the:
-          Investing makes your money work on your behalf.  Nowadays, it feels more advantageous to invest on something that just let your money be stocked for nothing.  Money interest on your bank savings account might not be enough to support you in the future.  Due to the current demands of life, it seems that man should not stick to only one paying job and depend on your retirement pension in the future.  The value of your retirement pension may not be enough to cope with the world’s inflation.  By investing wisely in a profit making institution, you can make the most out of your present earnings.
-          Given that investing requires a thorough study on how your money will work, there are still other factors which may be encountered along the way that may affect the investment you made and make it fall.  In other words, the probability of you losing your investment is still there.  Example of this is when you invested on an atypical commodity.  The probability of gaining profit from it will depend on its attractiveness in the market and its accessibility.

Beware of turning your investment to a gamble.  Make sure that you will make an extensive research of the current and future market before you pursue with investing.

And do not forget that investment is a long term process and if you want to feel the advantages of it, it will take time. Long time. Sometimes, if you get lucky you can see impressive results in few years, but it will be only short term success, but not sustainable investment benefits. 

Sustainable benefits of investment can be realized only when risk of investments is properly diversified over variety of investment assets. 

However, the disadvantages of investments you may suffer immediately. If you will start to invest in stock market not carefully you may loose money very quickly and will be hard to regain it back.

You have to consider seriously advantages and disadvantages and to make a good investment strategy before started to invest. 

Friday, August 12, 2011

Investing Advises for Beginners

Investing is a way of putting your money over something that profit earning which will help you be financially stable in the long run.

Even a regular working individual may acquire investment in any way. It doesn’t really matter how much you have in your wallet because simple savings, in any amount, is already an investment, just not a profitable one.

Here are some ideas on how you will start with investing:

1. Start setting aside small amounts of money for invest purposes. Saving like 5-10 percent of your pay check could yield an ample amount to invest in one whole year.
2. Make up your mind if there is a need for you to invest more rather than paying a debt that entails a high interest. Whatever you choose from the two (2), make sure that you set-up a certain fund for emergency first.
3. Investing costs should only be limited up to 2% of the deals value regardless of the amount that you are investing. You can get the transaction value by getting the product of the investment cost times 2%. In the even that the value of the deal is more than what you are expecting then better yet put your money in the bank savings account first and wait for a better deal.
4. $20 may get you in to investing. Some companies have this drip scheme where you can buy a company share directly from them. You need not to talk to brokers and pay off their commission because your transactions are made directly with the company. – Not all company do this kind of scheme but worry not because there are over 1000 companies for you to choose from. Usually direct investment in shares is made in large stakes, but its not for small investors like you.
5. In the event that you can’t choose any of those 1000 companies, then look for a broker who will allow you to have an agreement like that of the Drip scheme.
6. Scout for mutual fund investment that offers small investments. Though there are only a few of them so you really must be patient and careful in looking for one. Usually, these firms give such offer but you should sign an agreement that allows them to withhold a certain amount from your bank saving account every month. This is what they call an automatic investment plan.

If you don't trust on some product, try to check it on U.S. Securities and Exchange Commission.