Real estate investment trusts (REITs) are popular investment vehicles that generate income for their investors. A REIT is a company that owns and operates various real estate properties in which 90% of the income it generates is paid to shareholders in the form of dividends. As a result, REITs can offer investors a steady stream of income that is particularly attractive in a low interest-rate environment. Still, there are REIT risks you should understand before making an investment.
How Real Estate Investment Trusts Work
Since REITs return at least 90% of their taxable income to shareholders, they usually offer a higher yield relative to the rest of the market. REITs pay their shareholders through dividends, which are cash payments...
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So you've racked up thousands of dollars in paper profits on your favorite stock simulator and are now ready to take the big step from virtual trading to the real thing? Lest you think that making the transition will be an easy process, be aware that trading in the real world is an entirely different ballgame from simulated trading. Below are five disadvantages of stock simulators.
1) Simulated Trading May Breed Complacency
Perhaps the biggest danger of a stock simulator is that it may lull a novice trader into a false sense of complacency if they have had a hot streak of several successful virtual trades. As any trader will attest, real-life trading poses several challenges – some of which are detailed below – that are not part of the...
The market for impact investments had grown by 2020 to $715 billion, according to the Global Impact Investing Network’s (GIIN’s) “Annual Impact Investor Survey” and most respondents see ongoing steady or accelerating growth rates.
In addition to assets under management, Google Trends shows a steadily rising interest in ‘impact investing’ over the past decade among its searchers.
Let’s take a look at impact investing, how it has evolved over time, and how individuals can implement their own strategy with listed securities.
What Is Impact Investing?
Impact investments are investments designed to generate positive, measurable, social and environmental impact along with a financial return. For example, you might purchase a bond issued by...
A broker often needs to make a snap decision to buy, sell, or hold a stock. This is because there is no time to consult stock analysts, interview management, or read lengthy research reports. But a quick glance at some key information can lead to a good decision made whilst under pressure. So if a company has just released a press release about its quarterly report you can skip over the filler and look for some of the following key facts.
Increasing Sales
Check to see if the company is growing its sales and, if so, whether the sales growth is sustainable or related to a one-time event. In addition to checking the sales numbers, you'll have to skim through the entire press release in order to see what management said about the quarter...
“Price is what you pay; value is what you get.”– Warren Buffett paraphrasing Benjamin Graham
Fundamental analysis is the foundation of investing. While technical analysis uses statistics to predict a stock’s price movements, fundamental analysis uses financial statements to determine a fair value for the stock. Many investors use fundamental analysis to determine what stock to buy and technical analysis to determine when to buy and sell the stock, while others exclusively use one or the other.
In this article, we’ll take a look at fundamental analysis in order to understand the language and concepts behind it.
Qualitative Analysis
Fundamental analysis may be largely focused on financial statements, where things like price-earnings...
Traders and investors in the equity markets have been enjoying watching as prices have been breaking to all-time highs.
Of course the big question in everyone’s mind is where will this bull run end and is there anything I can do to protect my capital when it does? While no one can predict exactly where this price movement will reverse since there is no supply level above to signal this, there are some tools that traders can use to identify when the bullish pressure has subsided and therefore marked the time for profit taking in your portfolio.
Source: Sharekhan - TradeTiger
One of the most common methods is to use a moving average on your chart. The average summarizes the past trend and momentum and when prices start breaking down...
All stocks incur some risks that are generic in nature regardless of its sector and business specific activity.
Commodity Price Risk
Commodity price risk is simply the risk of a swing in commodity prices affecting the business. Companies that sell commodities benefit when prices go up, but suffer when they drop. Companies that use commodities as inputs see the opposite effect. However, even companies that have nothing to do with commodities, face commodities risk. As commodity prices climb, consumers tend to rein in spending, and this affects the whole economy, including the service economy.
Headline Risk
Headline risk is the risk that stories in the media will hurt a company's business. With the endless torrent of news washing over...
ETF Stop Loss Equals Big Risk
This equation might seem backward at first. Suppose that you use a stop-loss market order on an ETF and that ETF temporarily trades at a steep discount to its net asset value (NAV). What’s going to happen? Your position is going to be sold when the ETF is offering a discount. You could use a stop-loss limit order and that way, your sale isn't triggered at the bottom. However, that’s still not going to be a good trade. You could also attempt to implement an arbitrage strategy, but this is complicated and would require liquidity, speed, and plenty of capital. There are also other order types that you can try, but they probably won't help much either.
Most ETFs Track an Index.
Let’s use SPDR S&P Retail ETF...
Selecting good stocks isn't easy. The sheer volume of companies makes zeroing in on a good stock difficult and the volumes of data on the internet don't make things any easier. In fact, it's hard to sort out the useful information from all the worthless data. Fortunately, a stock screener can help you focus on the stocks that meet your standards and suit your strategy.
Stocks screeners are effective filters when you have a specific idea of the kinds of companies in which you are looking to invest. There are thousands of stocks listed on exchanges in the United States alone; it's just not feasible to track all of them on your own. A stock screener limits exposure to only those stocks that meet your unique parameters.
How Stock...
When traders and investors look to profit in the markets, they often look to stocks that they believe will grow rapidly in price. However, there is another group of stocks that can not only offer growth potential, but a steady stream of income in almost any market condition. This group is dividend paying stocks. Let’s examine what a dividend is, how it can benefit you financially, and how to choose the correct securities for your portfolio. Additionally, we can explore methods for protecting these investments in market turndowns.
What are Dividend Stocks?
A dividend is nothing more than a share of the profits of a company. When you purchase shares of stock, you are buying a piece of ownership in that company. Through the company’s...
Have you ever played musical chairs? Do you remember those instances when there are only a few players left and the music is playing longer than normal with the tension building as everyone knows the music will end at any second? It reminds me a little bit of the feeling of this current bull market. With reports, at the time of writing this article, that it is the longest bull market in history, supported by what might become the longest economic cycle without a recession in history, the music feels as though it has been playing longer than normal.
Add on top of that, stock market valuation indicators like the Schiller P/E ratio and the Buffett Indicator hitting record, or close to record, over-valuation metrics, and one might ask...
Though the efficient market hypothesis as a whole theorizes that the market is generally efficient, the theory is offered in three different versions: weak, semi-strong and strong.
The basic efficient market hypothesis posits that the market cannot be beaten because it incorporates all important determinative information into current share prices. Therefore, stocks trade at the fairest value, meaning that they can't be purchased undervalued or sold overvalued. The theory determines that the only opportunity investors have to gain higher returns on their investments is through purely speculative investments that pose substantial risk.
Weak Form
The three versions of the efficient market hypothesis are varying degrees of the same basic...
Tips for beating the market tend to come and go quickly, but one has held up extremely well: if executives, directors or others with inside knowledge of a public company are buying or selling shares, investors should consider doing the same thing. Research shows that insider trading activity is a valuable barometer of broad shifts in market and sector sentiment.
But before chasing each insider move, outsiders need to consider the factors that dictate the timing of trades and the factors that conceal the motivations.
Reasons to Follow Insider Trading
The argument for shadowing insiders makes a lot of sense. Executives and directors have the most up-to-date information on their companies' prospects. Intimately acquainted with cyclical...
Have you ever had to endure the tedium of listening politely to a loquacious individual at a party brag about the killing he made through investing in stocks or the stunning returns his little-known investment manager generated? If you’ve wondered whether there’s a way to get in on the action, mirror trading or investing may be the answer. But before you plunk down your hard-earned savings into a mirror trading account, you should know this fad has a number of drawbacks that may restrict its appeal to a tiny slice of the investing populace.
What is Mirror Trading?
The concept of mirror trading was first introduced in the foreign exchange market in the early 2000s but it took a few years for the equity market to catch on.
Mirror...
There are thousands of equities to choose from and day traders can pick virtually any sort of stock they want. So the first step in day trading is figuring out what to trade. Once one, or several, stocks or ETFs have been selected, the next step is coming up with some ways to profit from them. Here is how to select stocks for Intraday Trading.
1) High Liquidity.
Liquid stocks have big volume, whereby larger quantities can be purchased and sold without significantly affecting the price. Since intraday trading strategies depend on speed and precise timing, a lot of volume makes getting into and out of trades easier. Depth is also critical, which shows you how much liquidity a stock has at various price levels above or below the current...
Warren Buffett once said that as an investor, it is wise to
be “Fearful when others are greedy and greedy when others are fearful.” This
statement is somewhat of a contrarian view on stock markets and relates
directly to the price of an asset: when others are greedy, prices typically
boil over, and one should be cautious lest they overpay for an asset that
subsequently leads to anaemic returns. When others are fearful, it may present
a good value buying opportunity.
Keep in mind, the price is what you pay and value is what
you get, pay too high a price and returns are decimated. To elaborate on this,
the value of a stock is relative to the amount of earnings it will generate
over the life of its business. In particular, this value is...
Although they would not admit it, most portfolio managers take a core/satellite approach when managing their equity portfolios. The part of the portfolio that might mirror the overall market could be considered the "core" and the part of the portfolio that deviates from the overall market can be considered the "satellite" portion. When you hear portfolio managers say they are trading around their "core" bank holdings - or they are currently overweight oil stocks and underweight technology stocks, or they have a small cap tilt to their portfolios - they are essentially taking the core/satellite approach.
But what about the average investor? Exchange-traded funds (ETFs) provide an easy way of implementing a core/satellite approach. We...
Investing
opportunities today are not bound by geographical location. If you're intrigued
by the reports of emerging economies and booming growth in many nations around
the world, you may well want to invest in some of them. You just have to know
how to get started.
6 Paths to Global Growth
There are six ways to invest in foreign growth that are available to any
investor:
American
depositary receipts (ADRs)
Global
depositary receipts (GDR)
Direct
investing
Mutual
funds
Exchange traded
funds (ETFs)
Multinational
corporations
The Ups and Downs
For most
investors, the main points of investing in foreign stocks are to diversify
their portfolios and to take a stake in the growth of other economies.
Most
financial experts and...
Penny stocks come with high risks and the potential for extraordinary returns, so investing in them requires care and caution. Due to their inherent risks, few brokerages even offer penny stocks to their clients. Penny stock companies are often headed for bankruptcy or are highly overleveraged, because of that investing in penny stocks is risky. There are two ways to make money with penny stocks, but they’re both high-risk strategies. Below is a breakdown of the risk and rewards of penny stocks.
The Lowdown on Penny Stocks
Penny stocks can be defined in many different ways. Most people logically assume that penny stocks refer to stocks trading for less than $1. However, the SEC defines penny stocks as stocks trading for less than $5...
Amid thousands of stocks actively trading in global markets, a significant percentage are very thinly traded stocks, in other words, stocks that trade irregularly at low volumes. Investors should be aware of the considerable risks of trading in these low-volume stocks.
One risk of low-volume stocks is that they lack liquidity, an important criterion in stock trading. Liquidity is the ability to be easily bought or sold in the market without a change in price. This means that a stock which is trading at $25 per share should be easily bought or sold in large amounts (say 100,000 shares) while still maintaining the price of $25 per share. For stocks, a good measure of liquidity is the average daily trading volume. In general, any stock...
Google is well known for its popular search engine, email service, web browser, and various online tools we use daily at work, at home, and on the go. What many don’t think about day-to-day, however, is that all of these services are free. Parent company Alphabet (GOOGL) released Q3 2018 earnings on October 25, 2018. The global tech giant reported revenues of $33.7 billion for the quarter, roughly a 21% increase from $27.77 billion in Q3 2017.
On Dec 11th 2018, Google CEO Sundar Pichai testified before the U.S. Congress in a wide-range hearing about data breaches, misinformation campaigns, and concerns about working with China. The hearing was almost certainly a result of Pichai's absence in Congress earlier in the year when the chief...
Beginning stock traders know the stock market has regular trading hours - they are open for business between 9:30 a.m. and 4:00 p.m. Billions of shares of stock are traded in the American markets alone, making the markets very liquid and efficient.
What beginners may not know is the stock market is also open for business after regular trading hours. Pre-market and post-market trading sessions allow investors to trade stocks between the hours of 4:00 a.m. and 9:30 a.m. during pre-market trading, and 4:00 p.m. to 8:00 p.m. for the post-market session.
Compared to the billions of shares traded during the day, after-hours sessions trade only a small fraction of that volume, which invites other problems traders have to consider before...
If you ever look at the volume leaders for the trading day, you almost always will find Bank of America Corp. (BAC). On a day in October 2018, trading volume for BAC totaled 58,868,598. General Electric Company (GE) was even higher: 110,448,094. Those are big numbers, but where do they come from, and what do they mean?
The first part of the question can be answered with ease: market exchanges. The second part requires a little more detail. If you’re a retail investor, read on. While volume is only one tool of many, it adds value to your investing decision.
How it Works
Calculating volume is simply the total amount of shares traded for the day, which includes both buy and sell orders. You can determine the daily trading volume on your...
As the year winds down, it is the time where traders and advisors take stock of what the year has brought them and what they expect from the markets to come. We, too, shall look at the charts to see what they are predicting for the new year.
This has not been an easy year for investors. As of the date I am writing this article, the S&P 500 index is trading at nearly the same level as it started the year. Buy and hold investors are either flat or more likely negative for the year due to fees.
For those without the proper knowledge, this has been a lost year because many investments were flat, and you lost an entire year of your investing life. However, with the right knowledge and strategy, this was an excellent market to profit from...
Value investing is an investment discipline that was popularized by Benjamin Graham through his seminal books like Security Analysis published in 1934 and The Intelligent Investor in 1949. Value investing seeks to identify undervalued stocks that are trading below their intrinsic value, and buying and holding them until they turn around. Such value stocks typically trade at price-to-earnings (P/E) and price-to-book (P/B) multiples that are significantly below the valuations at which the market or their peers trade. While Warren Buffett has amassed a colossal fortune by adhering to the principles of value investing, there is little doubt that for us lesser mortals, value investing has its pitfalls in addition to its undeniable benefits...
When a stock's price starts to rise rapidly, short sellers want out, as they only profit when the stock goes down. They can face theoretically unlimited losses when shares rise. Their pain, however, can be a short squeezer's gain.
Understanding Short Squeezes
Before you can understand short squeezes, you have to understand how short sellingS works.
If a short seller thinks a stock is overvalued and shares are likely to drop in price, he or she can borrow the stock through a margin account. The short seller will then sell the stock and hold onto the proceeds in the margin account as collateral. Eventually, the seller will have to buy back shares. If the stock's price has dropped, the short seller makes money because he or she can cash...
One of the biggest differences between individual investors and professional portfolio managers is how they view performance. Individual Investors tend to overvalue short-term performance, placing too much emphasis on one, three and five-year returns. Professional portfolio managers place most of their analysis on seven to 10-year periods, since they coincide with a full market cycle. This is a marked difference and it can greatly change long-term results. To view how significant the differences can be, let’s take a look at 20 years of past performance.
Short-Term Performance
We will start by looking at the diversification chart below, which shows how various asset classes have performed. (The S&P 500 is represented by the category...
Today's investors and active traders have access to a growing number of trading instruments, from tried-and-true blue chip stocks and industrials, to the fast-paced futures and foreign exchange (or forex) markets. Deciding which of these markets to trade can be complicated, and many factors need to be considered in order to make the best choice.
The most important element may be the trader's or investor's risk tolerance and trading style. For example, buy-and-hold investors are often more suited to participating in the stock market, while short-term traders – including swing, day and scalp traders – may prefer markets wherein price volatility is more pronounced. In this article, we'll compare investing in the forex market to buying...
With the recent rise in volatility, there has been a lot of talk about a potential equity market crash. Many investors are nervous about when, not if, this crash will occur and are looking for some protection for their stock portfolios. Closing out your stock positions is an option, but many stocks pay dividends that the investors do not want to relinquish even when facing the threat of, or, during a crash. Another reason for holding on to a stock position is to avoid tax ramifications on profitable sales of securities.
The most common protection that traders/investors seek is to buy puts on stocks they are holding. The value of the put will increase as the price of the underlying stock decreases thus covering the losses in the...
Are you a risk taker? When you're an individual trader in the stock market, one of the few safety devices you have is the risk/reward calculation.
Risk v Reward
Sadly, retail investors might end up losing a lot of money when they try to invest their own money. There are many reasons for this, but one of those comes from the inability of individual investors to manage risk. Risk/reward is a common term in financial vernacular, but what does it mean? Simply put, investing money into the markets has a high degree of risk, and you should be compensated if you're going to take that risk. If somebody you marginally trust asks for a $50 loan and offers to pay you $60 in two weeks, it might not be worth the risk, but what if they offered to...