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Single marketplace transactions involving bank loan portfolios had until recently not been possible. This is no longer the case, as there is a firm that has recently been created with the intent of using the developing methodologies of e-commerce in order to create a unified marketplace.
Having developed a customer base as a national platform, loans are sorted into packages which are bid on - at respectable discount levels. Taking this approach data collection can be standardized over the transactions, while also creating a chance for smaller packages to be seen as worth buying. This change in the market allows any loan to be considered.
Get better access to investors by utilizing the reaching power of any online company - ensure you’ve publicized what you have to offer to investors. Location and time have stopped being of major importance and it’s possible to do business day and night, which saves everyone a substantial quantity of time and money. Approaching the highest possible number of leads is essential to selling any product. This service offers, as an additional benefit, all the useful information available to anyone who’s registered at a time of their asking - making the sale of loan packages smoother. The truest course to turn a profit derives from collecting and examining of granular information. During examination of any portfolio, information transparency gives you a deeper understanding of what you’re paying for and as a result reduces the exposure you carry. The standardization of loan level information lays the control of portfolio sales right in your lap, rather than handing it over to a third party broker. Both buyers and sellers are sure to profit from direct negotiation, with the data required to conduct loan transactions entirely in the open.
Easier selections of where to invest are made possible by keeping the packages standardized instead of fragmented. Finding the right package straight off the bat means that both buyer and seller save time and therefore, in a very real sense, money. A system of open bidding creates plety of opportunities to make the best deal possible, and the chance to improve profits, using contact between seller and buyer. The Web has evolved to offer you inexhaustible openings for the asking, and the scope for trade in loan packages is in the process of bursting wide open. They say there’s no smarter way to buy than using the web - what most people miss is that inversely, this also means there’s no smarter way to sell!
If you’re taking into consideration mortgage refinance you should first learn the key aspects that are involved. Understand why you may refinance a mortgage, what’s needed and more.
So why consider mortgage refinance? Refinancing a mortgage is basically paying off what your existing loan amount or a previous mortgage and taking out a new mortgage on different terms. Several people refinance a mortgage when the interest rates have been decreased from when they originally financed their mortgage. These homeowners benefit from the refinance with reduced monthly payments as a result of the lower interest rate, and sometimes lower principal balance. Others refinance a mortgage because they want to reduce their payments by spreading them out over a longer period of time.
The procedure of refinancing a mortgage is somewhat the same as buying a home. For you to refinance your mortgage, it is required that you get a home inspection, appraisal reports and records of your present employment and income. If your income and home value is rejected, this may possibly influence your eligibility to refinance a mortgage. The procedure of refinancing a mortgage is only probable if you have stable employment, you require less than the value of your home, and you have an acceptable credit score.
When your mortgage refinance is approved, the bank will proceed with the closing procedures. Comparable to a home purchase transaction, there will be closing payments. You can always apply for an estimate, as this will assist in calculating your closing payments. Usually, you’ll still have to sign the same mortgage documents seeing that you obtain any cash-out asked for during the refinancing procedures .
A refinancing your mortgage is one thing that more and more homeowners are considering because of the current state of the financial markets. The markets falling has dropped to lower interest rates, and anyone lucky enough and with a clear credit rating to refinance to a fixed rate mortgage under the current circumstances can save lots of money. The design is to pay off your existing mortgage with the new one and have a little left over to cover outstanding debts - leaving you with one convenient monthly repayment. The significant aspect of this idea is that you will be stretching those payments over a longer time - but will have to wait for the “mortgage free” feeling. The advantage for you is that if you refinance at the right time, you can end up with a great savings.
Finding the right deal is very much the crucial in this respect. If you use an online mortgage calculator before arranging your mortgage refinance you can find out exactly where you are financially. Taking into account your income and the current state of your finances a mortgage calculator will drive you towards the best deal for you. Although this is the best deal for you, it may not be the one which is best for others, and the calculator takes account of this. Overall, by paying attention you can save yourself a lot of money.
Everyone needs to save money. The best mortgage refinance will allow the customer to do this not simply in the short term, but can make the long-term debt you carry significantly smaller. The truth is this will not be the case for everyone, and this is what the mortgage calculator is there to find.
Unified marketplace transactions involving bank loan portfolios have not hitherto been attempted. An online company designed with the Ebay auction principle in mind has appeared and set out changing the model, with loan purchasing filtered with an innovative mindset.
Investors, banks, and others can bid on loan packages using a nationwide platform to find offers at often significant discount. Smaller packages thus turn into a worthwhile use of resources, meaning the market becomes more open to all investment. Due to the coming of a business model loosed from the constraints of time and location a number of other limits are erased and time and money can be saved. Any Web firm is able to contact far more clients than traditional counterparts, and the degree of access offered to investors by this service is a perfect example.
You can’t sell without potential customers to sell to, and these need to be discovered and contacted in bulk. To optimize the search, those registered with this marketplace are given any information access they request to make their lives easier. The more information at your fingertips, the more efficient you will be in promoting whatever product you want to sell. The more fully transparent the information regarding available portfolios is, the better your ability to avoid exposure and make the most from your investments will grow.
It’s always been mandatory go through a broker in these things simply due to the absence of proven expertise: this is changing, here and now, with the help of this service. Buyer and seller both are likely to benefit greatly from transparent exchanges of germane data, meaning that open communication becomes commonplace, accordingly helping balance profitability with risk. Preventing fragmentation in packages keeps things straightforward in terms of securing the ideal package. Locating the ideal package straight off the bat means that both seller and buyer waste less time and therefore, in a very real sense, money. Using this information access, the use of a bidding system produces the chance for all parties involved to leave with the best deals possible. Businessmen all over the world have leaped at the possibilities created by the advancement of e-commerce, and as online commerce starts to affect the trade in loans, you are well advised not to lag behind. A great many companies have lost money as e-commerce entered their form of commerce, merely because they didn’t capitalize on it: those who did are now prosperous.
Convertible corporate bonds offer investors the opportunity to own a bond that is convertible into a set amount of common stock of the company.
The benefits can work for the investor and the company. For the corporation, they are hoping their bond investors convert so that they do not have to pay on the bond anymore and they gain shareholders. Investors see them as protection against interest rates rising and an opportunity to buy stock in a company that they already have a relationship with. There are also spread or arbitrage opportunities between the stock and bond price, as you will see.
Convertible bonds hold their price value better than non converting bonds, because the market has priced in that feature. Most bonds are not convertible, but the few that are can be very beneficial to own. You can pick and choose your timing and even have a target stock price that you will wait on before converting.
One risk to the company is there is a potential dilution in the stock when bonds converted. The excess shares created will normally hurt the EPS (earnings per share). Because of this, the issuing of convertible corporate bonds by a company requires shareholder voter approval before they are issued.
The mechanics and the attractiveness of converting a bond come down to a few things:
Conversion Price
Common Stock Value
Par Value
Bond Value
Parity
The conversion price is fixed for the life of the bond. This does not represent the price that you can own the stock at. It is not an “option price”. It is a price that when divided into the par value of the bond (based on how many you own), will equal your shares - also known as the conversion ratio.
An example would be:
A customer owns ABC convertible bond that is selling in the market at $1040 or $104, the common stock is selling at $54 and the conversion price is $50. The investor would like to convert, but will only do so when the stock value is trading above the bond value. “Parity” would occur when the bond and stock are equal. The first thing you must find out is the amount of shares the customer is entitled to. We get that by dividing the conversion price into the par value of the bond ($1000). $1000 divided by 50 equals 20.
The investor can convert out of the bond into 20 shares of stock - no more, no less. The stock is currently trading at $54. The stock value is found by multiplying 20 (shares) by $54 (stock value), which equals $1080. $1080 is above the bond selling price of $1040, so converting at this time would meet the customer’s objectives of converting only when the stock value was above bond value or “above parity”.
It’s also helpful when you own these bonds to figure out what price on the stock will the bond be at parity. Let’s look at another example.
A bond that you own is currently selling at $1160 or $116, and the conversion price on the bond is $50. At what price on the common stock will true parity occur? You want to convert the bond, but you only will when the stock value (based on your shares) will be equal to $1160. First, you must figure out the shares or conversion ratio. Par value of $1000 is divided by $50, which equals 20. Then, you divide the bond price of $1160 by 20. That will equal $58. Thus, if the stock in the company rises to $58, based on 20 shares - it equals $1160 or parity.
Convertible corporate bonds have a place in every bond investor’s portfolio. As long as the rating is investment grade, the risk is minimal, and the returns on the bond or the stock can be rewarding.
Nick Hunter is the President of American Investment Training, AIT and the owner of http://www.brokerjobs.com - A financial education and career website with investment product descriptions.
Annuities are a series of payments made by an institution like an insurance company to the annuitant at regular intervals of time over a fixed time period. The payments are fixed and may be on a yearly, semi annual, quarterly or monthly basis. Generally, there are two types of annuity payments called “ordinary annuities” and “annuities due”.
Ordinary annuities require payments at the end of every period until the maturity period of the investment. For example, with bonds, usually the seller pays coupon interest payments to the buyer at the end of every six months. However, sometimes annuity payments will be made at the beginning of each period like a rent payment. These are called “annuity due”. Depending on the frequency of annuity payments, annuities can be divided into deferred annuities and immediate annuities. In immediate annuities, annuity payments are made at much frequenter intervals. Deferred annuities will make the annuity holders receive payments depending on the nature of the annuity. If the deferred annuity is a fixed deferred, the holder will get the guaranteed rate of return at regular intervals over the life of the contract. If it is variable deferred annuity, the payments depend on the performance of the underlying investment. This means the annuitant will not receive any guaranteed amount. However, the payments under the variable annuities are tax-free or tax-deferred.
There are several types of annuity payments depending on the nature of the annuity. If the annuitant or the nominee receives payments after the fixed period in spite of any contingency, such payments are called “annuity with period certain”. If an annuity payment continues after the death of the annuitant, it is called a “life annuity” payment. If it continues over the annuitant’s life or for a fixed period (whichever is longer), it is called “life with period certain”. The latest version for annuity payments is called “equity-indexed annuity payments”.
It is not advisable for the annuitant to get cash value of the annuity by cashing out, unless the annuitant is under financial stress. The ultimate responsibility of cashing out an annuity and getting the payments rests on the shoulders of the annuitant.
Cash For Annuities provides detailed information about cash for annuities, annuity brokers, annuity buyers, annuity payments and more. Cash For Annuities is the sister site of Senior Settlements Info.
Clearly, anyone who trades does so with the expectation of making profits. We take risks to gain rewards. The question each trader must answer, however, is what kind of return he or she expects to make? This is a very important consideration, as it speaks directly to what kind of trading will take place, what market or markets are best suited to the purpose, and the kinds of risks required.
Let s start with a very simple example. Suppose a trader would like to make 10% per year on a very consistent basis with little variance. There are any number of options available. If interest rates are sufficiently high, the trader could simply put the money in a fixed income instrument like a CD or a bond of some kind and take relatively little risk. Should interest rates not be sufficient, the trader could use one or more of any number of other markets (stocks, commodities, currencies, etc.) with varying risk profiles and structures to find one or more (perhaps in combination) which suits the need. The trader may not even have to make many actual transactions each year to accomplish the objective.
A trader looking for 100% returns each year would have a very different situation. This individual will not be looking at the cash fixed income market, but could do so via the leverage offered in the futures market. Similarly, other leverage based markets are more likely candidates than cash ones, perhaps including equities. The trader will almost certainly require greater market exposure to achieve the goal, and most likely will have to execute a larger number of transactions than in the previous scenario.
As you can see, your goal dictates the methods by which you achieve it. The end certainly dictates the means to a great degree.
There is one other consideration in this particular assessment, though, and it is one which harks back to the earlier discussion of willingness to lose. Trading systems have what are commonly referred to as drawdowns. A drawdown is the distance (measured in % or account/portfolio value terms) from an equity peak to the lowest point immediately following it. For example, say a trader’s portfolio rose from $10,000 to $15,000, fell to $12,000, then rose to $20,000. The drop from the $15,000 peak to the $12,000 trough would be considered a drawdown, in this case of $3000 or 20%.
Each trader must determine how large a drawdown (in this case generally thought of in percentage terms) he or she is willing to accept. It is very much a risk/reward decision. On one extreme are trading systems with very, very small drawdowns, but also with low returns (low risk - low reward). On the other extreme are the trading systems with large returns, but similarly large drawdowns (high risk - high reward). Of course, every trader’s dream is a system with high returns and small drawdowns. The reality of trading, however, is often less pleasantly somewhere in between.
The question might be asked what it matters if high returns in the objective. It is quite simple. The more the account value falls, the bigger the return required to make that loss back up. That means time. Large drawdowns tend to mean long periods between equity peaks. The combination of sharp drops in equity value and lengthy time spans making the money back can potentially be emotionally destabilizing, leading to the trader abandoning the system at exactly the wrong time. In short, the trader must be able to accept, without concern, the draw-downs expected to occur in the system being used.
It is also important to match one’s expectations up with one’s trading timeframe. It was noted earlier that in some cases more frequent trading can be required to achieve the risk/return profile sought. If the expectations and timeframe conflict, a resolution must be found, and it must be the questions from this expectations assesment which have to be reconsidered, since the time frames determined in the previous one are probably not very flexible (especially going from longer-term trading to shorter-term participation).
John Forman is author of The Essentials of Trading (Wiley - April 2006), and a near 20 year veteran of trading and analyzing the markets. Visit Anduril Analytics to learn more about his trading, market analysis, and research activities and to find out how you can get a copy of Anduril’s free report on what every trader and investor needs to succeed.
1. Put Your Money To Work
Investing is about putting money to work in effective ways to make more money. The most effective way to put your money to work over the long term is in well-run, profitable companies. Companies that are good stewards of your money, will help you create a level of wealth that you couldn’t generate by merely saving your money.
2. Investing is not a Game
Many people mistakenly think of investing in the same way they think of sports or gambling: as a game. Watch CNBC for a day and you’ll see what we mean. The ups the downs, the highs the lows. The stock market, over the short-term, can provide entertainment value and adrenaline rush.
But investing is not a game. Your goal is to make more money, and it turns out that over the long-term, there are intelligent and rational strategies for growing your money. The reason you make money should actually make sense!
Remember: don’t treat investing as a game of chance. Understanding why your investment makes you money is the key to being a common sense investor.
3. Risk is relative
It is not uncommon for financial advisers to give very bad advice. One of the most common pieces of bad advice is the view that saving your money in something like a CD is less risky than investing it in stock equities. Why is this not true (most of the time)? Because history tells us that risk is relative. Over a 15 year period of time it is clearly more risky to leave money in a CD than in good stock. While your balance won’t erode, the purchasing power of your money could due to inflation and taxes.
Over periods of time that are greater than three years, the common sense investor understands that, ceteris paribus, the best place for money is in stocks.
4. Invest in Good Companies, Avoid Bad Companies
The common sense investor entrusts his money in companies that put money to good use. Good companies will use money in effective ways to produce more wealth. One of the best ways to identify good companies is to look at their Return on Equity, which is essentially a measure of how well they create profits using shareholder investments.
5. Don’t Pay Too Much For a Good Thing
Even if you’ve found a good company, don’t invest in the company unless it’s being sold at a reasonable price. Ideally, try to find good companies that are selling at a discount. Often times, you will have to go against the flow and buy into companies that are out of favor for one reason or another (often irrational) with investing professionals. Normally, a company is priced too high if it’s Price To Earnings ratio is higher than its Return on Equity.
6. Fear the Following of Fads
Following the crowd can be disastrous for the common sense investor. More often than not, it results in paying way more than a company is worth. If the price of a company is dictated by short-term exuberance rather than long-term rationality, it should be avoided.
In fact, the common sense investor can take advantage of the fact that in the short term, stock market exuberance is often irrational. If the boys on Wall Street are too extreme in a sell-off for a good company, you should be ready to buy.
7. Time is on Your Side: the power of compounding interest
Give your money as much time to grow as possible. If your money doubled every five years, then five thousand dollars would turn into $320,000 in thirty years. Over 10 years, it would only turn into $20,000. Big difference.
It seems like magic, but it’s not. The earlier you put your money to work, the longer it works for you, and the more wealth you generate. It makes a lot of sense if you think about it. Wealth is generated via production. The longer your money works in good companies, the more time it has to produce further profit; profit which you get to share. The cool thing is that you can put all of your profit back to work, and effectively have more money generating more profit. This process can keep iterating so long as you don’t withdraw your money.
8. Some Debt is Good Debt, But Most Debt is Bad
Why pay off a debt that is accruing a 5% tax-deductible interest when you could be generating 12% interest by investing your money instead? Many people make the mistake of trying to pay down their home mortgage early, but this is often unadvisable for several reasons. First of all, the money you pay towards your mortgage is not liquid and gets tied up in your home until you sell. Second, mortgage is often tax-deductible. You can’t take advantage of this tax break if you avoid the interest.
Having said that, most debt should be avoided. Never sustain credit card debt and try to avoid all debt that will be used to purchase items that depreciate (e.g. cars, clothes, toys). Debt can be emotionally and psychologically difficult to sustain so only carry good debt if it doesn’t affect you aversely.
9. Keep It Simple
Always, always, always understand your investments. Understand the company’s business model: how they make money. If the business model seems odd (read: Enron) or complicated or unfocused, avoid the company, even if it means that you have to avoid the temptation of following the crowd.
Companies make money by producing products and services that people or businesses want and need. Make sure you understand what products and services your company are producing and developing for profit.
10. Employ Disciplined Principles
Invest regularly and intentionally. Force yourself to put your money to work, but don’t just throw your money at any investment. Choose your investments wisely. Don’t chase after fads. Fight your emotions. If you feel like selling (the market is doing badly), you should probably consider buying and if you feel like buying (the market is doing well), you should probably consider selling.
By Zach Dexter, writer for The Common Sense Investor at http://csinvestor.com
When looking at historical CD rates, it is apparent that some trends have remained constant. Generally, institutions that offer certificate of deposits grant higher rates of interests on their CDs that customers deposit money for the agree-on term than those on the CDs in which customers can withdraw the money on demand. For instance, during 2004 most of the popular banks in the world had offered 0.4% annual rate of interest on saving account deposits which are payable on demand, 0.8% on a 3-month CD and 2% on a 2-year CD.
When studying historical CD rates, the trend indicates that over the last 30 years the rates of interest were ranging in between 2-16% annually. During 1979, the average rate of interest on CDs was 11.44% worldwide. This was the rate before considering tax rate and inflation rate. During the same period, those rates were 66% and 13% respectively, which in turn left the net rate of interest of CD as 9.41%.
In 1981, the CD rate was almost 16% and in which year the tax rate and inflation rate were 66% and 9%. All of these factors have kept the net rate of return on CD as 3.5%. During the year 1986, the gross rate of interest was only 6.6%. However the tax rate and inflation rate were comparatively low which were only 52% and 1.1% respectively. Therefore there would not be more deductions from rate of return on CDs resulting in the net rate as 2.02%.
Whatever the previous rates may be, one can say that billions of dollars have been invested in CDs during the 20th and 21 centuries. When deciding on whether to invest in a CD or to go for other sources of investment, Investors need to take their goals and the rate of return into account.
CD Rates provides detailed information about CD rates, CD rate calculators, CD rate comparisons, and more. CD Rates is affiliated with Online Brokerage Firms.
An issue every investor faces is that of successfully implementing his investment strategy.
It’s nice to read or hear about great investing strategies but oftentimes, when you try to implement them, they fail to deliver the superior returns.
Here are some key points to consider to maximize your chance of success when you implement your strategy.
Transaction Costs
Advertised performances seldom take into account trading costs. One reason is that costs will be very different depending on which stock broker you use.
Ensure your Trading Cost is kept under 1%. Reciprocally, always remove a good 1% for transaction costs from any performance numbers you see.
Bid-Ask spread
This is a hidden fee and can be a Killer. It is too easy not to pay attention to: for instance, Bid-Ask spread is not included in Mutual Fund’s Expense Ratios. Very few studies or performances from investment books take it into account.
Bid-Ask spread is larger for small Cap (sometimes in excess of 1%) than for large Cap (usually less than 0.25%).
Turnover rate is also very important.
Value Investing with lower turnover rate and larger market capitalizations will suffer less than Momentum strategies that typically invest in smaller cap and keep stocks for just months, weeks or even days.
For instance, a strategy investing in small cap with 1% average Bid-Ask spread and an annual turnover rate of 300% will loose 1%*300%=3% per year. This is on top of trading costs !
Can you execute the trades ?
Most investment strategies assume that you Buy and Sell Stocks at specific time but can you, in practice, buy or sell at that specific time ?
How often have you seen Stock Picks recommendations - often on week-ends - but then on Monday it is impossible to execute at the Friday’s price because the share skyrocket 20% at the opening.
Later, the guru proudly announces that his stock pick outperformed but you could not buy at the set price so could not reap the advertised gain.
This can be an issue for strategies with frequent trades. Again, Value Investing will suffer less because there are fewer trades so it is less sensitive to exact entry/exit points. If you use Mar ket Timing, favor systems with few signals per year.
Diversification
After a strategy is highlighted, it is not rare to see it underperforming. A good example is the Dogs of the Dow. The strategy underperformed after it was detailed in the early 90s.
Many attribute its underperformance to the fact that too much money flowed into the strategy thereby reducing its efficiency. I rather attribute its underperformance to the biggest Bull Market in History where Value Investing was less rewarding than Growth/Momentum.
A take is that every strategy will underperform at some point. This is when your nerves will be at test and when you will be tempted to abandon and switch strategy… only to see it outperform afterwards.
The simple solution - highly recommended - is to diversify with 2 or more investing strategies.
Since then, the Dogs of the Dow has been outperforming the Dow Jones and the S&P500 since 2000.
Conclusion for Successful Investing
Whatever your investment strategy, there will be a difference between paper profits and real profits. This is true even if you invest in Index Funds.
To maximize your chance of success in the Stock Market:
- Strive to keep transaction costs below 1% per year
- Pay great care to strategies investing in Smaller Cap with high Bid-Ask spread
- Beware strategies with frequent trades
- Diversify