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Money flow index

2012-02-07T03:40:32Z

Summary:

Money flow index (MFI) is an oscillator calculated over a period of days. It range from 0 to 100, showing money flow on up days as a percentage of the total of up and down days. Money flow in technical analysis is typical price multiplied by volume, a kind of approximation to the dollar value of a day's trading.

==Calculation==

# Let ''P'' be the average of high, low and closing prices.
# Get the money flow by multiplying P and Volume traded.
# Positive money flow is define as the total for those days where P is higher than the previous day's P, and negative money flow vice versa.
# Derive the money ratio by taking the positive money flow divided by the negative money flow.
# The money flow index (MFI) would then be

MFI = 100-[100/(1+ Money Ratio)]

MFI is used as an oscillator. A value of 80 is generally considered overbought, or a value of 20 as oversold. Divergences between MFI and price action are also considered significant, for instance if price makes a new rally high but the MFI high is less than its previous high then that may indicate a weak advance, likely a reversal.

It will be noted the MFI is constructed in a similar fashion to the relative strength index. Both look at up days against total up plus down days, but the scale, i.e. what is accumulated on those days, is volume (or dollar volume approximation rather) for the MFI, as opposed to price change amounts for the RSI.

It's important to be clear about what "money flow" means. It refers to dollar volume, i.e. the total value of shares traded. Sometimes finance commentators speak of money "flowing into" a stock, but that expression only refers to the enthusiasm of buyers (obviously there's never any net money in or out, because for every buyer there's a seller of the same amount).

For the purposes of the MFI, "money flow", i.e. dollar volume, on an up day is taken to represent the enthusiasm of buyers, and on a down day to represent the enthusiasm of sellers. An excessive proportion in one direction or the other is interpreted as an extreme, likely to result in a price reversal.

[[Category: Technical Indicators]]

Advance-decline line

2012-02-07T02:48:33Z

Summary:

The '''advance–decline line''' is a stock market technical indicator used by traders to measure the number of individual stocks participating in a market rise or fall. As price changes of large stocks can have a disproportionate effect on capitalization weighted stock market indices and also the index is measured on a basket of stocks, it can be useful to know how the broad market is performing. The advance-decline line would give a clearer picture of the trading day and the performance of the market during this day as compared to the market indices.

The advance–decline line is a plot of the cumulative sum of the daily difference between the number of issues advancing and the number of issues declining in a particular stock market index. Thus it moves up when the index contains more advancing than declining issues, and moves down when there are more declining than advancing issues. The formula for ADL is:

AD line = (No. of advancing stocks – No. of declining stocks) + yesterday's A/D line value

To use the advance-decline line in technical analysis, traders needs to detect the 'divergence' between the indices and the advance-decline line. Divergence happens when the direction taken by the advance-decline line is different from the market indices.

There may be cases in which an index reports a gain at the end of the trading day. This gain may be caused by an increase in a certain number of stocks. However, a significant lead by declining stocks may be observed relative to the advancing stocks. Thus these results should be interpreted as a decline in the market, no matter that the index has experienced an increase. Therefore, you should base your judgments regarding the performance of the market on the advance/decline numbers, not on the performance of a particular index no matter how broad it is.

There have been many cases in which a major increase in an index was not accompanied by an increase in the advance number. In such a case it is reasonable to conclude that by the end of the trading day the index will decline. The reverse is also true. For instance, if there is a significant movement in the advance/decline numbers, you can expect a movement in the different indexes as well.

Finally, use advance–decline numbers whenever you need to make a judgment on the performance of the market. These numbers can also give you understanding on the movements of the indexes.

==See also==

* [[Accumulation-Distribution Line]]

[[Category: Technical Indicators]]

True strength index

2012-02-07T02:27:41Z

Summary:

'''True strength index''' (TSI) is an indicator that takes into account the trend direction and overbought/oversold conditions, using moving averages of the underlying momentum of the investment tool. Momentum is considered a leading indicator of price movements, and a moving average characteristically lags behind price. The TSI combines these characteristics to create an indication of price and direction more in sync with market turns as compared to either momentum or moving average.

The calculation of TSI requires [http://en.wikipedia.org/wiki/Exponential_moving_average Exponential Moving Average] and it takes a double 'smoothing' method (EMA), usually taking 25 days for the calculation of the first level of EMA followed by 13 days of the second level.

While the TSI output is bound between +100 and −100 , most values fall between +25 and −25. Investors can use the +25 and -25 level to interpret as overbought and oversold levels, respectively, at which point a trader may anticipate a market turn. Trend direction is indicated by the slope of the TSI; a rising TSI suggests an up-trend in the market, and a falling TSI suggests a down-trend.

==External Links==

* [http://en.wikipedia.org/wiki/True_strength_index Formula for True Strength Index]

==See Also==

* [[Relative strength index]]

[[Category: Technical Indicators]]

Swing index

2012-01-21T02:03:27Z

Summary:

'''Swing Index''' developed by Welles Wilder, is used as a part of the [[accumulation swing index]] because itself it creates an inconstant plot. The Swing Index compares the links between the ongoing prices - low, high open and close - and the previous period's prices to hold aside the "real" security's price.

The basic formula for the Swing Index is:

Swing Index = 50 * [ { Cy - C + 0.5(Cy - Oy) + 0.25(C - O) } / R ] * (K / T) Where:

C = Today's closing price
L = Today's lowest price
O = Today's opening price
Cy = Yesterday's closing price
Ly = Yesterday's lowest price
Oy = Yesterday's opening price
Hy = Yesterday's highest price
K = The larger of either (Hy - C) or (Ly - C)
R = A variable based on the relationship between today's closing price and yesterday's high and low
T = The limit move value

Wilder's book "New Concepts in Technical Trading Systems" provides precise instructions on measuring the Swing Index. The Swing Index indicator appoints a Swing Index value from 0 to 100 for an up bar and 0 to -100 for a down bar. It uses the ongoing bars of High, Low, Open, and Close as well as the latest bar's Open and Close to measure the Swing Index values. When a cross falls below 0 it demonstrates a fall in market price. Vice versa, when the Swing Index crosses over 0, a short-term price raise is predicted. A smaller or larger swing index value shows the sternness of the market's price's increase or decline.

For more information on the calculation, please refer to the book "New Concepts in Technical Trading Systems" by Welles Wilder.

==See also==

* [[Accumulation swing index]]

[[Category: Technical Indicators]]

Accumulation swing index

2012-01-21T01:36:58Z

Summary:

'''Accumulation Swing Index''' is a technical indicator that can provide the following:

* A measurable value that quantifies price swings
* Defines short-term swing points
* It uses the high, low and closing price to indicate the stregnth and direction of the market

The formula of Accumulation swing index is as follows:

Current Period Accumulation Swing Index = Previous Period Accumulation Swing Index + Current Period [[Swing index]]

This technical indicator creates reference lines of its own where when the Accumulation Swing Index breakout its own reference lines, gives more certainty to the reversal in price trends.

==See also==

* [[Swing index]]

[[Category:Technical Indicators]]

Accumulation-Distribution Line

2012-01-21T01:10:24Z

Summary:

'''Accumulation-Distribution Line''' (commonly known as A/D Line, not to be mixed up with [[Advance-Decline Line]]) is a momentum indicator that attempts to confirm changes in the pricing trend by determining whether investors are generally "accumulating" (buying) or "distributing" (selling) a particular stock by identifying divergences between stock price and volume flow.

It is calculated using the formula below:

Accumulation/Distribution = [(Price Close – Price Low) – (Price High – Price Close)] / (Price High – Price Low) * Period's volume

Looking at the formula, for example, if there are many 'up' days occurring especially with high volume could signal that the demand for the underlying is starting to increase. In practice, the Accumulation-Distribution Line indicator is used to find situations in which the indicator is heading in the opposite direction as the price, commonly known as divergence. For example, if you see that the price is trending upwards, but the Accumulation/Distribution Line is trending downwards or vice versa.

Once this divergence has been identified, the trader will have to wait to confirm the reversal through other technical indicators and change the trading strategies accordingly.

==See Also==

* [[On-balance_volume]]

[[Category: Technical Indicators]]

Moving average

2012-01-08T03:31:29Z

Summary:

'''Moving average''' is also called rolling average, rolling mean or running average. Given a series of numbers, say the price of Stock X over a period of 1 year, and a fixed subset size (usually the number of trading days), the moving average can be obtained by first taking the average of the first subset. The fixed subset size is then shifted forward by one unit, creating a new subset of numbers, which is averaged. This process is repeated over the entire data series.

For instance, we have the prices of Stock X for the last 30 days (i.e. data series). Assuming that we want to calculate the 5-day (i.e. fixed subset size) simple moving average of the price. To start off, we would take the price of Stock X from Day 1 to Day 5 and take its average to find the first data point of the 5-day simple moving average.

For the second data point of the 5-day moving average, we take the simple average of the price from Day 2 to Day 6, and for the third data point, we take the simple average of price from Day 3 to Day 7 and this goes on till we run out of data points from the first series (i.e. for this example, the last data point for the simple moving average would be the average from Day 26 to Day 30).

The more commonly used moving average int technical analysis is the simple moving average.

Technical investors can create the various moving average by varying the subset size, plot the graph together with trading information such as price and volume traded to get the most useful Moving average.

[[Category:Technical Indicators]]

Absolute breadth index

2012-01-08T02:13:19Z

Summary:

The '''Absolute Breadth Index (ABI)''' is a market momentum indicator as well as measures the volatility level in the market.

==Calculation==
The ABI takes into account the number of stocks that have increased in price or decreased in price without considering the overall price direction.

The calculation is as follows and it can be applied to any market or subsets of markets.

ABI = ABS(No. of Advancing Issues - No. of Declining Issues)

Usually, technical investors would calculate and plot several [[moving average]]s together with the market index to determine which moving average has a higher correlation to the market index and from there decide how the ABI would be used to show an indication of the market.

[[Category:Technical_Indicators]]

On-balance volume

2011-10-02T02:50:46Z

Summary:

'''On-balance volume (OBV)''' is a technical indicator intended to relate price and volume in the stock market. OBV is based on a cumulative total volume.

It is calculated in the following way:

* If Close is Higher : Yesterdays OBI + Today's Volume
* If Close is Lower : Yesterdays OBI + Yesterdays Volume
* If Close is Equal : Yesterdays OBI

Total volume for each day is assigned a positive or negative value depending on prices being higher or lower that day. A higher close results in the volume for that day to get a positive value, while a lower close results in negative value.Given such a derivation, you can start monitoring OBV at any time.

==Interpretation==

Based on the derivation when prices are going up, OBV should be going up too, and when prices make a new rally high, then OBV should too. If OBV fails to go past its previous rally high, then this is a negative divergence, suggesting a weak move. The interpretation is based on our understanding that a strong price movement is matched by high volumes.

As the technical indicators takes into account the volume of the securities traded, investors have to be sensitive to announcements on stock splits as they can affect the volume by a large extent.

==See Also==
* [[Volume price trend|Volume Price Trend]] (also known as Price Volume Trend)

[[Category:Technical Indicators]]

Volume price trend

2011-10-02T02:49:00Z

Summary:

'''Volume Price Trend''' (VPT) (also known as '''Price Volume Trend''') is a technical indicator intended to relate price and volume in the stock market. VPT is based on a running cumulative volume that adds or subtracts a multiple of the percentage change in share price trend and current volume, depending upon their upward or downward movements.

The derivation of VPT is similar to [[On-balance volume|On-Balance Volume]] but it takes into consideration the extent of security price changes.

Today's VPT = Yesterday's VPT + [( (Today's Close - Yesterday's Close) / Yesterday's Close) x Volume]

VPT is interpreted in similar ways to OBV. Generally, the idea is that volume is higher on days with a price move in the dominant direction, for example in a strong uptrend more volume on up days than down days. So, when prices are going up, VPT should be going up too, and when prices make a new rally high, VPT should too. If VPT fails to go past its previous rally high then this is a negative divergence, suggesting a weak move.

==See Also==

* [[On-balance volume|On-Balance Volume]] (OBV)

[[Category:Technical Indicators]]

Bollinger band

2011-10-01T10:27:50Z

Summary:

'''Bollinger band'''are technical indicators that provide a relative definition of high and low. By definition, prices are high at the upper band and low at the lower band.This definition can aid it in rigourous pattern recognition and is useful in comparing price action to the action of indicators to arrive at systematic trading decisions.

Bollinger Bands consist of:

* an N-period moving average (MA)
* an upper band at K times an N-period [http://en.wikipedia.org/wiki/Standard_deviation standard deviation] above the moving average (MA + Kσ)
* a lower band at K times an N-period [http://en.wikipedia.org/wiki/Standard_deviation standard deviation] below the moving average (MA − Kσ)

When the bands lie close together (measured vertically), a period of low volatility in stock price is indicated. Whereas when they lie far apart, a period of high volatility in price is indicated. When the bands have only a slight slope and lie approximately parallel for an extended time the price of a stock will be found to oscillate up and down between the bands as though in a channel.

The use of Bollinger band varies widely among traders. Some traders buy when price touches the lower Bollinger Band then sell when price touches the moving average in the centre of the bands. Other traders buy when price breaks above the upper Bollinger Band or sell when price falls below the lower Bollinger Band. Moreover, the use of Bollinger Bands is not confined to stock traders; option traders, most notably implied volatility traders, Often sell options when Bollinger Bands are historically far apart or by options when the Bollinger Bands are historically close together, in both instances, expecting volatility to revert back towards the average historical volatility level for the stock.

Traders are often inclined to use Bollinger Bands with other indicators to see if there is confirmation. In particular, the use of an oscillator like Bollinger Bands will often be coupled with a non-oscillator indicator like chart patterns or a trendline; if these indicators confirm the recommendation of the Bollinger Bands, the trader will have greater evidence that what the bands forecast is correct.

As can be seen from the derivation of the Bollinger bands, there are two 'moving' parts in getting the Bollinger Bands. Investors when using deriving the Bollinger Bands are strongly advised to experiment with different K's and N's to find a more "accurate" Bollinger Bands that better predicts the movement of the stock price in question.

==External Links==

* [http://en.wikipedia.org/wiki/Bollinger_band Bollinger Bands explained in Wikipedia]

[[Category: Technical Indicators]]

MACD

2011-09-14T06:02:39Z

Summary:

'''MACD''' (Moving Average Convergence/Divergence) is a technical analysis indicator used to spot changes in the strength, direction, momentum, and duration of a trend in a stock's price.

The MACD is a computation of the difference between two exponential moving averages (EMAs) of closing prices. This difference is charted over time, alongside a moving average of the difference. The divergence between the two is shown as a histogram or bar graph.

Exponential moving averages highlight recent changes in a stock's price. By comparing EMAs of different periods, the MACD line illustrates changes in the trend of a stock. Then by comparing that difference to an average, an analyst can chart subtle shifts in the stock's trend.

Since the MACD is based on moving averages, it is inherently a lagging indicator. As a metric of price trends, the MACD is less useful for stocks that are not moving sideways or are trading erratically.

Note that the term "MACD" is used both generally, to refer to the indicator as a whole, and specifically, to the MACD line itself.

==Derivation==

For most of the MACD indicators out there they would first calculate the 9-day moving average followed by the 26-day moving average of each day. Then get the difference by subtracting the 26-day moving average from the 9-day moving average to derive the MACD.

MACD = [9-day moving average] - [26-day moving average]

Again depending on the traders' outlook and other factors like industry and economy, traders may adjust the formula accordingly (i.e. taking 7-day average instead of 9-day).

MACD line goes through zero happens when there is no difference between the 9-day and 26-day EMAs (Commonly known as Zero Crossover). A move from positive to negative is bearish and from negative to positive, bullish. Zero crossovers provide evidence of a change in the direction of a trend but less confirmation of its momentum than a signal line crossover.

[[Category: Technical Indicators]]

Relative strength index

2011-09-14T05:24:29Z

Summary:

The '''Relative Strength Index (RSI)''' is a technical indicator used in the [[technical analysis]] of financial markets. It is intended to chart the current and historical strength or weakness of a security based on the closing prices of a recent trading period. The indicator should not be confused with relative strength.

The RSI is classified as a momentum oscillator, measuring the velocity and magnitude of directional price movements. Momentum is the rate of the change in price. The RSI computes momentum as the ratio of higher closes to lower closes: stocks which have had more or stronger positive changes have a higher RSI than stocks which have had more or stronger negative changes. Thus the higher the RSI, it means the price is on a rising momentum.

The RSI is most typically used on a 14 day timeframe, measured on a scale from 0 to 100, with high and low levels marked at 70 and 30, respectively. Shorter or longer timeframes can be used depending on the traders' outlook. More extreme high and low levels—80 and 20, or 90 and 10—occur less frequently but indicate stronger momentum.

==External Links==

* [http://en.wikipedia.org/wiki/Relative_strength_index RSI Explained in Wikipedia]

[[Category:Technical Indicators]]

Support and resistance

2011-09-13T13:08:31Z

Summary:

'''Support and resistance''' is a concept in [[technical analysis]] that the movement of the price of a security will tend to reverse its price movements at certain predetermined price levels.

'''Support''' is a price level where the price tends to find support as it is going down. This means the price is more likely to "bounce" off this level rather than move/break through it. However, once the price has passed this level, by an amount with some noise, it is likely to continue dropping until it finds another support level, a new price that traders find the security "cheap".

Resistance is the opposite of a support. It is where the price tends to find resistance as it is going up. It can be considered a ceiling of the price given the existing circumstances, unless it moves past it. Once the price has passed this level, by an amount with some noise, it is likely that it will continue rising until it finds another resistance level, a new price that traders find the security "expensive" or "right" time to take profit.

Support and resistance levels can be identified by [[trend lines]]. The more often a support/resistance level is "tested" (touched and bounced off by price), the more significance are given to that specific level.

Usually if a price breaks past a support level, that support level often becomes a new resistance level. The opposite is true as well, if price breaks a resistance level, it will often find support at that level in the future.

[[Category:Technical Indicators]]

Stochastic oscillator

2011-09-04T09:04:57Z

Summary:

'''Stochastic oscillator''' is a momentum indicator that uses support and resistance levels. Dr. George Lane promoted this indicator in the 1950s. The term stochastic refers to the location of a current price in relation to its price range over a period of time. This method attempts to predict price turning points by comparing the closing price of a security to its price range.

The method is based on the belief that in an upward-trending market, prices tend to close near their high, and during a downward-trending market, prices tend to close near their low. Transaction signals occur when the %K crosses through a three-period moving average called the "%D"

%K is calculated by the following formula:

%K = 100[(C - L''n'')/(H''n'' - L''n'')]

where

C is the most recent closing price.
L is the lowest price of the period of '''''n''''' days.
H is the highest price of the period of '''''n''''' days.

%D is the average of %K for 3 periods.

[[Category:Technical Indicators]]

Stock Market Index

2011-08-21T09:30:41Z

Summary:

A '''stock market index''' is a method of measuring a section of the stock market. Many indices are cited by news or financial services firms and are used as benchmarks, to measure the performance of portfolios such as [[Unit Trusts|mutual funds/units trust]] or stocks.

Generally the stocks used for the computation of the stock index are those that can reflect the general sentiments of the section in analysis. These stocks should also be the most liquid of the section as it is believed that higher [[liquidity]] means that the prices would reflect clearly the investors sentiment of the section in analysis since prices and/or volume traded of these stocks are used to calculate the stock market index.

Alternatively, an index may also be considered as an instrument (after all it can be traded) which derives its value from other instruments or indices. The index may be weighted to reflect the market capitalization of its components, or may be a simple index which merely represents the net change in the prices of the underlying instruments.

[[Category: Economic Indicators]][[Category: Investment Terms]]

Current events

2011-08-21T09:18:32Z

Summary: /* Year 2012 */

==Dollars & Sense Learning Community==

=Year 2012=

For the 2012 sessions, the details are as follows:

* Date: 14 January 2012
* Time: 11am - 12.30pm
* Venue: Jurong Regional Library, Singapore
* Topic: Budget Planning

* Date: 18 February 2012
* Time: 11am - 12.30pm
* Venue: Jurong Regional Library, Singapore
* Topic: Managing Credit

* Date: 17 March 2012
* Time: 11am - 12.30pm
* Venue: Jurong Regional Library, Singapore
* Topic: Insurance Planning

Inflation rate

2011-08-21T08:54:34Z

Summary:

In economics, the '''inflation rate''' is a measure of inflation, the rate of increase of a price index (for example, a [[consumer price index]] also commonly known as CPI). It is the percentage rate of change in price level over time. For example, to get the inflation rate for the year 2010, taking the CPI index as at January 2010 minus the CPI Index as at January 2009. Divide the results by the CPI Index as at January 2009 to get the inflation rate. The rate of decrease in the [[purchasing power]] of money is approximately equal.

The inflation rate is used to calculate the [[real interest rate]], as well as real increases in wages. Official measurements of this rate are input variables to [[COLA]] adjustments and inflation derivatives prices.

[[Category: Economic Indicators]]

Consumer Price Index

2011-08-21T08:40:10Z

Summary:

'''Consumer Price Index (CPI''') or Retail Price Index (RPI) is a statistical time-series measure of a weighted average of prices of a specified set of goods and services purchased by consumers. It is a price index that tracks the prices of a specified basket of consumer goods and services, providing a measure of inflation. The CPI is a fixed quantity price index and considered by some a cost-of-living index.

Typically an index is scaled to 100 for a chosen year (typically known as the base year), so that all other values of the index, at any other years, are a percentage relative to this one. Usually the chosen point in time would be a calendar year, and that particular year will be what we call a base year. The base year and the basket of goods and services are usually very contentious issues when measuring CPI.

The CPI can be used to track changes in prices of goods and services purchased for consumption by households, i.e., of the consumer basket. In countries with a higher than average indirect tax system, the CPI is used along side a RPI that includes a more accurate reflection of cost of living.

When analyzing Consumer Price Index especially when looking at [[inflation]] across time, one has to take note of the following.

# Are there any changes to the base year during the period of analysis?
# Are there any changes to the basket of goods that are used for measurement?

If any of these events does analysis during the period you are studying, you might need to make some subjective adjustments in your analysis.

==See Also==

* [[Inflation]]
* [[Inflation rate]]

[[Category:Economic Indicators]]

Dollar Cost Averaging

2011-08-07T10:26:18Z

Summary:

'''Dollar cost averaging''' (DCA) is an investment strategy that takes the form of investing equal amounts of money regularly and periodically over specific time periods (such as $500 monthly) in a particular investment tool. By doing so, more units of the investment tools are purchased when prices are low and fewer units are purchased when prices are high. The point of this is to lower the total average cost per share of the investment, giving the investor a lower overall cost for the shares purchased over time.

In dollar cost averaging, the investor decides on three parameters: the fixed amount of money invested each time, the investment frequency, and the time horizon over which all of the investments are made. With a shorter time horizon, the strategy behaves more like [[Lump Sum|lump sum investing]].

[[Category: Investment Strategies]]

Limit order

2011-06-05T07:33:46Z

Summary:

'''Limit order''' is an order to buy a security (eg. [[stocks]], [[bonds]]) at not more, or sell at not less, than a specific price. This gives the trader control over the price at which the trade is executed; however, the order may never be executed (or filled) depending on the security trading movement.

A buy limit order can only be executed at the limit price or lower. For example, if an investor wants to buy a stock, but doesn't want to pay more than $20 for it, the investor can place a limit order to buy the stock at $20 "or better". By entering a limit order rather than a market order, the investor will not buy the stock at a higher price, but, may get fewer shares than he wants or not get the stock at all. A sell limit order is analogous; it can only be executed at the limit price or higher.

Both buy and sell orders can be additionally constrained so do check with your trading securities companies.

[[Category: Investment Terms]]

Market depth

2011-06-05T07:25:23Z

Summary:

'''Market depth''' is the size of an order needed to move the market a given amount (or number of bids). If the market is deep, a large order is needed to change the price. Market depth closely relates to the notion of [[liquidity]], the ease to find a trading partner for a given order: a deep market is also a liquid market.

Factors influencing market depth include:

* Tick/bid size. This refers to the minimum price increment at which trades may be made on the market.
* Price movement restrictions.
* Trading restrictions.
* Allowable leverage/Minimum margin requirements - Major markets and governing bodies typically set minimum margin requirements for trading various products. While this may act to stabilize the marketplace, it decreases the market depth simply because participants otherwise willing to take on very high leverage cannot do so without providing more capital.
* Market transparency - The availability of the bid and ask price and its order size in different markets. The availability of such information may encourage more participants into the market, adding more depth into it.

==See Also==

* [[Liquidity]]
* [[Market breadth]]

[[Category: Investment Terms]]

Market breadth

2011-06-05T07:18:52Z

Summary:

'''Market breadth''' is properly described as the transaction cost per unit of liquidity demanded out of the market. It is the opposite of the more well known concept of [[market depth]]. Market depth is measured as the units bought or sold for a given transaction cost.

In its simplest form, market breadth can be regarded as the [[bid-ask spread]] of the market.

==See Also==

* [[Liquidity]]
* [[Market depth]]

[[Category: Investment Terms]]

Liquidity

2011-06-05T05:03:15Z

Summary:

'''Liquidity''' is actually the degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Usually high trading activities/high trading volume is associated with high liquidity. [[Assets]] that can be easily bought or sold, are known as liquid assets.

Money, or cash in hand, is the most liquid asset, and can be used immediately to pay debt or meeting immediate wants and needs.

A liquid asset has some or more of the following features. It can be sold rapidly, with minimal loss of value, any time within market hours. The essential characteristic of a liquid market is that there are ready and willing buyers and sellers at all times. Another definition of liquidity is the probability that the next trade is executed at a price equal to the last one. A market may be considered deeply liquid if there are ready and willing buyers and sellers in large quantities.

==See Also==

* [[Market breadth]]
* [[Market depth]]
* [[Liquidity Risk]]

[[Category: Investment Terms]]

Long Term Assets

2011-06-05T04:49:03Z

Summary:

'''Long Term Assets''' (also known as Non-Current Assets) are assets that cannot be converted to cash easily. As such it is usually not used to determine whether a company can meet its short-term liabilities.

It is pertinent to note that the cost of a fixed asset is its purchase price, inclusive of import duties and cost attributable to bringing and installing the asset in its needed location and the initial estimate of dismantling and removing the item if they are eventually no longer needed on the location.

Most assets that are classified under Long Term Assets can be [[Depreciation|depreciated]] over time.

Some examples of Long Term Assets are as below:

* Property, plant and equipment
* Investment property, such as real estate held for investment purposes

==See also==

* [[Balance Sheet]]
* [[Current assets]]
* [[Current Liability]]

[[Category: Accounting Terms]]

Private placement

2011-01-08T01:10:52Z

Summary:

'''Private placement''' (or non-public offering) is a funding round of securities which are sold without an initial public offering, usually to a small number of chosen private investors. Private placements may typically consist of stocks, shares of common stock or preferred stock or other forms of membership interests, warrants or promissory notes (including convertible promissory notes), and purchasers are often institutional investors such as banks, insurance companies or pension funds.

In many cases, detailed financial information is not disclosed and the need for a prospectus is waived. Finally, since the placements are private rather than public, the average investor may be made aware of the placement after it has occurred.

[[Category:Investment Terms]]

Weighted average cost of capital

2011-01-08T01:08:42Z

Summary:

The '''weighted average cost of capital (WACC)''' is the rate that a company is expected to pay on average to all its security holders to finance its assets.

The WACC is the minimum return that a company must earn on an existing asset base to satisfy its creditors, owners, and other providers of capital, or they will invest elsewhere. Companies raise money from a number of sources: common equity, preferred equity, straight debt, convertible debt, exchangeable debt, warrants, options, pension liabilities, executive stock options, governmental subsidies, and so on. Different securities, which represent different sources of finance, are expected to generate different returns. The WACC is calculated taking into account the relative weights of each component of the capital structure. The more complex the company's capital structure, the more laborious it is to calculate the WACC.

Companies can use WACC to see if an investment projects available to them are worthwhile to undertake, or structure the project financing so as to achieve a suitable profit.

[[Category:Investment Terms]]

Capital expenditure

2011-01-08T00:47:54Z

Summary:

'''Capital expenditures''' (CAPEX or capex) are expenditures creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life that extends beyond the taxable year. Capex are used by a company to acquire or upgrade physical assets such as equipment, property, or industrial buildings. In accounting, a capital expenditure is added to an asset account ("capitalized"), thus increasing the asset's basis (the cost or value of an asset as adjusted for tax purposes). Capex is commonly found on the cash flow statement as "Investment in Plant Property and Equipment" or something similar in the Investing subsection.

For tax purposes, capital expenditures are costs that cannot be deducted in the year in which they are paid or incurred and must be capitalized. The general rule is that if the property acquired has a useful life longer than the taxable year, the cost must be capitalized. The capital expenditure costs are then amortized or depreciated over the life of the asset in question. As stated above, capital expenditures create or add basis to the asset or property, which once adjusted, will determine tax liability in the event of sale or transfer. In the US, Internal Revenue Code §§263 and 263A deal extensively with capitalization requirements and exceptions.[1]

Included in capital expenditures are amounts spent on:

1. acquiring fixed assets
2. fixing problems with an asset that existed prior to acquisition if it results in a superior fixture
3. preparing an asset to be used in business
4. restoring property or adapting it to a new or different use
5. starting a new business

An ongoing question of the accounting of any company is whether certain expenses should be capitalized or expensed. Costs that are expensed in a particular month simply appear on the financial statement as a cost that was incurred that month. Costs that are capitalized, however, are amortized over multiple years. Capitalized expenditures show up on the balance sheet. Most ordinary business expenses are clearly either expensable or capitalizable, but some expenses could be treated either way, according to the preference of the company. Capitalized interest if applicable is also spread out over the life of the asset.

The counterpart of capital expenditure is operational expenditure ("OpEx").

[[Category: Accounting Terms]]

Free Cash Flow

2011-01-03T14:14:18Z

Summary:

'''Free cash flow''' is an indication of an entity's solvency as well as its ability to pay dividends or expand operations. It is the excess cash generated after expenses to maintain current productive capacity. The formula is as below

{| class="wikitable"
|-
! Element
! Data Source
|-
| [[EBIT]] x (1-Tax)
| Current Income Statement
|-
| + Depreciation/[[Amortization]]
| Current Income Statement
|-
| - Changes in [[Working Capital]]
| Prior & Current Balance Sheets: Current Assets and Liability accounts
|-
| - [[Capital expenditure]]
| Prior & Current Balance Sheets: Property, Plant and Equipment accounts
|-
| = '''Free Cash Flow'''
|}

[[Category:Investment_Terms]]
[[Category:Solvency Ratios]]

Cash Debt Coverage Ratio

2011-01-03T14:03:37Z

Summary:

Cash Debt Coverage Ratio is calculated by taking cash flow from operations divided by Average Total Liabilities. It is a measure of entity's ability to generate cash flow solely from its operations to meet all its obligations. A general rule of thumb is that a ratio below 0.20 is a cause for concern.

It is best to compare this ratio to those of other companies from the same industry as cash flow operations is sensitive to the general economic environment that the industry operates in.

[[Category: Financial Ratios]]
[[Category: Solvency Ratios]]

Solvency

2011-01-03T13:50:44Z

Summary:

'''Solvency''' is a measure of an entity's ability to pay interest as it comes due and to repay the face value of debt at [[maturity]]. In other words, it is the degree to which the [[current assets]] of an individual or entity exceed the [[current liabilities]] of that individual or entity. Solvency can also be described as the ability of a corporation to meet its long-term fixed expenses and to accomplish long-term expansion and growth.

To measure a company's solvency, we look at the solvency ratios like [[Debt to Total Asset Ratio]] or [[Cash Debt Coverage Ratio]].

For more information on the Solvency Ratio, please click [[:Category:Solvency Ratio|here]]

[[Category:Investment Terms]]

Sub-sales

2010-08-26T09:37:35Z

Summary:

'''Sub-sales''' are quick resale of uncompleted homes based on caveats lodged with [http://www.ura.gov.sg URA]. Sub-sales are a proxy of speculative activity.

[[Category:Property Investment Terms]]

Bond Duration

2010-03-31T06:06:52Z

Summary:

'''Bond Duration''' is a measure of of how long, in years, it takes for the price of a [[bond]] to be repaid by the present value of the bond's cash flows. It is an important measure for investors to consider, as bonds with higher durations (ie. takes longer time to recoup money invested) carry more risk and have higher price volatility than bonds with lower durations.

There are generally two factors that can affect duration and they are:

# Time to Maturity
# Coupon Rate/Actual Yields

There are four types of Duration and they are

# Macaulay duration
# Modified duration
# Effective duration
# Key-rate duration

[[Category: Investment Terms]]

Fiscal Year

2010-03-30T07:48:11Z

Summary:

'''Fiscal year''' (or financial year or budget year) is a period used for calculating annual financial statements in businesses and other organizations. In many jurisdictions, regulatory laws regarding accounting and taxation require such reports once every twelve months, but does not need the period reported on to constitute a calendar year (i.e., January through December). Fiscal years vary between businesses and countries.

[[Category: Investment Terms]]

Cash Ratio

2010-03-30T07:42:31Z

Summary:

'''Cash ratio''' is a more refined and focused indicator of a company's liquidity that further refines both the [[current ratio]] and the [[quick ratio]] by measuring the amount of cash, cash equivalents or invested funds there are in [[current assets]] to cover [[current liabilities]].

Basically it gives a picture of whether the companies can meet its [[current liabilities]] without putting itself in liquidity risk on its non-cash assets.

==See Also==

* [[Current Ratio]]
* [[Quick Ratio]]

[[Category: Financial Ratios]]

Cash Conversion Cycle

2010-03-30T03:49:49Z

Summary:

'''Cash Conversion Cycle''' (CCC) expresses the length of time (usually in days) that a company uses to sell inventory, collect receivables and pay its accounts payable. In simple words, CCC measures the number of days a company's cash is tied up in the the production and sales process of its operations and the benefit it gets from payment terms from its suppliers or creditors.

The shorter this cycle, the more liquid the company's working capital position is. However, shortening the CCC creates its own risks: while a firm can achieve a negative CCC by collecting from customers before paying suppliers, a policy of strict collections and lax payments can results in issues with both customers and suppliers.

[[Category: Financial Ratios]]

FIFO

2010-03-30T03:21:40Z

Summary:

'''FIFO''' is an asset-management and valuation method in which the assets produced or acquired first are sold or used first.

==Managing Inventory==

FIFO is commonly seen in accounting when it comes to managing [[inventory]]. Basically what it means is when accounting for [[COGS]], inventory that are stored first would be used up first.

For instance, if the current inventory of Company XYZ is broken down into the following
# Purchased on 1-Mar-2009, Cost of Each Unit of Inventory is $30, Total Units is 500
# Purchased on 1-Apr-2009, Cost of Each Unit of Inventory is $40, Total Units is 200
# Purchased on 1-May-2009, Cost of Each Unit of Inventory is $20, Total Units is 700

If at the end of the period the total unit of Inventory used is 600, using a FIFO approach, the [[COGS]] would be ($30 X 500)+ ($40 X 100)= $19,000.

Investors are advised to check on the company's accounting policy to see if the FIFO approach is adopted as it has implications on the Net Profits earned through the accounting of [[COGS]]. This is especially true for companies that store large amount of inventory.

==See Also==
# [[LIFO]]

[[Category: Accounting Terms]]

Gross Margin

2010-03-30T03:16:38Z

Summary:

'''Gross margin''', Gross profit margin or Gross Profit Rate is the difference between the sales and the production costs including the overhead. Gross margin can be defined as the amount of contribution to the business enterprise, after paying for direct-fixed and direct-variable unit costs, required to cover overheads (fixed commitments) and provide a buffer for unknown items. It expresses the relationship between gross profit and sales revenue. This is a clear calculation.

It can be expressed in absolute terms:

Gross margin = Net Sales - Cost of Sales + annual sales return

or as the ratio of gross profit to sales revenue, usually in the form of a percentage:

Gross Margin Percentage = (Revenue-Cost of Sales)/Revenue

Cost of Sales (also known as Cost of Goods (CoGs)) includes variable costs and fixed costs directly linked to the sale, such as material costs, labor, supplier profit, shipping costs, etc. It does not include indirect fixed costs like office expenses, rent, administrative costs, etc.

Higher gross margins for a manufacturer reflect greater efficiency in turning raw materials into income. For a retailer it will be their markup over wholesale. Larger gross margins are generally good for companies, with the exception of discount retailers. They need to show that operations efficiency and financing allows them to operate with tiny margins.

[[Category: Financial Ratios]]

Cost of Goods Sold

2010-03-30T03:10:32Z

Summary:

'''Cost of goods sold''' (COGS) includes the direct costs attributable to the production of the goods sold by a company. This amount includes the materials cost used in creating the goods along with the direct labor costs used to produce the good. It excludes indirect expenses such as distribution costs and sales force costs. COGS appears on the income statement and can be deducted from revenue to calculate a company's gross margin.

[[Category: Accounting Terms]]

Return on Assets

2010-03-30T03:02:20Z

Summary:

'''Return on assets''' tells you what the company can do with what it has, i.e. how many dollars of earnings they derive from each dollar of assets they control. Its a useful number for comparing competing companies in the same industry. The number will vary widely across different industries.

It is an indicator of how profitable a company is before considering leverage, and is compared with companies in the same industry. Since the figure for total assets of the company depends on the carrying value of the assets, some caution is required for companies whose carrying value may not correspond to the actual market value.

==See Also==

# [[Return on Equity]]

[[Category: Financial Ratios]]

Inventory Turnover

2010-03-28T13:16:00Z

Summary:

'''Inventory Turnover''' is an equation that measures the number of times inventory is sold or used over in a period such as a year. The equation equals the cost of goods sold ([[COGS]]) divided by the average inventory.

A low turnover rate may point to overstocking, obsolescence of inventory, or deficiencies in the product line or marketing effort. However, in some instances a low rate may be appropriate, such as where higher inventory levels occur in anticipation of rapidly rising prices or shortages of supply or in anticipation of higher seasonal demand. A high turnover rate may indicate inadequate inventory levels, which may lead to a loss in business. Assume cost of sales is $70,000, beginning inventory is $10,000, and ending inventory is $9,000. The inventory turnover equals 7.37 times ($70,000/(0.5*($10,000+$9000))).

It should be noted that some compilers of industry data use sales instead of cost of sales. COGS yields a more realistic turnover ratio, but it is often necessary to use sales for purposes of comparative analysis. COGS is considered to be more realistic because of the difference in which sales and the cost of sales are recorded. Sales are generally recorded at market value, i.e. the value at which the marketplace paid for the good or service provided by the firm. In the event that the firm had an exceptional year and the market paid a premium for the firm's goods and services then the numerator may be an inaccurate measure. However, COGS is recorded by the firm at what the firm actually paid for the materials available for sale. Additionally, firms may reduce prices to generate sales in an effort to cycle inventory. I

A company whose inventory is sold (turns over) once a year has higher holding cost than one that turns over twice, or three times, or more in that time. Stock turnover also indicates the briskness of the business. The purpose of increasing inventory turns is to reduce inventory for three reasons.

* Increasing inventory turns reduces holding cost. The organization spends less money on rent, utilities, insurance, theft and other costs of maintaining a stock of good to be sold.

* Reducing holding cost increases net income and profitability as long as the revenue from selling the item remains constant.

* Items that turn over more quickly increase responsiveness to changes in customer requirements while allowing the replacement of obsolete items. This is a major concern in fashion industries.

However high turns may indicate that the inventory is too low. This often can result in stock shortages.

When making comparison between firms, it's important to take note of the industry, or the comparison will be distorted. Making comparison between a supermarket and a car dealer, will not be appropriate, as supermarket sells fast moving goods such as sweets, chocolates, soft drinks so the stock turnover will be higher. However, a car dealer such as Honda will have a low turnover due to the item being a slow moving item. As such only intra-industry comparison will be appropriate.

[[Category: Financial Ratios]]

Inventory

2010-03-28T13:15:37Z

Summary:

'''Inventory''' is a list for goods and materials, or those goods and materials themselves, held available in stock by a business.

There are three basic reasons for keeping an inventory:

# Time - The time lags present in the supply chain, from supplier to user at every stage, requires that you maintain certain amount of inventory to use in this "lead time"
# Uncertainty - Inventories are maintained as buffers to meet uncertainties in demand, supply and movements of goods.
# Economies of scale - Ideal condition of "one unit at a time at a place where user needs it, when he needs it" principle tends to incur lots of costs in terms of logistics. So bulk buying, movement and storing brings in economies of scale, thus inventory.

In accounting, there are two methods of handling Inventory and they are called "First In First Out" ([[FIFO]]) and "Last In First Out" ([[LIFO]]).

For manufacturing firms, their inventory can be broken down into several categories depending on the manufacturing progress but they can be broken down into three main categories and they are

# Finished Goods
# Work-In-Progress
# Raw Materials

[[Category: Accounting Terms]]

Receivables to Payables Ratio

2010-03-28T10:33:18Z

Summary:

'''Receivables to Payables Ratio''' is obtained by taking the trade [[receivables]] divided by trade payables. This ratio shows that for every dollar of credit taken from suppliers, the company extended how many dollars of credit to clients. This Receivables to Payables Ratio should remain fairly constant throughout the years.

The magnitude of the ratio greatly depends on the industry the company under analysis is in. Thus when looking at this ratio, it would be advisable to compared with other companies that are in similar industry.

Any major changes experienced should be compared with other companies. If other companies does not experience any major changes, it is likely that there are changes in the credit policies either in the credit extended or the supplier's finance.

[[Category: Financial Ratios]]

Goodwill

2010-03-28T08:32:15Z

Summary:

'''Goodwill''' is an accounting term used to reflect the portion of the book value of a business entity not directly attributable to its net assets; it normally arises only in case of an acquisition. It reflects the ability of the entity to make a higher profit than would be derived from selling the tangible assets. Goodwill is considered an intangible asset.

Goodwill will usually be higher in services- or people-oriented companies as the primary cash-generating business comes from people or contacts and not tangible assets like machines.

Negative goodwill is also possible in this case the purchase price is less than the net assets (at book value). This is usually when companies purchase loss-making companies.

The basic goodwill formula

* Goodwill = Purchase Price – Fair Market Value of Net Assets
* Fair Market Value of Net Assets = Net Tangible Assets + Write-up of Net Assets
* Net Tangible Assets = Assets – Target's Existing Goodwill – Liabilities

As can be seen, a merger destroys the target's "old" goodwill and creates "new" goodwill to appear in consolidated books. Net assets write-up is prepared through a qualified appraisal in a process known as a Purchase Price Allocation.

[[Category: Accounting Terms]]

Choosing the Right Travel Insurance Part II

2010-02-28T02:15:42Z

Summary:

Singaporeans love to travel as seen by the number of travels fairs held. And all of us love to travel with a calm state of mind and getting sound '''travel insurance''' does that.

It is of vital importance that we get travel insurance because while travelling in unfamiliar territory, there can be a host of unforeseen circumstance that turn our travel dreams into nightmares. As overseas medical expenses can be very hefty and getting the right travel cover can eliminate a bulk of it.

It is advisable that travelers shop around for the right insurance cover that meets their needs. If you are travelling without baggage, a cover on loss of baggage would be useless.

So how do you go about selecting the right travel insurance?

Here are a few pointers

===Purchase your travel insurance early===

Preferably you should purchase your travel insurance once you have booked your trip. This is because for some insurance, there are travel cancellation coverage which can be beneficial if you start your insurance cover early.

===Buy What you Need===

It is of great importance to ensure that the travel insurance provide adequate coverage with the option of better benefits offered at a higher premium.

Some travel insurance offer coverage on hazardous activities like diving and skiing which you should look into if you are intending to participate. If you are unsure whether you would take part in these hazardous activities, it is advisable to purchase it so you can have the freedom and peace of mind when you do feel like taking part.

===Single or Annual===

Depending on your travel frequency, you might want to purchase an Annual Plan. If you make short-haul traveling often, it is advisable to take up an Annual Plan as well.

When deciding on Single Trip or Annual Coverage, the destination of travel is also important. As travel insurance coverage varies with destination, it is advisable to get coverage on all you trips.

===Automatic Extension of Coverage===

Sometimes you may be stuck in a particular destination due to circumstances beyond your control for instance, when the [http://en.wikipedia.org/wiki/People%27s_Alliance_for_Democracy#Seizure_of_Suvarnabhumi_International_Airport Thai International Airport was taken over in 2008]. As such it would be great if the travel insurance you purchase have an automatic extension. Look out for such option and its terms and conditions if you are traveling to destinations that are well-known for such events that make travelers stuck longer than intended.

===Definition of child and other definitions===

Different insurers have different definition of the word ‘''child''’. If you are purchasing a family policy, do check out what is the definition of ‘''child''’ and also other relevant definition that can be ambiguous.

For instance, how is travel delays defined? How many hours is needed to consider “delayed in flight”? And how are the hours of delay calculated?

===Premium Discounts===

Usually insurers will offer group discounts, so if you are traveling in a group, check out what discounts are available. Exercise the power of bulk buying!

===Keep all receipts and paperwork===

Do have a folder handy while traveling. For this folder, you can put in your receipts and other documents like visa, hotel baggage claim stubs and boarding passes.

If you should need to file your claims from insurers, such act would make your paperwork easier.

===Familiarise yourself with Claims Process===

Understand the timelines for filing claims. Some insurers would need you to file your claims from three to seven days after you have reached home. By understanding the timelines, you can avoid unnecessary hassle and some misunderstanding, smoothening your claim processes.

Settlement time will varies with the nature of claim, completeness of documents and insurers but most claims are settled within two weeks.

===Emergency Assistance Phone Number===

Ensure that you have recorded down the Emergency Phone Number and Insurance Policy no. in a notebook or mobile phone.

Provide another copy of the travel insurance certificate to your family members if they are not travelling with you. If there is a need, you can then call them up to seek for assistance.

[[Category: Insurance]]

Basic Rules to be Money Wise

2009-07-08T00:41:42Z

Summary:

Below are the '''basic rules to be Money Wise'''

==Live within your means and monitor how you spend==

It is very important that we live within our means. This is very challenging (but does not mean it cannot be done) given that banks are aggressively selling their credit cards with credit limit above our monthly income. So take on credit cards that you need for its discounts offered in stores and restaurants that you frequent.

It is vital that you monitor your expenditure so that you are not spending more than you should, and you will notice some areas where you can cut down your expenditure further, increase savings and use compound interest to work for you.

==Save a portion of your income before spending the balance==

If you have read many financial planning books, this is the "Pay Yourself First" mantra. What you should do is to keep two accounts. The first account should be your salary-crediting account and the other, your savings accounts. Every month, without fail and immediately on your pay day, shift a sum of the money to your savings accounts and only touch the savings account for investment purpose.

==Aim to keep at savings that are at least six to twelve months of your monthly expenditure==

Given the volatility of our economy and uncertainty in life, it is vital that you prepare an emergency fund. This emergency funds should only be touched as a last resort and it should tie you through a period of six to twelve months while you make adjustment to the new situation. Remember to adjust this funds according to your expenditure situations. A good place to place your emergency funds would be money market funds where risk are lower and interest rate is higher than your savings account.

==Use Credit Wisely==

We are bombarded by a wide variety of credit cards. You need to choose those credit cards that offers discount on stores and restaurant that you frequent often and REJECT those credit cards that does not. With lesser credit cards, it helps in managing them since it is vital you remember your total expenditure and when the payment due date is for each card.

Another important point is, always settle your credit card debts promptly to minimize charges. You will be surprise by the number of charges you are slapped with if you never pay promptly.

==Buying Financial Products==

Most of us shop around to get the most value-for-money consumer products. We should apply this mentality to purchasing financial products as well since we are investing with our hard-earned money. Use the Internet to gather information. Discuss with your spouse or your parents. Feel free to call up the banks for more information. Read up the terms and conditions of each financial products. Only when you fully understand how the financial product works then you should put it inside your list of options. DO NOT buy financial products that you do not understand.

This is especially true with insurance policies. An endowment plan from one company can be substantially different from one offered by another company. Find out how the insurance policies works, what it covers and what it excludes. Find out also how the claim process is like.

'''To be continued...'''

Warnings Signs of Company Stocks You Should Avoid– Part I

2009-07-03T23:54:12Z

Summary:

'''Warnings Signs of Company Stocks You Should Avoid– Part I'''

Most investors assess company stocks through financial statements. But there are also other characteristics that can be major turnoffs and bad omens of unpleasant things to come. Keep an eye out for these clues keep yourself from these stock investment pitfalls.

==Missing an Already Lowered Forecast==
It is common for publicly traded companies to lower their earnings guidance which they provide from time to time. Companies may do so when the macroeconomic situation seems bad or when a company-specific issue arises. With this in mind, when a company sets the earnings bar lower, it is important that they clear it and do not miss this revised forecast.
Reason being if the company does not meet the new projection it can have a negative impact on the morale of its shareholders and their ability to trust management. In other words, it can leave shareholders and those sitting on the fence wondering what the future may look like on the earnings front. Another reason is the analyst community could end up bashing the company or its stock as a result of this missed forecast. They may seriously scale back their estimates and perhaps lower their rating on the shares, which may result in the fall of share price.

==Selling Near the Lows==
It is also common for insiders at publicly traded companies to sell shares of their company's stock. But do note that there may be other legitimate reasons why the company executives sell their shares. For example, they may have to make tuition payments for their children, or perhaps they are in the process of buying a home and needed funds. Other times, an insider may sell shares simply to book some profits and/or to diversify their holdings.

But there are some times when certain insider selling activity or transactions should raise a few eyebrows, such as when a group of executives suddenly decides to sell off a portion of their holdings. Individuals who sell a very large portion or percentage of their total holdings may also raise some flags, as well as insiders that sell at or near 52-week lows.

Executives that sell near or at the lows seem to signal that the company is not worth investing. If it is, they should be buying more shares. Again, this may not be true and it's likely that an executive or insider may deny it. However, unloading shares at rock-bottom prices does sometimes convey that signal to the investment community.

==Not Providing Guidance==
It is never easy to provide the investment community with quarterly or annual financial forecasts. After all, corporations are large entities and the business environment they operate in can change rapidly over time. Plus, there is the chance that expected revenues could be pushed back to future quarters or bumped up. However, that doesn't mean that companies should not try to provide guidance; many retail and institutional investors like this type of handholding.

That said, one signal that trouble may be brewing is when a company abruptly discontinues its guidance. Such action signals that the company has no idea or doesn't expect to have an idea of when earnings could come in. Along those lines, such silence may signal that macroeconomic or company-specific forces may have a huge impact on forward earnings, making an accurate forecast impossible. Neither scenario is particularly encouraging. A company that isn't forthcoming and doesn't update the investment community about its progress (or lack thereof) may be trying to sweep bad news under the rug. That's not always the case, but it's something to think about.

==Related Articles==
* [[Warnings Signs of Company Stocks You Should Avoid– Part II]]

[[Category: Stocks]]

Warnings Signs of Company Stocks You Should Avoid– Part II

2009-07-03T23:54:09Z

Summary:

'''Warnings Signs of Company Stocks You Should Avoid– Part II'''

==Dividend Cuts==
Companies that pay dividends has a place in most portfolio, particularly for income-oriented investors. In addition, the fact that a company pays a dividend paints a good picture of the company’s health. However, when a dividend-paying company suddenly suspends its dividend, it may signal that the company is experiencing some sort of financial trouble. Such companies would not find favor with income-oriented shareholders thus resulting in selling of shares by these investors. Finally, a dividend suspension may come in advance of serious job cuts, plant closures or asset sales.

==Halting Repurchases==
If a company has been repurchasing shares and suddenly stops, it may signal that the company is short on cash or that it thinks that the shares aren't a good investment at the time. Frankly, neither scenario would be attractive.

==Lack of Diversification==
In order to be successful and achieve growth over time, it's important that a company introduces new products and remains innovative. Companies that don't innovate run the risk of becoming irrelevant if a superior product or improved technology hits the market. It's also highly important for a company to diversify its product offerings. The reason for this is simple: if a company was to stick to one product line or a small number of lines that run out of steam, that company could more easily go out of business. Thus keep a lookout for, and be wary of, companies that are not innovating.

==Industry Indicators==
Companies that operate in the same industry (for example, the auto industry) may experience similar trends. If one company is struggling in a certain market, its competitor may be as well. Investors should be on the lookout for signals of how the company may be doing as compared to other industry participants.
Suppose an investor was to note that a competitor was experiencing a decline in margins in its European business. In such a case, it might be assumed that other companies are seeing the same kind of decline. On the flipside, a company experiencing a huge influx of orders from a region may be a sign that other companies in that industry are experiencing similar trends. Keep an eye peeled for industry trends as this could signal what is around the corner.

'''''In Conclusion'''''

There are several indicators, besides the traditional financial valuation metrics, that may signal trouble to come for a company's stock. Investors with a sharp eye and a willingness to do research may be able to limit or prevent losses.

[[Category: Stocks]]

How to Improve Credit Ratings

2009-04-28T07:02:29Z

Summary:

'''How to Improve Credit Ratings''' in Singapore

* Pay bills on time and preferably in full, where possible.
* Pay down debts and consider charging less.
* Limit the number of credit cards owned.
* Cancel any unused cards.
* Not applying for lots of credit at once.
* Stay out of bankruptcy.
* Get credit report and seek credit counselling.

Teach Your Children the Value of Money

2009-04-28T03:54:40Z

Summary: /* Compounding */

'''Teach Your Children the Value of Money'''

All parents want to teach their own children to form healthy savings habits but have no idea how to go about. This articles aims to help parents to achieve their aim, providing their children the most important financial life skill.

==Before You Start==

# Discuss with your spouse what are the financial knowledge and priorities you want to teach your childrenso that you'll both be on the same page when it's time to talk to the kids about financial priorities.
# Always note that you need to place yourself in your children’s shoes, understand their thoughts, opinions and financial priorities as they grow up and impart the knowledge accordingly. Ask them if necessary, do not assume that they can understand what you are imparting.

==Teach Your Children the Value of Money==

Although there is an emphasis to add financial literacy into the school curriculum but sad to say, it is still inadequate. Most kids just learn the very basics of money usually associated with saving. That means it is up to all of us to see that our children reach adulthood prepared to face life's fiscal challenges, like retirement planning

==The Earlier the Better==

Teaching your children about money early on allows them gain more as compared to those children who start late.

In the short term, they may develop good saving habits, learn how to make smart purchases, begin to understand the true meaning of terms like "investment", “insurance”, “inflation”.

In the long term, you can help them avoid accumulating debt. And by teaching the value of saving for the future and later on, insurance planning, you can help them plan for financial security.
As you think about how, what, and when to teach your children, consider letting them direct you by using their natural inquisitiveness. But do start early by exposing them to more ideas. You can make them be inquisitive by asking them to ponder some simple questions like, “Ever notice that how come some candies are more expensive than others?” – ie. starting on their journey to understand what is Wants and Needs.

==Where Does Money Come From?==

An ideal time to begin teaching your children about the basics of money is when they first begin to ask questions about it. In a child's world, money comes from parent’s pockets. And when Mom and Dad slot in a card and push a few buttons, a machine magically spouts dollars. Or Mom flashes a magic card and we can take our groceries and my candy out. With such observations, it's natural for them to assume that money is readily available whenever it's needed.

When they can't understand why you can't meet their every demand, instead of choosing the easier way out with a response such as, "Money doesn't grow on trees", remember that a more constructive explanation may serve both of you better.

Even very young children can begin to understand the concept of earning money. Explain to your children that there are many sources of income but all needs effort to build it. To help them understand more about managing money, begin paying an allowance. Then help them set goals for how they spend and save their allowance.

==Make Saving Interesting==

You hear it every time you walk by a candy or toy store: "I want this...Buy me that... !" Again, pause and take a moment before responding. This situation presents a great opportunity to teach another important lesson about personal finance: savings and interest. Explain that people often save their money for items they want to buy.

A simple savings lesson involves using a piggy bank; or have fun by having your children getting and decorating an empty container to be their savings bank. Explain to them how you also use a real bank to save your money. Get your children to save for a special goal, like buying a gift for Mother’s Day or Dad’s birthday. Write down the goal and define how much the gift is. Help them to work out a savings schedule, and reward them when they stick to it consistently.
As they save money, you might reward them with a small additional amount, just like a bank pays interest.

Last, to further encourage the learning process, you might consider plotting a visual chart of their savings so they can easily see their savings grow. Remember the time when you have your kid to stand at a wall and you mark out how tall it is. That special wall became a great timeline to see how fast your kid grew. Do the same with their savings.

==Banking and Investing==

Once your children have developed a strong saving habit, it is time to take them to the bank to open their first savings account. Local banks like POSB and OCBC allow children to open first accounts with no minimum amount required. They even have accounts especially marketed to kids to make the learning process fun. They also give out savings passbook so that your children can see the progress of their savings efforts, as well as the interest that accrues.
Once your children is familiar with banks as a savings institution, you can begin to teach them about investing. When your children want something that they can't quite afford, discuss the value of saving versus borrowing.

If you do lend money, use a written IOU, establish a repayment schedule, and charge interest. By doing this, you let them experience what the real world is, in terms of borrowing. Also you can take the opportunity to teach your children that the higher the interest rate, the more they have to pay monthly to pay back the loan. It also establishes the framework for teaching your children that bonds and certificates of deposit are IOUs representing loans from investors to institutions.

==Compounding==

As your children get older review the lesson of compounding, or the ability of earnings to build upon themselves. Explain how compounding can be more dramatic over time; the longer money is left alone, the greater the effect. You can use charts or Excel spreadsheets to show them the power of compounding and at the same time teach them how to use Excel for simple personal accounting.

'''A Little Learning Can Pay Off'''

Teaching your children about our complex financial system may seem daunting, but you can help put your child on the right track by encouraging smart habits now.
Is it worth your time and effort to help your children learn about money? As Benjamin Franklin once said, "An investment in knowledge always pays the best interest." Answering your children's questions honestly and in terms they can understand help them begin life on sound financial footing.