Pay Attention to The “High Yields” and Hot Air

We’ve all seen investment offers that promise to pay sky-high returns for what are at best extremely risky propositions — and at worst are pure frauds. Here’s a list of red flags that we often find in many of the frauds we see.

• If it sounds too good to be true, it is. Mom was right! Compare promised yields with current returns on well-known stock indexes. Any investment opportunity that claims you’ll get substantially more could be highly risky. And that means you might lose money.
   
• “Guaranteed returns” aren’t. Every investment carries some degree of risk, and the level of risk typically correlates with the return you can expect to receive. Low risk generally means low yields, and high yields typically involve high risk. If your money is perfectly safe, you’ll most likely get a low return. High returns represent potential rewards for folks who are willing to take big risks. Most fraudsters spend a lot of time trying to convince investors that extremely high returns are “guaranteed” or “can’t miss.” Don’t believe it.
   
• Check out the company before you invest. If you’ve never heard of a company, broker, or adviser, spend some time checking them out before you invest. Most public companies make electronic filings with the SEC. There are computerized databases to check out brokers and advisers. Your state securities regulator may have additional information. And by the way — if a supposedly upright firm only lists a P.O. box, you’ll want to do a lot of work before sending your money!
   
• If it is that good, it will wait. Scam artists usually try to create a sense of urgency — implying that if you don’t act now, you’ll miss out on a fabulous opportunity. But savvy investors take time to do their homework before investing. If you’re being pressured to invest, especially if it is a once-in-a-lifetime, too-good-to-be-true opportunity that “just can’t miss,” just say “no.” Your wallet will thank you.
   
• Understand your investments. Fraudsters frequently use a lot of big words and technical-sounding phrases to impress you. But have faith in yourself! If you don’t understand an investment, don’t buy it. If a salesman isn’t able to explain a concept clearly enough for you to understand, it isn’t your fault. Don’t make it your problem by buying!
   
• Beauty isn’t everything. Don’t be fooled by a pretty website — they are remarkably easy to create.

Remember — an educated investor is our best defense against fraud! For more information on how to invest wisely and avoid fraud, please visit the Best Growth Stock Market Report .

Make a Financial Plan Towards Financial Freedom

Sit down and take an honest look at your entire financial situation. You can never take a journey without knowing where you’re starting from, and a journey to financial security is no different.

You’ll need to figure out on paper your current situation— what you own and what you owe. You’ll be creating a “net worth statement.” On one side of the page, list what you own. These are your “assets.” And on the other side list what you owe other people, your “liabilities” or debts.

Subtract your liabilities from your assets. If your assets are larger than your liabilities, you have a “positive” net worth. If your liabilities are greater than your assets, you have a “negative” net worth. You’ll want to update your “net worth statement” every year to keep track of how you are doing. Don’t be discouraged if you have a negative net worth. If you follow a plan to get into a positive position, you’re doing the right thing.

KNOW YOUR INCOME AND EXPENSES

The next step is to keep track of your income and your expenses for every month. Write down what you and others in your family earn, and then your monthly expenses. Include a category for savings and investing. What are you paying yourself every month? Many people get into the habit of saving and investing by following this advice: always pay yourself or your family first. Many people find it easier to pay themselves first if they allow their bank to automatically remove money from their paycheck and deposit it into a savings or investment account. Likely even better, for tax purposes, is to participate in an employer sponsored retirement plan such as a 401(k), 403(b), or 457(b). These plans will typically not only automatically deduct money from your paycheck, but will immediately reduce the taxes you are paying. Additionally, in many plans the employer matches some or all of your contribution. When your employer does that, it’s offering “free money.” Any time you have automatic deductions made from your paycheck or bank account, you’ll increase the chances of being able to stick to your plan and to realize your goals.

“But I Spend Everything I Make.”

If you are spending all your income, and never have money to save or invest, you’ll need to look for ways to cut back on your expenses. When you watch where you spend your money, you will be surprised how small everyday expenses that you can do without add up over a year.

Small Savings Add Up to Big Money

How much does a cup of coffee cost you?

Would you believe $465.84? Or more?

If you buy a cup of coffee every day for $1.00 (an awfully good price for a decent cup of coffee, nowadays), that adds up to $365.00 a year. If you saved that $365.00 for just one year, and put it into a savings account or investment that earns 5% a year, it would grow to $465.84 by the end of 5 years, and by the end of 30 years, to $1,577.50.

That’s the power of “compounding.” With compound interest, you earn interest on the money you save and on the interest that money earns. Over time, even a small amount saved can add up to big money.

If you are willing to watch what you spend and look for little ways to save on a regular schedule, you can make money grow. You just did it with one cup of coffee.

If a small cup of coffee can make such a huge difference, start looking at how you could make your money grow if you decided to spend less on other things and save those extra dollars.

If you buy on impulse, make a rule that you’ll always wait 24 hours to buy anything. You may lose your desire to buy it after a day. And try emptying your pockets and wallet of spare change at the end of each day. You’ll be surprised how quickly those nickels and dimes add up!

Pay Off Credit Card or Other High Interest Debt

Speaking of things adding up, there is no investment strategy anywhere that pays off as well as, or with less risk than, merely paying off all high interest debt you may have. Many people have wallets filled with credit cards, some of which they’ve “maxed out” (meaning they’ve spent up to their credit limit). Credit cards can make it seem easy to buy expensive things when you don’t have the cash in your pocket—or in the bank. But credit cards aren’t free money.

Most credit cards charge high interest rates—as much as 18 percent or more—if you don’t pay off your balance in full each month. If you owe money on your credit cards, the wisest thing you can do is pay off the balance in full as quickly as possible. Virtually no investment will give you the high returns you’ll need to keep pace with an 18 percent interest charge. That’s why you’re better off eliminating all credit card debt before investing savings. Once you’ve paid off your credit cards, you can budget your money and begin to save and invest. Here are some tips for avoiding credit card debt:

• Put Away the Plastic

Don’t use a credit card unless your debt is at a manageable level and you know you’ll have the money to pay the bill when it arrives.

• Know What You Owe

It’s easy to forget how much you’ve charged on your credit card. Every time you use a credit card, write down how much you have spent and figure out how much you’ll have to pay that month. If you know you won’t be able to pay your balance in full, try to figure out how much you can pay each month and how long it’ll take to pay the balance in full.

• Pay Off the Card with the Highest Rate

If you’ve got unpaid balances on several credit cards, you should first pay down the card that charges the highest rate. Pay as much as you can toward that debt each month until your balance is once again zero, while still paying the minimum on your other cards.

The same advice goes for any other high interest debt (about 8% or above) which does not offer the tax advantages of, for example, a mortgage.

Once you have paid off those credit cards and begun to set aside some money to save and invest, you’re in the savings habit! Now that you are freeing up some money to save and invest, it’s time to move ahead to the next stop in your journey.

Factors for good investment

You need to identify the best stocks when you plan investment. The motto is to make certain greater profit and reduce the losses. You will find people getting bankrupt and still others making fortunes through investment in stock market. Well, contrary to a still popular belief, success in stock investment has nothing to do with luck and neither there is any magic formula for success. It is all about sound reasoning and calculation. In order to identify the best growth stocks for investment, you require information through research and are able to analyze that information so that you could use them.

 Here are a few factors which can prove instrumental in determining the potential of the company and its stock.

Sales Revenue – The sales revenue is an important stricture which will aid you to judge the financial condition of the respective company. It refers to the amount of money that the company makes in that fiscal year. Sales revenue also includes scraps of information regarding the cost and the loss of the company as well.

Earnings – This also refers to the net income of the company. It reveals the business condition that whether the company is garnering profit or running losses. The earning of the company not only describes its current fiscal condition but also is of great help to ascertain the future prospect of the company. If the company is found to harbor profits year after year, it becomes naturally obvious that it has a promising future ahead.

Debt – This value refers to the financial liability of the company. When in debt, the major share of the company’s earnings slips away in repaying those debts. And the natural result happens to be a substantial decrease in the net profit margins. Therefore, for good investment, you need to look for stocks that have a negligible or no debt.

Liquidity – The cash holding position of the company is revealed by the liquidity amount. It is a natural inference that a company which has a better or higher liquidity will automatically grow in the near future and promote expansion in business. Thus, liquidity happens to be an important determinant in ensuring a positive investment option.

Valuation – Valuation determines the worth of the company. The most popular and the easiest method to calculate the valuation of the company is the Profit – Earning ratio. Financial experts suggests that investment in growth stocks which have a P/E Ratio between 5 and 50 will always offer positive returns.

All the above points will enable a stock investor to make good investment decision based on the growth stock market report . There are other important factors that are worth considering, they are: the direction of the stock market, the average stock market trend, the prevailing trend in the concerned industry sector and so on.  

Hedging Your Bets: A Guide To Hedge Funds

What are hedge funds?

Like mutual funds, hedge funds pool investors’ money and invest those funds in financial instruments in an effort to make a positive return. Many hedge funds seek to profit in all kinds of markets by pursuing leveraging and other speculative investment practices that may increase the risk of investment loss.

Unlike mutual funds, however, hedge funds are not required to register with the SEC. Hedge funds typically issue securities in “private offerings” that are not registered with the SEC under the Securities Act of 1933. In addition, hedge funds are not required to make periodic reports under the Securities Exchange Act of 1934. But hedge funds are subject to the same prohibitions against fraud as are other stock market participants, and their managers have the same fiduciary duties as other investment advisers.

What are “funds of hedge funds?”

A fund of hedge funds is an investment company that invests in hedge funds — rather than investing in individual securities. Some funds of hedge funds register their securities with the SEC. These funds of hedge funds must provide investors with a prospectus and must file certain reports quarterly with the SEC.

Note: Not all funds of hedge funds register with the SEC.

Many registered funds of hedge funds have much lower investment minimums (e.g., $25,000) than individual hedge funds. Thus, some investors that would be unable to invest in a hedge fund directly may be able to purchase shares of registered funds of hedge funds.

What protections do I have if I purchase a hedge fund?

Hedge fund investors do not receive all of the federal and state law protections that commonly apply to most registered investments. For example, you won’t get the same level of disclosures from a hedge fund that you’ll get from registered investments. Without the disclosures that the securities laws require for most registered investments, it can be quite difficult to verify representations you may receive from a hedge fund. You should also be aware that, while the SEC may conduct examinations of any hedge fund manager that is registered as an investment adviser under the Investment Advisers Act, the SEC and other securities regulators generally have limited ability to check routinely on hedge fund activities.

The SEC can take action against a hedge fund that defrauds investors, and we have brought a number of fraud cases involving hedge funds. Commonly in these cases, hedge fund advisers misrepresented their experience and the fund’s track record. Other cases were classic “Ponzi schemes,” where early investors were paid off to make the scheme look legitimate. In some of the cases we have brought, the hedge funds sent phony account statements to investors to camouflage the fact that their money had been stolen. That’s why it is extremely important to thoroughly check out every aspect of any hedge fund you might consider as an investment.

Mutual Funds Breakpoints

Some mutual funds that charge front-end sales loads will charge lower sales loads for larger investments. For example, a fund might charge a 5% front-end sales load for investments up to $25,000, but charge a load of 4% for investments between $25,000 and $50,000 and 3% for investments exceeding $50,000. The investment levels required to obtain a reduced sales load are commonly referred to as “breakpoints.” In this example, the breakpoints were $25,000 and $50,000. Funds that offer breakpoints can set them at their discretion.

The SEC does not require a fund to offer breakpoints in the fund’s sales load. If breakpoints exist, the fund must disclose them. In addition, a brokerage firm that is a member of FINRA should not sell you shares of a fund in an amount that is “just below” the fund’s sales load breakpoint simply to earn a higher commission.

Each fund company establishes its own formula for how they will calculate whether an investor is entitled to receive a breakpoint. For that reason, it is important to seek out breakpoint information from your financial advisor or fund. You’ll need to ask how a particular fund establishes eligibility for breakpoint discounts, as well as what the fund’s breakpoint amounts are.

Some funds base eligibility for a breakpoint discount upon the investments of all of the individuals within a household and, in some instances, may include multiple accounts of an individual within the household. Others look only at the total amount you personally have invested. Keep in mind that you may be entitled to aggregate investments made in all of your accounts to calculate whether you may receive a breakpoint. These might include brokerage accounts you or other members of your household have at different firms, college savings accounts (so-called “529 plans”) and retirement accounts. You might be able to aggregate purchases in different funds within a fund family or aggregate different classes of shares of the same fund.

You may be entitled to combine your previous fund purchase amounts to obtain a breakpoint discount upon a purchase you make today. Or, you might be able to obtain a breakpoint discount for an investment today if you agree to make additional purchases in the future. In such case, you would sign a “letter of intent” to make additional purchases in the future. Be aware, though, that if you don’t carry through with your promised future purchases, the firm may retroactively collect a higher fee.

Always check to make sure that you have been credited the breakpoint discounts to which you are entitled. If you think you should have gotten the benefit of a breakpoint but did not, first contact your broker (or the fund if you did not use a broker) and ask that you be given the discount. If you aren’t happy with the answer, or if you don’t understand what you’re told, write a letter to your broker or mutual fund and ask for a written reply.

The other features to consider in growth stock companies

A growth stock does not usually pay any dividends. The profit is held back by the company to be used as capital to foster further growth. Growth stocks are brought for their potential price appreciation. The primary requirement of a growth stock is that it must grow. So, how would you separate a growth stock from just another stock?

A growth investor is concerned about the company’s prospects and the future of the stock market . The business must possess those market attribute which will enhance its growth. Let us look at the non-financial characteristics of those businesses which are important market attributes. They are essential in the sense that without them, the respective company is quite unlikely to retain and sustain its leadership position.

Product must have legs to run

The product or the service of the company should cater to the present market. No one is interested in either bygone product or a bygone popular feature. Neither is it considered important if the current product of the company is only a passing reflection of yesteryears hottest technological revolution. The current utilization factor is the primary consideration for the market.

There was a time when people were crazy about VCRs. But today the retailers are no longer interested in the machines. A lot of video stores nowadays refuse to accept new releases on video tapes; they want their stock to be in DVD format. Those companies which are able to hold the interest of the consumers year after year have either always retained their trademark universal appeal or refreshed their product qualities conforming to the changes in the consumer requirements.

The companies with strong competitive advantages

They are also called the deep moat. It sort of protects these huge companies from their competitors. They can be the heavy manufacturers of cars and aero planes. They can also have massive recognition behind them, in the likes of McDonald or Coca Cola. It can also be a low-price leader like Wal-mart. Competitors are unable to grab the market share due to their superiority.

Market leadership

Market leaders always stand to set the agenda for the industry. But an investor has to ascertain whether they are the ones who are slow in leadership and are mere complacent giants.  For those who rest on their past laurels eventually fade into oblivion.

A growth stock investor ought to take all these characteristics of the company into consideration. These are the non-financial traits of a growth stock company. 

Growth Stocks: Tips for proper investment

The term ‘growth stock’ has been a victim of occasional misunderstandings. Some apprehends growth stock as a name stock that has a lot of demand. There are others who think growth stocks are those stocks which sell at high earning multiples. But belonging to a popular company or having a name does not form a necessary synonym for true growth. More often than not it can be a stock which has gone past its period of growth. It is a natural tendency for investors to go too far with their preference for popular stocks. During the period of market excesses, there happens to be a popular misconception that growth stocks are always beyond the reasonable or acceptable price-earning ratio. This P/E ratio is considered to be the basic criteria to evaluate the stock prices.

Growth stocks and the ‘emerging growth stocks’ are actually well-managed companies which operate in industries whose earnings and dividends grow at a faster rate than the expected estimates. It does not get buoyed down by the inflation and the shaky condition of the over-all economy. Their extraordinary and positive growth momentum ought to be equally maintained both during economic affluence and economic poverty. Contrary to popular belief, growth stocks are not to be found in the traditional popular sectors. They rather belong to newer upcoming sectors like the telecommunications, health care, computers and bio-technology.

Major characteristic features of growth stocks include:

·      They have a higher price/earning ratio compared to the market average

·      They possess a substantial potential for long term price appreciation and its ability to remain above-average.

·      Their price levels are volatile

·      They conserve their capital for future growth. So, there is no dividend payout.

How do you ascertain that it is an emerging growth stock? For this:

·      You need to shun those companies which are two down in the earning years during the past five years

·      The company should have a minimum average of 20% revenue and a constant earning growth

·      You are required to stay clear of those firms which have a return of average equity that is below 13%.

·      Those companies whose debt is more than 30% of its total capital should be avoided.

An expert growth stock hunter will naturally know that he will not gain any excess return from investment truly and will try ‘blue chip’ stock representative of a main stream stock market index like, the Dow Jones Industrial Average and the S & P 500. He will rather explore the market to get hold of the next growth stock, that which may well become the next Google. 

Investment in Growth Stocks

Before a potential investment there are several points which the growth investor must take into account. Does the company which he has zeroed on in, possess a stable management and whether its finance credibility is positioned for sustained growth. Then he must check whether the present economic environment will benefit the particular industry of which the company is a part? And above all, the value of the stock is very important.

To determine a sound entry price for a strong growth stock can be a difficult task. But to determine the success of an investment, it is the most important factor. An investor would ideally be inclined to buy into a growth company very early, because he would naturally like to garner enough profit from its persistent growth. But at the same time it is very important for the investor not to place a huge chunk of his premium on his apprehension of the company’s growth potential. For, doing so might limit his future profits from another possible sector.

At the starting point the investor needs to decide about his own investment preference. He can either be a ‘value’ or a ‘growth’ investor or he can be both. But it is always advisable to choose a primary focus. It’s important to note that growth and value investment are not contradictory options but are rather two different approaches to an identical situation.

An investor can decide his own inclination regarding which strategy appears the most appealing. Given below are the basic characteristics of growth stock investment : 

• The average growth rates in revenue and earning of these companies are higher in comparison to the other companies.
• These companies cater to such industrial sectors which are continuously expanding. They are smoothly sailing through the current demographic and economic cycle.
• These companies do not pay dividends.
• These companies are characterized by such high growths that they often end up beyond the earning estimates.
• The continued growth of the company determines the holding period.  

Growth investment is all about estimating and predicting the future. It is constantly in the investor’s thought that whether the respective company would maintain the same steady pace in the stock market . He must be extremely concerned about the company plans and policies like revenue, earnings, and sales and so on. He needs to keep an eye on the industry and the level of participation of the company in that growth. Some attentive reading done online and the financial press can immensely help the growth stock investor. Another notable feature of the growth stock is that it belongs to growth industries. A growth industry is usually related to some kind of technology. Next, the growth stocks belong to companies that are small to mid-sized. In fact a wide range of factors keep the large companies away from maintaining a steady growth rate.

Financial Statement Ratios and Calculations

You’ve probably heard people banter around phrases like “P/E ratio,” “current ratio” and “operating margin.” But what do these terms mean and why don’t they show up on financial statements? Listed below are just some of the many ratios that investors calculate from information on financial statements and then use to evaluate a company stock market value. As a general rule, desirable ratios vary by industry.

• Debt-to-equity ratio compares a company’s total debt to shareholders’ equity. Both of these numbers can be found on a company’s balance sheet. To calculate debt-to-equity ratio, you divide a company’s total liabilities by its shareholder equity, or

Debt-to-Equity Ratio = Total Liabilities / Shareholders’ Equity

If a company has a debt-to-equity ratio of 2 to 1, it means that the company has two dollars of debt to every one dollar shareholders invest in the company. In other words, the company is taking on debt at twice the rate that its owners are investing in the company.

• Inventory turnover ratio compares a company’s cost of sales on its income statement with its average inventory balance for the period. To calculate the average inventory balance for the period, look at the inventory numbers listed on the balance sheet. Take the balance listed for the period of the report and add it to the balance listed for the previous comparable period, and then divide by two. (Remember that balance sheets are snapshots in time. So the inventory balance for the previous period is the beginning balance for the current period, and the inventory balance for the current period is the ending balance.) To calculate the inventory turnover ratio, you divide a company’s cost of sales (just below the net revenues on the income statement) by the average inventory for the period, or

Inventory Turnover Ratio = Cost of Sales / Average Inventory for the Period

If a company has an inventory turnover ratio of 2 to 1, it means that the company’s inventory turned over twice in the reporting period.

• Operating margin compares a company’s operating income to net revenues. Both of these numbers can be found on a company’s income statement. To calculate operating margin, you divide a company’s income from operations (before interest and income tax expenses) by its net revenues, or

Operating Margin = Income from Operations / Net Revenues

Operating margin is usually expressed as a percentage. It shows, for each dollar of sales, what percentage was profit.

• P/E ratio compares a company’s common stock price with its earnings per share. To calculate a company’s P/E ratio, you divide a company’s stock price by its earnings per share, or

P/E Ratio = Price per share / Earnings per share

If a company’s stock is selling at $20 per share and the company is earning $2 per share, then the company’s P/E Ratio is 10 to 1. The company’s stock is selling at 10 times its earnings.

• Working capital is the money leftover if a company paid its current liabilities (that is, its debts due within one-year of the date of the balance sheet) from its current assets.

Working Capital = Current Assets – Current Liabilities

Cheap But Great Stocks: Are They In Todays Stock Market?

The combination of those words: cheap and good, may make the average stock investor’s mouth water.  After all, this describes the place to go to start seeing returns on your investment.  The problem with cheap stocks is that they are often not good stocks.  These stocks have very low prices because, in most cases, the companies are facing problems such as a shrinking market share, slow earnings or they may be seeing problems with growth.  If you purchase a penny stock with these traits, you risk losing money.

On the other hand, if you are an investor such as Warren Buffett, then you also know that there are some key investments to be made when buying cheap stocks.  Mr. Buffett is a prime example of a person that has made a fortune for himself buying cheap stocks.  The key question for you to be asking right now is how to make the right decisions on these stocks.  Where should you be going with your investments?

First, be sure you are buying into a business, not just purchasing stock.  You should understand the business and be able to have faith in it.  What are the challenges that this company faces into the future and is there room for it to grow?  You definitely need to do your homework, but making these investments could be one of the best routes to take.

Another avenue that you can work on is purchasing growth stocks from companies with a record of accomplishment.  You may not have realized it, but many of the most established companies do go through periods of difficulties, and getting in at a down level most certainly brings you to the top again.  Look for companies that have a long history of providing a good return on investment and a free cash flow growth rate. 

Also, look for a company that has strength it in and some level of protection.  A good brand name for example is something that is going to be around for some time.  Does the company has a trademark or patent that is in demand that they will hold for some time?  These are protections the company has, which can push it into the future. 

These stocks are often good stocks, but you will have to monitor them to find good entry points.  Get to know those stocks that offer a cheap way in and find out what about them you can get behind.