Ordinary shares as the tool of investment

Posted on July 4th, 2008 by admin, under Basic concepts of investing, Investing basics.

Ordinary shares attract investors for different reasons: it is an opportunity to earn much, if the rate will “fly up”, for owners of large packages of dividends can provide a permanent source of income. Considering variety of shares traded on the stock market (more than securities 20000 in U.S.) – it could be argued that whatever is investor’s objective, he could always pick up the paper, suitable for his investment strategy.

The basis of attractiveness of shares is that their owner is entitled to participate in the profits of the company. Naturally, in case of rapid growth of company income rate of its shares also grows - the history of the stock market knows many examples when the stock price increases in the tens and hundreds of times by year or two. Bad aspect is that the investor is not only not guaranteed any level of profitability, but simply keeping enclosed means in safety. Stock market knows a lot of stories strongest market falls and bankruptcies of largest companies such as the crisis of 1987 and 1999-2000 (USA), the Russian stock market collapse in May of 2006; Enron collapse and bankruptcy of YUKOS.

Stock indices - Dow Jones (S&P500,NASDAQ) have stable growing momentum in the long scale.

Difficulty, therefore, lies in correct selection of shares for inclusion in a portfolio of the investor.

No Comments




Why are investments in Forex better than investments in mutual funds? Comparing Forex and mutual funds investments.

Posted on June 27th, 2008 by admin, under Mutual funds.

What your share in profit on use of your money?
Bank deposit You get only interest rate that was agreed in advance
with bank. The bank leaves all other earned profit to itself.
Opened mutual fund Every day you know the pureexpense of your
shares and accumulated profits. You can always take
away all the profits.
Forex active management / Forex 50 % from profit received on yours to the account
What is the average profitableness on investments?
Bank deposit 9-13% per annum
Opened mutual fund 30-50% per annum
Forex active management / Forex 100-300% per annum
What are the investment risks of loss of invested
funds?
Bank deposit Low
Opened mutual fund Average
Forex active management / Forex High
How do investors receive the income?
Bank deposit Payment of income at the end of term of the deposit. Bank
receives revenue by lending its customers and other ways.
Opened mutual fund Possession of fund does not provide reception of regular
payments in the form of percent or dividends to its owner. The income of the
shareholder consists of the difference between the price of redemption and price
of the acquisition of shares. The investor may receive income from their
investments only in the case of a sale of its own shares, provided that the
value of shares during the period of possession of them has grown up.
Forex active management / Forex The monthly distribution of profit received at management
of your trading account.
How strongly expenses of the managing director reduce
profit on use of your money?
Bank deposit You do not know this. Expenses of the bank are opaque to
you.
Opened mutual fund You know the maximum possible expenses in advance - it is
specified in Rules of fund and is controlled by the state. Charges of the
investor are in average 3,5 % from the invested sum of year plus on the
average 1 % from the deposit at entering or removal of money resources.
Forex active management / Forex The company has its own expenses to manage your account.
How do your money invested?
Bank deposit You do not know this. According to the law, the bank is
not accountable to you. You can not evaluate how risky the bank plays with your
money.
Opened mutual fund The structure of the fund’s actives is tightly regulated
by law. You always know, where and with what efficiency your money are
invested.
Forex active management / Forex Money are invested in purchase-sale of currency. All
transactions are reflected on your trading account. In online mode you have
access to your account and can control the actions of a manager.
What will happen if you
want to return your money urgently?
Bank deposit Bank will leave to itself all the accumulated percents on
the deposit under early withdrawal of funds. At best, you will receive the
minimum bid, as demand for deposits.
Opened mutual fund You can sell the unit and away
themoney at any time. You do
not lose accumulated income. (Only for opened funds).
Forex active management / Forex You can always pick up take away all of money or part of
the money from your trading account.
What unforeseen expenses may arise?
Bank deposit The bank may unilaterally on their own install an
additional commission, if you want to take away the money ahead of schedule.
Opened mutual fund The fund is not fine its shareholders. You know in
advance all expenses. The fund may increase or decrease them, only changing
the rules of fund, which preliminary are a subject to the state registration.
Forex active management / Forex In case of early termination of the contract profit shares
according to the contract signed between the investor and the company,
additional penalty at a rate of 1% of the amount in the management, is paid by
the initiator of break, at current losses at the time of terminating the
contract loss falls on the initiator of terminating the contract.
And if bankruptcy?
Bank deposit Bank may fail. You can lose all your money. If the bank
is a member of deposit insurance, then you can count on the compensation at a
rate up to sum defined in the law.
Opened mutual fund Fund can not fail. Every day you know the expense of active
pure actives of the fund.
Forex active management / Forex The broker may fail, but each account is insured for 100
thousand U.S. dollars.
And how do your maximal losses depend on you?
Bank deposit In the case of bankruptcy of the bank you can lose all
the money. You can not know the likely size of probable losses in advance.
Opened mutual fund Every day you know value of shares. If the value of the
Fund’s actives decreases, you can at any time sell their units and limit your
losses.
Forex active management / Forex The company guarantees preservation of 75% of the
deposit. Because trade is conducted only 10% of deposit.
Whether your money can be stolen?
Bank deposit It can be, but it is a criminal offence and such cases
are rare.
Opened mutual fund It cannot be. The Fund’s actives are kept in a
specialized depository.
Forex active management / Forex It cannot be. Any withdrawal of input / output from your
account to the account of third parties is forbidden by the law.
What taxes the investor pays?
Bank deposit If the rate on deposit is less than 13% of income derived
from the deposit is not subject to income tax.
Opened mutual fund The tax is kept from the value of income received by
shareholders. In turn, the income is formed only in case of repayment of
shareholders shares. Thus, when shareholders continues to own shares and does
not sell them, the income and taxes does not arise.

At payment of shares, if the shareholders is a private
person, the management company, as the tax agent, keeps him from income tax
at a rate of 13% of the value of income.

In case when shareholder is the legal person, the profit
tax is paid by them independently.
Forex active management / Forex Since all operations are conducted in the international
market, the investor independently calculates and pays the tax in the country
in which he is resident.
How profitableness of investments is guaranteed?
Bank deposit The bank itself takes the obligation to pay income after
term of expiry of the deposit.
Opened mutual fund According to the legislation Management Company can not
guarantee profitableness of an investment in mutual funds. Typically
shareholders makes a decision on purchase of shares based on information
about the profitability of mutual fund for prior periods. The operating
companies are interested in achieving the best results of management of money
of investors as comparison of results of various funds allows to draw a
conclusion on a level of their professionalism.

Nevertheless, with investments shareholders should bear
in mind that the share price could rise as well as shrink; investment results
in the past are not indicative of the future; State do not guarantees profitableness
of investments into investment funds.
Forex active management / Forex Profitableness of investments is not guaranteed. But the
company sends all the efforts and previous experience to receive guaranteed
minimum annual yield of 100.

No Comments




Mutual funds

Posted on June 23rd, 2008 by admin, under Mutual funds.

Mutual fund - a combined investment funds transferred to trust management company. Mutual fund itself is not a legal entity, it is so-called “property complex”, and indeed, is investment portfolio.

Investing money in mutual funds, investor actually enters into a contract with the management company and trust management becomes the owner of investment shares. Management Company extradites shares, making this trust management of mutual funds.

The assets transferred into mutual funds by shareholders, remains the property of shareholders and management company is implementing trust management of mutual funds, making transactions with that property.

The Management Company is entitled to transfer their rights and responsibilities for managing mutual funds to another management company.

No Comments




Sequence of investment actions

Posted on June 21st, 2008 by admin, under Sequence of investments.

When investing serious amounts of money it makes sense to work out a plan of investing. We need to define the aims of investing – terms and sizes of investments, what risk is acceptable in the process of investing, expected profits. Then you can try to pick up suitable instruments for investing.

It is necessary to estimate financial instruments in terms correlation of profitability and risk - we can do this only after detailed consideration of types of instruments.

In order to reduce the risk of any adverse events associated with specific financial instrument (bankruptcy of company, defolt of the state etc.) we must strive to diversify investments – aim to invest in different markets, different industries, different companies. These attachments will make the “diversified portfolio”. Once your portfolio is formed, it is necessary to “manage the portfolio”. This means withdraw from portfolio investments that didn’t show planned profit, or instruments that didn’t meet expectations, with the acquisition of potentially profitable instruments instead.

No Comments




Sructure of investment process

Posted on June 20th, 2008 by admin, under Structure of investment process.

Investment process is a mechanism of bringing together of investors (having temporally free funds) and sellers of financial instruments (actions, bonds) – having needs for money.

Financial markets is a mechanism, taking together “sellers” and “buyers” by means of mediators (exchange stocks). There are a several types of financial markets - stock market, bonds, market of futures and options.

Investors participate in financial operations on markets both directly and through “financial institutes” – banks, insurance and pension companies (funds), investment funds.

The most important participant in financial markets is, as a rule, state - as a seller of government bonds, as investor (placing temporarily free funds) and as a regulatory organ.

Companies typically act as nets-borrowers. Private individuals supply considerable part of free funds to the market in order to get profit.

No Comments




Basic concepts of investing

Posted on June 19th, 2008 by admin, under Basic concepts of investing.

Investments - is any tool, in which can put the money, hoping to keep or to multiply their value and (or) to ensure a positive value of income. In the broadest sense investment is mechanism necessary for financing the economy growth.

Free money can not be considered an investment because the value of money will gradually be absorbed by inflation, and thus there will be no income. Bank deposit is considered an investment because it guarantees a certain income.

Securities or ” stock values” are investment instruments, confirmative a debt obligation (bond) or right to participate in the income of company (action).

Investing in “real assets” are investing in acre, real estate, in own business. A direct investment is buying of securities directly by an investor. Indirect investments are investments through collective funds.

The risk level is the most important characteristic of investments. In the area of finances risk means possibility of adverse end of investing. This is possibility of not to receive supposed profit or to receive loss. As a rule, higher risks are peculiar to high-yield instruments of investing, and vice versa – low risks usually means low profitability.

Investments are divided into “short-term” and “long-term”. Short-term investments are usually up to a year, and long-term ones – more than a year. We are entitled to expect a higher profits on average in the case of long-term investments.

 

No Comments




Investing basics

Posted on June 18th, 2008 by admin, under Investing basics.

In this section we will view investing to financial instruments – deposits, promissory instruments (actions, bonds), and so-called derivative instruments (futures and options – commodity, index etc.)

This section is intended for those who are going to invest in the amount of 10000 dollars and more and more concerned with reducing risk than ultra-high returns. In so doing, many of you do not have a serious investment experience and do not understand all the “pitfalls” of the process.In our time Internet gives the real opportunity for anyone, not even being a professional, multiply their funds by investing them in world financial markets In this section we will view investing to financial instruments – deposits, promissory instruments (actions, bonds), and so-called derivative instruments (futures and options – commodity, index etc.)

This section is intended for those who are going to invest in the amount of 10000 dollars and more and more concerned with reducing risk than ultra-high returns. In so doing, many of you do not have a serious investment experience and do not understand all the “pitfalls” of the process.

In our time Internet gives the real opportunity for anyone, not even even being a professional, multiply their funds by investing them in world financial markets.

No Comments