Coal is the most important fossil fuel in India and accounts for approximately 55% of India's energy needs. Coal has contributed significantly to India's industrial heritage ever since the introduction of steam locomotives in 1853, and continues to do so, due to India's ever increasing energy consumption and needs. Through a sustained programme of investment and greater thrust on application of modern technologies, it has been possible to raise the production of coal from about 70 million tonnes at the time of nationalisation in the early 1970's to about 478.18 million tonnes in 2007. It is envisaged that India's current coal production of over 450 million tonnes would go over 600 million tonnes by 2012, requiring an investment outlay of upto approximately $15 billion.
Legislative History
Coal mining was brought under the public sector between 1971- 1973 with the passing of the Coal Mines (Nationalisation) Act, 1973. Nationalisation was done in 2 phases; the first with coking coal mines (by The Coking Coal Mines (Nationalisation) Act, 1972, under which coking coal mines and coke oven plants other than those with the Tata Iron & Steel Company Limited and Indian Iron & Steel Company Limited, were nationalised in May, 1972) and then with non-coking coal mines in 1973, with the enactment of the Coal Mines (Nationalisation) Act, 1973 (hereafter the "1973 Act"), which continues to be the Central legislation determining the eligibility of coal mining in India. The 1973 Act categorically states that "no person, other than the central government or a government company or a corporation owned, managed or controlled by the Central Government shall carry on coal mining operation in India, in any form."
India's Coal Reserves
As a result of exploration carried out up to the depth of 1,200m, as on April 1 2009, India has estimated hard coal reserves of around 267.21 billion tonnes - one of the richest in the world, of which 105.82 billion tonnes are proven.
Nodal Authority
The Ministry of Coal has the overall responsibility of determining policies and strategies in respect of exploration and development of coal and lignite reserves and sanctioning of important projects. These key functions are exercised through its public sector undertakings, namely, Coal India Limited ("CIL") and Neyveli Lignite Corporation Limited ("NLC") and Singareni Collieries Company Limited ("SSCL").
Coal India Limited
The Coal Mines Authority Ltd. ("CMAL") was set up in 1973 to operate the nationalised non-coking coal mines. In September 1975, the nationalised coal industry was restructured with the establishment of CIL. CIL now has eight subsidiary companies. At present, with its monopolistic position, CIL accounts for 85% of coal production, followed by SCCL (8.5%), and captive producers (6.5%).
Private Sector Investment
The 1973 Act was amended in 1976 terminating all mining leases on coal held by private lessees to allow (a) captive mining by private companies engaged in the production of iron and steel, and (b) sub-leasing to private parties of isolated small pockets not amenable to economic development and not requiring rail transport.
In 1993, the 1973 Act was further amended to allow captive coal mining in the private sector for power generation, washing of coal obtained from a mine and such other end uses as notified by the Central Government from time to time. Coal gasification and coal liquefaction have also been notified as specified end uses.
In March 1996, the Central Government allowed captive mining of coal for production of cement. The restriction of captive mining does not apply to state-owned coal mineral development undertakings. Commercial coal sales can legally only be undertaken by and through public sector coal companies (and their subsidiaries) and coal produced from captive mines by the private sector cannot be sold on the open market.
In February 1997, the cabinet approved a proposal to amend the 1973 Act to allow non-captive coal mining, which met with stiff opposition from trade unions, who expressed concerns that pre-nationalization ills like unscientific mining practices, environmental degradation and labour exploitation, would re-occur. Due to this, it took at least three years for the Bill to be re-formulated after taking care of the concerns of the trade unions, and it was introduced in Parliament in 2000. The Bill is, however, yet to be passed.
Foreign Direct Investment
Currently, foreign direct investment has been allowed upto 100% under the automatic route as follows:
- Coal and lignite mining for captive consumption by power projects, iron, steel and cement units and other eligible activities permitted under and subject to provisions of the 1973 Act;
- Setting up coal processing plantslike washeries subject to thecondition that the Indian company will notundertake coal mining and will not sellwashed coal or sized coal from itscoal processing plants in the openmarket. In addition, the Indian company will supply the washedor sized coal to those entities who aresupplying raw coal to coal processing plants for washing or sizing.
Allocation of Coal Blocks
Under the existing provisions of the 1973 Act, coal blocks for captive mining are allocated to public/private companies engaged inmanufacture of iron and steel, generation of power, coal washery and production of cement. Allocationof captive mining blocks is decided by an inter ministerial and inter governmental body known as the Screening Committee, headed by the Secretary,Ministry of Coal. Though there are detailed guidelines for the allocation of coal blocks (as well as for blocks for underground coal gasification mines), it is now proposed to introduce an auction based system through competitive bidding as a selection process for allocation of coal blocks for mining for captive consumption.
As on December 31, 2009, the Ministry of Coal has effectively allocated 208 coal blocks, of which 84 coal blocks have been allocated to the power sector. So far production has commenced in only 25 blocks.
Under the captive dispensation framework, a company engaged in specific end use, viz. power, cement, washery, steel, etc. can apply for allocation of a captive coal block. Further, acompany(ies) engaged in any of the approved end-uses can mine coal from a captive block through an associated coal company formed with the sole objective of mining coal and supplying the coal on exclusive basis from the captive coal block to the end-user company(ies), provided the end-user company(ies) has at least 26% equity ownership in the associated coal company at all times. In addition, there can be a holding company with two subsidiaries, i.e., (i) a company engaged in any of the approved end-uses, and (ii) an associated coal company formed with the sole objective of mining coal and supplying the coal on exclusive basis from the captive coal block to the end-user company, provided the holding company has at least 26% equity ownership in both the end-user company and the associated coal company. Thus, in view of the permitted ownership structures, investors may consider several collaborative options and strategies within the guidelines.
General Conditions of Allocation
Coal blocks are generally awarded subject to compliance with several conditions including that:
- the allocation is made to meet the coal requirement of the permitted end use project, and is meant for captive use in the allocate company's own specified end use projects or that of associates/end use company(ies) in case of a mining company.
- coal production from the captive blocks is required to commence within 36 months (42 months in case the area falls under forest land) of the date of allocation in opencast mine and in 48 months (54 months in case the area falls under forest land) from the date of allocation in underground mine.
- in respect of fully explored blocks, the allocatee company will need to buy the geological report from the Central Mine Planning & Design Institute Limited within 6 weeks of the date of allocation.In respect of an unexplored block, the allocattee company will need to apply for a prospecting license within 3 months of the date of issue of allotment. Exploration would need to be completed and geological report prepared within 2 years from the date of issue of prospecting license.
- in respect of explored blocks, the allocatee company would need to submit a mining plan for approval within six months.In respect of unexplored blocks, the mining plan should be submitted for approval within two years and six months from the date of issue of the letter of allocation.
- The allocate company would also have to make its own arrangement for transportation of coal mined.
In addition to the above, the allocate company would need to approach the Central Government/concerned State Government for necessary permissions/clearances, etc., for attaining mining rights and related matters (for example, environmental clearance, forest clearance, land acquisition, etc.), a process that could take between 2 to 5 years. While building a coal mine and the accompanying infrastructure is indeed a time-consuming process, it should however be borne in mind that normative timelines for commissioning of coal blocks are far higher in India compared to international benchmarks as approvals are required at multiple stages from various agencies. The Government is considering a slew of measures and reforms to combat this, with the objective of giving faster approval to coal projects (including providing alternative coal blocks to projects that do not get environmental clearance).
It is to be noted that the Central Government periodically monitors and reviews the development of allocated blocks as well as end use plants by coal companies. Wherever delays are noticed, show cause notices for de-allocation or advisories are issued to the coal companies cautioning them to bring the coal blocks into production as per the guidelines and milestones chart. Allocation/mining lease of the coal block may be cancelled, inter-alia, if it is determined that progress of coal mining project or implementation of specified end uses is unsatisfactory, or breach of any conditions of allocation.
Mining lease
The allocatee company will be required to obtain a coal mining lease from the concerned State Governments under the Mines and Minerals (Regulation & Development) Act, 1957. State Governments can grant coal mining leases only with the previous approval of the Central Government. Before the approval of the Central Government is accorded, the allocatee mining company is required to get its mining plan for the proposed coal mining area approved from the Central Government. Coal mining leases are now granted for 20-30 years initially and can be renewed for a further period of 20 years with the previous approval of the Central Government. Coal mining leases are ordinarily subject to a ceiling of 10 sq. kms. of area.
Conclusion
India has large reserves of coal suitable for thermal power generation and metal manufacturing. Several ultra mega power plants are planned over the next five years, which could utilise over 40 MMT per annum of coal. The coal sector is expected to grow rapidly, driven by the increasing gap between power supply and demand due to rapid economic growth. There is also a need for investments in improved technology, higher production and better productivity at existing mines, as also the need to explore and develop new coal mines. Considering the limited reserve potential of other fossil fuel energy sources and the fact that development of renewable energy sources are still a distant goal, coal continues to be vital to India's energy needs. The Planning Commission of India recently stated that coal will remain the most viable fuel for driving sustained economic growth over the next 25 years - a fact strongly reinforced by the hugely successful recent public offering of CIL, the biggest IPO in India till date.
This Article does not, and should not be construed, to constitute legal advice. It is not a substitute for legal advice from qualified counsel.
The savings bond value calculator is an important tool for taking monetary and fiscal decisions for anybody. It helps us to find the value of various government bonds. A clear indication of what we are expected to gain from these bonds now, and even later. These bonds include the I series, the EE series and the HH series. The parameters that we need to feed into the savings bond value calculator include the year of issue and the month of issue. The series and denomination are also required. The bond serial number, coupon rate, discount rate and months until maturity may be required too. Without this important tool, we may be depriving ourselves of our rightful profit, even without having the inkling about it; we may be redeeming our bonds too soon, simply because we are relying on guesswork and hunches, and hence we will not be getting the predicted gain. Online savings bond value calculators are not hard to find.
TreasuryDirect is from the U.S. Treasury and hence reliable. It is also free for all. We need to enter the particulars as printed on the bond and it will calculate the present value of our bonds. The future value of each kind of bond is also easily found out. We simply need to enter a future date in the appropriate field and the future worth is automatically calculated. This method is a sound one because we get a clear idea of what our bonds are priced at before we go to the bank to redeem the same. Not going by this idea may result in a financial debacle for us. The YTD or Year To Date feature is also a handy tool at TreasuryDirect. There are non-government sites too, which provide the same service. However, they can charge money for these services, though there are some websites which provide it without any remuneration.
The results from the savings bond value calculator takes out the guesswork from interpreting the true value of our bonds, and it also provides a authentic and honest information and reliable prediction. To any investor, this tool is considered to be a priceless asset. This method is also less cumbersome or tedious than getting the bond brokers involved in the process. It is also very quick as all we need is an internet connection and the click of a mouse. Any confusion regarding the process details can easily be resolved by the concerned website immediately in the Help section.
Financial spread betting is a way of trading in which you deal with financial instruments without holding them directly. It is in a way, a leveraged investment which allows spread bettors to take a stance on the prices offered by the provider and predict the movements in the coming time. You can take long and short positions on in a wide variety of financial markets including stock, commodities, fixed income products and currencies.
Indices
Unlike in stock trading where traders buy or sell stock of individual companies is usually done on indices more often compared to individual shares. Indices of markers are amongst the most traded instruments in financial and are also supposedly the best option for new traders looking to get a hang.
Currencies
Spread betting is also done on currency fluctuations. Individual spread bettors specialise in currency pairs and in foreign exchange markets. The risk is slightly higher because magnifies winnings and losses and forex markets by nature are far more volatile because of the wide variety of factors that can influence currencies.
Bonds and interest rates
Fixed income products like bonds along with various types of interest rates are also used in spread betting. However, these are more for the seasoned bettors and the novice traders usually don't enter these markets.
Commodities
Spread betting initially started with bettors trading in gold. Now a wide range of other commodities, oil etc. also offer great opportunities for the bettors to try their luck out.
Spread betting as a tool
A lot of spread bettors use like a tool especially when they have a share portfolio. So the risks taken through involves hedging the existing share prices. If the share values are decreasing then you could bet against the share prices and make up for the loss.
Comparing spread betting strategies
Often the strategy that works for one spread bettor doesn't work for another. So you will have to choose the right strategy that suits your style. For example, some spread bettors are risk averse and hence go for scalping which involves making small Financial Spread Betting and quick gains all through the day instead of high risk positions over weeks where funding itself could become very expensive.
Other spread bettors follow strategies such as following market trends or reversals wherein they are waiting for a particular event or indicator and take a quick position before the rest of the investors move in thereby leading the position and making a profit before the price adjustments take place.
Some spread bettors go for break out strategies where they are looking for indicators for a bullish or bearish market. This is when the prices are over their upper limits or below their lower limits over successive days. Spread bettors use this strategy along with stop loss to ensure that they don't lose when the prices go above or below a certain limit against their predictions. Therefore, spread bettors have to compare and choose their markets as well as their strategies.
For more tips and compare spread betting of various spread betting providers and markets, you can visit spreadcompare.co.uk
What is the first picture that comes to mind when you think of an island? You might be thinking about a very small patch of white sand surrounded by the ocean. If you're lucky, there might be a few palm trees to provide shade to whatever poor stranded sailors or passengers who might have found their way there in search of rescue. A few coconuts would be the highest items of value on the entire island.
Now with that picture in mind, you would think that I was crazy to ask you to invest your hard earned capital into an island. You might think me even more nuts if I told you of how popular offshore companies on islands have become. But it's true. Let's take for example the island Mauritius.
The island of Mauritius has attracted more than a billion dollars in foreign investment in the banking sector and more than nine thousand foreign entities. But how can that be? Are they growing golden coconuts that the rest of us do not know about? Do they have an ancient buried treasure that had been hidden for centuries and recently was discovered? The answer to that question is both yes and no.
The treasure that can be found in this island that has attracted so many investors and millions of dollars of investment is quite simply: Tax - or rather the lack thereof. Of course the fact that the island has its own flourishing economy (more than a few coconuts: sugar production, tourism, clothing manufacturing, information technology) and that it has a stable government are also major drawing cards, but the biggest attraction that makes this island so irresistible to foreign investors is the extremely low and sometimes non-existent tax that is issued to foreign investment on the island.
So the next time somebody asks you to invest in an island, don't ask them if they're crazy; ask them if the island is Mauritius.
For more information on Investing in Mauritius visit Dale Trust International
When considering shares to purchase, a company that generates below average earnings, has poor cashflow or a weak balance sheet may be one for you to look at especially carefully before purchasing. Whilst there are other characteristics of weakness to look for, these offer clues that unpleasant issues may be about to surface.
One things that companies must always keep to the fore is to communicate, communicate, communicate, even if over and above the regulatory requirements - especially in troubled times.
1. Earnings Guidance - it is not uncommon for companies to lower their earnings guidance previously issued. Reasons may be related to the economy generally, or to a specific company related issue. However, if the company does not meet the revised earnings rate the effect can be one of negativity in the marketplace and well as with employees and shareholders and a downward spiral quickens. Stock analysts may then scale back their recommendations and reduce earnings estimations further - all of which may have a subsequent further negative on the share price.
2. Executives Selling - neither is It uncommon for executives of publicly listed companies to sell shares they hold in their company. There are often very legitimate reasons for executives to download their share holding - they may be purchasing a new home or need money for some family reason, or to just earn some profits or diversify their holdings (such as the recent down selling of Telstra shares by the Future Fund).
There are, however, times when some selling activity can and should raise eyebrows, such as when more than one executive is looking to off load parts of their holdings, or when an individual sells a large proportion of their holdings, or when executives sell at or neat the 52 week low. Whilst executives might comment that they have other need for funds, the action does tend to raise alarms in the investment community- both in terms of management practices within the company as well as the personal expertise of the executive.
3. Stopping Quarterly or Annual Financial Forecasts - Whilst it is not always easy to provide the investment community with quarterly or annual financial forecasts as corporations are large entities and the business environment can change rapidly over time, with revenue changes both up and down. However, companies should still endeavour to provide some operational guidance to ensure confidence remains in the business and investment community.
A signal that there may be trouble brewing is when a company abruptly stops issuing forecasts. Silence in this case is not golden as it can raise concerns as to what is happening, Not having some future earnings guidance can give the impression of actually trying to hide information, so investors and analysts become wary, when in fact there may or may not be a reasonable explanation.
4. Suspending Dividend - For income-seeking investors, companies paying dividends are always tempting, and in fact necessary. That a company is paying a dividend (especially fully franked) is often viewed as a sign that the company is doing well. So if a dividend-paying company suddenly suspends dividends it may be a signal that the company is experiencing some financial difficulty. Also, the company may see a significant sell off of its shares as those income-seeking investors off load their shares. Additionally a dividend suspension may herald serious job cuts, production reduction, asset sales and plant closures. A reduction in the dividend, or the franking amount are reasons to investigate company operations and ask appropriate questions.
5. Termination of Buy Back - If a company has been buying back shares and suddenly stops, it may be a signal that the company is short of cash, or the shares are not as good an investment at the time, and that investors are eager to offload without any brokerage fees. None of these scenarios would be especially attractive to new investors.
6. Lack of Diversification and Innovation - Successful companies need to achieve growth over time and it is important for a company to consider new products and to encourage innovation, especially in a fast-moving business environment where new products may take a long time to introduce. Companies that do not embrace innovation run the risk of becoming irrelevant, especially if new technology or an improved and superior product hits the marketplace. Whilst there are exceptions to the rule be wary of companies not considering building on their business through diversification with new or improved offerings.
7. Industry Trends - Companies operating in the same industry may experience similar trends. Investors should be on the lookout for signals of how a company may be doing compared with others in the same industry, if one is declining others may also, or if one is declining and others are doing well. Look at various industry trends as this could also signal economic trends on a larger scale.
8. The Bottom Line - In addition to the traditional valuations and measures there are several indicators that may signal trouble to come for a company. It is necessary for an investor to do research to avoid making incorrect decisions leading to losses in income or capital.
By using an investment advisor who does the research for you and then makes recommendations specifically for your needs, you are limiting your risk factors.
Let Andrew Frith of The Self-Managed Super Specialists assist you in meeting your financial goals.
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One of the leading providers of financial advice for both business and personal solutions across NSW and QLD. Leenane Templeton Chartered Accountants and Business Advisors are specialists in Accounting and Taxation Compliance, Business Services Consulting, Finance, Acquisition and Divestment Strategies, Cash Flow Management, Business Development, Business Advisory, Self Managed Super Annuation, Retirement Planning. With offices in Sydney, Brisbane and Newcastle. Call Leenane Templeton today to talk about your requirements.
Disclaimer: The information contained in this document is based on information believed to be accurate and reliable at the time of publication. Any illustrations of past performance do not imply similar performance in the future. This information is of a general nature only. It is not intended as personal advice or as an investment recommendation, and does not take into account the particular investment objectives, financial situation and needs of a particular investor. Before making an investment decision you should see your financial adviser to assess whether the advice is appropriate to your individual investment objectives, financial situation and particular needs.
Financial market investors have the possibility of trading a wide array of instruments. They can trade stocks and bonds, options, futures and so on. In the case of derivative securities, there is also an underlying asset, from which the derivative derives its value. For instance, options are sold (written) against stocks, namely one option is sold for around 100 shares. Being securities, options themselves can be traded (bought and sold) and have value.
When trading in an option exchange market, an investor will be able to operate with two values: the value of the option (aka its premium) and the value of its underlying asset (usually stock). Therefore, the investor can make (or loose) money from the algebraic sum of these two values. If he wins more on stock appreciation (called upside potential) than he looses on selling the options, overall he made progress and garnered some profit. The same goes for the other way around, in the situation when he makes more from the time premium than he looses from the stock depreciation.
As a rule of thumb, the most safety lies in selling in-the-money options (betting on the fact that the stock value will exceed the strike price). But an investor can sell an out-of-the-money covered call, betting on the fact that stock will appreciate just a little, without reaching the threshold which is necessary for the option to be exercised. If that happens, the seller will gain both from the option premium as well as from stock appreciation.
The upside potential of an investment can involve a good deal of stock appreciation. You may end up earning more from this buy the time premium may be a greater factor. The Born to Sell website will help you to understand more about how this can work and how all of these functions will be taken care of in these investments.
Where should you put your investment money? What should you trade? These are the big daunting questions. With more than 28,000 symbols in the markets how do you pick?
My first rule is don't take "tips".
My second rule is don't buy just because someone else says to.
Now with those rules out of the way let's discuss your options. You have three basic choices from which you can choose or you can even mix all three.
The markets contain:
Stocks, which everybody has heard of, whether it be large companies like International Business Machines (known as IBM) and Ford (F), or small companies like Datalink (DTLK).
Mutual Funds which are groups of stocks, like Fidelity select Automotive (FSAVX) or Vanguard Dividend Growth (VDIGX).
ETFs which are similar to mutual funds except that the groups are not 'managed' and trade like stocks, for example: iShares Brazil (EWZ).
These are the primary types of stock market investments you may make. There are pluses and minus for each of these three basic investment types.
? Stocks - you can trade at any time, they may or may not pay dividends (which is like earning interest on your investment since the company is giving shareholders a share of its profits); but they can be more susceptible to either upward price jumps or downfalls.
? Mutual Funds - consist of many individual stocks and involve a manager who buys and sell the stocks making up the fund's portfolio so that the funds value is more of a composite average of all the individual stocks which helps to reduce or average sudden changes in individual stock prices, which also reduces the chance of a major sudden loss and a major profit gain.
? ETFs - the abbreviation for Exchange Traded funds, are kind of a composite of stocks like mutual funds but they trade like stocks. Thus an ETF represents a portfolio of stocks as if it were a mutual fund; but it isn't a mutual fund because the individual stocks are not 'managed' and sold or bought frequently like they are in a mutual fund.
ETFs are a relatively new product and have only become popular in recent years with many mutual fund investors switching to ETFS because of their ease of trading.
Your personal investment portfolio can contain any of these three basic investment types or a mix of all to give you a diversification of your portfolio. Diversification is extremely important and means something different to almost everyone. We will discuss diversification in another article.
Author Raymond Dominick has been investing in the markets since his teenage years. He is the designer of Dynamic Investor Pro investment software. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana. View his software at: http://www.dynamicinvestorpro.com
Forex Brokers help a forex trader to access foreign exchange markets and do the trading against the traders around the world. Different forex brokers offer different types of service to the traders. If someone wants to be successful in forex market, it is essential to understand forex brokers? way of functioning and how can they be helpful to the traders. There are numerous forex broking firms helping the investors perform trading in the forex market and provide their services online as well as off-line. Their trading platforms, where the investors can see their investments growing, provide proven tools and techniques. They provide their services to all types of forex investors ? novice, semi-experienced, experienced and expert with different types of investment capabilities.
The forex brokers also provide the investors tutorials instruction manuals in many languages to the traders around the world. The languages in which they provide advice are English, French, Chinese, Italian, Arabic and Spanish. Their customer service executives address the queries efficiently and help the traders in understanding latest market trend and the techniques. The online registration in their website is easy and a trader with a minimum investment of $50 can also register to their service. The transaction starts with a minimum of $25.
Their trading process is very easy and provides instant results. Some renowned brokers provide innovative feature to their investors which allows them to bring many traders close and share the knowledge with each other. Their research tools and the online community serves the investors by providing them forums, chat sessions and different contests which keep the investors busy and enhance their knowledge base. The broking firms rely on the Information Technology for the daily activities they perform. Their market information comes from dedicated sources which they use while providing the trading tips and other information to their investors.
The investors of the Forex Brokers manage the growth of their investment and can trade from home or office. The review and forecasting systems allow the traders know the latest events in the forex market. The brokers do not imply any limitation on investment and trading money. The profit is not guaranteed always as there are risks and losses also in forex trading but by following their proven tricks and trading tools one can minimize the loss and make profits.
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Glenn Belisario is an independent forex trader who has been associated with providing the users with the information on various aspects of forex trading. With more than eight year?s currency trading experience, the author focuses on operating simple to follow trading strategies combined with tight money management. For More Information Please Visit, Forex Brokers.
Are automatic forex trading software, also known as "trading robots" worth their price or are they just money in the pocket for developers and foreign exchange institutions? Opinions vary among professional forex traders, but what about your needs? The concept behind automatic trading software is a trader's dream. Imagine if we found automatic forex trading software that worked in all market conditions. Whether at the beach, on a cruise, sleeping or even working (who would be at that point,) your trading account would be growing. This dream is what keeps trading software buyers chasing every hyped forex software product released. The question remains, are trading robots a fantasy living with unicorns, a secret product only the rich/money grabbing hedge funds can afford, or a reality that is reached for the financially average or even above average trader? The first step would be to define what qualities an automatic forex trading software product would include and analyze the reality of developing it.
Make me a software integrator for a time and here is what I would do. Find the best forex traders; individually explore their strategies, techniques and how they apply them in different volatile market conditions. Next hire a few quantum physics experts to convert each strategy into multiple algorithms. Then develop and apply systematic filtering mechanisms to differentiate market volatility periods. Finally, with the aid of all the experts, crunch the data into software code that matches the right algorithms to any market condition with quantum strength filters. Bingo! A true automatic forex trading software package that literally grows money in trading accounts while we rest next to the pool, clearing our head from the cruise's previous night's activities.
Heck yeah! That is the life traders dream of and may soon get. Is it possible? Will the next forex product be the one? Be real, there are two realities known to every successful forex or stock trader. Number one, there will never be a person or software filter that selects algorithm(s) that perfectly execute every trade, but 80-85% or better is reasonable and some pro's average that regularly. Number two, "News Trumps All," even pure technical analysis experts will admit that, maybe not publicly, but they get it. And unless you are an illegal insider in every major currency's financial center it's not possible to know the news. And if one were so blessed, he or she could not execute it instantly as a computer could. A good automatic trading product could, but is it out yet or will it be coming out in the future?
Many in the trading world admit it is not too far-reaching with today's technology to develop a good filter set that selects algorithms that calculate and react to market movements. Many believe and is almost factual that an algorithm exists for every market movement. This explains why a few trading software products excel in certain conditions while others fail in the exact market, and vice versa. The truly successful automatic trading robot has filters that select algorithms from its database to apply in that period's market condition. The dream robot automatically gets you in and out of good trades, out of a bad trades, cutting losses before news spreads as technical analysis does for many traders, but quicker.
Filtering which signals to follow is the tricky part for any human or software product. Quantum physics claim a solution is available for every problem. Has it solved the mystery of automatic trading software? A product is surely in the making and might be the next to hit the forex trading software market. Wonder if traders will see it when it arrives or are we all are so jaded with past products that we miss out? I for one will keep my eyes open. And while I am ordering up the perfect automatic forex trading software like a happy meal, please add in an advanced money management system and full functional controls that let me tweak it on occasion. Hmm, have I seen a product like this or am I still asleep? Meet me in the "webosphere" and we'll see what automatic forex trading software gets delivered.
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Learn more about forex robot trading software. Visit eforextradingreviews.net/ for forex trading reviews and tips.
Investing money in 2011 through 2012 may require that most people change their thinking about the best investment strategy. Traditional investing strategy for average folks suggests an asset allocation of over 50% to stock funds, about 40% to bond funds, and the rest to perhaps a precious metals (gold) fund for added diversification. In the world of investing money, times are changing; especially for bonds and gold.
In putting together your investment strategy one of the best ways to focus is to consider the flow of money between asset classes over the recent months and years. In the investing world money always goes someplace, and it tends to concentrates in different areas at different times. When money floods an asset class like bonds or gold, prices can rise dramatically. When it makes a grand exit prices can tumble. Extremes in price movements should grab your attention when investing money for 2011 and beyond, especially when you hear mention of the word "bubble".
In the months leading up to 2011, investors both large and small were investing money heavily in bonds and in precious metals like gold. This investment strategy was among the best as prices in both asset classes climbed to record or near record highs. Millions of everyday folks threw money at bond funds and some discovered gold funds. The question going forward: are prices at extremes, and is either investment a bubble waiting to deflate or burst? Let's look at bonds first.
Investors have flooded bond funds with an additional net inflow of hundreds of billions of dollars while pulling money out of stock funds in recent times. The bond funds have then taken this money and bought more bonds, in the process sending bond prices up to extremes. This has pushed bond yields (interest income as a percentage) to near-record lows. Looking back to 1981, the 10-year Treasury note (intermediate-term government bonds) hit a high yield of 14%. Today they're paying less than 3%, near historical lows. The problem: investing money in bonds and bond funds carries a significant risk today. When interest rates go UP, bond prices (values) will FALL. If there is a bubble here it will deflate as investors rush to pull money out of bonds.
The best investment strategy for 2011 in the bond department is to avoid long-term bonds and funds that invest in them because they will get hit the hardest when rates go up. Who wants to get stuck at a low fixed interest rate for 20 or so years when rates are going up? Go with shorter-term funds holding average bond maturities of 7 years or less. DON'T chase bond funds; consider cutting back your holdings. Investing too much money here has too much downside risk associated with it... unless you're willing to speculate that interest rates and our economy will stay depressed well beyond 2011.
Now let's get a perspective on gold prices that recently glittered at an all-time high of over $1400 an ounce. In 1999 gold sold for as little as $253. Investing money in 2011 and beyond in gold or gold funds at these prices is as much speculation as it is hedging against disaster. The best investment strategy here is to take some profits if you have them. If you missed the boat in gold, wait for the next one. The price of gold has been unstable at best since the yellow metal resumed trading in the U.S. in the mid-1970s. Don't view gold as the best growth investment. View it more as a speculative bubble with risk outweighing future profit potential. The price would have to go up $1400 an ounce in order to double your money at recent prices. This is not a likely scenario.
Now that you've cut back on bonds and precious metals, what's the best investment strategy for the rest of your money? Unless you're over the age of 80 and/or extremely risk adverse, you need stocks in your investment portfolio. There hasn't been a real bubble in the stock market since 1999 when the Dow peaked and closed the year at 11,497. In late 2010 that ever-popular stock market barometer was fighting just to get back to its 1999 highs... after the shock delivered to it by the financial crisis of 2008.
In 2011 and beyond investing money in stock (equity) funds should focus on both those that invest in domestic (U.S.) stocks, and in international funds that invest money abroad as well. You need all of the diversification you can get. Go with funds that invest money in large well established companies with a good record for paying dividends. These are less risky and volatile than growth funds that pay little if any dividends. Plus, good reliable income from either dividends or interest is hard to come by these days.
For the rest of your money you need good safe investments that pay interest. Here we face another of today's extremes: historically low interest rates at the bank and in the money markets. Even though you're looking at less than 1% a year in interest, you've got to go with the flow and continue investing money here because these are truly the best safe investments. The best investment strategy for mutual fund investors: money market funds. When rates go back up your money market fund yields will automatically follow and go up accordingly.
The best investment strategy for 2011 and beyond will be to diversify broadly, leaning toward a defensive posture. Investing money across all of the investment classes mentioned is still the key to long term success as an investor. Sometimes... like now... it's better to be more conservative when investing, and live to chase opportunity another day.
A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.
Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com.
Technical analysis will help you to illuminate your path when entering the world of trading and investment that looks so attractive although it is not as easy as imagined. Investors and traders like you need a set of tools that will help you to achieve success in trading. Technical analysis will be a spotlight which will light up your way of trading and it is very useful for you, for instance when you must take accurate trading decisions and it will maintain your objectivity. You just need to know and study it more deeply.
In general, technical analysis is a study of price movements in a market like stocks and forex market. This discipline studies the price movements that have occurred and predicts future prices that will occur in certain markets. The highest and lowest value of a commodity, the patterns of price movements and trends are several things you learn from this kind of market analysis. In short, this analysis method studies the past to predict the future. Do not misunderstand on the "technical" word, this does not mean you need to have a technical background as an engineer; anyone with any educational background can study and master it.
Technical analysis is a shortcut to study and analyze a market. Unlike fundamental analysis where you have to learn several things such as economics, politics, financial statements, trade balance and so on, with technical analysis you only need to study charts and technical indicators such as moving averages, chart patterns and so forth. The basic idea of this market analysis technique is that price discounts everything. It means price is the ultimate result of any factors in the market. Therefore, you do not have anything to focus on but the price.
Joseph de la Vega's of the Dutch markets in the 17th century was believed to be the oldest clue of technical analysis presence.In Asia, there was Munehisa Homma, a Japanese rice trader during early 18th century who developed candlestick charting techniques. Today Homma's work is widely used as a main charting tool. In early modern day, Charles Henry Dow, the founder of Dow Jones Industrial Average and a well-know theory called Dow Theory, also known as the person who utilizes this market analysis method. It is said that nowadays approximately 80% of traders all around the world are technicians. So why don't you be one of them? Remember that as a short cut in examining a market, technical analysis can help you to save your time and obtain more focus on the market.
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"A real decision is measured by the fact that you've taken a new action. If there's no action, you haven't truly decided." Tony Robbins.
Are YOU ready to fight for your future?
There are many benefits of financial spread betting or even margined trading as it is also often known as.
Given below are some of them:
a) To start with, this trading instrument is much easier to understand as compared to futures and options, CFDs and so on. Unless you understand a particular trading instrument clearly and how it can be used to your benefit, you would not enjoy trading with it. The simplicity of financial spread betting gives it a huge advantage over others.
b) None of us would like to pay tax if we can help it. When you make some profits, it will indeed hurt if some portion of it is deducted towards tax. Fortunately in the case of margined trading, any profit you make is fully tax free. That is because of the manner in which this trading instrument is perceived by the authorities. They perceive it to be a gambling instrument and thus do not charge any stamp duty or capital gains. There is no physical exchange of stocks. The only tax that is liable to be paid is the 3% tax that the company needs to pay and that is something it incorporates into its spread that is offered to the customer. Thus margined trading is beneficial to the trader as well as to the spread betting company offering the spread.
c) Since you pay no taxes or are not required to pay any tax on spread betting trades, you do not need to maintain any documents or records of trades that you would have to do otherwise with normal physical or futures trading to pay your taxes. That in itself is a great relief as organization of such records can be quite a cumbersome process.
d) The potential to earn high profits due to the leverage component is yet another benefit of spread betting. Though such an advantage also exists with futures or CFD trading, the fact that you get the benefit of leverage and not pay any tax or brokerage is a huge benefit that is unique to financial spread betting.
e) The advantage of being able to make phased exits if the movement of the market is not favorable to the position taken is another one that spread betting offers. Though you can do that in the physical market too, the brokerage fees on each transaction would invariably compel you to hold on to your position and you could end up with a loss should the market take a nose dive the next day.
Learn more about the many benefits of this derivative by reading the Financial Spread Betting Guide, also get other informative news and articles on topics such as TD Waterhouse brokerage.
In order to give the reader of this article the background on a scam and the steps and precautions that could have been taken to guard ones self against fraud I've created a case study using passed frauds as examples. One television show that showcases scams of all sorts is American Greed, which airs on CNBC. In this article I've included a synopsis of a scam profiled in an episode of American Greed and how the investors could have conducted due diligence on the opportunity being presented in order to raise red flags.
Year: 1994
Fraud Amount: 170 million
Number of people defrauded: 3,000
Perpetrators: Gilbert Allen Ziegler a.k.a. Van Brink
Scam:
When the country of Granada opened it doors to the offshore banking industry Gilbert Allen Ziegler saw his chance to perpetrate a gigantic scam. While opening his bank in the name of First International Bank of Grenada, in order to escape his shady past, he decided to change his own name too: Van Brink.
In the Grenada Offshore Bank application paperwork he claims that the bank will be capitalized by $26 billion including a four-pound sculpted ruby, which was valued at 20 million. He provided a picture of the ruby as proof of its existence.
Through the use glossy, well produced marketing materials. He pitched that an investment in his offshore bank would be placed in a CD and received up to a 250% return. In order to create an air of legitimacy Brink included the initials IDIC which stood for International Deposit Insurance Corporation, which were made to look similar to the United States' FDIC. Investors made the assumption that the IDIC was the International equivalent to the FDIC. Brink claimed that the IDIC not only insured the investor's principle, but also the interest as well.
Upon investing into the First International Bank of Grenada, investors would receive official looking documents written in flowery calligraphy stating the amounts invested. Investors be invited to Grenada to view the operations of the bank. Investors would be paraded through the mailroom in order to view all the bank correspondence and investment money coming in from around the world.
The scheme would then follow a pattern where investors would receive interest payments for four or five consecutive months. The payments would then stop with investors not receiving any more of the guaranteed promised returns or their principle.
Conclusion:
Grenadine bank officials shut down the bank in 2000, but it takes four years to get to the bottom of the scam. Unfortunately for those seeking justice, Van Brink dies of a heart attack in 2005 waiting for his trial.
Financial Pornography Due Diligence
Investors could have researched a few things on their own or even hired the professional expertise of a private investigator to verify information.
- Investigate the IDIC.
- Background checks on the principles of the bank and would have exposed Van Brink's former name.
- Subscribe to Offshore banking newsletters and industry watchdog reports such as http://www.offshorealert.com/offshore_alert.asp
Skepticism, good questioning, and not giving up until you have proof-positive answers to those questions will allow you to avoid being a victim of financial pornography.
Ryan Windley authored the ebook,
"Don't Let Financial Pornography Leave You Naked
Three Keys to Investigating Your Next Investment Opportunity"
It is Ryan's hope this book will allow anyone who has unknowingly been propositioned by a scam artist the ability to take a deep breath, read the book, and make a wise decision about the investment opportunity being presented.
You can learn these Three Keys by going to http://www.stopfinancialpornography.com
There are many ways to trade and generate huge money to run the business smoothly. Penny stocks are not preferred generally and every trader tries to avoid it. They are in fact one of the greatest ways to generate income. This type is suggested due to various strong reasons.
1. Greatness of dilly percentage gains: The daily percentages usually show a rising trend and the traders take as much advantage of this as they can. Daily percentages make the real profit and the business grows at an idea pace. The main thing behind the scene is to sell the products when the rates are running high to get the maximum profit of your products.
2. Immediate gains: The gains in the trading by this method are not risky and the profits flow to you very quickly.
In stock trading the results are achieved very rapidly and the situations change very quickly and you will get immediate profits during your high time. You can further manage these profits to generate more by investing in the stock again.
3. Start with a low capital: Stock trading doesn't have any huge restrictions related to the penny stocks. You can start your trade by making a small investment and you will start generating money soon.
There no need to invest again and again. This will give you much faster results.
4. Less research: You will not need any kind of big effort like keeping updated about the recent trend of the market and then trading. The stock market delivers the results in the minimal time saving much of your valuable time.
5. Stay at home and trade: There is no need to go anywhere for the latest updates of the stock trading. It is possible to keep the trade running and monitoring the activities real time at home. This is a great idea set a home business.
Are you running out of ideas on what to give as a gift? See the edible gift baskets and the romantic gift baskets for suggestions and gift ideas.
With the potential costs of a university education spiralling, house prices still being relatively high and the cost of weddings increasing, it has never been more important to begin a programme of savings for children and grandchildren.
Added to this the effective demise of the Child Trust Fund has left a gaping hole in effective provision.
In part 1 of this 2-part series, let's examine some of the tax-efficient opportunities that remain.
Facts and Analysis
The economic downturn has had an important indirect impact on the finances of the younger person, typically people in the age group 18 to 25. As mentioned above, the financial needs of this group of people embrace three main areas.
The Costs of Higher Education
Because of the economic downturn, it is likely that more and more students will be encouraged to stay in higher education and go on to university. But this decision will have considerable financial implications. For example, many who graduate from university will begin their working lives wondering how they will ever repay their debts to large bank overdrafts, credit and store-card debts and money owed to the Student Loans Company.
Also, if their parents are also suffering financially they are likely to be less able to help.
Moreover, this financial burden is likely to increase.
Last year, the then Labour government was reported as planning a cut in the budget for higher education with a possible increase in tuition fees above the current 3,290 cap. As we've seen with the recent Parliamentary debate and vote, tuition fees are set to rise to 6,000 - 9,000 pa.
Inevitably greater financial pressure will be placed on universities and students alike and it seems certain that the costs of funding a university education will rise in the future.
Assistance With House Purchase
Although interest rates are comparatively low, the impact of the credit crunch is that mortgages are more difficult to obtain. Lenders will typically now expect a bigger deposit and base lending on a lower multiple of annual income making it much more difficult for the first- time buyer.
Moreover, although house prices may have dropped recently, residential property is still relatively expensive for the first- time buyer. The combination of these factors can make it very difficult for a young person to take the first step on the property ladder.
Wedding Costs
The expectation arising from a wedding is now much greater with the parties looking for a bigger and better reception and honeymoon. Costs can easily exceed 10,000 which can be very difficult to pay without some advance planning.
Who pays?
So what can be done to help these youngsters? Where a parent has excess capital or income, he/she could make effective advance provision for a child. However, this is undoubtedly becoming increasingly difficult.
Given the recent economic climate more and more parents will be concerned to protect their own future financial position rather than give assistance to their children.
For those parents with insufficient income or capital and who may require help with funding the costs of a university education, it may be worth asking grandparents for assistance.
Frequently, grandparents will have capital available that they do not need and they may be prepared to invest on behalf of a grandchild who aspires to a university education or to get on the housing ladder.
This will particularly be the case if those grandparents have cash available, perhaps because they have benefited from the housing market by selling a private residence and downsizing and, in so doing, have realised cash that is now surplus to their anticipated future requirements.
Some may also be in receipt of a guaranteed pension from an occupational pension scheme.
So what can parents and grandparents do now to make children more financially secure in the future?
The answer here is to consider a programme of saving as soon as possible to provide those funds in a tax efficient way and in a structure which is acceptable to them.
Let's look at some of the options that are available.
The Child Trust Fund
This is one investment that is no longer available. It is being phased out which means that from 1 August 2010, for most, the initial government payment will reduce from 250 to 50. From 1 January 2011, there will be no initial payment.
Given the phased withdrawal of new Child Trust Funds, parents will need to give consideration to other tax-efficient savings plans for children / grandchildren, such as:
ISAs
It will make sense to consider tax-efficient investments, in particular the individual savings account (ISA). Currently, 10,200 per annum can be invested in an ISA - up to 5,100 into a cash ISA, with the balance into a stocks and shares ISA.
The benefit of the ISA is complete tax freedom on capital gains and virtually complete tax freedom on income. This means that investments have scope to increase in value at a faster pace and therefore the earlier a programme of ISA saving is established the better.
Unfortunately, a child cannot generally establish an ISA (although a 16 year old can effect a cash ISA if the money for the investment comes from the parent the 100 income tax rule will apply). Further as an ISA cannot be put in trust, this will mean that it is the parent / grandparent who will need to make the investment in his / her own name with a view to using the proceeds of the ISA for the benefit of a child when encashment occurs.
Personal Pension Plan
Another investment that a parent or grandparent could make for a child would be a personal pension plan. Here, a gross amount of 3,600 could be paid by the grandparent to a personal pension plan in the grandchild's name - even though he was a minor.
The grandparent would make the payment net of 20% income tax and so 2,880 would be paid each year. The pension provider would reclaim the tax deducted from HM Revenue and Customs.
The benefits of this arrangement are:
- Basic rate tax relief at source on the contribution
- Investments held in a highly tax efficient fund
- Whilst contributions are gifts, the normal expenditure out of income exemption and annual 3,000 exemption would normally be available
- Tax free cash of 25% of the fund from age 55 for the grandchild
The downside of this is no access to the grandchild until age 55.
So this won't help with university costs, mortgage costs or the costs of a wedding - well at the very least it's unlikely for the latter!
Children's Bonus Bonds
This investment is available from National Savings and provides a return free of income tax and capital gains tax. The Bonds earn a guaranteed fixed rate of interest for five years, with a guaranteed bonus addition on the fifth anniversary. At the time of writing the current Issue 34 of the Bonds pays 2.5% per annum compound over the 5 year term.
This return is derived from compound interest at the rate of 1.85% per annum plus the bonus at the end of 5 years which is equal to 3.56% of the Bond purchase price.
The maximum investment per child per Issue is 3,000 and the minimum 25. At each 5-year anniversary the Bond can be encashed or left to run to the next 5-year anniversary at the interest rates prevailing at that time. The Bond must mature at age 21 when a final bonus is added.
Although the Bonds are owned by the child they are issued to the child's parent(s) or guardian(s) regardless of who the purchaser is.
Early encashment is possible, with penalties. As the controller(s) of the Bond the parent(s) or guardian(s) can encash the Bond up to the child's sixteenth birthday; thereafter encashment rights lie with the child who is then in control of the Bond.
Before investing a check must be made to ensure that the proposed investment plus any amount already invested in the particular Issue for a particular child does not exceed 3,000.
The Financial Tips Bottom Line
As can be seen, there are various options (and we've not covered them all yet) available to invest and save for children. Take the time now to analyse how many of these strategies might be appropriate for your own situation.
Part 2 will follow next time where we'll look at the use of Trust arrangements.
Ray Prince is a fee based Certified Financial Planner with Rutherford Wilkinson ltd, and helps UK Resident Doctors and Dentists plan to achieve their financial objectives. Just visit http://www.medicaldentalfs.com where you can request your free retirement planning guide.
Rutherford Wilkinson ltd is authorised and regulated by the Financial Services Authority.
According to a recent report by the Forest Trends? Ecosystem Marketplace and Bloomberg New Energy Finance, in 2010, projects that reduce emissions from deforestation and forest degradation (REDD) accounted for 29% of carbon credits transacted in the voluntary market. Forestry investors can -- and should -- take full advantage of offsetting their greenhouse gas (GHG) emissions through forestry investments, so evaluating their options before investing is essential.
What Are the Standards
A forestry investment project has to meet certain pre-set criteria before the carbon credits it produces are deemed eligible for offsetting and trading. There are several third-party certification entities that usually deal with project evaluations. The Voluntary Carbon Standard (VCS) is the main verification scheme to look at when it comes to making sure that your prospective forestry investment project is producing valid carbon credits. According to the above-mentioned report, in 2010, VCS carbon credits held 34% of transaction volumes on the voluntary carbon market, placing it at the top spot among third-party standards. Other third-party verification schemes are The Climate, Community and Biodiversity (CCB) Standards, the Climate Action Reserve (CAR), the newly-added Brasil Mata Viva (BMV) and Forest Carbon Standard International, as well as the specialty standards CarbonFix and Plan Vivo. The UK recently launched their own Woodland Carbon Code, created by the Forestry Commission, to empower and ensure investors looking to inject money into forestry that the projects they are selecting are, indeed, carbon-credible.
Where to Find Them
Each of the above-mentioned third-party verification standards has a registry, which lists projects, including all forestry investments, that have been thoroughly evaluated and certified as carbon-credible. The Rainforest Alliance has listed links to some major registries, where potential investors can browse projects, pick and reach out to the companies behind them for more information on the nature of the forestry investments.
What to Look For
Once an investor has selected forestry projects that meet the requirements for certification, they can now look further into the details of the initiative to pick and choose which project features answer their own personal investment preferences and priorities. The Manomet Center for Conservation Sciences, a U.S. independent enviromnetal research organization, has created a uniform scorecard, which can serve as a checklist to any investor, giving them an starting point for questions they need to address with the forestry investment project before making a final decision. The scorecard consists of 43 yes/no questions, which examine eight general components of the forestry offset projects:
1. Contract structure (ownership, compliance with local laws, length of project)
2. Baselines (qualitative description and quantitative calculation)
3. Additionality (does it prevent new emission reductions or remove existing ones to compensate for new emissions someplace else)
4. Monitoring, measurement, reporting and verification (the ability to carry out the monitoring/measurements; will a third party regularly review and verify accuracy)
5. Permanence (all of the project?s carbon risks and risk management strategies)
6. Leakage (does a project cause GHG emissions elsewhere)
7. Transparency (will project records and verification reports be publicly available)
8. Co-benefits/costs (what positive environmental, social and economic outcomes does the offset project produce)
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Gathering all data and asking the right questions before making a forestry investment ensures not only a good return of investment, but also stability and durability for the investment. As most forestry projects are typically long-term investments, it makes it that much more important to choose certified forestry projects that place importance on continuity.
In layman terms, bonds are investments with fixed rate of return, unlike equity shares. This explains why bonds are often referred to as 'fixed-income securities.' The return on investment, in this parlance, is known as 'yield.' In the real terms, though the token rate of interest payable on bonds is fixed, the yield tends to change with a number of factors, such as change in prevailing interest rates in the economy and inflation. Let us look at what are the three types of bond yields and what they signify.
- Nominal Yield
Also known as the 'coupon rate,' it is the indicated rate of interest on the bond. The annual interest is calculated on the par value of the bond at the coupon rate. It is immaterial whether you purchased the bond at premium (more than par value) or at a discount (less than par value) - the nominal yield always concerns with the par value. For instance, 7% $250 Notes imply that 7% coupon rate is payable on $250, even if you bought the Notes at, say, $280.
- Current Yield
Current yield is the current percentage return on the security. It assumes the holder will keep the security only over the next one year and during that period there will be no change in its market price. In effect, it does not refer to the 'total yield' up to the time of maturity. It also eliminates the assumption of reinvesting the periodic receipts at a constant rate. It can be represented in the form of a form of a formula, as below:
Current Yield = Nominal Yield/Market Price
This percentage indicates the actual return if you decide to purchase the bond at current market price.
- Yield-to-Maturity
Yield-to-Maturity refers to the total return over the life of the security. Theoretically, it implies reinvestment of the annual interest receipts at a constant rate. It is considered the most important parameter to assess the viability of a bond investment. However, the calculation for YTM is rather complex that relies on a 'trial and error method' or the aid of some calculating device. The concept can be expressed mathematically, as:
N (1+R)-1 + N (1+R)-2 +..... N (1+R)-n + P (1+R)-n = M
where
C ≈ Annual Coupon Interest or Nominal Yield;
R ≈ Yield-to-Maturity;
P ≈ Par Value or Redemption Value;
n ≈ Years left for maturity;
M ≈ Price of the bond;
It is interesting to note that if and only if a bond is selling at par, the three yields are equal.
Swati Sinha, a qualified Indian Chartered Accountant, has strong industry experience. She owns Eurion Constellation, a combination of efficiency and effectiveness that brings out the best products, consultancy, and outsourcing services for you and your business, no matter in which part of the world you are. For more, log on to http://www.eurionconstellation.com. You can access our downloadable work samples and templates at http://www.scribd.com/EurionConst.
In most cases the greatest financial rewards that private investors see as a result of their investment come not via regular income from the business, but as a lump sum when they end their involvement with the business. The amount of money which is received at this stage can often depend on how well the investor has planned their exit strategy.
Exit strategies
There are a number of exit routes for private investors, each of which has its own advantages and disadvantages. The most common are:
- Public Flotation
- Trade Sale
- Management Buyout
A management buyout is where key individuals and staff members are offered the option of securing finance to purchase all or part of the interest which is held by the businesses owners or investors. This is often an attractive option when coupled with an agreement that the investor will retain a minority shareholding or will continue to receive income from the business for a number of years because control of the business will pass to people who are familiar with the market and who can maximise the future revenues which the investor will draw. Maximising sale price of the investment Calculating the value of an investor's shareholding in a business and the price for which he can sell this stake is more complicated than just working out the value of the business as a whole and then pro-rating this. The price which can be achieved is affected by a variety of factors and it is advisable for a private equity investor to take steps to try and control as many of these factors as possible form the outset of their investment. Major factors which will affect the price an investor can achieve for the disposal of his investment include: - Timing
- Information reporting
The more information which a private investor has available about the functioning of a business, its prosperity and projections for the future, the better able he will be to plan his exit to achieve the maximum return on his investment. - Exit by other shareholders
A sale by other shareholders can have the effect of increasing the desirability and value of the investor's stake in the business, but if all other shareholders sell to a single person creating one shareholder with a super-majority, the investor's own minority shareholding could be devalued because it's influence will decrease. - 'Drag-Along' and 'Tag-Along' rights
'Drag-along' rights allow the investor to force other shareholders to sell their own stake in the business at the same time as he sells his own. This allows the investor to maximise the sale price as he can guarantee the purchaser a majority stake - effectively selling control of the company even though he does not hold a controlling share himself. 'Tag-along' rights enable the investor to prevent his own shareholding from being devalued by a mass sale of shares by other shareholders by forcing those shareholders to require any potential buyer to also purchase the investor's shares at the same time. - Prohibition and Premption rights
These rights allow the investor to prevent other shareholders from selling their own stake in the business, or alternatively to force other shareholders to offer to sell their stakes to the investor before offering them to outside buyers. Usually the clause which confers this right on the investor will set the method by which the pre-emption sale price is set.
These factors can be achieved through a variety of legal means, such as a shareholders' agreement, alteration of the businesses constitution, attaching particular rights to shares held by the investor and writing obligations into directors' service contracts. Because a private equity investor is injecting a substantial amount of much needed capital into the business in which he invests he will be in a strong position to negotiate favourable terms even if he is only obtaining a minority shareholding.
Controlling the factors
There are a number of important rights which the investor should make sure he has when making an investment as these can be invaluable tools in controlling those factors which cause the value and achievable sale price for his investment to fluctuate.
Because of the complexities involved, this is an area in which investors are advised to take legal advice. This should always be sought before the investment is made, as if appropriate protections and provisions are not set in place at the outset, it can be difficult for the investor to secure these at a later date. Advice should be sought from a solicitor or barrister who specialises in this area of law.
For more free legal information, advice and resources visit lawontheweb.co.uk.
The age we are living in is the era of the third Industrial revolution. Businesses are expanding more than ever, and this generates more complexities. When a person is thinking about quitting his job and finding a business where he can invest, there are lots of challenges which he has to face. An experienced businessman of today also tries to construct a suitable strategy if he has a plan of investing anywhere. To invest is easy but to decide where to invest have become a difficult task for a common investor. Stock trading software is the modern tool for the investors. This tool assists the investors to find a right mix of strategy for their investment. By using stock market software, the strategists are able to predict the future of their business. This helps them enhance their business in a more pervasive manner.
There are many tools available online that can help you develop a sound investment strategy. Let us discuss the merits of the tools, and how they can assist a common investor:
With every business, there are some ups and downs. Forecast and prediction is very important for a common investor, but how to have a good prediction? When there is a big variation in the business system, this question keeps coming up. The investment strategy tool is what gives you person a detailed forecast of the future. It comes with depth of analysis and make them pretend whether the investment is going to pay them with loss or profit. It presents the picture of the future of the business surroundings. If there is a boom, the investor hits the chance of investing and if there is a probability of loss, the investor tries to block his investment and save it for the time when the trend has settled down.
However, there is a big question mark in the accuracy of a tool. It can't have emotions. It works on the basis of systematic processing. It is a processor of variables and constraints and develops a graph of structural analysis. You can say it is a backup support that constructs your decision. A good strategy tool is the one that can buy, sell, and hold check points on its own without your decision. It is really helpful when you cannot make a decision.
A problem which a new investor faces is that he does not have the experience to invest when there is a critical multi-directed business surrounding it. The tool helps the person to make the right decision. The tool is based on programming so it will derive up the consequences that are accurate and precise in nature.
Many experienced business people use the tool for bench-marking. The tool develops the graph charts of the other business strategies happening in the surrounding. The strategists find it easier to develop their own strategy by bench marking the other strategies of the business surrounding. This gives them a new way of deriving refined tactics for their business.
The tool can also construct the learning curves. It is a kind of histogram to study the bottleneck, and errors of your business that occurred in the past.
Stewart Wrighter recently purchased a stock trading software course from an online store. His daughter ordered a stock market software course in order to become more knowledgeable about investing.
Are you wondering at how people manage to save and build wealth in these taxing times? Or are you one of those individuals who try really hard however are never successful at wealth management. If yes, then you should try following these tips for strategic wealth management.
Every penny counts: Think twice before shopping spontaneously. Impulsive shopping sprees can burn a larger hole in your wallet than you actually think. Budget your spending and stick to it religiously. You will realize at the end of the year, how much you have saved by not indulging in shopping sprees.
Investment: There is nothing better than making your money work for you. Invest in diverse profiles with the help of individuals who help to build wealth. Diversified investments are recommended as they help to even out the risks. However always take an expert opinion before you plan to build wealth management profiles.
Retirement/ pension plans: Start investing in retirement plan or pension plans when you are in your late twenties. Earmarking your funds in such manner is a sure shot way to protect your income and have steady cash flow after your retirement.
Earn extra income: It is easy to earn few extra bucks by working online and you can definitely spend few hours everyday to this activity. Income earned through part time activities should be used as liquidity account. This means you use these funds only in dire circumstances.
Help your children save: Cultivate the habit of saving money in your children. This is the best method to build wealth in long run. Teach children the value of money and importance of savings and its long term benefits. Trust this helps you.
Sharmila Shetty is a freelance content writer and a training consultant.She has been with transformation & development vertical for last 6 years. She is avid blogger and you can read her thoughts at http://www.sharmilashetty-devilsworld.blogspot.com
You can contact her at sharmila08@gmail.com
Massive withdrawals from savings banks have been occurring over the past week in Korea. Here is an article from the Korea Times on the subject; below is an excerpt:
A total of 490 billion won was withdrawn from 98 savings banks Monday, despite the financial regulator's assurance that there will be no more shutdowns of such institutions.The amount is up 60 billion won compared with Friday, when the Financial Services Commission (FSC) suspended operations of four savings banks. Regulators are looking to see whether the mass withdrawals will continue today.
The withdrawals came after the FSC confirmed that it will avoid suspending operations of additional savings banks unless in an emergency, such as a bank run.
In many ways this is simply an example of the global banking crisis we are currently in the midst of, born out of faulty loans made in a global housing crisis.
I think this is another prime example of financial contagion, something we are seeing more and more of in our global economy. I believe our global economy is deeply interconnected at this point; no event occurs in isolation, and a crisis in one part can spread to a crisis in other parts.
As for traders, I think there are a few implications:
1. For better or worse, central banks tend to respond to crises with stimulus and market interventions. As the situation in Korea intensifies, we may see central bank intervention or intervention from the IMF.
2. I believe the root problem is the need for a new global monetary agreement. If this perspective is valid, so long as these problems continue, precious metals should rally.
3. It is worth noting that Korean monetary authorities have attempted to instill confidence in the banking system, but withdrawals continue nonetheless. Distrust of the Korean government is thus at high levels. This type of a run on the banks, and the market's lack of belief in the ability of the government in question to stabilize the economy, are historically conditions that lead to runs on a currency and the ensuing bout of rapid price inflation. For traders, there may be an opportunity in "the political dissatisfaction trade" -- short currencies where political dissatisfaction is high, long currencies with a more popular political regime. Due to the contagion we're seeing, though, I wonder if global political unrest is in the cards -- and if new forms of government will emerge, perhaps in the form of new regional governments like the Eurozone, or non-state networks like Hezbollah and cyber-networks like Facebook.
Simit Patel is the founder of InformedTrades.com, a site dedicated to helping individuals learn currency trading. For more quality information from expert traders, see the INO TV archive.