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Us Stock Market - Us Stock Market - Investment Opportunities

The US stock market has a long history dotted with a lot of ups and downs. The stock market is made up of two exchanges - the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotations system (NASDAQ).
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The Two Flavors of Real Estate Index Funds

These funds invest in real estate investment trusts (REITs) which are firms investing in real estate (equity) or mortgages on real estate (debt) or a combination of the two. A fund focused largely on equity would be valued on the property invested in and the rents received from the property. The valuation of property is not tied to interest rates. Funds focused on the debt side of real estate are valued based upon the ability of the financed to pay their mortgages. Interest rates can have a big impact on these REITs. As indexes, both types of funds seek to mimic the performance of the real estate market.

Much has been in the news lately about the American housing market slump and mortgage crunch. It would be easy to think that in today’s market, it would not be wise to invest in a real estate index fund. But the opposite is probably true. One of the most popular real estate index funds, Dow Jones U.S. Real Estate Index Fund (IYR) is down from its 52 week high of 94.99 at 72.65 on August 31, 2007. This shows a rebound from the 52 week low at 66 after the news about mortgage companies going bankrupt broke. IYR is still a bargain at the current price. It looks like the real estate bubble won’t burst any further for this well-established REIT.

The best known mortgage REIT, Annaly Mortgage Management (NLY), is similarly off its 52 week high of a little over 16 at the current price of 14.10 and is similarly making a rebound. This is another investment that is probably bargain priced. After all, mortgages don’t go away once the mortgage house goes under, but are bought and sold by different firms. When the fed meets in September to lower interest rates as speculation leads us to believe it will, that will only drive the stock price of funds like NLY up.

Defining the Nikkei 225 Stock Index, its Weighting, Modifications and Changes of Components

In the TSE (Tokyo Stock Exchange), the “Nikkei 225” is a market index which is the most important in the Asian stocks. Since 1971, this stock index has been calculated every day by the “Nihon Keizai Shimbun (Nikkei)” newspaper. Moreover, and besides being reviewed once every year, the Nikkei’s unit is the Yen.

After its introduction to the OSE (Osaka Securities Exchange), CME (Chicago Mercantile Exchange, and the SGX (Singapore Exchange, the Nikkei 225 has become an international ingredient in the stock exchange. One of its other major indexes is the “Topix”.

The highest average ever recorded of the Nikkei 225 in the 20th century was in 1989 (reaching 38,957.44 before closing at 38,915.87). In the 21st century, it reached right above 18.300 points.

To weight stock by the Nikkei 225, they are given equal weighting based on 50 yen per share. Such weighting is also influenced by removals, splits and addition of constituents. Since it reflects the overall market, there is no final weighting for the Nikkei 225.Review results of the Nikkei 225 are published every September with changes applied early October. Such changes are usually announced in the Japanese Nikkei newspaper plus appearing on the NNI. Whenever a stock is being replaced, the divisor is, afterwards, changed to make sure that there is a smooth transition of the stock index.


Mutual Funds with Best Rate of Return over 5 and 10 year Periods

The top performing mutual funds over the last five years are dominated by Latin American funds. Of the 13 funds reporting a greater than 40% return after five years, five are mutual funds emphasizing Latin America. More impressively, the top four returns after five years are all Latin American funds with BlackRock Latin America (MDLTX) leading the pack with a whopping return of 49.4%. That means a $1,000 investment in MDLTX 5 years ago would be worth $7443.08 today. Some of the performance of these funds over the last five years can be attributed to the rise of commodity and oil prices. Much oil, minerals, and agricultural products are exported from the region. Another reason behind the Latin American fund surge is many governments have adopted sound macroeconomic policies, especially in Brazil, Mexico, and Chile where greater control over interest rates, inflation, and government spending has come about during the time period. Also, national debts have been reduced. The future does look bright for Latin American funds, but caution must be taken. I’ll elaborate on why in the last paragraph.

There is a different picture if we look at the best performing funds over a ten year period. No single focus area dominates as Latin America does over a five year period but there are several focusing on small cap and ultra-small cap or micro-cap companies. The best return rate is 21.5% for Wasatch Micro Cap (WMICX) which would make that $1000 investment worth $7018.83. The fund is very volatile, at one time gaining 30.5% over a month (July 1998) and another time losing 24.7% in a month (August 1998). However, the 5 year rate of return is 20%, and the one year rate is 20.5%, showing that for this fund, 20% or better can be expected. Averaging rates over 20% for a period of ten years paints an excellent track record for the fund’s management.

The ten year rate of return paints a different picture of the Latin American funds that dominate the five year period. MDLTX, mentioned above, has a return rate of 15.5% over ten years so something drastic happened between 5 and 10 years ago and the fund has rebounded in the last five years. If considering a Latin American fund, do the research on what companies are focused on. There are still some unstable countries in the southern hemisphere with oil-rich OPEC member Venezuela providing a glaring example. Venezuela’s government has been seizing assets of private companies recently.

Stock Option for Dummy: How do Stock Option Trading work?

Stock options are perks employees gain from their employers. Basically, stock options give an employee a right to purchase a set amount of shares of company stock during a specific time period at a set price. The strike price (the option price of company stock) is discounted and can be the price of the stock at the time the employee gained options rights or, in the case of privately held firms, it is the internal valuation of the stock at the historical time period that is then voted on by the board of directors.

For example, an employee is hired on at a publicly traded firm and has this perk; the strike price will be the price of the stock on the day the employee was hired. This same company may allow the employee to exercise the option 1 year later in the volume of 100 shares. So, this employee will be allowed to buy 100 shares of the stock, 1 year in the future, at the price it was a year before when the employee was hired. The hope is that the stock price goes up during the period and the employee gains real benefit from exercising the options. Usually the amount of shares the employee can buy is vested over a period of time. If it were 4 years, the employee would purchase 25% the first year at the strike price, another 25% the second year at the strike price, etc.

The tax implications depend upon whether the options can be classified as incentive stock options (ISOs) or non-qualified stock options (NSOs). NSOs are more common than ISOs and carry more of an immediate tax burden than do ISOs. NSOs are far simpler for a company to structure for their employees, but don’t meet all the qualifications for an ISO that are established by the IRS. In the case of an ISO, ordinary income tax is paid when the option is exercised meaning the difference between the strike price and the market price is treated as ordinary income. For ISOs, the tax implications do not come into play until the stock is sold. Simply exercising the options by turning them into stock shares does not carry any tax burden. Capital gains taxes on ISO stock options are only figured when the stock is sold. NSO stock options are effectively taxed twice if the shares are held onto after the options are exercised and when sold capital gains taxes must be paid. Obviously, there is a big difference in the amount of taxes paid between ISO and NSO options and its very important to understand which type an employer is offering.

Common Stock vs. Preferred Stock: What’s the Difference?

Preferred Stock is a very different creature from what is generally referred to as common stock. Common stock is what most investors think of when they purchase stock. It really is the most “common” type of stock traded. Stock is that equity in a company that an investor purchases. Preferred stock is quite the opposite. Preferred stock is ownership within the traded company, but with added perks. It is almost like a bond, with guaranteed rights to a company’s assets if the firm were liquidated.

Preferred stockholders have a greater claim to the firm’s assets than common stockholders do. For this reason, when dividends are paid, the claims from preferred stock are paid first – before any dividends are paid to common stock claims. This difference in classification is most essential during times of insolvency by the firm, however. If a company were to be liquidated, preferred stockholders are paid before common stockholders get a single penny.

Also, the dividends that are paid to preferred stocks are quite different from common stocks. Dividends are generally paid at regular intervals, not intermittently when a company’s board decides to, which is commonly how dividends for common stock are paid. Oftentimes these dividends are guaranteed by the firm.

So with all these added perks to common stock what are the disadvantages? First off, preferred stock is not issued by every publicly traded company. The cost of raising capital through preferred stock for a firm is 35% greater than through issuing bonds because the dividends paid are not tax deductible. Preferred stock represents a fraction of the total stock market in the US at around $200 billion in August 2006, compared to $16 trillion for equities and $5 trillion for the bond market. Also, there are corporate tax advantages available to corporate ownership of preferred stock that can never be realized by individuals. For this reason, it is common to see corporations snapping up preferred stock issuances.

Mutual Funds for Dummy : Advantages and Disadvantages of Mutual Funds

Mutual funds are collections of stocks or bonds that are managed by an “investment professional.” Mutual funds cover the whole spectrum of investment possibilities – specific sectors, objectives, etc. These objectives are outlined in the mutual fund prospectus. The mutual fund investor purchases shares in the fund; the price of the fund varies daily according to its’ trading price – just like other publicly traded assets. Purchasing shares in the fund gives the investor a position in the fund.

The mutual fund shareholders pay an annual fee to an investment representative who buys and sells stocks for the fund. However, the prospective mutual fund investor must be careful in selecting a mutual fund. While they may advertise in being professionally managed, the truth is most mutual funds underperform average stock market returns. Another difficulty with mutual funds involves understanding the fees involved in owning shares in a mutual fund. Lots of “fine print” can be involved. It is very important to read the prospectus.

But if you do your research as you would with any other investment, there are good mutual funds out there worth your hard-earned dollars. Read the prospectus on the mutual fund and study how the fund has performed over the years. Make sure the fund has been around for a while so a good, lengthy track record can be established. The diversification within a well-managed mutual fund can guard against market adjustment periods. The real advantage the investor gets with a mutual fund is the level of expertise gained in the fund’s management. Seeking out funds that are actively managed and managed well is essential when researching mutual funds. Some of the best managed mutual funds are not run by the big investment companies, but by smaller firms. Another advantage in mutual fund ownership is the fact that transaction costs are lower due to the high volume buying and selling of shares involved. Minimum investment is also usually low, sometimes as low as $100.

Online Investment Club for Dummy - Finding the Right Investment Club

So you think you would like to join an investment club? The first thing you need to do is find the right fit. Investment clubs come in all types, just as the investment world is composed of all types of investing styles. Do you know how you want to invest? This is the first question that must be answered before finding the right club. Are you an aggressive investor? If you’re under 40, you probably are on the aggressive side, and less risk-averse. However, as we age our investment styles should become more conservative as we approach retirement age and become more risk-averse.

The best way to find out the details about the club would be to attend a meeting. Most clubs have monthly meetings where they get together and decide what stocks they want to research and discuss the club’s policies. Well-organized clubs should have some established bylaws and written partnership agreements detailing the club’s goals and how they intend to reach these goals. Local clubs may meet in person; virtual investment clubs may have a chat or BBS discussion. Its here you’ll be able to decide whether or not the club is a good fit for you.

After finding the right club that suits your investment style be sure to scrutinize the club’s track record. Has the club reached any of its goals? Has the club outperformed the S&P 500? Has the club averaged better than 10% returns on a yearly basis? If they are getting returns over 10%, the club has done a great job getting their money to work for them.

Some clubs may have a steep buy-in expense, requiring the new member to buy an equal share of the pie. Other clubs will have detailed accounting systems in place that allow a new member to buy a percentage. Some clubs may require a new member to “buy out” another member. Once again, all these details can be found out at the club meetings.

History Of Stock Market Index - How the Stock Market Started

Contrary to the common belief that the stock market was first invented by the Italians, the real beginnings of the stock market were in 11th-century Cairo where Muslim and Jewish merchants employed various methods of credit and payment. The first brokers, however, were the French, for in the 12th century, the “courratiers de change” represented the banks and regulated and managed the different debts related to agriculture.

The “Beurzen”, on the other hand, started spreading in Ghent and Amsterdam after 1309 due to the efforts of Van der Beurse, hence, changing an informal meeting to an institutionalized one.

Pisa, Genoa, Verona and Florence saw trading in government funds and secutiries as early as the 14th century. Joint stock companies, opened to shareholders, were later opened by the Dutch. The first company to ever issue stocks and bonds was the “Dutch East India Company” opened in 1602.

The “Amesterdam Beurs”, or stock market, was the first one where there was a continuous exchange of trading in the early 17th century. By then, stock markets were in most developed economies, most importantly in the US, China, Canada, UK, Germany, India, France and Japan.


Trade Stock - Trading On The New York Stock Exchange

In terms of how much money is traded at any given day, the New York Stock Exchange is considered the largest exchange market in the world. It is also regarded as the leader in the equities market in terms of technology and investments coming in from all corners of the globe. Every day, the New York Stock Exchange is where the biggest companies buy and sell billions of dollars worth of shares.
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