What Should You Do During A Stock Market Correction

What to Do During a Stock Market Correction?

The market can undergo tough days as it can go through good days. Such instance is not surprising, since a stock market correction is just around the corner. It would be alarming if the market would not have a period of correction and crash.

If a stock market correction happens, what are the advisable actions that an investor must do?

  1. Do Nothing

A wise investor is someone with a financial plan and an investment strategy at the same time. If a stock market correction happens, it does not necessarily mean that you need to do something immediately. Making a certain move in reaction to the correction is not really an advisable move. The least you can do is to wait until the market volatility settles somehow. The sound advice for investors is to – “relax.” Hold, as it will work itself out.

  1. Do Calm Down

Do not panic. Panic will just cost you a lot of money. Crashes happen once in a blue moon. To be able to think appropriately, you first have to calm yourself before making any move.

Market corrections are a normal part of a stock market cycle. No investor can control or counteract such events. What you can do is to set up your portfolio so that it can withstand unforeseen and untoward events such as a market correction.

  1. Do Ignore the Media

 News deliver good information and it is highly essential that you know what is happening with market trends. However, during periods of market correction, news can highlight fear which may in turn cause the investor to panic. The media is not the proper venue for you to be during such times. It is advisable that you go back to your financial plan and investment strategy to aid you during such phase.

  1. Do Review Your Portfolio

As the saying goes, there is always a positive to every negative. This means that during a market correction, you can take advantage of such incident to assess the performance of your portfolio. If you find yourself fearing the effect of the correction to your portfolio, then maybe it is high time that you review your asset allocation. If you think that you cannot do it alone, you can always ask for the help of a professional financial advisor to review your portfolio and employ the necessary strategy.

Conclusion

Admit it, stock market corrections are frightening. In this era of fast information dissemination and a wide range of media when it comes to updates, investors are advised to remain calm before reacting. Investors might find themselves at a loss during such periods; however, it is a part of reality that markets tend to correct at some time. As a wise and smart investor, you have to factor such unfortunate event to your plans.

Read also: Ways to Survive a Stock Market Crash

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

What Stage of Wealth Are You

Find out What Stage of Wealth Are You

In assessing others’ level of wealth, as well as your own level, it is important to have a sound measurement on your financial situation. Merely assessing someone by just their lifestyle and the kind of car they drive are just one of the many myths people believe to be true in order to say that someone is doing well in life. Certainly, there must be a sensible way in determining the financial position of a person.

Read also: Taking Charge of your money in your 60s

What Stage of Wealth Are You

Find out in this post the definite stage of wealth you are into at the moment. There will be different stages that will be discussed, and here they are:

Stage 1 – Financial Solvency

You are in wealth stage 1 if you can pay your bills on time and be able to save even a small chunk from your income. Generally, the standard when it comes to saving is a minimum of 10%. Yes, saving can help you be financially independent; however, you will need three decades at a minimum for you to be able to enjoy your money.

Stage 2 – Financial Stability

Stage 2 requires you to have an emergency fund that you can use anytime an unwanted financial situation happens, i.e. hospitalization. If the emergency fund is lacking, there is a higher chance that you will be inclined to spending a portion or even the whole of your savings.

You cannot say that you are in the financial stability stage if you have not surpassed the solvency stage. You must be financially solvent first before becoming financially stable.

Stage 3 – Debt Freedom

As the name says it, a person is considered to be on this stage if he or she had finished paying all of his or her debts. A lot of people usually reach this stage a few years before retirement, between 40-60 years old. This stage is hard to achieve, as there are mortgage and vehicle offers wherein the pay period range from 25 years and above.

A person is said to achieve this stage if the first two stages have been attained.

Stage 4 – Financial Security

You are said to reach this stage when you already have a positive cash flow which you can use to build wealth further. The person, then, is able to make his or her money work for him or her, allowing you to have a bigger amount of money than your annual gross.

When a person is at this stage, he or she can take deal with more investment risks (such as getting into the investing field and portfolio diversification) without worrying about the consequences in order to grow more his or her wealth.

Stage 5 – Financial Freedom

Financial freedom entails that as you let your money work for you, you are not only getting more financial sources aside from your gross income, but you are also given the opportunity to spend on extravagant things that you were not able to give yourself or your loved ones.

There are people that may think they are already in this stage since they can afford the extravagant things in life, but remember you must have confidently and truly surpassed the first four stages before considering yourself belonging in this stage. The word “afford” then might not really apply to you – you might just be spending on extravagant things without really becoming financially able to buy them.

Conclusion

The measurement of wealth mentioned in this post can be considered to be the concrete gauge for assessing in what particular stage of wealth you are into. Remember that, wealth cannot just be inferred from the accumulation of material goods.

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

The Reasons Behind Mergers and Acquisitions

The Reasons Behind Mergers and Acquisitions

You probably have heard of companies announcing acquisitions of other companies or merging with other businesses and you might be wondering why other business owners agree with such offer. It is important to note that the primary motive lie in these simple phrases – and that is to make the most of shareholder wealth. This post will unearth the other underlying legitimate reasons why mergers and acquisitions happen.

  1. Diversification

There are business firms that aim for diversification or a broader line of business and / or products. Sometimes a company merges with another company (of another industry) to diversify its line of business and / or business. The reason for this is to reduce the impact of that company to its own profitability.

It is like scattering its eggs, instead of putting all in one basket.

  1. Refining Business Focus

Also, there are cases when a company merges with other companies having a deeper and wider market penetration which is essential for business operations. 

Mergers and Acquisitions

  1. Amplify Supply-Chain

When a company decides to buy one of its suppliers, it is able to both eliminate a percentage of costs (margins that the supplier adds to its costs). In addition, a company may also choose to buy one of its distributors for it to cut to a lower cost the shipment of its products. 

  1. Collaboration

This is also considered as synergy. As the Merriam-Webster online dictionary defines the word synergy, it means a combined action or operation which is considered as a mutually advantageous conjunction of elements. When synergy is given emphasis in mergers and acquisitions, the idea is that when businesses combine with one another, the opportunity to increase performance is boosted. It is also a way to decrease costs of a certain company.

Generally, a company will merge with another one if its strengths complement its weaknesses.

  1. Growth

Mergers provide the acquiring company the chance to grow its market share even without putting much effort in doing the work themselves. A company may choose to buy a smaller competing company and authorizing it to produce more products and sell more to its loyal customers.

It can also mean a move to improve the financial stance of a certain company, especially if a company is in a deep financial problem, it may opt to look for another company that is willing to acquire it – just to go out of bankruptcy. 

  1. Eradicate Competition

A lot of mergers and acquisitions activities permit the acquirer to eliminate competition and increase market share of its products’ market. However, in order to convince the target company’s management to accept the offer, a large amount of money is needed.

Conclusion

Mergers and acquisitions happen since companies are after following key reasons: to protect their own business, to improve the strength of their business and to boost business profits. Nevertheless, just like any complex decision mergers and acquisitions can be either successful or disastrous – yet this depends on the strategies put in place by the collaborating companies.

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

Tips to Put in Mind When Dealing with IPO Stocks

Tips to Put in Mind When Dealing with IPO Stocks

A number of people say that buying IPO stocks is an exciting part when investing in the stock market. In order to make better investment decisions, it is important that one reads investing guidelines and know-hows. Analysis and understanding must be applied to better utilize your readings. If you are one of the people who are eyeing on investing in IPO stocks, written here are some tips you can take into consideration.

See also: Importance of Financial Investing

What is an IPO?

Initial Public Offering or IPO is the manner where the shares or stock of a private company is opened to the public. Usually, this is done by smaller, starting companies that seek to expand their capitals. For some cases, there are large private companies that would like to begin being publicly traded.

What makes IPO exciting?

Buying IPO stocks seem to attract the attention of both traders and investors in the stock market. Traders make the most out of the price rallies that follow after a company’s listing period. On the other hand, it is a chance for investors to be a part of a particular company’s beginnings until it grows massively in the market.

What are some of the tips that you can consider when dealing with an IPO stock?

Dealing with IPO Stocks

1. Develop a plan

Knowing your financial goals matters a lot. Yet, as your goals begin to unfold before your very eyes, planning is an integral part. Following a trading plan helps you to stay on track and recognize your stock market strategy.

It can also help you come up with an educated decision if you should buy such IPO stock or even deciding if you are going to hold it for a short, medium, or long-term period.

2. Do your research about the company

In today’s social media age, cases of people giving in to herd mentality are increasing. There are people who believed instantly to an advice and then they get hyped afterwards. It is important to be cautious of stock market tips that you follow.

The best thing to do is to research and study the fundamentals of the company which will be out for an IPO. Is it a company looking for operations expansion or one that will use the money to pay enduring debts?

Consider a company that must qualify to any of the following: part of a growing industry, with good earning records, having a dependable management, offer top-quality and unique products and one having a robust balance sheet.

3. Steer clear of first day listing volatility

Avoid buying shares during the initial days of listing as this period is usually volatile. Basing it from history, IPOs do trade higher than that of their offering price during such stretch.

For short-term traders, they will do their profit-taking activity after several days. The ideal period to buy the IPO stock is after the correction period where the stock has recovered.

Conclusion

When dealing with an IPO stock, a well-informed investor can outpace and perform better than the others. A number of companies go public every month, it is best to apply the following tips mentioned in this post.

Read also: 5 Common reasons why companies go public

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

The Five Commandments of Investing

The Five Commandments of Investing

The Ten Commandments you have heard since childhood are laws used as standards that deal with man’s relationship to God and man’s relationship to his fellow human beings. These act like a manual for people on how to live a better life. Hence, these are like guidelines which help people to keep themselves out of trouble.

This article will teach you the counterpart of the Ten Commandments compressed into Five Commandments, to guide you in the world of investing and to keep your money in safe hands.

Is investing hard?

For the less knowledgeable, yes, investment is a hard concept and field to grasp; but for those who continue to enrich their knowledge, investing will come easy as it seems. Knowing the right principles and being able to adhere to these religiously can lead you to the path of investment success.

See also: 5 Warnings for Investing Newbies

Five Commandments of Investing

The Five Commandments of Investing

  1. Thou shalt be clear with your goals and avoid gambling

 What separates investors from gamblers is that investors follow a mathematical formula and concrete strategies to be able to profit from their move. Gamblers are not fond of such. They bet their money on unknown and uncertain outcomes.

Do not just invest for the thrill or fun, rather invest for profit. In order to do this, having the discipline is essential to reach financial security and consistent profits. Growing wealth has a science behind it. As a perfect analogy for this one, you should have a particular destination in mind so you would not be lost when you are already at the sea.

  1. Thou shalt ensure that thy financial house is in regulation

 One of the top responsibilities of an investor is to keep his or her personal finances in order first before jumping in the investing activity. Investing when you have debts scattered all around such as drowning in credit card bills and overdue fees can get you into serious problems sooner or later. Take care of your debts first before taking the plunge in the investing world.

  1. Thou shalt need to exercise due diligence

 Exercising due diligence in investing means that you invest within the scope of your understanding. If you do not understand something, it is not advisable to take the risk and invest. When exercising due diligence, it also means that you avoid rushing into making an investment decision. You need to study all positions first before putting in your money.

You need to increase your understanding to be able to come up to an informed decision. Exercising due diligence also means that you know what investment risk management strategies you need to apply to protect your capital from permanent loss.

  1. Thou shalt avoid jumping on the bandwagon

 This can be considered as having herd mentality (a well-known descriptor of human behavior since people learned to socialize) or the way people are being influenced by their peers to adopt some behaviors. This one applies greatly to the stock market. There is a difference between passive investing and passive investor. When you are a passive investor, you tend to digest all information presented to you and failing to thinking about it critically.

In the field of investing, you have to see things on your own in order to realize the true value of a stock.

  1. Thou shalt continue to invest in thyself

As your investment portfolio and money grows, so your financial intelligence must increase as well. The level of your investment skills and knowledge reflects your investment results. If you want to improve your profits, you have to improve your financial intelligence.

Moreover, the best investment you can have is YOURSELF. As the good old saying goes, nobody can take away your learning and it can double, triple or even multiply your dividends a number of times for the rest of your life.

Conclusion

The above-mentioned guidelines can greatly help you with your investing career. Keep yourselves out of difficulties by observing these proven guiding principles.

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

Taking Charge of Your Money in Your 60s

Taking Charge of Your Money in Your 60s

Delaying retirement is not a common instance nowadays. Studies reveal that the average retirement age by Americans is age 62. A lot of people are retiring at age 65 or older since they find themselves not adequately prepared.

A number of retirees would solely depend on social security. If you are in your 50’s or 60’s and you feel that you aren’t yet ready for retirement, here’s how you can better prepare for the future. Ensure that you will have the funds you will need to enjoy a good life.

Financial Life During Your 60s

How do you picture yourself after retirement?

People have different concepts when it comes to retirement. There are people who wanted to spend the rest of their lives traveling, others wanted to ensure their children’s future, others would still want to work part-time to keep with the expenses, and a number would still be haunted by debts even after retirement.

Each person’s financial situation is unique. There is no one-size fits all retirement plan. If you are a firm believer of the saying, “it’s never too late,” then it is really never late for you. Especially when it is about retirement planning, do not let hopes abandon you.

What if you haven’t saved enough for retirement?

Most 60-year olds do not have enough money for retirement. This point in your life, you should take an honest perspective regarding money and retirement. Financially speaking, where are you compared to your peers? If you are lagging behind your peers, it is not the right time to get discouraged. Do not get stuck on that comparison – you just do what you can with the remaining time.

Why do you need to preserve your capital?

Individuals retiring soon should focus themselves on capital preservation. Capital preservation means putting your hard-earned money in conservative investments and keeping a practical lifestyle. Your retirement savings must last longer – such as living on less but with sufficient money to live with and not worrying about the years to come.

You must choose the best investment strategy where you can meet your needs and goals. You might want to divert your money to income-producing yet conservative type of investments.

See also: Importance of Financial Investing

Where should you start after a period of contemplation?

You might not be able to do it on your own. When talking about retirement, there are a number of factors that one needs to consider. This is where the role of a financial advisor enters the picture. A financial advisor can help you assess your risk tolerance, time horizon, investment knowledge and understanding, targets and how interest rates can affect you.

Advisors can help you increase your income-producing investments to get you ready by the time of your retirement. Aside from that, advisors can help you choose the right kind of investments depending on your goals.

Read also: Becoming Your Own Financial Advisor

You should also take into consideration that inflation, increases in property taxes, other maintenance fees, and rental fees can undermine your money. Hence, you can consider Exchange-Traded Funds (ETFs) as they are a low-cost alternative compared to mutual funds and other managed investments. In fact, they can offer higher returns as well.

Conclusion

You should not let it happen that you don’t have enough money to cover your after retirement expenses. Be open as early as now and reach out to those who can professionally help you.

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

A Must Know Computing Your ROI

A Must Know: Computing Your ROI

One of the many essentials when investing is determining whether it’s all worth it by asking yourself the greatest question, “How much money did I make?” There are investors that do not do this basic stuff, maybe because they simply do not know how to or they do not know its importance.

In this article you both can uncover the importance knowing the basics of ROI as well as being able to compute it.

What is Return on investment?

This is a known metric or performance measure to gauge a certain investment’s profitability. ROI can help you sort out investments that are profitable and make a comparison with your other investments, too. It is just easy to compute and interpret, thus, you can apply it to a wide array of personal investments. It can aid you in making wiser decisions and moves.

Computing your Return on Investment

Why knowing ROI is important?

ROI is important in knowing the efficiency on your investments. It aims to measure the amount of return in comparison with the investment’s cost. An investor cannot really assess his investments (i.e. stock, bond, rental property, collectible, option, etc.) without calculating for this one. It can give a concrete signal to any investor about the viability or practicality of a specific investment.

How to compute ROI?

When calculating for the Return on Investment, the return of a particular investment is divided by the cost of the investment. The formula goes like this:

ROI = [(Gain from investment – Cost of investment)  / Cost of investment] x 100

Where, the gain of investment represents the proceeds acquired from the sale of the investment.

Or

ROI = (Net profit / Cost of investment) * 100

The results can either give you a plus or a minus. A plus (a.k.a. positive result) means profit while a minus (a.k.a. negative result) indicates a loss.

What affects ROI?

With the given formula, there is one factor that does not appear in the calculation that can greatly affect ROI. Truly, it is a performance measure that has a simple calculation. Investors should know that TIME is one major factor that must be considered. An investment might indicate a 1,000% returns and another one reflects a 50% returns. By merely looking at the figures, the investment with a 1,000% returns is alluring; however, one must be able to consider the influence of time. What if the first investment takes 25 years to flourish whereas the second one just needs a month to pay off? Hence, time periods must be strongly considered, too.

Conclusion

Return on Investment is a powerful and useful tool to assess your investments. It does not mean that an ROI gives you a positive result and you can stay complacent. It can still falter in the future. Expected ROI are not useful since there is no data to back it up.

See also: 10 Crucial points when evaluating an investment opportunity

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

Is Inflation Something to be Dreaded About

Is Inflation Something to be Dreaded About?

Inflation is indeed an extremely debated topic in economics. There are different points of view stating that it is just a phenomenon that drags the economy down – making everything harder and riskier.

Inflation is usually described as the sustained rise in prices of goods and services in a certain country. Its triggering point is – the value of money falls. If the prices of things keep on increasing and is making everything more difficult, then, is it something to be really dreaded about?

Or does it bring its own benefits, too?

Inflation is actually good for the economy

In cases that the economy is not running fully due to deflation (i.e. rise in unemployment and unused resources), inflation can help turn the tables. When the economy has been stuck in a period of recession, a higher rate of inflation can help it recover, thus, boosting its economic growth.

Moreover, when the prices of goods and services are falling (deflation), people are becoming unwilling to spend their money since they are thinking that prices can get cheaper sooner or later, hence, it leads them to delay purchases. If this happens, it can have an adverse domino effect to demand, then affecting production, distressing employment rate which may further lead to layoffs, and worst, a weakening and failing economy.

On the other hand, inflation boosts consumption. If you know that items are more likely to rise by 2-3% in a year, then you can be urged to purchase it now since buying it after some time can most likely increase its price.

Looking for a great investment strategy? Try Growth Investing.

All About Inflation

essentially increases wages

If the price of goods and services continue to increase in the market, employers find it easier to adjust and increase wages. In turn, employee productivity increases since there is an increase in the workers’ morale. Rise in wages can be attributed to inflation.

aids debtors

Inflation is a great help to people with current debts and are repaying their loans. With inflation peaking, wages of people can increase fast as well. To put it simply, loan payments become less valuable since it is taking a smaller portion of a person’s income. Quite the reverse of deflation or falling of prices – it actually intensifies the value of loans.

A good example is the United States, which is known as the leading debtor in the world, inflation helps reduce the impact of its massive debt.

favorable if it is 2-3% a year

Economists argue that a little does of inflation is vital to promote economic growth and to stabilize the economy. The considered healthy rate is 2-3% per year. As examined in this article, it can still be considered positive since it can result to wage growth. It can also lead to profitability of businesses due to a continued flow in their capital.

Inflation is a constructive phenomenon as long as the factors being considered such as employment, business growth, and wage concerns are moving up altogether in unison.

Read also about the events you need to anticipate in the economic calendar.

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

Investing Dictionary #4 Federal Funds

Investing Dictionary #4: Federal Funds

The Federal Funds or just Fed Funds in some cases are the excess reserves that the commercial banks and other financial institutions deposit at regional Federal Reserve Banks. According to Investopedia, these funds can be lent, then, to other market participants with insufficient cash on hand to meet their lending and reserve needs. The loans are unsecured and are made at a relatively low-interest rate, called the federal fund’s rate or overnight rate, as that is the period for which most such loans are made.

Federal Government

Federal Reserve Building, Washington DC, USA

All You Need To Know About Federal Funds

More from the Federal Funds, these fed funds are present to guide the country’s commercial banks to meet their daily reserve requirements which are equaled to the money banks are required to maintain at their regional Federal Reserve.

Among the regional banks, the Fed is the one that sets a set target rate or range for the fund’s rate; this means that the target set for each region can vary. One more thing about the set rate or target is, it is adjusted periodically based on economic and monetary conditions.

Federal Reserve

Federal Funds and Interest Rates

Interest rates are the means the Federal Reserve uses in the open market operations to manage the supply of money in the economy. The Fed funds and the Interest Rates are highly related, they have a lot much in common when it comes to the broader market. The Federal Reserve task is to announce the effective fund’s rate at the end of each trading, which in return set the weight of the average rate for all transactions in the market day.

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!

Investing Dictionary #3 Expense Ratio

Investing Dictionary #3: Expense Ratio

Expense Ratio is a rare word to stumble upon, it is a word prevalent in-between companies and it varies on more private talks the market community has seen. So going back to Expense Ratio, it is actually a measure of what it costs an investment company to operate a mutual fund.

You may ask how expense ratio is determined; well according to the Investopedia: An expense ratio is determined through an annual calculation, where a fund’s operating expenses are divided by the average dollar value of its assets under management (AUM). Operating expenses are taken out of a fund’s assets and lower the return to a fund’s investors. It is also known as the management expense ratio (MER).

See also: An Understanding About Financial Reports

Expense Report

All You Need To Know About Expense Ratio

Expense ratio varies very differently on each type of fund, operating expenses vary widely. One of the biggest parts or the crucial component of operating expenses lies on the fee paid to a fund’s investment manager or advisor.

Further costs include record keeping, custodial services, taxes, legal expenses, and accounting and auditing fees. Investopedia makes a clear distinction between funds, “expenses that are charged by the fund as reflected in the fund’s daily net asset value (NAV) and do not appear as a distinct charge to shareholders.”

Expense Ratio

Funds to Keep In Mind

There are two different expense ratio fund; Index Funds and Actively Managed Funds are both type of funds to keep a list on. Index Funds usually carry very low expense ratios; the managers who oversee these funds are plainly repeating a given index, so the need to have a full management team on staff is deliberately discarded.

Actively managed funds, on the other hand, employs teams of research analysts examining companies as potential investments. By coming up with a team, creating and managing this team adds more costs that are then get passed on to shareholders in the form of higher and bigger expense ratios.

Read also: 5 Tips that could help you analyze earnings reports easier

 

You can earn bigger profits and execute better trades here at Trade12 by reading the latest market updates. Striving to become the best forex broker for you, Trade12 reviews daily market events essential to your trading activities to help you improve your overall trading performance. Register an account now and enjoy a wonderful trading experience!