Showing posts with label stocks. Show all posts
Showing posts with label stocks. Show all posts

Friday, November 30, 2012

Rules to follow before investing high dividends stocks

Buying stocks with high dividends is very much important for a long term benefit. A dividend is a share of the profits that the company pays to its shareholders. Our goal is to gradually build a portfolio of stocks with high dividends with a good performance for us. So, I do not position to seek a gain in the short term but to generate regular dividends over the long term.

 Why should we focus on this particular investment strategy? The reason behind this strategy is to make passive income each year, a yield higher than 3% of life insurance ... and enjoy the low cost of current actions. Selection of companies is paramount! You have to follow certain conditions that I validate whether they are eligible:

 Check whether dividends were paid for several years without interruption:

This is the first and foremost criterion to verify. The payment of dividends is much important usually it is decided one year prior. Therefore ensure that they were paid on a regular basis for many years.

 Check for whether the dividends are growing:

 The initial dividend is of course interesting, but its growth is even more interesting for us. In the long term, an action that has a yield of 3%, which increases each year by 10%, will quickly defeat an action that has a fixed return of 6%. This is the power of growing dividends, like compound interest, every year they bring back more passive income.
Analyze the financial data of the company: 

 Some questions should be ask about financial data of recent years: Is the revenue increases ?,If the profits increase, does especially where they come from? To find out, it is important to calculate the net operating income is the prime indicator to consider. Operating income takes into account the income and expenses related to the operation of the business while taking into account net financial expenses, financial income and extraordinary.

 For Example: if a company has a negative operating result and has a net positive, then it should be understood that the latter is obtained by the sale of an asset, for example a machine (exceptional items) or financial income (financial). The interest is whether the company can generate long-term benefits of its exploitation (healthy society) rather than non-recurring activities (sale of assets, financial products ...). Finally, it is worth checking the debt of the company. Too high debt will mean that a significant portion of the profits will be used to repay creditors. The remaining profit will perhaps not sufficient to ensure the payment of dividends.

 The dividend payout ratio should not be too high:

 This ratio is calculated as follows, total dividends divided by net income. It should not be too high for the company retains a portion of the profits to invest. The remaining investment capacity will enable its development. Ideally this ratio should be less than 50%, however in practice if it remains below 100%, while investment capacity remains available.

 Choose future business and diversify its portfolio:

 The important part of this step is always to target the long term. What are the growth sectors? Health, food, energy ... All that we cannot do without and which constitutes basic needs. We should not put all your eggs in one basket so diversification in these areas is needed. Once all these steps validated you can be confident in your savings plan and collect your dividends every year! I would try to make a selection of companies in a future article soon.

 I hope these tips will serve you, tell me what you think of this approach in the comments.

Monday, May 30, 2011

Stocks and Bonds Together

There is no surprising that the rising stock market has since been held in conjunction with the rise of the bonds, the yield of government bonds to 10 years back from 4% to 3.50%.
In my opinion, the phenomenon is rather healthy. It is true that in times of intense crisis, we see the fall of actions coincide with the rise of the bonds, in a movement of flight to quality. This divergence implies then a very strong rise in the risk premium on equities.
In an assessment of market shares made by discounting future cash flows, the relevant discount rate is the rate "risk free" government bonds plus the risk premium on the market. This means that the increase of joint stocks and bonds is reflected, side actions, lower the discount rate as a result of lower risk-free rate. Looking back a little, we know that rising stock between 1995 and 1999 could be largely explained by lower bond yields during this period.
In recent months, there was again a decline in risk premium, which can be read for example in the course of corporate CDS and in reducing the implied volatilities of options and that improved earnings expectations.
Decrease the risk free rate, reducing the risk premium, higher earnings forecasts: These three elements combine to explain the current rally in equities.
Whether it goes well in the optimism is that another story.

Saturday, March 6, 2010

Market Riders

Hello Friends! Good day to you all and today I am going to share you all my idea about an online site which is about managing retirement portfolio using Market Riders. As a matter of fact I get into this online site through by means of an excellent online banner called as the etfs which had greatly directed me to this excellent online place. I am very much amazed to share you all my whole contemplation about the general things concerning with the ira investments. The diversity of investment opportunities available for investors is enormous and growing. Stocks, bonds, money market instruments, financial derivatives, alternative investment products and literally thousands of pooled investment vehicles.
Where do you start? The first question to ask is: what are your goals? In other words, what are you looking to achieve with your investment? You need to ask this question because of different investment products naturally have different characteristics, both in terms of performance and - more critically - in terms of risks in the process that can achieve this yield. Regarding the risks and returns on the different asset classes exhibit very different characteristics. Actions, for example, offer the highest returns, but as we shall see, they also carry a greater risk of loss. The Vanguard is a United States investment management consort that manages approximately $1 trillion in assets, based in Malvern, Pennsylvania. This is entirely different while compare with the Vanguard funds is exceptional among mutual-fund companies since it is owned by the assets themselves.
In this structure, apiece fund contributes an ordered turn of crowning towards mutual management, marketing, and organization services. Bonds cannot achieve as good performance, however they offer more stability than stocks (less variation in terms of performance). The money market yields are relatively low, but you never lose your initial investment. The last aspect of this puzzle is the deadline to which you want to get your performance. Indeed, not only the different asset classes exhibit different characteristics in terms of risk / return characteristics, but these change depending on how long you hold these assets - known as the period of detention. It is really appreciable to say that this excellent online site is nothing place for the asset allocation and also the mutual fund manager which is a great tool to beat the market.

Friday, January 1, 2010

Mutual Funds or Stocks?

Many Investors have doubts about whether to invest in stocks directly or in Mutual funds. If we can analyze the performance of the Mutual during the Bull Markets and Bear Markets, it would give a clear answer about it.

The present bull market started around 2003 and ended in 2008. The Mutual funds performed well during that period but still their performance lagged behind the performance of Stock Indices. In India, Bombay Stock Exchange Index Sensex appreciated by seven times. But no fund appreciated by seven times in this time. If we take into consideration some well performed sectors like, Reality, Power and Infra, the performance of the funds is far more less, which clearly indicates, Mutual funds have not performed extraordinarily. They have performed as an ordinary investors do.

Had an Investor invested directly in stocks, he would have multiplied his money manifold. So, Mutual fund Managers are not smarter than us. I prefer investing in Stocks directly instead of Mutual funds.

But investing directly in stocks do have some risks. Had anyone invested in Hindustan Unilever in Bse or General Motors in USA, he would have not seen his investment appreciate far the last five years. So, picking the right sector and right stock is more important in investing. Any secular bull market will sustain for five years to ten years. Always hold your investments till the bull market is over. Don’t shuffle your stocks in your portfolio frequently.

If one can follow the rules propounded here, then one can prefer stocks over Mutual funds.

Which one do you prefer?

Tuesday, December 29, 2009

Fundamental performance of companies for the past five years

The fundamental performance of any company is the performance of their sales, net profit and etc. If it grows year by year then we can say it is growing. It can be stagnant or it can show negative growth. Some companies may show loss also.
So a company can grow positively, or it can grow negatively. Likewise, it can remain stagnant or it may show loss. The financial health of any company can be gauged by the financial performance of that company over these years.

Technical performance of the stock price may not really reflect the fundamentals. Let me discuss the fundamental performance of all the companies in the year 2008-2009. Though Stock Markets have rise all over the world in the year 2009, does it really reflect in the fundamental performance of the companies?

The performance of the companies started showing good growth since 2003 and it peaked in 2007-2008 year. In 2008-2009 period it showed negative growth in many sectors except few sectors. In 2009-2010, it has improved but not at the pace that we have seen in the last five years. To put it simple, the present growth is not as good as it seen in the past five years.
But Stock indices have rallied to 2008 levels which show that the present rally is not supported by the fundamentals. So, it is purely a technical rally in the Bear Market. One need to wait and watch for few more quarters of financial resulss before deciding about the future fundamental performance of the companies.

Saturday, December 26, 2009

Risk versus reward

Risk is always directly proportionate to reward. The same holds good in investments also. The riskier investments are always give good returns. For example, Investing in Stock is riskier than investing in Real estate. Investing in real estate is riskier than investing in Gold. Investing in Gold is riskier than investing in Bonds. Investing in Bonds is riskier than fixed deposits.
When taking into consideration, investing in Stocks are looking riskiest of all. Dow was trading around 14000 in 2007 and it traded around 7000 in 2009 march. The Indian BSE Index Sensex was trading around 2100 those on January 2008, but by 2008 October, it depreciated by more 60 percent. The Chinese stock market Index was trading around 6100 in October 2007 and by October 2008, it was trading around 1670.

Investments in Stocks would have given negative return to one’s portfolio. Whereas, those who have invested in Gold, would be in good profits till now. Likewise those who have invested in fixed deposits would have got a fixed small return.

But in the longer run, say in another 5 years, Dow may be trading above 25000, Sensex may be trading above 50000 or Shanghai Index may be trading above 15000. If you take in to consideration the return we get from these Indices, it would be phenomenal. Stocks are riskier but in the longer run it will perform above other assets.
So risk is always is directly proportionate to rewards. In one’s portfolio all types of investment of various risks should be maintained for successful investing. One should not choose only a particular asset class. One should choose right mixture of assets including high risk stocks and low risk fixed deposits.
Happy investing.

Sunday, December 13, 2009

Fundamental Analysis of a Stock

Fundamental Analysis is the way of analysis of security based on their internal and actual performance of Company unlike Technical Analysis in which just the movement of prices is studied, without considering the fundamentals of the company

Fundamental analysis of a security is the study of Balance sheets, Profit or Loss account, assets and liabilities, sales income, other income, interest payment and etc.

Based on this an Analyst comes a conclusion about the future of the stock or the Company.

Some of the main value they see are PE ratio, EPS and Book value.

PE ratio is the ratio between Price of the Stock at the Market to the earning of the stock per share. Higher it is, the stock price is highly valued. If it is less, then the stock price is priced low.

EPS denotes Earnings per Share. It is the ratio of profits made for the year to the number of shares of the company. If the value is high, it means the earnings are high for the company and if it is low, then the earnings of the company is low.

Growing sales figure or slowing sales figure would influence the future performance of a company.

An analyst also see the performance of the sector at which a particular belongs to. They analyze the performance of the company with the sector’s performance. And also they see the future for the that sector.

Various factors like this influence the movement of the price of a particular stock. Study of this factors is Fundamental Analysis.