Tips for Investment In Stocks Part.II

The Money is considered a low risk investment and therefore to use in policies with high risk aversion.

Diversification, the key against all attacks (almost). Whether to retain a single word it is this one: DIVERSIFICATION!

As stated above the proverb fits so well: "Do not put all your eggs in one basket."

Stock market diversification is to invest in different companies, different business sectors, different geographic areas, this allows not only partially undergo a crisis of a business or present in a geographic area.

Take the example of the Internet bubble at the end of year 90:
Case 1: People who invested only in technology stocks could have a portfolio valued at several million at the end of year 90. When the Internet bubble burst, their portfolio has plummeted to a value near zero.
Case 2: People with a partially invested in technology stocks and partly in the so-called traditional values, certainly had a portfolio valued less than the 'case 1', however, when the Internet bubble burst, their investments in traditional societies were allowed to keep a good value of their portfolio (even if the technology stocks that have collapsed, traditional values have continued to grow).
Investing in life is to apply a rule to limit losses due to changing markets. The principle: invest gradually and investing in time.
Financial speculation
Financial speculation is the fact to act in anticipation of market trends. It aims to use the profits in the short to medium term and is applied to all financial markets (equities, currency, commodities ...).

The principle of speculation is the goal of profit by anticipating market trends.
Investors speculation on the current price of a barrel of oil price increase its estimate that more or less important in the near future. They will buy at a price of barrels of oil to be sold at a price B (B> A) a little later.

Tips for Investment In Stocks Part.I

Here are some important principles to be followed while invest in share market. Applying these principles has the effect to win every time but to reduce its exposure to changing markets. They are not exhaustive but represent a good start to understand the philosophy of financial investments. Knowing the aversion to risk is very important in stock trading. What is risk aversion?

Risk aversion is the level of risk you're willing to accept. A strong aversion to risk means that you bear little risk, and conversely a low aversion to risk implies that you're willing to take risks.
Risk aversion can be classified into three categories:

* Low
* Average
* Strong

Once its aversion to risk assessment, it is possible to choose its investment products. It is important to realize that the returns are commensurate with risks: the higher the risk, the greater the gain / loss potential can be significant.

Some products are to be avoided or privileged following its aversion to risk, here are the 3 main families of products that can be used:

* Shares

Shares are products with high volatility, it is best to choose this mode of investment strategies with low risk aversion. It is possible to make a lot quickly, but also losing a lot.

* Bonds

The Bonds are to be considered in strategies to moderate or high risk aversion (this will depend on the strength of the underlying). These products allow recovery of interest at intervals over a set period of time. The risk of these investments is the cessation of payment of the underlying (state, company ...).

Local Fund Management

Some local governments also use the notation to assess their client image from financial institutions.
Representing a significant market potential, and a limited risk of default, local authorities have benefited from the years 1990 positive effects of competition between banking intermediaries:

* Commoditization of credit to local authorities;
* Lowering the cost of credit;
* Strengthening innovation in the development of formulas to simplify the method of debt management and financing tailored to different aspects of local budgets.

With the strengthening of financial independence and their need for funding, the decentralization offers new opportunities and banks are continuing their efforts to penetrate while searching for a quality signature.

The landscape of local funding has therefore changed with the advent of increased competition between the banking intermediaries and diversification of the offer. The complexity of the financial environment for local communities contributes to the professionalization of their financial functions that adopt progressive methods of reasoning of private management to optimize and streamline the management of debt:

* Arbitrage rate to reduce the risk of exposure;
* Active management of cash;
* Tighter budgetary control which requires the identification of commitments vis-à-vis third parties and to book, upstream, the necessary funds;
* Taking into account the multi-annual dimension of public management in local part of a prospective approach.

These developments are a key factor in terms of financial innovation. The banks have set up the financing products (cash management, lending short-term interest rate hedging ...) and services (value of active management of debt, project financing, investment of windfall ...) enabling them meet the new budget and financial practices of local communities.

The rise of the finance function in different directions with a strong accounting is also an important vector of disintermediation. Funding for local government being deregulated, they can raise funds directly in financial markets. New financial instruments of capital markets are, therefore, supplements or alternatives to traditional bank financing. Faced with disintermediation of financing local authorities, banks offer services in financial engineering and step up their financial activities in addition to traditional banking activities.

It should however be noted that the financial instruments are much more complex than the traditional bank loan, they can be handled only by large communities that have the expertise and responsiveness necessary to make the most of market opportunities. The disintermediation is to funding of local remains generally high banked.

Financial Management

The recent decentralization movement thus results in the management by local authorities of new economic functions in a new accounting and budgetary framework. The resources that these functions will induce change in level as the budgets that structure.
Local authorities must seek new funding to implement investments related to the exercise of their economic function, despite a high savings capacity.


With a self-borrowing, local governments must make a tradeoff between own resources and resources of loans to finance their investments. The bond acts as an adjustment variable whose magnitude depends on both the level of savings and the relative level of debt earlier.

After several years of moderate changes, it appears that the dynamism of local public investment began in 2003 continues at an annual growth of 8% for 4 years. Local communities continue to invest heavily:

* The election cycle is conducive to investment communal;
* While nearly 70% of public investment is devoted to building and public works, costs in construction and public works experience sustained growth;
* The transfer of responsibilities will encourage communities to support heavy investments (railway equipment, road investment ...).

This increase in investment volume is characterized by a need for increased funding. This results in increases in taxation and an increased reliance on borrowing, facilitated by a context of interest rates still low. In late 2006, the amount of the debt of local authorities is around 111 billion Euros, equivalent to 6% of GDP. This proportion is low in light of European commitments on debt: according to the Maastricht Treaty, the debt cannot exceed 60% of global GDP. In addition, the "financial valve" that is the fiscal autonomy increases the flexibility of local authorities in terms of borrowing.


The principles governing the development of local budgets (principle of annual, principle of unity, and rule of balancing the budget ...) require local management framed.
Therefore, despite important differences, the level of risk and solvency of all local authorities is excellent.

Credit Rating Agencies the heart of global financial systems Part.III

In the United States is the SEC that accredits the rating agencies can note issuers, a special status, the NRSRO. It is now held by the five main rating agencies that represent 98% of the U.S. market. The two challengers were able to obtain this status, a prelude to any attempt to internationalize, in 2003 for the Canadian DBRS (Dominion Bond Rating Services) and 2005 to the American AM Best, which specializes in rating companies insurance.


This demand for self-regulation has led rating agencies to overhaul their practices in methodology and ethics. Indeed, quantitative approaches too opaque and often resulted in "very good" ratings of financial players to hidden risks, or having issued bonds such as "structured finance" in spite of the risks associated with the nature of these products.

So in March 2007, it revised its rating methodology for banks by reducing the inclusion of state support or supervisory authorities in order to avoid masking the credit risk inherent in each bank. In June of that year, S & P revised its criteria for assessing securitization vehicles financing leveraged to take into account the loan contracts with very lightweight protection clauses.
On June 25, 2007, the French Banking Commission released the list of ECAI distinguishes seven actors: the Bank of France, Coface, DBRS, Fitch Ratings, Moody's, S & P and Japan Credit Agency. This status enables credit institutions to use the notations of ECAIs mentioned above for France to determine regulatory capital requirements arising from Basel 2 regulations.

The market for credit ratings is changing in light of internal innovations, new regulations and fears of investors. This cache of new players those focus on different goals in the field.