April 2008
You are currently browsing the articles from Investing in Bonds written in the month of April 2008.
A major branch of investment comes in the form of bonds. For investment beginners who want to explore their options, an elementary introduction and exploration of the basics of bonds is required.
Bonds basically operate like this: You and your friend are going shopping, and you see this fantastic dress on the last day of sale. You want to purchase it already, but your paycheck’s not coming til next week. What you do is you ask if you can borrow from your friend first, then pay her back when your paycheck comes and treat her to lunch as a thank you note for letting you borrow the cash. Your friend agrees, and presto, new dress.
In the corporate world, bonds operate on pretty much a similar level. Businesses do not usually generate enough cash on the onset for the payment of supplies, salaries, and equipment for its continued growth and development. Due to this cash shortage, they may engage in investments, which usually involves one of two things.
The first is to sell portions of the company to the public via the issuing of additional shares of stock, making the company part-owned by the public. The second is to issue bonds.
A company that issues bonds basically borrows money from investors, who in turn will receive interest on regular intervals for a measured amount of time. It’s similar to a mortgage, only this time, the investor or the bond buyer is the bank.
Many people fail to see the potential in bonds because long-run investments are usually the arena of the stock market. And while part of it is often true, bonds have properties that stocks cannot even begin to match.
A bond for example, allows the investor to preserve their capital. Barring a company’s bankruptcy, investors can be assured that they will receive the amount they originally invested. Stocks do not have this luxury and are thus more prone to unfortunate developments.
Another good thing about bonds is that they are set to pay interest on regular intervals– which allows for steady income for retired couples and individuals. Those who own bonds with a high value (on the 6-digit side) may receive considerable interest that they can live with, without touching the original amount. It’s like converting your time to savings– the longer your savings are in a company’s hands, the more it gives you.
Lastly, bonds have excellent tax advantage for a lot of people. Supposing a government issues several types of bonds in order to build infrastructure, the interest earned from that bond is exempt from tax. This option to purchase government bonds is greatly advantageous to those who would love to minimize tax liability.
Written by admin on April 17th, 2008 with no comments.
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Anything preceded by a 101 is bound to be meant for beginners. Golf 101, Drawing 101, Stocks 101, everything is down to one thing: the basics.
With our current topic of investing, 101 will go a long way as the scope of investing covers a rather broad and intimidating amount of knowledge. Moreover, investing deals with plenty of statistics, charts, graphs and numbers, and wading through them to pick the most relevant ones may sound complicated. Where do we start when we want to know about investing?
Traditionally, the first step to knowing about something is to define it. Investing is defined as the act of committing capital / money with the purpose of incurring profit. In simple terms, it’s basically making your money do your work for you.
Unlike what plenty of people believe, investing isn’t a get rich-quick scheme. It requires time to make it work– and it may take years, even decades, before you reach the amount of financial resources you dreamed of. Controlling one’s own finances take a lot of work, and the investor will probably have to pass through a learning curve to fully understand what it takes to invest.
Learning how to invest will enable you to make you own decisions later, and spare you the trouble of asking the opinions and expertise of banks, investment professionals or executive coaches. It encourages the notion of having you as the sole decision-maker of what is best for you and your money.
Some investments can go well depending on the personality type of the investor. The most relevant item here is the risks involved. For optimistic people, aggressive investing may do good with them; for the cautious type, a safe, calculated investment would please them.
Investment should not be equated to gambling, as investment doesn’t rely on pure luck or the careful counting of cards. Investment takes plenty of effort, timing and crucial decisions, making it a rather difficulty, but ultimately rewarding endeavor.
Written by admin on April 17th, 2008 with no comments.
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NASDAQ has a rich history of service and excellence, dating back to 1971. Its objective is to be a beacon of change to all business models that come their way. Back in 1971, every market in the world was floor-based, and NASDAQ took this as its charge to bring about greater efficiency to the trading industry. To achieve this goal, they made use of modern technology, one of the first of their kind, to provide business solutions that were previously unheard of. NASDAQ continues to evolve, and NASDAQ has been executing technology-driven cases ever since. Today, they provide one of the fastest, most efficient electronic market models that are used as standards for equity markets everywhere.
NASDAQ is also the largest U.S. electronic stock market, with thousands of stock investors and owners. Due to their policy of constant innovation, they have garnered a large following of investors who want to make good use of their money. NASDAQ makes major investments in their trading system to ensure their position as the technology leader among global equity markets.
NASDAQ had acquired INET ECN where it integrated plenty of its other systems, to come up with a single NASDAQ platform They also implemented the NASDAQ crossing network which consisted of the Intraday Crosses and Post-Close Cross, which are autonomous trade execution facilities designed to promote large trade execution with minimal market impact.
With technology and a history of excellent quality, NASDAQ investing is the one investing you can’t go wrong with.
Written by admin on April 15th, 2008 with no comments.
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In the U.S.A., there are two popular types of saving bonds, the I series bonds and the EE series bonds. Both these bonds dole out a specific interest rate over the course of two years, with the interest being compounded on a semi-annual basis. However, that’s where the similirities end.
Series I bonds have the cost of their face value, with no guarantees to the specific value of the bond at any given time. The interest payment is comprised of two specific components: the non-variable interest payment and the variable interest payment. Both factors are based on the inflation index of the US economy. The most selling point of the I-bond is that they are protected against inflation risks, and moreover, should the inflation rate go up, the variable interest rate will follow suit.
Series EE bonds on the other hand usually cost the half of its face value. It pays out a fixed interest rate over 30 years. This may seem like an unproductive strategy but hold on. Series EE bonds are also guaranteed to double their value in 20 years, thus making the bond worth its face value. Supposing the interest rate of the bond is on the low end and cannot meet the doubled value within the twenty years, there will be a one-time payment added to the bond in question just to be able to meet the face value.
Choosing which is preferable depends on the circumstances and of course, inflation rate. If a double digit inflation hits the country, then being in the Series I bonds is a blessing, as it offers inflation protection. However, if interests rates are on the low end, the EE series is more dependable due to their guaranteed double value in the twentieth year.
Written by admin on April 14th, 2008 with no comments.
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A bond is a debt security that is sold to the public in set nominal values. Basically, it is interest-bearing money people lend to institutions such as the government or private firms. The interest rate is usually fixed, which means that no matter who holds the bond, the amount of income will remain the same. A bond is objectified by a piece of paper stating the principal amount that was borrowed, the agreed-upon rate of interest, and the term/maturity of the bond.
Bond investing operates on a simple basis. By purchasing a bond from the government, the bond bearer lends them money in exchange for receiving a fixed monthly income equivalent to the rate of interest times the principal amount. The bond bearer continues to receive interest until the bond matures, wherein he/she will get back the face value, or principal amount. (more…)
Written by admin on April 14th, 2008 with no comments.
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A good number of investment analysts for bonds investing lean towards using a pretax income number for reasons that are almost the same as that of operating income.
The difference is that in this case, a company is allowed a number of different tax-management techniques. This allows for the manipulation of the timing and extent of the income that is taxable.
Written by admin on April 14th, 2008 with no comments.
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Operating Income is taken when the SG&A, or selling, general, and administrative, is subtracted as expenses from a company’s gross profit number. The management usually has some more control over operating expenses as opposed to its cost of sales. This is why investors require the careful scrutiny of operating profit margins. Both positive and negative trends for this kind of ratio are mostly derived from the decisions of the management.
The operating income figure of a company is usually the favored measure, as it is more reliable. Preferred by investment analysts, this figure is usually chosen over its net income figure as it creates financial projections and inter-company comparisons.
Written by admin on April 14th, 2008 with no comments.
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Net profit margin is more popularly known as the profit margin of a company. This is vital in bonds investments as the bottom line is quite often the main topic of discussion with regards to a company’s capacity to produce profit.
With regards to investing in bonds, this is a crucial number. But given that, investors can quickly see from a comprehensive profit margin analysis that there are a few income and expense operating elements within an income statement. These elements determine what is called the net profit margin. It allows investors to be able to actually see a company’s profit margins on an organized basis.
Written by admin on April 14th, 2008 with no comments.
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Retirement investing is probably the last type of investment a person may have, assuming he/she has accomplished the life insurance forms already. Retirement investing ensures that the investor lives the rest of his retirement years in comfort and convenience. This means a steady stream of income for the years to come. Most retirement plans come in the form of pension, which the government provides.
However, while pension may cover your most basic needs, it won’t cover the frivolous and extravagant wants you may want to have or experience before shuffling off the mortal coil. This is where retirement investment comes in– a way to have plenty of money for nothing but enjoyment to live the last years of your life.
However, there are great benefits to investing in riskier endeavors such as bonds and stocks, as these afford you more money to spend and enjoy life with. Also with the rate inflation is rising, what could be a huge amount now may barely pay for your necessities in the future, so as much as possible, income that follows the trend of the economy will greatly help you in the long run.
Retirement income may require aggressive investing, especially in the area of stocks. That way, in the event that the market merely churns out an average performance over the long stretch of a career and retirement combined, aggression will deliver a larger amount of retirement stash by the time a person is ready to retire. Not only that, it will also allow a person to elicit a couple of extra years of income from your portfolio. This way, average can actually result to bigger earnings.
Written by admin on April 10th, 2008 with no comments.
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S&P 500 stands for Standard and Poor 500, where a specific index of 500 stocks are chosen with the following criteria: liquidity, market size, and industry grouping.. The S&P index is specifically designed to serve as an indicator of U.S. equities, that would reflect the return/risk qualities of the large cap universe. Basically, it’s the benchmark for the U.S. equity performance.
Some companies always included in the list of the S & P 500 is Microsoft, General Electronic, Pfizer, Citigroup, Wal-Mart, American International Group, and Intel. These companies are usually also the biggest in terms of market share and revenue in the nation, though bigger doesn’t necessarily mean they’re included. To be specific the S & P index chooses companies with the widest range of held stocks.
The companies included in the S&P 500 index are carefully chosen by the S&P Index committee, a group of economists and analysts in S&P’s employment. The S & P index is considered a market value weighted index, where every stock’s weight is proportional to it’s corresponding market value.
Investing in S & P 500 usually involves buying an index fund in a Vanguard fund based on the S & P 500. This is a popular path of investment for a lot of people. There are other choices other than Vanguard, but Vanguard has the edge of having difficult to beat low-expense ratios. Other than Vanguard, there’s also the new Exchange Traded Funds, which occasionally have lower expense rations than Vanguard.
Written by admin on April 1st, 2008 with no comments.
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