by 趙永祥 2018-06-17 07:44:09, 回應(0), 人氣(2)

Why Smart Beta Stocks Can Crush the Market

Traditional index funds attempt merely to match the market's performance, and Rob Arnott, founder of Research Associates, derides this as a "buy high, sell low" approach to investing, Barron's reports. The originator of so-called "smart beta" indexes that look to beat the averages, Arnott notes that, by contrast, traditional index funds are structured and managed in such a way that they pass up clear opportunities to beat the market. This strikes him as indefensible. Meanwhile, per Barron's, $730 billion is invested in smart beta products, including $180 billion in funds that have licensed the indexes created by Research Associates. (For more, see also: Smart Beta ETFs Notch More Records.)

The Wisdom of a Smart Beta Ace

Arnott's lengthy interview with Barron's might be distilled into five main points:

1. Grab low hanging fruit (stocks with market-beating alpha)
2. Avoid stocks just added to major indexes
3. Buy stocks dropped from major indexes, but wait 3 to 6 months
4. Buy deep value emerging markets
5. Today's top 10 stocks are likely to underperform over the next 10 years

1. Grab Low Hanging Fruit

Traditional stock market indexes, and the index funds that attempt to track them, tend to be weighted by market capitalization. By following this formula robotically, the funds are designed to ignore even obvious opportunities to beat the market. By contrast, his smart beta approach favors the creation of indexes based on fundamental factors such as revenues, dividends, corporate governance and diversity that may point to the presence of market-beating alpha.

^SPX Chart

^SPX data by YCharts

2. Avoid Stocks Just Added by Indexes

While the indexes, and index funds, are designed to follow the markets, they actually influence them, and thus create market inefficiencies, Arnott notes. When a stock is added to an index, the index funds tied to it rush in to buy, pushing up the price. Arnott's analysis of the S&P 500 Index (SPX) from 1989 to 2017 indicates that new additions underperformed new deletions by an average of 23 percentage points during the following 12 months.

Moreover, he also observes that new additions tend to trade at high valuation multiples, while new deletions "are almost always trading at bargain-bin prices." This is the basis of his critique of traditional index funds as engineered to buy high and sell low.

3. Buy the Rejects, But Wait

As noted above, stocks recently deleted from the major indexes tend to outperform those recently added. However, Arnott suggests that investors be patient and wait about 3 to 6 months before acquiring the rejects, after the downward impact on prices of mass selling by the index funds has run its course. (For more, see also: Getting Better Acquainted With Smart Beta ETFs.)

4. Buy Deep-Value Emerging Markets

Arnott favors this theme between now and the middle of 2019, citing valuations that are about half that of U.S. stocks, based on CAPE ratio analysis. This is a much bigger valuation gap than average historical discount of 20%, he indicates. Any slight improvement in the outlook for these markets can cause valuations to soar, in his opinion.

By contrast, Arnott notes that the CAPE ratio for U.S. stocks is near historic highs, and that a real, inflation-adjusted, cumulative total return (capital appreciation plus dividends) of only about 2.8% would be in the cards for the next 10 years if the current ratio of 32 holds. If the CAPE reverts to its historic mean of 16, he calculates that a real loss of about 3% would be endured over this period. A reversion halfway, to a CAPE of 24, would imply a real return of about zero.

5. Expect Today's Top 10 Stocks to Underperform

Most of the largest companies in the world by market cap are tech companies such as those in the FAAMG group, but most of these trade at high multiples, and "Some of these compete against each other, so the likelihood of all succeeding is limited," in Arnott' s opinion. He cites historical analysis indicating that 8 of the top 10 stocks at any time are likely to drop out of that select group within the next 10 years. "So if your investment horizon is 10 years, those top stocks have about a 90% chance each of underperforming," he says.

Read more: Why Smart Beta Stocks Can Crush the Market | Investopedia 

by 趙永祥 2018-06-16 06:26:55, 回應(0), 人氣(4)

China will impose additional 25 percent tariffs on 659 U.S. goods worth $50 billion in 

response to the U.S. announcement that it will levy tariffs on Chinese imports, 

the Chinese commerce ministry said.

Tariffs on $34 billion of U.S. goods including agricultural products such as soybeans will 

take effect from July 6, the ministry said. Soybeans are China's biggest import from the 

United States by value.

The tariffs will also be applied to autos and aquatic products, the ministry said.

The list of 659 U.S. goods was longer than a preliminary list of 106 goods published by 

the commerce ministry in April, although the value of products affected remained unchanged 

at $50 billion. (http://images.mofcom.gov.cn/www/201806/20180616015345014.pdf)

Aircraft, included in the earlier Chinese list, were not on the revised list.

The effective date of the tariffs on the remaining $16 billion of U.S. goods will be announced 

later, according to the commerce ministry. Among the affected $16 billion in U.S. goods 

include crude oil, natural gas, coal and some refined oil products. 


U.S. President Donald Trump announced on Friday 25 percent tariffs on $50 billion of 

Chinese imports, in a move that looks set to ignite a trade war between the world's two 

largest economies.

Trump said the tariffs would be imposed on a list of strategically important imports from 

China. He also vowed further measures if Beijing struck back.

"The U.S. has ignored China's resolute opposition and solemn representation, and has 

insisted on adopting behaviours that violate WTO rules," China's commerce ministry said.

"This is a violation of the legitimate rights and interests that China is entitled to according to 

WTO rules, and is a threat to China's economic interest and security." 

(Reporting by Ryan Woo; editing by David Evans)

Read more: China to Impose 25 pct Tariffs on 659 U.S. Goods Worth $50 Bln | Investopedia 

by 趙永祥 2018-06-02 00:42:12, 回應(0), 人氣(6)

How Do Interest Rates Affect the Stock Market ?

The investment community and the financial media tend to obsess over interest rates—the cost someone pays for the use of someone else's money— and with good reason. When the Federal Open Market Committee (FOMC) sets the target for the federal funds rate at which banks borrow from and lend to each other, it has a ripple effect across the entire U.S. economy, not to mention the U.S. stock market. And, while it usually takes at least 12 months for any increase or decrease in interest rates to be felt in a widespread economic way, the market's response to a change (or news of a potential change) is often more immediate.
Understanding the relationship between interest rates and the stock markets can help investors understand how changes might affect their investments and how to make better financial decisions.

The Interest Rate That Impacts Stocks

The interest rate that moves markets is the federal funds rate. Also known as the overnight rate, this is the rate depository institutions are charged for borrowing money from Federal Reserve banks.

The federal funds rate is used by the Federal Reserve (the Fed) to attempt to control inflation. Basically, by increasing the federal funds rate, the Fed attempts to shrink the supply of money available for purchasing or doing things, by making money more expensive to obtain. Conversely, when it decreases the federal funds rate, the Fed is increasing the money supply and, by making it cheaper to borrow, encouraging spending. Other countries' central banks do the same thing for the same reason.

[See some of the resources online brokers offer to keep track of the latest central bank policies here.]

Why is this number, what one bank pays another, so significant? Because the prime interest rate—the interest rate commercial banks charge their most credit-worthy customers—is largely based on the federal funds rate. It also forms the basis for mortgage loan rates, credit card annual percentage rates (APRs) and a host of other consumer and business loan rates.

What Happens When Interest Rates Rise?

When the Fed increases the federal funds rate, it does not directly affect the stock market itself. The only truly direct effect is it becomes more expensive for banks to borrow money from the Fed. But, as noted above, increases in the federal funds rate have a ripple effect.

Because it costs them more to borrow money, financial institutions often increase the rates they charge their customers to borrow money. Individuals are affected through increases to credit card and mortgage interest rates, especially if these loans carry a variable interest rate. This has the effect of decreasing the amount of money consumers can spend. After all, people still have to pay the bills, and when those bills become more expensive, households are left with less disposable income. This means people will spend less discretionary money, which will affect businesses' revenues and profits.

[Revenue and profit growth can impact a company's stock performance. Learn how to use that knowledge as you invest through our Investing for Beginners course on the Investopedia Academy.]

But businesses are affected in a more direct way as well because they also borrow money from banks to run and expand their operations. When the banks make borrowing more expensive, companies might not borrow as much and will pay higher rates of interest on their loans. Less business spending can slow the growth of a company; it might curtail expansion plans or new ventures, or even induce cutbacks. There might be a decrease in earnings as well, which, for a public company, usually means the stock price takes a hit.

Interest Rates and the Stock Market

So now we see how those ripples can rock the stock market. If a company is seen as cutting back on its growth or is less profitable—either through higher debt expenses or less revenue—the estimated amount of future cash flows will drop. All else being equal, this will lower the price of the company's stock. (For related reading, see: Taking Stock of Discounted Cash Flow.)

If enough companies experience declines in their stock prices, the whole market, or the key indexes (e.g., Dow Jones Industrial Average, S&P 500) many people equate with the market, will go down. With a lowered expectation in the growth and future cash flows of the company, investors will not get as much growth from stock price appreciation, making stock ownership less desirable. Furthermore, investing in equities can be viewed as too risky compared to other investments.

However, some sectors do benefit from interest rate hikes. One sector that tends to benefit most is the financial industry. Banks, brokerages, mortgage companies and insurance companies' earnings often increase as interest rates move higher, because they can charge more for lending.

Interest Rates and the Bond Market

Interest rates also affect bond prices and the return on CDs, T-bonds and T-bills. There is an inverse relationship between bond prices and interest rates, meaning as interest rates rise, bond prices fall, and vice versa. The longer the maturity of the bond, the more it will fluctuate in relation to interest rates. (For related reading, see: How Bond Market Pricing Works.)

When the Fed raises the federal funds rate, newly offered government securities, such Treasury bills and bonds, are often viewed as the safest investments and will usually experience a corresponding increase in interest rates. In other words, the "risk-free" rate of return goes up, making these investments more desirable. As the risk-free rate goes up, the total return required for investing in stocks also increases. Therefore, if the required risk premium decreases while the potential return remains the same or dips lower, investors might feel stocks have become too risky and will put their money elsewhere.

One way governments and businesses raise money is through the sale of bonds. As interest rates move up, the cost of borrowing becomes more expensive. This means demand for lower-yield bonds will drop, causing their price to drop. As interest rates fall, it becomes easier to borrow money, causing many companies to issue new bonds to finance new ventures. This will cause the demand for higher-yielding bonds to increase, forcing bond prices higher. Issuers of callable bonds may choose to refinance by calling their existing bonds so they can lock in a lower interest rate.

For income-oriented investors, reducing the federal funds rate means a decreased opportunity to make money from interest. Newly issued treasuries and annuities won't pay as much. A decrease in interest rates will prompt investors to move money from the bond market to the equity market, which then starts to rise with the influx of new capital.

What Happens When Interest Rates Fall?

When the economy is slowing, the Federal Reserve cuts the federal funds rate to stimulate financial activity. A decrease in interest rates by the Fed has the opposite effect of a rate hike. Investors and economists alike view lower interest rates as catalysts for growth—a benefit to personal and corporate borrowing, which in turn leads to greater profits and a robust economy. Consumers will spend more, with the lower interest rates making them feel they can finally afford to buy that new house or send the kids to a private school. Businesses will enjoy the ability to finance operations, acquisitions and expansions at a cheaper rate, thereby increasing their future earnings potential, which, in turn, leads to higher stock prices.

Particular winners of lower federal funds rates are dividend-paying sectors such as utilities and real estate investment trusts (REITs). Additionally, large companies with stable cash flows and strong balance sheets benefit from cheaper debt financing. (For related reading, see: Do Interest Rate Changes Affect Dividend Payers?)

Impact of Interest Rates on Stocks

Nothing has to actually happen to consumers or companies for the stock market to react to interest-rate changes. Rising or falling interest rates also affect investors' psychology, and the markets are nothing if not psychological. When the Fed announces a hike, both businesses and consumers will cut back on spending, which will cause earnings to fall and stock prices to drop, everyone thinks, and the market tumbles in anticipation. On the other hand, when the Fed announces a cut, the assumption is consumers and businesses will increase spending and investment, causing stock prices to rise.

However, if expectations differ significantly from the Fed's actions, these generalized, conventional reactions may not apply. For example, let's say the word on the street is the Fed is going to cut interest rates by 50 basis points at its next meeting, but the Fed announces a drop of only 25 basis points. The news may actually cause stocks to decline because assumptions of a 50-basis-points cut had already been priced into the market. (For related reading, see: 8 Pshychological Traps Investors Should Avoid.)

The business cycle, and where the economy is in it, can also affect the market's reaction. At the onset of a weakening economy, the modest boost provided by lower rates is not enough to offset the loss of economic activity, and stocks continue to decline. Conversely, towards the end of a boom cycle, when the Fed is moving in to raise rates—a nod to improved corporate profits—certain sectors often continue to do well, such as technology stocks, growth stocks and entertainment/recreational company stocks.

Read more: How Do Interest Rates Affect the Stock Market? | Investopedia 

by 趙永祥 2018-05-30 21:54:02, 回應(0), 人氣(7)

China Slams Surprise U.S. Trade Announcement, Says Ready to Fight

China on Wednesday lashed out at Washington's unexpected statement that it will press ahead with tariffs and restrictions on investments by Chinese companies, saying Beijing was ready to fight back if Washington was looking to ignite a trade war.

The United States said on Tuesday that it still held the threat of imposing tariffs on $50 billion of imports from China and would use it unless Beijing addressed the issue of theft of American intellectual property.

The declaration came after the two sides had agreed earlier this month to look at steps to narrow China's $375 billion trade surplus with America, and days ahead of a visit to Beijing by U.S. Commerce Secretary Wilbur Ross for further negotiations.

William Zarit, chairman of the American Chamber of Commerce in China, said Washington's threat of tariffs appeared to have been "somewhat effective" thus far.

"I don't think it is only a tactic, personally," he told reporters on Wednesday, adding that the group does not view tariffs as the best way to address the trade frictions.

"The thinking became that if the U.S. doesn't have any leverage and there is no pressure on our Chinese friends, then we will not have serious negotiations."

China's Commerce Ministry reacted swiftly overnight with a short statement, saying it was surprised and saw it as contrary to the consensus both sides had reached recently.

The Global Times said the United States was suffering from a "delusion" and warned that the "trade renege could leave Washington dancing with itself".

The widely read tabloid is run by the Communist Party's official People's Daily, although its stance does not necessarily reflect Chinese government policy.

"The Chinese government will have the necessary measures in place to deal with a U.S. withdrawal from any settled agreement. If the U.S. wants to play games, then China would be more than willing to play along and do so until the very end," it said.


Fears of a trade war between the world's two biggest economies had also receded after the administration of President Donald Trump said it had reached a deal that would put ZTE Corp back in business after banning China's second-biggest telecoms equipment maker from buying U.S. technology parts.

Still hanging in the balance, however, is San Diego-based Qualcomm Inc's proposal to acquire NXP Semiconductors NV - a $44 billion deal that requires clearance from China's antitrust regulators. The recent easing in tensions had fuelled optimism that an agreement was imminent.

"On hold now," a person familiar with Qualcomm's talks with the Chinese government said on Wednesday, declining to be identified as the negotiations are confidential.

"Trump is crazy. Crazy tactics might work, though," the person added.

State news agency Xinhua said China hoped that the United States would not act impulsively but stood ready to fight to protect its own interests.

"China's attitude, as always, is: we do not want to fight, but we are also not afraid to fight," it said in a commentary.

"China will continue to hold pragmatic consultations with the United States' delegation and hope that the United States will act in accordance with the spirit of the joint statement."


Commerce Secretary Ross is scheduled to visit Beijing from June 2 to June 4 to try and get China to agree to firm numbers for additional U.S. exports to the country.

The deal to reduce China's trade surplus with the U.S. was separate from the U.S. probe into China's alleged theft of intellectual property.

A White House official said on Tuesday that the U.S. government plans to shorten the length of visas issued to some Chinese citizens as part of a strategy to prevent intellectual property theft by U.S. rivals.

Citing a document issued by the Trump administration in December, the official said the U.S. government would consider restrictions on visas for science and technology students from some countries.

The China Daily newspaper said the repeated U.S. claim that Beijing had forced foreign firms to transfer their technologies to Chinese businesses was without evidence and was being used as an excuse to facilitate its trade protectionism.

It said technology transfers between U.S. companies and their Chinese partners were the result of normal business practices, not coercive policies. (Reporting by Brenda Goh in SHANGHAI and Michael Martina in BEIJING; Additional writing by Ryan Woo; Editing by Kim Coghill)

Read more: 

by 趙永祥 2018-05-27 21:46:57, 回應(0), 人氣(9)

8 Basic Forex Market Concepts


Kathy Lien and Boris Schlossberg

You don't have to be a daily trader to take advantage of the forex market – every time you travel overseas and exchange your money into a foreign currency, you are participating in the foreign exchange, or forex, market. In fact, the forex market is the quiet giant of finance, dwarfing all other capital markets in its world.

Despite this market’s overwhelming size, when it comes to trading currencies, the concepts are simple. Let’s take a look at some of the basic concepts that all forex investors need to understand.

1. Eight Majors

Unlike the stock market, where investors have thousands of stocks to choose from, in the currency market you only need to follow eight major economies and then determine which will provide the best undervalued or overvalued opportunities. The following eight countries make up the majority of trade in the currency market:

  • United States
  • Eurozone (the ones to watch are Germany, France, Italy and Spain)
  • Japan
  • United Kingdom
  • Switzerland
  • Canada
  • Australia
  • New Zealand

These economies have the largest and most sophisticated financial markets in the world. By strictly focusing on these eight countries, we can take advantage of earning interest income on the most creditworthy and liquid instruments in the financial markets.

Economic data is released from these countries on an almost daily basis, allowing investors to stay on top of the game when it comes to assessing the health of each country and its economy. 

Yield and Return

When it comes to trading currencies, the key to remember is that yield drives return.

When you trade in the foreign exchange spot market (where trading happens immediately or on the spot), you are actually buying and selling two underlying currencies. All currencies are quoted in pairs, because each currency is valued in relation to another. For example, if the EUR/USD pair is quoted as 1.2200 that means it takes $1.22 to purchase one euro. 

In every foreign exchange transaction, you are simultaneously buying one currency and selling another. In effect, you are using the proceeds from the currency you sold to purchase the currency you are buying. Furthermore, every currency in the world comes attached with an interest rate set by the central bank of that currency's country. You are obligated to pay the interest on the currency that you have sold, but you also have the privilege of earning interest on the currency that you have bought. For example, let’s look at the New Zealand dollar/Japanese yen pair (NZD/JPY). Let’s assume that New Zealand has an interest rate of 8% and that Japan has an interest rate of 0.5% In the currency market, interest rates are calculated in basis points. A basis point is simply 1/100th of 1%. So, New Zealand rates are 800 basis points and Japanese rates are 50 basis points. If you decide to go long NZD/JPY you will earn 8% in annualized interest, but have to pay 0.5% for a net return of 7.5%, or 750 basis points.

The forex market also offers tremendous leverage – often as high as 100:1 – which means that you can control $10,000 worth of assets with as little as $100 of capital. However, leverage can be a double-edged sword; it can create massive profits when you are correct, but may also generate huge losses when you are wrong.

Clearly, leverage should be used judiciously, but even with relatively conservative 10:1 leverage, the 7.5% yield on NZD/JPY pair would translate into a 75% return on an annual basis. So, if you were to hold a 100,000 unit position in NZD/JPY using $5,000 worth of equity, you would earn $9.40 in interest every day. That’s $94 dollars in interest after only 10 days, $940 worth of interest after three months, or $3,760 annually. Not too shabby given the fact that the same amount of money would only earn you $250 in a bank savings account (with a rate of 5% interest) after a whole year. The only real edge the bank account provides is that the $250 return would be risk-free. 

The use of leverage basically exacerbates any sort of market movements. As easily as it increases profits, it can just as quickly cause large losses. However, these losses can be capped through the use of stops. Furthermore, almost all forex brokers offer the protection of a margin watcher – a piece of software that watches your position 24 hours a day, five days per week and automatically liquidates it once margin requirements are breached. This process ensures that your account will never post a negative balance and your risk will be limited to the amount of money in your account.

3. Carry Trades

Currency values never remain stationary, and it is this dynamic that gave birth to one of the most popular trading strategies of all time, the carry trade. Carry traders hope to earn not only the interest rate differential between the two currencies (discussed above), but also look for their positions to appreciate in value. There have been plenty of opportunities for big profits in the past. Let’s take a look at some historical examples. 

Between 2003 and the end of 2004, the AUD/USD currency pair offered a positive yield spread of 2.5%. Although this may seem very small, the return would become 25% with the use of 10:1 leverage. During that same time, the Australian dollar also rallied from 56 cents to close at 80 cents against the U.S. dollar, which represented a 42% appreciation in the currency pair. This means that if you were in this trade – and many hedge funds at the time were – you would have not only earned the positive yield, but you would have also seen tremendous capital gains in your underlying investment. 

Figure 1: Australian Dollar Composite, 2003-2005
Source: eSignal

The carry trade opportunity was also seen in USD/JPY in 2005. Between January and December of that year, the currency rallied from 102 to a high of 121.40 before ending at 117.80. This is equal to an appreciation from low to high of 19%, which was far more attractive than the 2.9% return in the S&P 500 during that same year. In addition, at the time, the interest rate spread between the U.S. dollar and the Japanese yen averaged around 3.25%. Unleveraged, this means that a trader could have earned as much as 22.25% over the course of the year. Introduce 10:1 leverage, and that could be as much as 220% gain.

Figure 2: Japan Yen Composite, 2005
Source: eSignal

4. Carry Trade Success

The key to creating a successful carry trade strategy is not simply to pair up the currency with the highest interest rate against a currency with the lowest rate. Rather, far more important than the absolute spread itself is the direction of the spread. In order for carry trades to work best, you need to be long in a currency with an interest rate that is in the process of expanding against a currency with a stationary or contracting interest rate. This dynamic can be true if the central bank of the country that you are long in is looking to raise interest rates or if the central bank of the country that you are short in is looking to lower interest rates.

In the previous USD/JPY example, between 2005 and 2006 the U.S. Federal Reserve was aggressively raising interest rates from 2.25% in January to 4.25%, an increase of 200 basis points. During that same time, the Bank of Japan sat on its hands and left interest rates at zero. Therefore, the spread between U.S. and Japanese interest rates grew from 2.25% (2.25% - 0%) to 4.25% (4.25% - 0%). This is what we call an expanding interest rate spread.

The bottom line is that you want to pick carry trades that benefit not only from a positive and growing yield, but that also have the potential to appreciate in value. This is important because just as currency appreciation can increase the value of your carry trade earnings, currency depreciation can erase all of your carry trade gains – and then some

5. Getting to Know Interest Rates

Knowing where interest rates are headed is important in forex trading and requires a good understanding of the underlying economics of the country in question. Generally speaking, countries that are performing very well, with strong growth rates and increasing inflation will probably raise interest rates to tame inflation and control growth. On the flip side, countries that are facing difficult economic conditions ranging from a broad slowdown in demand to a full recession will consider the possibility of reducing interest rates. 

Read more: 8 Basic Forex Market Concepts 

by 趙永祥 2018-05-22 22:15:23, 回應(0), 人氣(14)

With real estate a firm part of the capital allocation matrix for both institutional and 

retail investors, real estate funds have been seeing increasing growth recently. 

Due to the capital-intensive nature of real estate investing, its requirement for active

management, as well as the rise in global real estate opportunities, institutions seeking 

efficient asset management are gradually moving to real estate funds of funds.

The same is true for retail investors, who now benefit from access to a much larger 

selection of real estate mutual funds than before, allowing for efficient capital 

allocation and diversification. Like any other investment sector, real estate has its 

pros and cons. It should, however, be considered for most investment portfolios, 

with real estate investment trusts (REITs) and real estate mutual funds seen as possibly 

the best methods of filling that allocation.

Real Estate for Institutional Investors

Real estate investment has long been dominated by large players: pension funds

insurance companies, and other large financial institutions. Thanks to the globalization

of real estate investing and the emergence of new offshore opportunities, 

both allowing for a greater degree of diversification as well as return potential, 

a permanent place for real estate in institutional portfolio allocations is developing 

as a trend.

The permanent allocation of real estate capital comes with certain hurdles. 

First and foremost, it is capital intensive. Unlike stocks that can be purchased in 

small increments, commercial real estate investments require relatively large sums, 

and direct investment often results in lumpy portfolios and inordinate risks in either 

location or by property type. Real estate also requires active management, which is 

labor intensive. Managing a real estate allocation requires significant resources as 

compared to traditional investments. As a result of these issues, aiming to increase 

management efficiency and capital distribution, institutions tend to gravitate toward 

real estate funds and funds of funds. These same advantages can be achieved by 

retail investors through REITs, REIT exchange-traded funds (ETFs), and real estate 

mutual funds.

Retail Investors

Here are several ways for retail investors to access the return potential of real estate 

and obtain exposure to the asset class.

Direct Investment

This strategy relates to investors directly selecting specific properties. The great advantage 

of this strategy is control. Direct ownership of property allows for the development 

and execution of strategy, as well as direct influence over return. However, direct 

investment makes it very difficult to create a well-diversified real estate portfolio. 

For most retail investors, the real estate allocation is not large enough to allow the 

purchase of enough properties for true diversification; it also increases exposure to 

the local property market, as well as property-type risks.

Real Estate Investment Trusts (REITs)

REIT shares represent private and public equity stock in companies that are structured 

as trusts that invest in real estate, mortgages or other real estate collateralized 


REITs typically own and operate real estate properties. These may include multifamily 

residential properties, grocery-anchored shopping centers, local retail properties 

and strip centers, malls, commercial office space, and hotels.

Real estate investment trusts are run by a board of directors that makes investment 

management decisions on behalf of the trust. REITs pay little or no federal income 

tax as long as they distribute 90% of taxable income as dividends to shareholders. 

Even though the tax advantage increases after-tax cash flows, the inability for REITs 

to retain cash can significantly hamper growth and long-term appreciation. 

Apart from the tax advantage, REITs provide many of the same advantages and 

disadvantages as equities.

REIT managers provide strategic vision and make the investment-and property-related 

decisions, thus addressing management-related issues for investors. 

The greatest disadvantages of REITs for retail investors are the difficulty of investing 

with limited capital and the significant amount of asset-specific knowledge and analysis 

required to select them and forecast their performance.

REIT investments have a much higher correlation to the overall stock market than 

do direct real estate investments, which leads some to downplay their diversification

characteristics. Volatility in the REIT market has also been higher than in direct real 

estate. This is due to the influence of macroeconomic forces on REIT values and 

the fact that REIT stocks are continuously valued, while direct real estate is influenced 

more by local property markets, and is valued using the appraisal method, 

which tends to smooth investment returns.

Real Estate Mutual Funds

Real estate mutual funds invest primarily in REIT stocks and real estate operating 

companies. They provide the ability to gain diversified exposure to real estate using 

a relatively small amount of capital. Depending on their strategy and diversification 

goals, they provide investors with a much broader asset selection than can be 

achieved by buying REIT stocks alone, and also provide the flexibility of easily moving 

from one fund to another. Flexibility is also advantageous to the mutual fund investor 

because of the comparative ease in acquiring and disposing of assets on a systematic 

and regulated exchange, as opposed to direct investing, which is arduous and expensive. 

More speculative investors can tactically overweight certain property or regional 

exposure in order to maximize return.

Creating exposure to a broad base of mutual funds can also reduce transaction 

costs and commissions relative to buying individual REIT stocks. 

Another significant advantage for retail investors is the analytical and research information 

provided by the funds on acquired assets, as well as management's perspective on 

the viability and performance of real estate, both as specific investments and as an 

asset class.

For investors without the desire, knowledge, or capital to buy land or property on 

their own real estate funds allow to participate in the income and long-term growth 

potential of real estate. Although real estate mutual funds bring liquidity to a traditionally 

illiquid asset class, naysayers believe they cannot compare to direct investment in 

real estate.

Home Ownership

Many retail investors who have not considered real estate allocations for their 

investment portfolios fail to realize that they may already be investing in real estate 

by owning a home. Not only do they already have real estate exposure, 

most are also taking additional financial risk by having a home mortgage. 

For the most part, this exposure has been beneficial, helping many amass the 

capital required for retirement.

by 趙永祥 2018-05-15 21:36:09, 回應(0), 人氣(8)

What Is A Cash Flow Statement (CFS)?

The statement of cash flows or the cash flow statement, as it's commonly referred to, is a financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company. 

The cash flow statement (CFS) measures how well a company manages its cash position, meaning how well the company generates cash to pay it's debt obligations and fund it's operating expenses. The cash flow statement complements the balance sheet and income statement and is a mandatory part of a company's financial reports since 1987. 

In this article, we'll show you how the CFS is structured, and how you can use it when analyzing a company. (Also check out our tutorial, An Introduction To Fundamental Analysis.)

The Structure of The CFS

The main components of the cash flow statement are:

  1. Cash from operating activities,
  2. Cash from investing activities, 
  3. Cash from financing activities, 
  4. A fourth category, disclosure of noncash activities, is sometimes included when prepared under the generally accepted accounting principles, or GAAP.

It's important to note that the CFS is distinct from the income statement and balance sheet because it does not include the amount of future incoming and outgoing cash that has been recorded on credit. Therefore, cash is not the same as net income, which on the income statement and balance sheet, includes cash sales and sales made on credit. (For background reading, see Analyze Cash Flow The Easy Way.)

Read more: What Is A Cash Flow Statement? 

by 趙永祥 2018-05-15 21:34:31, 回應(0), 人氣(10)

The Easy Way to Analyze Cash Flow 

By Richard Loth | Updated April 30, 2018

The statement of cash flows shows how a company spends its money (cash outflows) and where the money comes from (cash inflows). The cash flow statement includes all cash inflows a company receives from its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given quarter. In this article, we'll explain the cash flow statement and how it can help you analyze a company for investing. 

Why The Cash Flow Statement Is Important

There are two forms of accounting: cash and accrual.

Accrual accounting is used by most public companies and is the accounting method where revenue is reported as income when it's earned rather than when the company receives payment. Expenses are reported when incurred even though no cash payments have been made.  

For example, if a company records a sale, the revenue is recognized on the income statement, but the company may not receive cash until a later date. From an accounting standpoint, the company would be earning a profit on the income statement and be paying income taxes on it. However, no cash would have been exchanged. Also, the transaction would likely be an outflow of cash initially since it costs money for the company to buy inventory and manufacture the product to be sold. It's common for businesses to extend terms of thirty, sixty, or even ninety days for a customer to pay the invoice. The sale would be an accounts receivable with no impact on cash until collected. 


by 趙永祥 2018-05-12 09:08:04, 回應(0), 人氣(14)

Although forex is the largest financial market in the world, it is relatively unfamiliar terrain for retail traders. Until the popularization of internet trading a few years ago, forex (FX) was primarily the domain of large financial institutionsmultinational corporations and hedge funds. But times have changed, and individual investors are hungry for information on this fascinating 

market. Whether you are an FX novice or just need a refresher course on the basics of 

currency trading, we'll address some of the most frequently asked questions about the 

FX market. (See also our Foreign Exchange tutorial.)

1. How Does the Forex Market Differ from other Markets?

Unlike stocks, futures or options, currency trading does not take place on a regulated 


It is not controlled by any central governing body, there are no clearing houses to 

guarantee the trades and there is no arbitration panel to adjudicate disputes. 

All members 

trade with each other based on credit agreements. Essentially, business in the largest, 

most liquid market in the world depends on nothing more than a metaphorical handshake.

At first glance, this ad-hoc arrangement must seem bewildering to investors who are used 

to structured exchanges such as the NYSE or CME. (To learn more, see 

"Getting to Know Stock Exchanges.") However, this arrangement works exceedingly well 

in practice. Self regulation provides very effective control over the market because 

participants in FX must both compete and cooperate with each other. Furthermore, 

reputable retail FX dealers in the U.S. become members of the National Futures Association 

(NFA), and by doing so agree to binding arbitration in the event of any dispute. 

Therefore, it is critical that any retail customer who contemplates trading currencies do 

so only through an NFA member firm.

The FX market is different from other markets in some other key ways that are sure to 

raise eyebrows. Think that the EUR/USD is going to spiral downward? Feel free to short 

the pair at will. There is no uptick rule in FX as there is in stocks. There are also no limits 

on the size of your position (as there are in futures); so, in theory, you could sell $100 

billion worth of currency if you had the capital. Interestingly enough, if your biggest 

Japanese client, who also happens to golf with the governor of the Bank of Japan

tells you on the golf course that BOJ is planning to raise rates at its next meeting, 

you could go right ahead and buy as much yen as you like. No one will ever prosecute you 

for insider trading should your bet pay off. There is no such thing as insider trading in FX; 

in fact, European economic data, such as German employment figures, are often leaked 

days before they are officially released.

Before we leave you with the impression that FX is the Wild West of finance, we should 

note that this is the most liquid and fluid market in the world. It trades 24 hours a day, 

from 5 p.m. EST Sunday to 4 p.m. EST Friday, and it rarely has any gaps in price. 

Its sheer size and scope (from Asia to Europe to North America) makes the currency 

market the most accessible in the world. (See also reviews of forex brokers.)

[Note: Since the forex market is a 24-hour market, there tends to be a large amount of data that can be used to gauge future price movements. This makes it the perfect market for traders that use technical tools. If you want to learn more about technical analysis from one of the world's most widely followed technical analysts, check out Investopedia Academy's Technical Analysis course.]

2. Where Is the Commission in Forex Trading?

Investors who trade stocks, futures or options typically use a broker, who acts as an agent 

in the transaction. The broker takes the order to an exchange and attempts to execute it 

per the customer's instructions. The broker is paid a commission when the customer buys 

and sells the tradable instrument for providing this service.

The FX market does not have commissions. Unlike exchange-based markets, FX is a principals-only market. FX firms are dealers, not brokers. This is a critical distinction that all investors must understand. Unlike brokers, dealers assume market risk by serving as a counterparty to the investor's trade. They do not charge commission; instead, they make their money through the bid-ask spread.

In FX, the investor cannot attempt to buy on the bid or sell at the offer like in exchange-based 

markets. On the other hand, once the price clears the cost of the spread, there are no 

additional fees or commissions. Every single penny gained is pure profit to the investor. 

Nevertheless, the fact that traders must always overcome the bid/ask spread makes scalping much more difficult in FX. (To learn more, see "Scalping: Small Quick Profits Can Add Up.")

3. What Is a Pip in Forex Trading?

Pip stands for "percentage in point" and is the smallest increment of trade in FX. In the 

FX market, prices are quoted to the fourth decimal point. For example, if a bar of soap in 

the drugstore was priced at $1.20, in the FX market the same bar of soap would be quoted 

at 1.2000. The change in that fourth decimal point is called 1 pip and is typically equal to 

1/100th of 1%. Among the major currencies, the only exception to that rule is the Japanese yen. One Japanese yen is now worth approximately US$0.01; so, in the USD/JPY pair, the quotation is only taken out to two decimal points (i.e. to 1/100th of yen, as opposed to 1/1000th with other major currencies).

4. What Are You Really Selling or Buying in the Currency Market?

The short answer is nothing. The retail FX market is purely a speculative market. 

No physical exchange of currencies ever takes place. All trades exist simply as computer

entries and are netted out depending on market price. For dollar-denominated accounts, 

all profits or losses are calculated in dollars and recorded as such on the trader's account.

The primary reason the FX market exists is to facilitate the exchange of one currency into 

another for multinational corporations that need to continually trade currencies 

(i.e., for payroll, payment for costs of goods and services from foreign vendors, and 

mergers and acquisitions). However, these day-to-day corporate needs comprise only 

about 20% of the market volume. There are 80% of trades in the currency market that 

are speculative in nature, put on by large financial institutions, multibillion-dollar hedge 

funds and even individuals who want to express their opinions on the economic and geopolitical events of the day.

Because currencies always trade in pairs, when a trader makes a trade they are always 

long one currency and short the other. For example, if a trader sells one standard lot 

(equivalent to 100,000 units) of EUR/USD, they would have exchanged euros for dollars 

and would now be "short" euros and "long" dollars. To better understand this dynamic, 

if you went into an electronics store and purchased a computer for $1,000, what would 

you be doing? You would be exchanging your dollars for a computer. You would basically be "short" $1,000 and "long" one computer. The store would be "long" $1,000, but now "short" one computer in its inventory. The same principle applies to the FX market, except that no physical exchange takes place. While all transactions are simply computer entries, the 

consequences are no less real.

5. Which Currencies Are Traded in the Forex Market?

Although some retail dealers trade exotic currencies such as the Thai baht or the Czech 

koruna, the majority trade the seven most liquid currency pairs in the world, which are 

the four "majors":

  • EUR/USD (euro/dollar)
  • USD/JPY (dollar/Japanese yen)
  • GBP/USD (British pound/dollar)
  • USD/CHF (dollar/Swiss franc)

and the three commodity pairs:

  • AUD/USD (Australian dollar/dollar)
  • USD/CAD (dollar/Canadian dollar)
  • NZD/USD (New Zealand dollar/dollar)

These currency pairs, along with their various combinations 

(such as EUR/JPY, GBP/JPY and EUR/GBP), account for more than 95% of all speculative 

trading in FX. Given the small number of trading instruments – only 18 pairs and 

crosses are actively traded – the FX market is far more concentrated than the 

stock market. (To read more, check out "Popular Forex Currencies.")

6. What Is a Currency Carry Trade?

Carry is the most popular trade in the currency market, practiced by both the largest hedge 

funds and the smallest retail speculators. The carry trade rests on the fact that every currency 

in the world has an interest rate attached to it. These short-term interest rates are set by 

the central banks of these countries: the Federal Reserve in the U.S., the Bank of Japan 

in Japan and the Bank of England in the U.K.

The idea behind carry is quite straightforward. The trader goes long the currency with a 

high interest rate and finances that purchase with a currency that has a low interest rate. 

For example, in 2005, one of the best pairings was the NZD/JPY cross. The New Zealand 

economy, spurred by huge commodity demand from China and a hot housing market, 

saw its rates rise to 7.25% and stay there, while Japanese rates remained at 0%. 

A trader going long the NZD/JPY could have harvested 725 basis points in yield alone. On a 10:1 leverage basis, the carry trade in NZD/JPY could have produced a 72.5% annual return from interest rate differentials, without any contribution from capital appreciation. Now you can understand why the carry trade is so popular!

But before you rush out and buy the next high-yield pair, be advised that when the carry 

trade is unwound, the declines can be rapid and severe. This process is known as carry 

trade liquidation and occurs when the majority of speculators decide that the carry trade 

may not have future potential. With every trader seeking to exit his or her position at once, bids disappear and the profits from interest rate differentials are not nearly enough to offset the capital losses. Anticipation is the key to success: the best time to position in the carry is at the beginning of the rate-tightening cycle, allowing the trader to ride the move as interest rate differentials increase. (To learn more about this type of trade, see "Currency Carry Trades 101.")

Knowing Your Forex Jargon

Every discipline has its own jargon, and the currency market is no different. 

Here are some terms to know that will make you sound like a seasoned currency trader:

  • Cable, sterling, pound: alternative names for the GBP
  • Greenback, buck: nicknames for the U.S. dollar
  • Swissie: nickname for the Swiss franc
  • Aussie: nickname for the Australian dollar
  • Kiwi: nickname for the New Zealand dollar
  • Loonie, the little dollar: nicknames for the Canadian dollar
  • Figure: FX term connoting a round number like 1.2000
  • Yard: a billion units, as in "I sold a couple of yards of sterling."

Read more: Top 7 Questions About Currency Trading Answered 

by 趙永祥 2018-05-12 01:36:05, 回應(0), 人氣(15)

The bull market in stocks has begun its 10th year with largely sideways movement, and 

investors are understandably concerned about what the future holds. Michael Hartnett, 

the chief investment strategist at Bank of America Merrill Lynch, recognizes that "asset 

markets are struggling" and thus he is tilting towards a bearish view, 

according to ZeroHedge.com. Accordingly, he recommends seven trades to investors. 

Meanwhile, Callum Thomas, founder of chart-driven macro research house 

Topdown Charts, writes: “If you thought quantitative easing (QE) was a tailwind for 

stocks on the way up it stands to reason that it will be a headwind on the way down. 

So this will be one to watch and a risk to be mindful of.”

Uncertain Situation

Hartnett sees "catalysts" for both bull and bear cases, as quoted by ZeroHedge, 

observing that the reason for the confusion is "Because it's late-cycle, profits are peaking,

and the Fed is tightening." The bull market in the S&P 500 Index (SPX) would become 

the longest ever if it lasts until August 22, while the current economic expansion in the 

U.S. will be the longest since the Civil War if it continues into July 2019, he says.

Hartnett believes that a true bear market is unlikely to begin in 2018, but suggests that 

investors start to get defensive. In line with Callum Thomas' concerns about the impact 

of an end to QE, BofAML advises rotating from QE winners, such as 

levered cyclical stocks, to QE losers, such as liquid defensive stocks.

7 Ways to Play Defense

As summarized by ZeroHedge, the seven ways that investors can protect themselves 

against a market downdraft, per BofAML, are:

  1. Buy only blue chipAAA-rated assets
  2. Go long on U.S. Treasury Bills in the face of rising yields
  3. Go long on Chinese stocks, based on policy easing and rising corporate credibility there
  4. Go long on the U.S. dollar, which should rise as a result of "stealth easing" by other central banks
  5. Go short on emerging markets debt denominated in those countries' currencies
  6. Short the FAANG technology stocks since these are crowded investments marked by undue optimism
  7. Short high yield bonds as a hedge against central bank "policy impotence

The main triggers for a move to the downside for the S&P 500, sending it below the 

current support level of 2,550 would be, in Hartnett's opinion, a weakening of GDP and 

EPS growth, a slowdown in Chinese export growth, geopolitical crises, a crisis in the 

credit markets, or the "policy impotence" of central banks in trying to suppress the 

widening of high yield spreads or the increase in volatility.

Other Bearish Strategies

Anticipating the inevitable onset of the next bear market, Investopedia ran a series of 

articles in the fall that presented various strategies that investors might employ to protect 

their gains. These strategies include portfolio reallocation, hedging with options contracts 

on the S&P 500, and seeking greater diversification, both internationally and regionally. 

Also, in line with the recent BofAML recommendations outlined above, these suggestions

included shorting various stocks and sectors, as well as rotating into higher-quality 

companies. (For more, see also: Stock Investors' Handbook for a Bear Market.)

More recently, we looked at other advice. Among noted billionaire investors, Warren Buffett 

warns against buying stocks on margin and obsessing about scary daily financial headlines

, while Ray Dalio joins Buffett in observing that hasty, panicked selling often is a huge 

mistake. Mitch Goldberg, president of investment firm ClientFirst Strategy, insists that 

improper diversification is the biggest error made by many investors. 

The uptick in volatility so far in 2018 has produced yet more recommendations. 

(For more, see also: How to Plan for a Bear Market.)

Read more: 7 Ways to Invest in a Bear Market | Investopedia 
by 趙永祥 2018-05-06 21:01:33, 回應(0), 人氣(13)

Introduction to Elliott Wave Theory

Ralph Nelson Elliott developed the Elliott Wave Theory in the late 1920s. Elliott believed that stock markets, generally thought to behave in a somewhat chaotic manner, in fact traded in repetitive cycles. In this article, we'll take a look at the history behind Elliott Wave Theory and how it is applied to trading. 

Cycles and Waves

Elliott proposed that market cycles resulted from investors' reactions to outside influences, or predominant psychology of the masses at the time. He found that the upward and downward swings of the mass psychology always showed up in the same repetitive patterns, which were then divided further into patterns he termed "waves." (For more on the history of technical analysis, check out The Pioneers of Technical Analysis.)

Elliott's theory is somewhat based on the Dow theory in that stock prices move in waves. Because of the "fractal" nature of markets, however, Elliott was able to break down and analyze them in much greater detail. Fractals are mathematical structures, which on an ever-smaller scale infinitely repeat themselves. Elliott discovered stock trading patterns were structured in the same way. He then began to look at how these repeating patterns could be used as predictive indicators of future market moves. 

[If you want to supplement your knowledge about Elliott Wave Theory with lessons on the history of Dow Theory and other indicators that every active trader must know, check out Investopedia Academy's technical analysis course.]

Market Predictions Based on Wave Patterns

Elliott made detailed stock market predictions based on unique characteristics he discovered in the wave patterns. An impulsive wave, which goes with the main trend, always shows five waves in its pattern. On a smaller scale, within each of the impulsive waves, five waves can again be found. In this smaller pattern, the same pattern repeats itself ad infinitum. These ever-smaller patterns are labeled as different wave degrees in the Elliott Wave Principle. Only much later were fractals recognized by scientists.

In the financial markets we know that "every action creates an equal and opposite reaction" as a price movement up or down must be followed by a contrary movement. Price action is divided into trends and corrections or sideways movements. Trends show the main direction of prices while corrections move against the trend. Elliott labeled these "impulsive" and "corrective" waves.

Theory Interpretation

The Elliott Wave Theory is interpreted as follows:

  • 1. Every action is followed by a reaction.
  • 2. Five waves move in the direction of the main trend followed by three corrective waves (a 5-3 move).
  • 3. A 5-3 move completes a cycle.
  • 4. This 5-3 move then becomes two subdivisions of the next higher 5-3 wave.
  • 5. The underlying 5-3 pattern remains constant, though the time span of each may vary.

Let's have a look at the following chart made up of eight waves (five up and three down) labeled 1, 2, 3, 4, 5, A, B and C.


You can see that the three waves in the direction of the trend are impulses, so these waves also have five waves within them. The waves against the trend are corrections and are composed of three waves each.


Theory's Popularity

In the 1970s, this wave principle gained popularity through the work of A.J. Frost and Robert Prechter. 

They published a legendary book on the Elliott Wave entitled Elliott Wave PrincipleKey to Stock Market Profits. In this book, the authors predicted the bull market of the 1970s, and Prechter predicted the crash of 1987

(For related reading, see Digging Deeper Into Bull and Bear Markets and The Greatest Market Crashes.)


The corrective wave formation normally has three distinct price movements - two in the direction of the main correction (A and C) and one against it (B). Waves 2 and 4 in the above picture are corrections. These waves have the following structure:


Note that waves A and C move in the direction of the shorter-term trend and, therefore, are impulsive and composed of five waves, which are shown in the picture above.

An impulse-wave formation, followed by a corrective wave, form an Elliott wave degree consisting of trends and countertrends. Although the patterns pictured above are bullish, the same applies for bear markets where the main trend is down.

Series of Wave Categories

The Elliott Wave Theory assigns a series of categories to the waves from largest to smallest. They are:

  • Grand Supercycle
  • Supercycle
  • Cycle
  • Primary
  • Intermediate
  • Minor
  • Minute
  • Minuette
  • Sub-Minuette

To use the theory in everyday trading, the trader determines the main wave, or supercycle, goes long and then sells or shorts the position as the pattern runs out of steam and a reversal is imminent.

The Bottom Line

Elliott Wave Theory has its devotees and its detractors like many of the other technical analysis theories out there. One of the key weaknesses is that the practitioners can always blame their reading of the charts rather than weaknesses in the theory. Failing that, there is the open-ended interpretation of how long a cycle takes to complete. That said, the traders who commit to Elliott Wave Theory passionately defend it. To dig deeper into Elliott Wave Theory check out Elliott Wave in the 21st Century.

Read more: Elliott Wave Theory https://www.investopedia.com/articles/technical/111401.asp#ixzz5Ej4eGzS7 
Follow us: Investopedia on Facebook
by 趙永祥 2018-05-04 01:11:53, 回應(0), 人氣(12)

Young professionals who are quantitatively inclined, skilled problem solvers and logical 

thinkers, and who keep up to date with the markets should consider a career as a 

financial analyst. In a broad sense, financial analysts examine financial data to help 

companies make investing decisions.

Some financial analysts work internally and help their employers make investments, 

while others work for third-party firms hired by outside clients to lend their expertise. 

The field of financial analysis is a rather broad category. Some financial analysts look at 

the big picture, analyzing overall market trends to locate profitable investments in different 

industries and market segments. Others take a micro approach, breaking investment 

opportunities down company by company to try to pinpoint the investment potential of 

each. These professionals are called equity analysts.

Buy-Side and Sell-Side Analysts

Equity analysts come in two types: buy-side analysts and sell-side analysts. Buy-side 

analysts work for fund managers at mutual fund brokers and financial advisory firms. 

They research companies in their employers' portfolios, as well as other companies that 

may represent profitable investment opportunities. Based on this research, they prepare 

reports that offer buy and sell recommendations to management.

Sell-side equity analysts often work for the big investment banks, such as Goldman Sachs. 

Their jobs entail researching the financial fundamentals of companies the bank is 

considering taking public and determining which ones have the strongest potential to 

become profitable.

For aspiring financial analysts, one of the most important decisions is whether to specialize 

as an equity analyst or pursue another niche under the broader umbrella of financial analysis.

The following comparison explains some of the subtle differences between a career as a 

financial analyst and an equity analyst.

Education Required

No licensing board or regulatory authority sets hard-and-fast educational minimums for 

financial analysts or equity analysts. However, a bachelor's degree has become a 

de facto minimum for receiving an offer to work in either field. Beyond this, the individual 

firms doing the hiring set the standards.

Because financial analysis is the broader of the two careers, more employment opportunities 

abound, from huge Wall Street investment banks to insurance companies and small, 

local firms. Educational standards can vary depending on which of these routes an 

applicant pursues. At the very least, he or she should have a bachelor's degree, with the 

most preferable majors being economics, finance and statistics.

Equity analysts are much more concentrated on Wall Street at the big investment banks. 

The big banks are known to look for the best of the best when hiring those right out of 

college. Because of this, they focus their recruiting efforts almost exclusively on top-tier 

schools, such as the Ivy Leagues, Duke and the University of Chicago. While applying 

with a degree from a lesser-rated school is short of a death knell in the field, the plain fact

is, statistically, a Princeton grad has a much stronger shot at landing an equity analyst 

position compared to a graduate of a typical large state university. For graduates of 

non-top-tier schools who still want to pursue equity analysis, their best bet is getting into, 

and graduating from, an elite MBA program.

Skills Needed

Financial analysts and equity analysts need strong analytical and quantitative skills, 

problem-solving ability and, equally importantly, a love for the markets. Just as a financial 

advisor or stockbroker keeps a finger constantly on the pulse of the market, analysts who

study investment data must do the same to draw accurate conclusions from the data.

While both careers require hard work and dedication, equity analysts in particular, due to 

the nature of their likely employers, should be prepared for a tough grind and a lot of work 

hours. A job at a big investment bank is not a 9-to-5 gig with weekends off. The average 

workweek, particularly during the first few years, could very well be upward of 80 or 90 

hours. In fact, some banks have bunk rooms so that analysts working into the night can 

crash for a few hours before being back at their desks before the following day's opening 


Starting Salary

An equity analyst almost invariably makes more money than a traditional financial analyst, 

but he or she puts in a lot more hours to earn that money. As of 2017, the average annual 

base salary for an entry-level financial analyst was $55,300, according to Salary.com. 

Bonuses, when given, are usually small and tied to company performance, not individual 


Equity analysts, by contrast, earn a median base salary of $80,400. Equity analysts also 

have the potential to double their base pay with bonuses, even during the first year. A 

common first-year total income goal for an equity analyst is $140,000. Most financial analysts, 

though they make above-average incomes, have to work many years before getting to 

the income an equity analyst can make his or her first year, and some never get there.

Job Outlook

According to the U.S. Bureau of Labor Statistics (BLS), the job outlook for financial analysts 

is strong through 2026. Projected job growth in the field is 11% compared to 7% growth 

across all occupations. The BLS lumps equity analysts with financial analysts when 

making employment projections.

It's worth noting that the job market for equity analysts is, for obvious reasons, tied to the 

health of the big banks. This health was tenuous for a period beginning in 2008, but thanks 

to restructuring, along with an injection of taxpayer-funded aid, investment banks are doing much better. Assuming no subsequent turbulence, equity analysts should continue to enjoy a strong job market.

Which One to Choose

These careers require similar skills, education and background. One consideration is what 

kind of employer you want to work for. Basically, if you prefer a smaller or mid-sized 

company, you have a much better shot as a financial analyst given the aforementioned 

fact that most equity analyst jobs are at big investment banks.

Another consideration is, of course, money. If your No. 1 goal is a big paycheck, become 

an equity analyst at a big bank. Keep in mind you are probably going to be settling in at 

the office for an evening of work while your financial analyst friends are at the gym, 

happy hour, or playing rec league softball. If work-life balance is at the top of your list, 

lean toward financial analysis, and definitely stay away from the big investment banks.

Read more: 

by 趙永祥 2018-04-25 19:56:22, 回應(0), 人氣(19)

By conventional reckoning, the S&P 500 Index (SPX) has had one correction so far in 2018,

a 10.2% decline from the record high close on January 26 through the close on February 8, 

a brief pullback that lasted just 13 calendar days, per Yardeni Research Inc. Or maybe the 

correction is still underway, having lasted 88 calendar days and 52 trading sessions through 

April 24, making this the longest correction since May 2008, according to MarketWatch

Perhaps there are even more ways of looking at corrections.

The 2018 Correction: Conventional Measurement

The S&P 500 closed at a value of 2,872.87 on January 26. This was both its all-time highest 

close, and its all-time peak reached at any point during any trading day. The conventional

method for measuring corrections, as used by Yardeni, looks strictly at closing prices. 

A correction involves a price decline of at least 10%, and is measured from a market peak 

to the subsequent market trough. That trough was reached at the close on February 8, 

which was 13 calendar days and 9 trading sessions later, at 2,581.00, 10.2% below the 

January 26 peak.

If you expand the analysis to include intraday prices, the trough was reached one day 

later, February 9. The S&P 500 sunk as low as 2,532.69 on that day, but recovered to 

close at 2,619.55. On this basis, the correction bottomed out at an 11.8% decline. 

That intraday low on February 9 is also the lowest point that the index has reached so far

this year. As of the close on April 24, the S&P 500 is down by 8.3% from the January 26 


The Alternative Measurement

According to WSJ data reported by MarketWatch, the current correction is the longest since 

the one ending on May 1, 2008. From a peak of 1,409.13 on January 9, 2008, the S&P 500 

bottomed out at 1,256.98 (10.8% lower) in intraday trading on March 17, 2008, and regained 

that peak on May 1, 2008. By this set of definitions, that correction lasted 33 trading days.

MarketWatch cites analysis by The Wall Street Journal Market Data Group that considers 

a correction to remain underway until the previous market peak has been regained. 

Based on the number of trading days that MarketWatch indicates as the length of the 

current correction so far, it is apparent that this method starts the count on the day that 

the index first traded below 90% of its previous peak. So, the count began on February 8 

and will continue until the S&P 500 reaches 2,872.87 once again, 9.0% above the April 24 


Longer Corrections Mean Shorter Bull Markets

The alternative method for measuring corrections also has ramifications for dating and 

measuring bull markets. The conventional method considers the current bull market to 

have begun at the close on March 9, 2009, the trough of the previous bear market. But if 

corrections (and also, presumably, bear market declines of 20% or more) are not deemed 

to be over until the previous peak is regained, the current bull market did not really begin 

until more than four years later, on March 28, 2013. That is when the previous bull market 

peak of 1,565.15, set on October 9, 2007, was reached once again.

MarketWatch essentially argues that the 2018 correction is longer and more severe than 

typically reported. To be logically consistent, they also should argue that the current bull market 

is much shorter (five years rather than nine years) and of a much smaller magnitude 

(a 68% gain rather than a 289% gain through April 24) than standard measurements indicate. 

Double Dip Below 10%

Without explaining his methodology, John Stoltzfus, chief investment strategist at Oppenheimer, 

told CNBC "we've had two separate 10% pullbacks" this year. More accurately, taking 

intraday prices into account, the S&P 500 has been more than 10% below its January 26 

peak on two separate occasions, February 8–9 and April 2. In any case, Stoltzfus sees 

solid fundamentals that will propel the index to close 2018 at 3,000, whereas other pundits 

see a host of negative factors that will trigger a plunge of 30%, 40% or even 60%. 

(For more, see also: Stocks' 'Remarkable Resilience' Can Boost Market 12%.)

Recent History of Corrections

Per the WSJ data cited by MarketWatch, the average correction since 1950 has lasted 

61 trading days, while the last five corrections have averaged 37 sessions. Analysis by 

Goldman Sachs Group indicates that the typical correction takes 70 days to reach the 


followed by a recovery period that averages 88 days, MarketWatch adds.

Using what we call the alternative method above, Bloomberg has reported that, on average, 

the four corrections after 2009 but prior to 2018 lasted 200 days and reduced the value 

of the S&P 500 by 14%. The longest took 417 days. Per the standard method used by Yardeni, 

the averages were 106 days and a 15% drop, while the longest lasted 157 days. 

(For more, see also: 5 Stock Corrections Show More Pain Ahead.)

Read more: This Stock Correction Is Now the Longest in a Decade | Investopedia 

by 趙永祥 2018-04-10 12:21:28, 回應(0), 人氣(21)

While most news covers sports and politics in a largely intuitive language that caters to 

a wide audience, stock market news is typically delivered to a more educated, affluent 

demographic that is assumed to be well-versed in investing jargon – even more so in 

updates reporting the quarterly and annual successes of a publicly traded company.

In order to get a better understanding of what you read, we’ll briefly explore the terms 

you commonly encounter in market news – specifically when a company announces its 

earnings. This article will illustrate where you will see these words, what they mean, and 

what they pose for a company, using excerpts from an earnings news report covering a 

fictional company, Hemlock Incorporated.

Earnings Announcement

Hemlock Incorporated announced its fiscal 2017 Q3 results after the markets closed

, reporting non-GAAP earnings per share of 67 cents, an increase of 17% from the 

last quarter, coupled with a net income of $250 million, up from $235 million. 

Earnings guidance from Hemlock Incorporated fell within range, with EBITDA, 

net income from continuing operations, and free cash flow beyond the high-end of their 

respective guidance ranges.

Highlights from the third quarter of 2017 include:

  • Cash and cash equivalents of $128 million.
  • EBITDA increase of 19% from Q2.
  • Free cash flow of $35 million, up from Q2’s $32.7 million
  • Total debt increased from $95 million to $100 million.

However, despite the 17% EPS gain, Hemlock Incorporated fell well below the 

analyst earnings estimate of 71 cents. Coupled with Hemlock’s increasing total debt,

some analysts are left questioning the company’s ability to service its debt moving 


4 Common Terms

Net income in its most basic definition refers to a company’s total earnings or profit. 

Simply put, net income is the difference calculated when subtracting all expenses 

(including tax expenses) from revenue. When a company’s net income increases, 

it’s normally a result of either revenue increasing or expenses being slashed. It goes 

without saying that an increase in net income is generally perceived as a positive thing 

and factors into a stock’s performance.

Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) is calculated by 

subtracting operating expenses from revenue and adding back depreciation and 

amortization to operating profit (aka EBIT). EBITDA can be used as a proxy for 

free cash flow (FCF) because it accounts for the non-cash expenses of depreciation and 


On the income statement, EBITDA is a line item above net income that excludes other 

non-operating expenses, as well as interest expenses and taxes. Some could argue that 

compared to net income, EBITDA paints a rawer image of profitability. 

While some proponents of EBITDA argue that it’s a less-complicated look at a company’s

financial health, many critics state that it oversimplifies earnings, which can create 

misleading values and measurements of company profitability.

As a new investor, it’s important to know the distinction between like measurements 

because the market allows firms to advertise their numbers in ways not otherwise 

regulated. For instance, often companies will publicize their numbers using either 

GAAP or non-GAAP measures. GAAP, or Generally Accepted Accounting Principles

outlines rules and conventions for reporting financial information. It is a means to 

standardize financial statements and ensure consistency in reporting.

When a company publicizes their earnings and includes non-GAAP figures, it means they

want to provide investors with an arguably more-accurate depiction of the company’s 

health, like removing one-time items to smooth out earnings. However, the further away a 

company deviates from GAAP standards, the more room is allocated for some 

creative accounting and manipulation (like in the case of EBITDA). 

When looking at a company publishing non-GAAP numbers, new investors should be 

careful of these pro-forma statements, as they may differ greatly from what GAAP deems 


Finally, earnings per share (EPS) is one of the most common things highlighted in an 

earnings announcement and provides investors insight into a company’s earnings health 

and often affects its stock price after an announcement. EPS is calculated by taking net 

income, subtracting the preferred dividends 

(for the sake of simplicity, let’s assume Hemlock Incorporated doesn't pay dividends on 

preferred shares), and taking that difference and dividing it by the average number of 

outstanding shares.

In the case of Hemlock, its current quarterly EPS is calculated by dividing its net income 

of $250 million by the company’s 37 million outstanding shares. 

When reported, EPS is typically compared to earnings from either the previous quarter or 

the same quarter in the previous fiscal year (year over year, or YoY). It is also used in 

basic valuation calculations like the P/E ratio.

Cash on Hand, Money in the Bank

Another thing most news reports look at is how companies manage their money – specifically, 

how much they have in free cash flow, total debt, and what assets they have available in 

cash equivalents, such as short-term government bonds that they can sell to settle debts.

In Hemlock Inc.’s announcement, free cash flow is increasing, meaning that after all 

expenses have been laid out in order to maintain the business’ continuing operations, 

the amount of cash it has on hand is growing. On Hemlock’s balance sheet

the company shows cash and cash equivalents of $128 million, which can be converted 

into cash if required, especially in the event that their total debt increases 

and/or income takes a hit.

When assessing a company’s quarterly success or failure, pay attention to those terms. 

How effectively a company handles the cash it possesses and how it pays down its 

debts are both indicators of its ability to grow and increase shareholder value.

Plans and Expectations

Even though Hemlock has seen numbers jump in various areas over the past quarter, 

the fact that it missed analysts' estimates may not bode well for investor confidence. 

Earnings estimates are forecast expectations of earnings or revenue based on 

projections, models and research into the company’s operations and most frequently 

published by financial analysts. Some companies will provide "guidance" of management's 

expectations for future results.

Even if a company sees an increase in profitability, if the actual earnings fall below 

expected earnings, the market will see to it that the stock price adjusts to the new information 

(read: drop in value.) This is due to the fact that estimates are usually built into the 

current price of a stock. Thus, when investors hear how a company “missed expectations” 

in spite of higher revenues being reported, the market corrects the price of the stock 


Read more: 10 Common Finance Terms Every Newbie Needs To Know | Investopedia 

by 趙永祥 2018-03-25 06:18:02, 回應(0), 人氣(23)

Private equity is capital made available to private companies or investors. 

The funds raised might be used to develop new products and technologies, 

expand working capital, make acquisitions, or strengthen a company's balance sheet. 

Unless you are willing to put up quite a bit of cash, your choices in investing in the 

high-stakes world of private equity are very limited. In this article, we'll show you why 

and where you can invest in the private equity game.

Why Invest in Private Equity?

Institutional investors and wealthy individuals are often attracted to private equity 

investments. This includes large university endowments, pension plans and family offices. 

Their money becomes funding for early-stage, high-risk ventures and plays a major role 

in the economy.

Often, the money will go into new companies believed to have significant growth possibilities 

in industries such as telecommunications, software, hardware, healthcare and 

biotechnology. Private equity firms try to add value to the companies they buy and make 

them even more profitable. For example, they might bring in a new management team, 

add complementary companies and aggressively cut costs, then sell for big profits.

You probably recognize some of the companies below that received private equity funding 

over the years:

  • A&W Restaurants
  • Harrah's Entertainment Inc.
  • Cisco Systems
  • Intel
  • Network Solutions (the world's largest domain name registrar)
  • FedEx

Without private equity money, these firms might not have grown into household names.

Typical Minimum Investment Requirement

Private equity investing is not easily accessible for the average investor. 

Most private equity firms typically look for investors who are willing to commit as much 

as $25 million. Although some firms have dropped their minimums to $250,000, this is 

still out of reach for most people.

Fund of Funds

fund of funds holds the shares of many private partnerships that invest in private equities.

It provides a way for firms to increase cost effectiveness and reduce their minimum investment 

requirement. This can also mean greater diversification, since a fund of funds might invest 

in hundreds of companies representing many different phases of venture capital and 

industry sectors. In addition, because of its size and diversification, a fund of funds has 

the potential to offer less risk than you might experience with an individual private equity 


Mutual funds have restrictions in terms of buying private equity directly due to the SEC's 

rules regarding illiquid securities holdings. The SEC guidelines for mutual funds allow up 

to 15% allocation to illiquid securities. Also, mutual funds typically have their own rules 

restricting investment in illiquid equity and debt securities. For this reason, mutual funds 

that invest in private equity are typically the fund of funds type.

The disadvantage is there is an additional layer of fees paid to the fund of funds manager. 

Minimum investments can be in the $100,000 to $250,000 range, and the manager may 

not let you participate unless you have a net worth between $1.5 million to $5 million.

Private Equity ETF

You can purchase shares of an exchange-traded fund (ETF) that tracks an index of publicly 

traded companies investing in private equities. Since you are buying individual shares 

over the stock exchange, you don't have to worry about minimum investment requirements.

However, like a fund of funds, an ETF will add an extra layer of management expenses 

you might not encounter with a direct, private equity investment. 

Also, depending on your brokerage, each time you buy or sell shares, you might have to 

pay a brokerage fee. (For related reading, see: Introduction To Exchange-Traded Funds.)

Special Purpose Acquisition Companies (SPAC)

You can also invest in publicly traded shell companies that make private-equity investments 

in undervalued private companies, but they can be risky. The problem is the SPAC might 

only invest in one company, which won't provide much diversification. They may also be 

under pressure to meet an investment deadline as outlined in their IPO statement. 

This could make them take on an investment without doing their due diligence.

The Bottom Line

There are several key risks in any type of private-equity investing. As mentioned earlier, 

the fees of private-equity investments that cater to smaller investors can be higher than 

you would normally expect with conventional investments, such as mutual funds

This could reduce returns. Additionally, the more private equity investing opens up to 

more people, the harder it could become for private equity firms to locate good investment 


Plus, some of the private equity investment vehicles that have lower minimum investment 

requirements do not have long histories for you to compare to other investments. 

You should also be prepared to commit your money for at least 10 years; otherwise, 

you may lose out as companies emerge from the acquisition phase, become profitable 

and are eventually sold.

Companies that specialize in certain industries can carry additional risks. For instance, 

many firms invest only in high technology companies. Their risks can include:

  • Technology risk: Will the technology work?
  • Market risk: Will a new market develop for this technology?
  • Company risk: Can management develop a successful strategy?

Despite its drawbacks, if you are willing to take a little more risk with 2% to 5% of your 

investment portfolio, the potential payoff of investing in private equity could be big. 

(For related reading, see: Grasp the Accounting of Private Equity Funds.)

Read more: How To Invest In Private Equity 

by 趙永祥 2018-03-18 21:05:06, 回應(0), 人氣(27)

Why a 20% Plunge In Tech Stocks Is a Buying Opportunity
Facebook Inc
Advanced Micro Devices Inc
Micron Technology Inc
Apple Inc
View Watchlist

Tech stock valuations have reached such high levels that the sector may be due for a 

sharp pullback of 20%, says Paul Meeks, a veteran of more than 30 years in the tech 

field as an analyst, portfolio manager, and chief investment officer (CIO),

in remarks on CNBC. "Because they're so volatile high beta [risk] stocks, when they 

correct they don't just go down 2 percent. They go down 20 percent," as he told CNBC, 

adding, "It could happen at any time."

Meeks nonetheless remains bullish on the sector despite these stocks' wild swings. 

He says he would use a selloff of 10% or more as a buying opportunity to scoop up 

shares of Facebook, Inc.

 (FBFBFacebook Inc185.09+0.67%) and others. "I've been covering the tech sector for 

a very long time, and I can say in my heart of hearts that the fundamentals relative to 

the other 10 sectors in the S&P 500 are as good as they've ever been," he told CNBC, 

adding, "Fundamentally I like it."

Big Advance

The S&P 500 Information Technology Index (S5INFT) has advanced by a robust 491% 

from its bear market low on March 3, 2009 through the close on March 12, 2018, versus 

a 300% gain for the S&P 500 Index (SPX) over the same time period, 

per S&P Dow Jones Indices. Given that the S&P 500 tech stocks are up by 37.5% 

over the past year, per the same source, a 20% pullback would leave investors with 

one-year gains of about 10%.

Meeks' Shopping List

"Valuations are extended for some of the names, and everybody's favorite names 

particularly the FANGs," Meeks told CNBC. As mentioned, he indicated that FANG 

member Facebook is on his shopping list if prices decline though he did not say at what 

price. He already holds shares of Apple Inc. 

(AAPLAAPLApple Inc178.02-0.35%), CNBC notes. 

(For more, see also: Amazon, Netflix Selling At 'Crazy' Prices Poised For Big Selloff.)

"I think some of the semiconductors have fallen and they haven't gotten back up. 

But I think they're some good opportunities," Meeks also said. He mentioned Advanced 

Micro Devices Inc. (AMDAMDAdvanced Micro Devices Inc11.47+0.09%) and 

Micron Technology Inc. 

(MUMUMicron Technology Inc60.58+2.96%) in this vein. Technology fund manager 

Paul Wick is among those who see semiconductor stocks as a cheap way to ride some 

of the big secular trends in technology, even at current prices. 

Meanwhile, a number of companies in the sector may be acquisition targets. 

(For more, see also: Chip Stocks At Record Highs Still a Bargain.)

'1990s Bubble Was MUCH, MUCH Bigger'

The tech-heavy Nasdaq Composite Index reached a new all-time high on March 12, 

but investors should note key differences with the Dotcom Bubble, according to 

Justin Walters, co-founder of research firm Bespoke Investment Group, 

as quoted by Barron's. Looking instead at the Nasdaq 100 Index

Walters reminded readers that its trailing P/E ratio soared to an incredible 80 times 

earnings in 2001, while its valuation has remained below 30 during its current rally. 

In fact, as of March 9, its trailing P/E ratio was 27.25, versus 25.79 for the S&P 500, 

per The Wall Street Journal.

The S&P 500 tech sector had a forward P/E ratio of 18.6 as of March 1, compared to 

17.0 for the entire S&P 500, per analysis by Yardeni Research Inc. The recent bottom 

for tech valuations was a forward P/E of about 11 in late 2008, at which time the 

S&P 500 had bottomed out at a forward multiple of about 10. During the Dotcom bubble, 

the S&P 500 tech sector's forward P/E topped out at just below 50, according to 

Yardeni's charts.

As far as price gains go, Walters also indicated that the Nasdaq 100 advanced 

by 1,223% during the Dotcom Bubble, more than double the 584% advance from its 

trough during the financial crisis through last week. "This isn't to say that the current 

rally isn't a bubble itself, but it does show that the 1990s bubble was MUCH, MUCH 

bigger," he wrote, as quoted by Barron's.

Read more: Why a 20% Plunge In Tech Stocks Is a Buying Opportunity | Investopedia 


by 趙永祥 2018-03-18 21:00:40, 回應(0), 人氣(23)


Investment Information


Mutual Funds

  1. Top 5 Mutual Fund Holders of Electronic Arts

  2. Top Mutual Fund Holders of FedEx (FDX)

  3. The Value in Socially Responsible Investing

    Socially responsible investing has been growing in popularity. Discover if it's the right strategy for you.
  4. Bitwise Claims First Cryptocurrency Index Fund for Accredited Investors

    Bitwise launched the HOLD 10 Index―a market-cap-weighted index that tracks the largest cryptocurrencies, including bitcoin, ...
  5. 9 Fund Favorites for Income Investors

    Historically low interest rates have created challenges in recent years for investors seeking yield. For those who want to ...
  6. Top 4 Mutual Fund Holders in Marvell Technology Group (MRVL)

    Marvell Technology Group is a chipmaker and technology company known for powering Google's Chromecast streaming device.
  1. How Statistical Arbitrage Can Lead to Profits

  2. Absolute Return

  3. Instant History Bias

    An instant history bias is a reporting accuracy issue created by the fact that hedge fund managers can sometimes backfill ...
  4. Collateralized Debt Obligation Squared - CDO-Squared

    A collateralized debt obligation squared is a special purpose vehicle (SPV) with securitization payments backed by CDO tranches. ...
  5. The Basics of REIT Taxation

    The unique tax advantages offered by real estate investment trusts (REITs) can translate into superior yields.
  6. Top 3 Mutual Fund Holders of Qualcomm

    Explore the three mutual funds that hold the largest amounts of Qualcomm shares.

Read more: Investing - Mutual Funds | Investopedia 

by 趙永祥 2018-03-17 06:30:43, 回應(0), 人氣(24)

Vng Dvdnd Aprct
Stryker Corp
View Watchlist

Stock investors looking for ways to "de-risk" their portfolio at the peak of the market make

 a big mistake by simply rushing into bonds, according to Barron's. Instead, they should 

pursue a multifaceted approach. "It's more about reducing the risks within an asset class, 

rather than changing the asset mix," as David Lafferty, market strategist at Natixis Global 

Asset Management, told Barron's.

 (For more, see also: Is It Time To Lock In Your Stock Gains?)

Among the de-risking suggestions from investment professionals interviewed by 

Barron's: increase your diversification across countries and regions; put your U.S. stock 

allocation into higher-quality companies; and choose bonds carefully, since "some of the 

biggest risks lie in bonds," Barron's warns. 

(For more, see also: Stocks Face "Nasty Shock" From Fed-Created Bubble.)

Source: Barron's

Foreign Stocks

Even after posting large gains so far in 2017, European and emerging markets stocks 

offer cheaper valuations and better earnings growth prospects than most U.S. equities, 

Barron's says. The Oakmark International Investor Fund 

(OAKIX) and the Baron Emerging Markets Fund (BEXFX) have good records of success 

in finding undervalued companies that offer long-term growth, according to Barron's. 

The Oakmark fund has delivered a total return of 36.5% during the past year, placing it in the top 1% of funds in its category, per Morningstar Inc. It also has been in the top 2% in the last three, five and ten-year periods. The Baron fund has a total return of 26.9% during the past year, putting in the top 43% of its category, per Morningstar. It was in the top 4% for the last five-year period.

The Vanguard Total International Stock Index Fund (VGSTX) has delivered a total return 

of 24.2% over the past year, placing it in the top 33% of its category, per Morningstar

This fund is designed to track the MSCI All-Country World Index Excluding U.S., and Morningstar considers its peer group to be foreign large blended funds.

Higher Quality U.S. Stocks

The Jensen Quality Growth Fund (JENRX) has been upgrading an already high quality 

in order to reduce risk, Barron's says, adding that portfolio co-manager Eric Schoenstein 

cites medical device maker Stryker Corp. 

(SYKSYKStryker Corp167.51+0.64%) as an underappreciated growth stock. 

Meanwhile, fund manager Thomas Huber of the  T. Rowe Price Dividend Growth Fund 

(PRDGX) tells Barron's that medical device makers and financial stocks offer relatively 

cheap valuations along with good growth prospects. 

(For more, see also: Which Stocks May Outperform in the Next Market Crash.)

The Jensen fund's total return of 20.9% over the past year has lagged both the S&P 500 

Index (SPX) and 81% of its peers, according to Morningstar. Longer-term, over the past 

ten years, it has been in the top 34% of its peer group. The fund from T. Rowe Price, 

meanwhile, has delivered a total return of 19.6% over the past year, behind 76% of its 

category, but it is in the top 13% for the last ten-year period, per Morningstar

The Vanguard Dividend Appreciation ETF

 (VIGVIGVng Dvdnd Aprct103.93+0.26%) is up 19.4% over the past year and currently 

yields 1.8%, per Investopedia data.

Beware of Credit Risk

In reaching for yield, bond investors have been loading up on high-yield debt with high 

credit risk. The problem with that approach, Barron's says, is that high-yield bonds act 

more like stocks, and thus do not reduce the risk associated with a stock portfolio. 

Meanwhile, many bond funds have increased their exposure to high-yield debt, 

according to research by Morningstar cited by Barron's. 

The bond funds listed in the table above, by contrast, have "gone light on credit risk," 

per Barron's. Moreover, the MetWest fund has had one of the lowest correlations with 

stocks over the past decade, Barron's adds.

Read more: How To 'De-Risk' Your Stock Portfolio For A Crash | Investopedia 

by 趙永祥 2018-03-14 07:24:00, 回應(0), 人氣(24)


Short selling allows a person to profit from a falling stock, which comes in handy as stock prices are constantly rising and falling. There are brokerage departments and firms whose sole purpose is to research deteriorating companies that are prime short-selling candidates. These firms pore over financial statements looking for weaknesses that the market may not have discounted yet or a company that is simply overvalued. One factor they look at is called short interest, which serves as a market-sentiment indicator. We'll look at short interest and how it can be used as an indicator for the near-term performance of a stock.

[Short interest is just one market-sentiment indicator that day traders use when deciding when to buy or sell a particular security. For example, a breakout in a stock with a high level of short interest can lead to a snowball effect as shorts cover their position. Investopedia's Become a Day Trader Course will teach you how to use short interest and other indicators to make successful trades.]

The Art of Short Selling

Short selling is the opposite of buying stocks. It's the selling of a security that the seller does not own, done in the hope that the price will fall. If you feel a particular security's price, let's say the stock of a struggling company, will fall, then you can borrow the stock from your broker-dealer, sell it and get the proceeds from the sale. If, after a period of time, the stock price declines, you can close out the position by buying the stock on the open market at the lower price and returning the stock to your broker. Since you paid less for the stock you returned to the broker than you received selling the originally borrowed stock, you realize a gain.

The catch is that you lose money if the stock price rises. This is because you have to buy the stock back at the higher price. In addition, your broker-dealer can demand that the position be closed out at any time, regardless of the stock price. However, this demand typically occurs only if the dealer-broker feels the creditworthiness of the borrower is too risky for the firm. (For a complete overview on short selling, see our Short Selling Tutorial.)

Short Interest Shows Sentiment

Short interest is the total number of shares of a particular stock that have been sold short by investors but have not yet been covered or closed out. This can be expressed as a number or as a percentage.

When expressed as a percentage, short interest is the number of shorted shares divided by the number of shares outstanding. For example, a stock with 1.5 million shares sold short and 10 million shares outstanding has a short interest of 15% (1.5 million/10 million = 15%).

Most stock exchanges track the short interest in each stock and issue reports at month's end, although Nasdaq is among those reporting twice monthly. These reports are great for traders because they allow people to gauge overall market sentiment surrounding a particular stock by showing what short sellers are doing. 

News Drives Changes in Short Interest 

A large increase or decrease in a stock's short interest from the previous month can be a very telling indicator of investor sentiment. Let's say that Microsoft's short interest increased by 10% in one month. This means that there was a 10% increase in the number of people who believe the stock price will decrease. Such a significant shift provides good reason for investors to find out more. We would need to check the current research and any recent news reports to see what is happening with the company and why more investors are selling its stock.

A high short-interest stock should be approached with extreme caution, but not necessarily avoided at all cost. Short sellers (like all investors) aren't perfect and have been known to be wrong. In fact, many contrarian investors use short interest as a tool to determine the direction of the market. The rationale is that if everyone is selling, then the stock is already at its low and can only move up. Thus, contrarians feel a high short-interest ratio is bullish because, eventually, there will be significant upward pressure on the stock's price as short sellers cover their short positions. (Learn more in Can Perpetual Contrarians Profit as Traders?)

Understanding the Short-Interest Ratio

The short-interest ratio is the number of shares sold short (short interest) divided by average daily volume. This is often called the "days-to-cover ratio" because it determines, based on the stock's average trading volume, how many days it will take short sellers to cover their positions if positive news about the company lifts the price.

Let's assume a stock has a short interest of 40 million shares, while the average daily volume of shares traded is 20 million. Doing a quick and easy calculation (40,000,000/20,000,000), we find that it would take two days for all of the short sellers to cover their positions. The higher the ratio, the longer it will take to buy back the borrowed shares - an important factor upon which traders or investors decide whether to take a short position. Typically, if the days to cover stretch past eight or more days, covering a short position could prove difficult.

The NYSE Short Interest Ratio

The New York Stock Exchange short-interest ratio is another great metric that can be used to determine the sentiment of the overall market. The NYSE short-interest ratio is the same as short interest except it is calculated as monthly short interest on the entire exchange divided by the average daily volume of the NYSE for the last month.

For example, suppose there are 5 billion shares sold short in August and the average daily volume on the NYSE for the same period is 1 billion shares per day. This gives us a NYSE short-interest ratio of 5 (5 billion /1 billion). This means that, on average, it will take five days to cover the entire short position on the NYSE. In theory, a higher NYSE short interest ratio indicates more bearish sentiment toward the exchange and the world economy as a whole by extension. (For related reading, see When to Short a Stock.) 

Getting Caught in the Short Squeeze

Some bullish investors see high short interest as an opportunity. This outlook is based on the short interest theory. The rationale is, if you are short selling a stock and the stock keeps rising rather than falling, you'll most likely want to get out before you lose your shirt. A short squeeze occurs when short sellers are scrambling to replace their borrowed stock, thereby increasing demand, decreasing supply and forcing prices up. Short squeezes tend to occur more often in smaller-cap stocks, which have a very small float (supply), but large caps are certainly not immune to this situation.

If a stock has a high short interest, short positions may be forced to liquidate and cover their position by purchasing the stock. If a short squeeze occurs and enough short sellers buy back the stock, the price could go even higher. Unfortunately, however, this is a very difficult phenomenon to predict. (Find out how this strategy is used in The Short Squeeze Method.)

The Bottom Line

Although it can be a telling sentiment indicator, an investment decision should not be based entirely on a stock's short interest. That said, investors often overlook this ratio and its usefulness despite its widespread availability. Unlike the fundamentals of a company, the short interest requires little or no calculations. Half a minute of time to look up short interest can help provide valuable insight into investor sentiment toward a particular company or exchange. Whether you agree with the overall sentiment or not, it is a data point worth adding to you overall analysis of a stock. 

Read more: Short Interest: What It Tells Us 
by 趙永祥 2018-03-07 21:26:22, 回應(0), 人氣(26)

The current bull market is just days away from becoming nine years old, given that the previous bear market came to an end with the close of trading on March 9, 2009. Many investors wonder how much longer it can go. Famed investor and market watcher Mohammed El-Erian writes on March 4, as printed in the Financial Times: "The particular sequence of the last month—abrupt correction followed by a rapid bounce back and then last week's pull back—raises interesting questions as to whether markets are in the initial phase of a prolonged sell-off or, instead, being placed on a stronger medium-term footing. The answer to that question will be answered by five factors."

Those five factors are: economic growth; monetary policy; the yield curve; volatility and liquidity; and investor complacency. The Investopedia Anxiety Index (IAI) records very high levels of concern about the securities markets among our millions of readers around the world. While the S&P 500 Index (SPX) has risen by 303% since the end of the last bear market, it is down by 5.0% from its high at the close on January 26, and up by just 2.0% year-to-date through the close on March 6. Meanwhile, volatility as measured by the CBOE Volatility Index (VIX) surged in January, adding to worries among investors who had gotten used to steady gains in stock prices.

Resume in Brief

A contributor to Bloomberg and the Financial Times, El-Erian is the chief economic adviser at Allianz SE, the parent company of asset management firm Pimco, where he previously was CEO and co-chief investment officer (CIO). Among other positions, he also headed the Global Development Council under President Barack Obama, was CEO of the Harvard Management Co., which invests that university's endowment, was a managing director at Salomon Smith Barney (later acquired by Citigroup, then sold to Morgan Stanley), and was a deputy director of the IMFper Bloomberg.

1. Economic Growth

"Supported by pro-growth policies in the U.S. and a natural economic healing process in Europe, the global economy is in the midst of synchronized pick-up in growth," El-Erian writes. He is encouraged by the fact that consumption and business investment have been the major drivers of growth, rather than "financial engineering." Continued strong economic fundamentals are essential for the markets, he says, and he looks for the markets to be less reliant on liquidity from central banks in the form of asset purchases, or on liquidity from companies in the form of share buybacks, dividends, and acquisitions. He also believes that "growth can gain additional momentum if the world avoids a costly stagflationary trade war."

2. Monetary Policy

An upbeat sign for the U.S. economy, per El-Erian, is that economic growth has strengthened despite tightening by the Federal Reserve in the form of interest rate increases, announcements of future increases, and the cessation of asset purchases called quantitative easing. Indications that other leading central banks will follow a similar path also have failed to derail growth overseas, he notes. However, it remains to be seen, he adds, whether growth will persist "if the policy transition becomes more simultaneous [among]...several systemically-important central banks."

3. The Yield Curve

El-Erian sees a "relatively orderly" increase in bond yields that is reducing incentives for excessive risk taking. Moreover, he believes that the flat yield curve is primarily the result of "investment flows and bond issuance patterns," rather than forces that herald a "significant economic slowdown."

4. Volatility and Liquidity

He also finds it encouraging that volatility as measured by the VIX has increased to a more "realistic and sustainable range" than existed before the correction. Meanwhile, the recent implosion of exotic investment products linked to the VIX, as well as the interest shown by regulators in their failure, should remind investors of the importance of liquidity, he adds. (For more, see also: Stock Sell-Off Has Worrisome Similarities to 2008 Crisis.)

5. Investor Complacency

Another positive sign for El-Erian is that the return of volatility seems to have made investors less confident, and less certain that buying the dips will guarantee gains. In particular, the refusal of central banks to "immediately provide markets with comforting signals" during the correction gave a needed jolt to investor complacency, he adds. "Further progress on all five of these issues would put markets on a firmer footing and lower the risk of a much more dramatic and durable market sell-off," he concludes. (For more, see also: Why Stock Investors Can't Count on a Fed Rescue.)

Red Flags

Meanwhile, quantitative strategists at Bank of America Merrill Lynch note that 13 of their 19 "bear market signposts," or 68%, have been tripped, CNBC reports. These include economic, monetary, earnings and technical indicators, CNBC says, noting "Nearly all of them have usually been triggered before past bear markets."

Additionally, while sustained bear market declines of 20% or more are rare outside of a recession, the current bull market offers a more complicated picture, CNBC indicates, since stock valuations and stock prices raced ahead of the real economy, with stocks eventually becoming "over-owned and over-loved" by January of this year. Whether some over-compensation to the downside is long overdue remains a matter for debate.

Read more: 5 Ways to Stabilize a Volatile Stock Market: El-Erian | Investopedia