Tuesday, March 3, 2009

Advice to Investors

The novice investor generally shields himself from this unpleasant
fact by arguing that since he still holds the stock he bought 20
points higher, he has sustained no loss. (It's only a paper loss.)
That's being as realistic as a bald man, carrying a picture of his
high school head of hair, going into the barbershop for a shampoo. It
just isn't there anymore.

If you bought 100 shares at 35 and the stock is now selling at 20, you
are NOW out $1,500, plus commissions, and no amount of wishful
thinking can disguise that fact. The loss may be in a stock you should
have never bought in the first place. Or it may be in a stock which
once made sense but no longer suits your investment needs. Or it may
even be in a stock you'd like to continue owning, and should. It seems
that there is little argument about taking such losses in tune to
reduce your income tax bill. By "in time," of course, is meant a sale
anytime before the close of the stock market on Dec. 31.

And a sale it must be. Far too many investors think they can continue
to hold shares which have fallen in price and still claim a tax loss,
Not so. You may have bought stock in a "pie-in-the-sky" nursing home,
or restaurant or leisure products company when you felt you could
afford to take the risk. And it didn't work out. Now is the time to
face that fact.

Not only can the year-end tax loss maneuver help you reduce the income
tax bite but it can serve as a period of much-needed portfolio review,
prompted by the fact that if admitting one's mistakes is in itself a
virtue, the good to be derived can also spill over into an actual cash
savings. Of course, the loss may be in an investment grade stock which
did suit your needs when you bought it and, as a matter of fact, still
Many fine motor, utility, oil stocks, for example, remain investment
grade, still pay generous dividends, even at lower market prices. Even
so, if the tax loss can be helpful, consideration should be given to
taking that loss now even if you intend to (and, perhaps, should)
repurchase the stock after the required 31-day, waiting interval. Or
if, in order to retain an uninterrupted investment, you buy an
additional amount of the stock now and sell the shares on which you
have a loss 31 days later — BUT before Dec. 31.

The main point to be made here is that NOW is the time for a candid
review of the loss securities you hold. Try be honest with yourself in
answering: Was this stock a mistake in the first place? What really
are its chances of ever coming back? Even if I still like the stock
and am hopeful, shouldn't I take the tax loss by either buying more
stock now and selling out the original block after 31 days — or
selling now and buying back after 31 days?

It is a custom to adopt constructive resolutions for the New Year. In
investing, it is almost obligatory to take a long, hard, realistic
look at your portfolio losses — in time to recoup some of the money,
the stock market has taken away from you in recent months and years.

Monday, February 2, 2009

Sports Investments Opportunity

The sports industry is a powerful medium in advertising and sponsorship. The more proficient a sports team is envisaged, in terms of stature, success and fan base, the higher the attraction for a company or organization to appear connected with that team. US football is a front-runner in the American sports industry and conjures a huge audience in the path to Superbowl glory. The Epoch Times Local reported in their June 17-23 2005 issue that ''Industry sources have said NBC, a unit of General Electric Co., has agreed to pay $600 million a year for 16 regular-season Sunday night NFL games and the annual Thursday season opener. The six-year NBC package also includes two playoff games and three prime-time preseason games each year, as well as the 2009 and 2012 Super Bowl championship contests. By comparison, ESPN is said to be paying the NFL $1.1 billion a year over eight years to take over the "Monday Night Football" package.''
This clearly emphasizes the importance and net worth of American Football, and the potential capacity for financial growth and development for a corporation, and its subsequent performance in the stock market, if it can be identified as an affiliate with a successful team or sport, irrespective of the mainstream nature of the business. The NFL has thirty-two teams, each with their own official corporate sponsors. To be associated with an individual football team is more prolific than sponsoring a league, as fans identify with their personal preferences. If you support American Football and you are keen to invest in the stock market, combine both and invest in the NFL. Personal speculation is your own investment in your team. It must be clearly accepted that investing in stocks and shares can result in both an increase and decrease in value, according to current trends within the marketplace and the state of the economy. Any investment can yield a dividend and an increase in net worth, but you can also experience a decrease in the overall value of your investment.
Three leading corporate sponsors within the NFL that are continuing to record promising results for investors are General Electric (GE), Anheuser-Busch (BUD) and Verizon Communications (VZ) - Stock ticker symbol in parenthesis, for the New York Stock Exchange (NYSE). General Electric is a multinational conglomerate which is experiencing a continued growth in earnings, and believes in investing in the future. They operate in growing markets and report a total return of $25.4 billion to shareholders, via stock buyback and dividend payments. For 32 consecutive years the company has increased the dividend payout per share. (GE.com 2008) Anheuser-Busch is America's leading brewery with over 100 brands, including Budweiser beer and Michelob lager. For five years the company has been ranked No1 according to Fortune Magazines list of US beverage companies. Share prices have risen steadily in the last ten years, from $24.375 (09.02.98) to the current price of $68.030 (09.02.08), and a dividend increase of 12.1 percent was recently announced. (Anheuser-Busch.com 2008) Verizon Communications provides broadband, television and telecommunication services. In July 2008, the company reported that they had experienced an earnings growth into double figures, its key areas witnessed sales gains, and they have a strong operating cash flow. Current share prices are $35.70 (09.03.08), and the 52 week range has seen shares prices fluctuate between $33.15 - $46.24.

Thursday, January 22, 2009

invest during a recession

Knowing how to invest during a recession is essential if you don't want to be relying on your kids to pay for your groceries after you retire. Do you really want your son trying to cook anything more complicated than Macaroni and Cheese? Yeah, I didn't think so.

Many people feel its time to cash in their stocks as soon as the market hits hard times. This is not necessary. Instead, you should make some adjustments in your long term investment strategy. As is often the case, being diversified is essential to limiting your risk during turbulent economic times.

Most people want to take steps to protect their money during a recession. People take fewer risks, and are unwilling to take a chance at loosing any money, even if it means getting lower returns.

Bond Funds

There are several ways to invest your money which you should consider during a recession. Investing in bond funds is one of these options. Many brokers and professionals will recommended that people put their money into investment grade corporate bonds - these are much better than U.S. Treasuries, gold, or fixed income securities. Even after a surprise half-point interest rate cut, corporate bonds remain a good alternative for investors who are trying to avoid the risks associated with stocks.

The average yield on a five to ten year corporate bond is almost always above the ten year U.S. Treasury bond rate, with not a lot more risk. Returns are even greater on a twenty year investment grade corporate bond. Higher yields do reflect the higher risk associated with corporate debt compared to U.S. Treasuries bond debt, but this risk is often not much higher, especially if you are investing in a bond mutual fund.

The percentage of corporations defaulting on debt obligations has been on the rise, but investment risk is still low for high grade investment quality bonds. The default rate for high quality bonds is less then one percent. If you hold an investment grade bond fund, your risk from defaults is quite low. If you buy individual bonds, your risk is much higher.

Junk Bonds
Junk bonds are another way to invest during a recession. Bolder investors may want to consider these. Junk bonds are named so because they represent debt from high risk companies. Junk bond investors have historically earned their best returns the year after the junk bond market bottomed out. In 1991, when the nation was knee deep in the last recession, the junk bond market produced a 34.6% return on investment.

Interest rates always come down during a recession - bonds benefit from lower interest rates. The declining interest rate is magnified on the junk market because high-yield bonds carry much higher rates than other kinds of bonds. The declining interest rates make the high yields more attractive, which raises the price of the bonds.

The Stock Market

For those who prefer the stock market, exchange traded funds are often a good investment. These can be mutual funds that own stocks which track the performance of a major market index (such as the S&P500), or are actively managed funds. These funds often are involved in early rallies in the stock market, without being exposed to the poor earnings of a single company. ETFs have grown in popularity because they are cheap and easy to trade.

Money Markets

One of the safer investments you can make during a recession is money markets. These are relatively safe, but offer little in return, especially with interest rates being very low. These are great investments if you are not concerned with making money during the recession, but simply want to protect your principle balance and not loose anything.