freeforex-signals

Most traders use technical analysis to look at price charts and patterns to predict subsequent stock price changes. Some of these chart patterns imply that human behavior is similarly repeated many times. These patterns mirror the predictable conduct of buyers and sellers, such as Stock Strategy patterns. Historical price data are used by traders who analyze past market patterns, which help them to predict forthcoming pricing trends.

Overreaction and Underreaction

There are also overreactions and underreactions in human behavior in the stock market. News creates exaggerated price movements because investors overreact to them. This can lead to opportunities whereby people will find repetitions and take advantage of the overreactions. Unlike the overreaction that results when the market responds immediately after gaining new info when it takes long for a market to absorb a new piece of data entirely, it is known as under-reaction, and prices adjust slowly but surely.

Conclusion

Human behavior recurrence is among the notable forces that influence movement in stock market prices in the fascinating stock market arena. Investors find lots of helpful insights by navigating through herd mentality, psychological biases, and market trends.

freeforex forex freeforex-signals at 6:12 PM EDT
Post Comment | Permalink | Share This Post

Wednesday, 27 December 2023

The Right Stocks for Swing Trading

The Right Stocks for Swing Trading

The first key to successful swing trading is picking the right stocks. There are two key variables to consider when choosing the stocks to swing trade: liquidity and volatility.

The best candidates are large-cap stocks, which are among the most actively traded stocks on the major exchanges. In an active market, these stocks will have a high transaction volume. If a stock has poor liquidity or doesn't have deep action in a broker's trade book, it may be difficult to sell or may require substantial price discounts to relinquish the shares.

In addition, volatility can be a swing trader's best friend. Without price movement, there are no opportunities to make a profit. While volatility is often thought of negatively, swing trading relies on volatility to create an opportunity to capitalize on the appreciation of a stock's price. The stocks that have the highest volatility may be the most ideal for swing trading as there are the most opportunities for profit.

The Right Market

Financial markets typically have three prevailing long-term trends: the bear market, the bull market, or somewhere in between. Swing trading strategy is different under each environment.

Bear Market Swing Trading

Bear market swing trading is among the more difficult for natural buy-and-sell trades. In a downtrend environment, equity market prices are decreasing in the long term. Therefore, it is not advantageous to buy a security and hold it with expectations of price appreciation. There are several strategies to circumnavigate this:

Shorten your trade period. Instead of holding for weeks, be prepared to have a quicker turnaround on the securities you are holding.

Hold more cash. Plan on holding back some capital you may otherwise be trading in the event that securities you are holding do suffer material price declines.

Convert to options (by buying puts). Instead of buying now and selling later, the ideal position to hold if you believe prices are declining is to sell a security first, then buy it back later.

Bull Market Swing Trading

Alternatively, to bear markets, bull market trading may be easier. As prices tend to appreciate during these market conditions, it's easier to buy a security and experience a profit a short while later. However, there are a few things to keep in mind when swing trading during bullet markets:

Entry points are higher. After liquidating your position and capturing profits, chances are greater that general market securities are now more expensive if broad markets have appreciated. Be prepared to pay higher prices for securities.

Bad habits are formed. It's often said that bad trading habits are formed during bull markets. Continue to do due diligence and market research on the best securities to hold; while it may seem like every security is a winner, this won't always be the case.

Consider leverage. Leverage trading is not for everyone, and consider your risk appetite prior to leveraging. However, if you are confident in continual appreciation of the markets, you may be able to multiply your position through leverage.

In-Between Market Conditions

The best swing trading conditions occur when financial markets are trading sideways. When the market is transitioning between bear and bull markets or when the market is facing broad uncertainty, the best positions often present themselves for swing trading. Several items to consider include:

Https://stockstrategy.net

Volatility is good. When markets are volatile in both directions, the best swing trades are to be had. When volatility is strictly in one direction (like in bull or bear markets), it is often more difficult to pull off trades.

Conditions are safest. Not all swing trades work out. In the event you're stuck holding securities, chances are that neutral market conditions will minimize your losses. Instead of being stuck with securities during strong downtrend conditions, there is often more likelihood of prices rebounding.

The time frames that you should use for swing trading are an hour, four hours, daily, and weekly.

Using the Exponential Moving Average

Simple moving averages (SMAs) provide support and resistance levels, as well as bullish and bearish patterns. Support and resistance levels are often useful information when determining a course of action. Bullish and bearish crossover patterns signal price points where you should enter and exit stocks.

The exponential moving average (EMA) is a variation of the SMA that places more emphasis on the latest data points. The EMA gives traders clear trend signals and entry and exit points faster than a simple moving average. The EMA crossover can be used in swing trading to time entry and exit points.

A basic EMA crossover system can be used by focusing on the nine-, 13- and 50-period EMAs. A bullish crossover occurs when the price crosses above these moving averages after being below. This signifies that a reversal may be in the cards and that an uptrend may be beginning.

Read more on:

freeforex forex freeforex-signals at 12:59 PM EST
Post Comment | Permalink | Share This Post

Sunday, 26 November 2023

What Is Value Investing?

What Is Value Investing?

Value investing is an investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value. Value investors actively ferret out stocks they think the stock market is underestimating. They believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond to a company's long-term fundamentals. The overreaction offers an opportunity to profit by purchasing stocks at discounted prices.

Warren Buffett is probably the best-known value investor today, but there are many others, including Benjamin Graham (Buffett's professor and mentor), David Dodd, Charlie Munger (Buffet's business partner), Christopher Browne (another Graham student), and billionaire hedge-fund manager, Seth Karman.

KEY TAKEAWAYS

Value investing is an investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value.

Value investors actively ferret out stocks they think the stock market is underestimating.

Value investors use financial analysis, don't follow the herd, and are long-term investors of quality companies.

Value Investing

Investopedia / Sydney Saporito

Understanding Value Investing

The basic concept behind everyday value investing is straightforward: If you know the true value of something, you can save a lot of money when you buy it. Most folks would agree that whether you buy a new TV on sale, or at full price, you’re getting the same TV with the same screen size and picture quality.

Stock prices work in a similar manner, meaning a company’s share price can change even when the company’s valuation has remained the same. This means, strictly speaking, there is no such thing as a true, or intrinsic, value of the stock of a given company. But there are relative values.

Market participants can buy or sell shares without being tethered to an objective price figure. Therefore, stocks, like TVs, go through periods of higher and lower demand leading to price fluctuations. If the company's fundamentals are the same, and its future opportunities are unchanged, then the value of the shares is largely the same even though the price differs.

Value investing developed from a concept by Columbia Business School professors Benjamin Graham and David Dodd in 1934 and was popularized in Graham's 1949 book, "The Intelligent Investor."

Just like savvy shoppers would argue that it makes no sense to pay full price for a TV since TVs go on sale several times a year, savvy value investors believe stocks work the same way. Of course, unlike TVs, stocks won't go on sale at predictable times of the year such as Black Friday, and their sale prices won’t be advertised.

Value investing is the process of doing detective work to find these secret sales on stocks and buying them at a discount compared to how the market values them. In return for buying and holding these value stocks for the long term, investors can be rewarded handsomely.

Intrinsic Value and Value Investing

In the stock market, the equivalent of a stock being cheap or discounted is when its shares are undervalued. Value investors hope to profit from shares they perceive to be deeply discounted.

Investors use various metrics to attempt to find the valuation or intrinsic value of a stock. Intrinsic value is a combination of using financial analysis, such as studying a company's financial performance, revenue, earnings, cash flow, profit, and fundamental factors. It includes the company's brand, business model, target market, and competitive advantage. Some metrics used to value a company's stock include:

Price-to-book (P/B), which measures the value of a company's assets and compares them to the stock price. If the price is lower than the value of the assets, the stock is undervalued, assuming the company is not in financial hardship.

Price-to-earnings (P/E), which shows the company's track record for earnings to determine if the stock price is not reflecting all of the earnings or is undervalued.

Free cash flow, which is the cash generated from a company's revenue or operations after the costs of expenditures have been subtracted.

Free cash flow is the cash remaining after expenses have been paid, including operating expenses and large purchases called capital expenditures, which is the purchase of assets like equipment or upgrading a manufacturing plant. If a company is generating free cash flow, it'll have money left over to invest in the future of the business, pay off debt, pay dividends or rewards to shareholders, and issue share buybacks.

Of course, there are many other metrics used in the analysis, including analyzing debt, equity, sales, and revenue growth. After reviewing these metrics, the value investor can decide to purchase shares if the comparative value—the stock's current price vis-a-vis its company's intrinsic worth—is attractive enough.

freeforex forex freeforex-signals at 1:54 PM EST
Post Comment | Permalink | Share This Post

Tuesday, 31 October 2023

How Financial Advisors Get Paid

How Financial Advisors Get Paid

The job of a financial advisor is to create a personalized financial plan based on each client's income, long-term goals, and financial situation. It may include a budget and a strategy for saving and long-term investing. Depending on the client, it may include recommendations for life insurance, a college savings plan, a portfolio of investments, and more.

Advisors may steer their clients toward specific investments, such as certain mutual funds. If they are also registered traders, they may execute trades in the financial markets by proxy for their clients. In such cases, they may receive compensation by the sponsor.

Registered financial advisors may follow either of two standards:

The fiduciary standard requires them to act in the best interests of the client in recommending investments. They are compensated only by their clients.

The suitability standard requires them to recommend investments that are suitable to the client's situation. They may receive payment from companies for recommending their products.

Stephen Rischall, CFP®, CRPC

1080 Financial Group, Los Angeles, CA

If your financial advisor is a broker, the answer is yes. Brokers are paid commissions based on the products they sell and are oftentimes incentivized to sell certain products over others. When you purchase a mutual fund with a sales load, part of that additional expense is used by the mutual fund company to pay a commission to the advisor. Additionally, most mutual funds charge a 12b-1 fee as part of their expense ratio collected each year. Part of that fee goes toward paying the broker a trailer commission, so long as the client remains invested in the fund.

In contrast, if your financial advisor is a fee-only, fiduciary advisor, then they do not receive commissions or compensation from outside parties.

How Financial Advisors Earn Trailer Fees

Mutual funds pay financial advisors ongoing trailer fees, ranging from 0.25% to 1% per year of the amount invested. The fees are intended to motivate financial advisors to recommend that their clients invest in their mutual funds.

As long as the client remains invested in the fund, the fund pays the financial advisor the percentage fee.

How Financial Advisors Earn Load Fees

Mutual funds charge their investors front-load fees when they buy into the fund and back-load fees when they leave it. Every time an investor buys or sells shares of the fund, they are charged one of these fees.

A financial advisor receives a small share of both of these fees. It is termed a contingent deferred sales charge by the mutual fund company.

How Do Financial Advisors Get Paid?

A financial advisor may get paid in one of several ways. If it is not immediately clear, the client should ask.

A fee-only fiduciary advisor is paid only by the client.

A "fee-based" financial advisor may be paid by both the companies that sponsor investments the advisor recommends and by the client.

A commission-based advisor is paid only by the companies that sponsor investments the advisor recommends. The service is free to the client.

What Percentage Do Financial Advisors Charge?

If a financial advisor charges a flat annual fee, the average cost is 1% to 3% per year of the assets in the account. That generally covers most advisory services, investment research, and trading.

The client may choose to be billed hourly fees.

Which choice is better depends on the amount of service you expect from an advisor. If you want frequent contact with an advisor and frequent changes to your investments, the flat fee might be best. If you want help drawing up a long-term financial plan but expect to leave your investments alone for the long haul, the hourly fee may cost you less.

Is It Worth It to Pay a Financial Advisor?

How confident are you in your ability to handle your finances independently? If you're not all that confident, a session with a financial advisor can get you on a long-term spending and savings plan that is feasible and makes sense for you and your family, given your current income and future goals.

The advisor will want to know if you have sufficient life insurance to protect your family; whether you're saving enough towards retirement; whether you're a homeowner or want to be, and much more.

This may turn into a long-term relationship with a financial advisor, or not. Your plan should change with your circumstances over time.

freeforex forex freeforex-signals at 4:00 PM EDT
Post Comment | Permalink | Share This Post

Wednesday, 18 October 2023

What Are Soft Dollars?

What Are Soft Dollars?

Soft dollars are a means of paying brokerage firms for their services through commission revenue, as opposed to through hard-dollar direct payments.

The investing public tends to have a negative perception of soft-dollar arrangements. Many investors believe that buy-side firms should pay expenses out of their own profits. As a result, the use of hard-dollar compensation is becoming more common.

KEY TAKEAWAYS

Soft dollars are commission payments to a brokerage firm that are used, in part, to pay for other services such as research.

Soft-dollar transactions are frequently criticized for lacking transparency and hiding abuses.

Soft dollars are sometimes defended as providing access to a greater variety of research.

How a Soft-Dollar Transaction Works

Suppose that an institutional investor pays a brokerage firm six cents per share in commissions. However, it might only cost three cents per share to perform the trade. The other three cents are soft dollars used to pay for additional services provided by the brokerage. In exchange for paying these higher fees, the institutional investor might receive access to research.

Under the right conditions, none of the above presents a problem for the Securities and Exchange Commission (SEC). The regulator is willing to permit soft-dollar transactions, provided that the investor gets good execution, and the commissions are reasonable.

Criticism of Soft Dollars

Mutual fund investors pay the costs of research and other bundled services provided in the soft-dollar transaction. Yet these costs are not disclosed by the fund. They are simply part of the costs of trades, and they impact the long-term performance of the fund.

Technically, the mutual fund would disclose the hard cost of research in its management fee. However, that charge is not paid from the management fee when it is paid for with soft dollars. The fund managers argue that institutional investors ultimately bear all of the costs. However, using soft dollars to pay for research doesn't allow investors to conduct an accurate cost analysis when selecting the fund.

Soft dollar values are not determinable, nor are they equal. What one investment manager receives in the form of services may differ from what another manager gets. That opens the door for conflicts and abuses. The mutual fund investors never know what portion of their transaction costs are applied to the soft services or their actual investment.

Although soft-dollar transactions are still widely used, there is a growing movement to eliminate them. That is especially true as financial reform and issues of transparency become more important in the industry.

Benefits of Soft Dollars

Soft dollars can provide some benefits to investors. One of the main arguments is that they offer access to a greater variety of research.

For instance, investment advisors can use all the research material obtained through soft dollars to benefit all of their clients. According to defenders of soft dollars, eliminating this practice could hinder research efforts by investment advisors and lower returns for their clients.

Example of Soft Dollars

A mutual fund may offer to pay for research from a brokerage firm by executing trades at the brokerage.

Assume that a large-cap value fund wants to buy some research from XYZ Brokerage Firm. The fund may agree to spend at least $10,000 in commissions for brokerage services in return for the research, which would be a soft-dollar payment. If the fund simply wanted to buy the research, it might have to pay the brokerage firm $7,000 in hard dollars (cash) instead.

Real-World Example of Soft Dollars

In 2013, the SEC levied sanctions against New York brokerage firm Instinet, LLC. Instinet did not flag payments of more than $400,000 in soft dollars to San Diego-based advisor J.S. Oliver Capital Management. However, there were clear signs that the money was used for dubious purposes and not properly disclosed to clients.

The SEC found that associates at J.S. Oliver Capital had misused the soft-dollar payments. Ultimately, the SEC ruled that Instinet overlooked the misuse of the soft dollars and settled with the company for about $800,000.

freeforex forex freeforex-signals at 4:16 PM EDT
Post Comment | Permalink | Share This Post

Monday, 2 October 2023

8 Best Funds for Regular Dividend Income

8 Best Funds for Regular Dividend Income

By SHOBHIT SETH Updated August 03, 2023

Reviewed by CHIP STAPLETON

Fact checked by TIMOTHY LI

Reinvestment is known to increase long-term returns. When you reinvest your money, the interim income you generate is put back into the investment. But some investors opt to receive periodic payments from their investments, depending on their specific needs. Periodic coupon or interest payments from bonds, which are debt instruments, and regular dividends, which are cash payments from stocks and mutual funds, can offer investors a steady stream of income. In this article, we explore eight of the best dividend mutual funds that regularly pay dividends regularly.

How Do Mutual Funds Pay Dividends?

Mutual funds often contain a basket of securities including equities or stocks, which may pay dividends. Dividends are paid to shareholders at different times. For instance, mutual funds that follow a dividend reinvestment plan (DRIP) reinvest the received dividend amount back into the stocks. Other funds follow the dividend payment plan by continuing to aggregate dividend income over a monthly, quarterly, or sometimes six-month period, then making a periodic dividend payment to account holders.

A fund pays income after expenses. If a fund gets a regular yield from the dividend-paying constituent stocks, those expenses can be covered fully or partially by dividend income. Depending on local laws, dividend income may be tax-free, which can add to an investor’s overall return.

Investors should also note that companies are not obliged to make dividend payments on their stocks, meaning that dividends are not guaranteed. Investors looking for dividend income may find dividend-paying mutual funds a better bet than individual stocks, as the latter aggregates the available dividend income from multiple stocks. A mutual fund also helps with diversifying risk from depreciating stock prices since the invested money is spread among dozens of companies.

Here are the best mutual funds that pay high-dividend yields.

A useful benchmark for gauging the dividend-paying performance of a fund is to compare the mutual fund yield with the yield of the benchmark S&P 500 index. The 30-day SEC yield is a standard measurement in the industry mandated by the U.S. Securities and Exchange Commission (SEC) to help investors compare funds before investing.

1. Vanguard High Dividend Yield Index Admiral Shares (VHYAX)

Vanguard's High Dividend Yield Index Admiral Shares is an index fund that attempts to replicate the performance of the FTSE High Dividend Yield Index. This index contains stocks of companies that usually pay higher-than-expected or greater-than-average dividends. Being an index fund, VHYAX replicates the benchmark stock constituents in the same proportion. This fund has maintained a consistent history of paying quarterly dividends since its inception on Feb. 7, 2019.12

Being an index fund, the VHYAX has one of the lowest expense ratios—0.08%, as of Feb. 27, 2023—and its SEC yield was 3.06%, as of July 31, 2023. The fund has a $3,000 minimum investment requirement. It may be a perfect low-cost fund for anyone looking for higher-than-average dividend income.2

For investors looking for a lower minimum investment requirement, Vanguard offers this fund as an exchange-traded fund (ETF), which has many similar characteristics. The ETF version is called the Vanguard High Dividend Yield ETF (VYM).3