BUSINESS
JUNE 10, 2010, 10:52 A.M. ET
Financial Planners Say BP Is a Gamble
By IAN SALISBURY
Some advisers are concluding that BP PLC, which just a few months ago seemed like a blue chip, is just too risky for their clients.
The giant British oil company, with a 100-year history and a $10.5 billion annual dividend, has seen its shares plunge by roughly half in a matter of weeks as oil from a well deep underwater gushes into the Gulf of Mexico. No one seems able to say for sure when it will stop, much less what the cleanup will ultimately cost.
"Before the oil spill, BP was a good long-term holding," said Keith Amburgey, a financial planner in Cresskill, N.J. "After the spill, the stock became a short-term speculative play."
Mr. Amburgey said his firm began selling BP stock in early May, about two weeks after the rig explosion, eliminating BP holdings some clients had owned for years. By that point, he said, it had started to become clear that questions about the incident were going to influence the price of the stock for a very long time. Although he personally suspects the market has overreacted, BP's legal and political jeopardy changed the risks and rewards of owning its shares for his buy-and-hold clients.
He likened the crisis to ones that have engulfed other seemingly impregnable companies recently, like Toyota Motor Corp., with its headline-making recall because of faulty brakes, and Goldman Sachs Group Inc., tarred by government charges over its business practices.
"This event served as a reminder of the benefits of diversification," he added.
BP's U.S.-listed shares rebounded sharply on Thursday after plunging nearly 16% on Wednesday as investors speculated that the company may suspend its dividend amid strong pressure from the Obama administration. BP is listed in the U.K. -- where it is extremely widely held by investors including large pension funds -- and in the U.S.
Some large brokerage firms have made moves too. Wells Fargo Advisors said it removed BP from its Diversified Stock Income Plan, a list of stocks with attractive yields and good prospects for hiking dividends that it provides to clients. Meanwhile, Wells's sector analyst also advised conservative investors to consider other, less volatile energy stocks, according to a spokeswoman.
UBS AG said it helped arrange a recent discussion between its clients and BP investor relations officials. UBS's United Kingdom research department, which covers BP, published its seventh update on the spill situation Monday. Although UBS still rates BP a buy, the note warned investors should be prepared for BP not to make its July dividend payment if U.S. political pressure intensifies.
For some, the BP debacle is a chance to make lemonade out of lemons. Bryan Wisda, a financial planner with offices in Scottsdale, Ariz., said he has several clients with big positions in BP, such as one accumulated by a longtime employee of Amoco, the U.S. oil company BP acquired in 1998.
While the BP positions never fit well with Mr. Wisda's passive-oriented investment philosophy, he had been afraid that selling the holdings would generate an unnecessary capital gain for tax purposes. Now Mr. Wisda has been laboriously searching through the clients' accounts for lots of stocks that were purchased at prices equivalent to BP's current one and therefore can be unloaded without a tax hit.
While he concedes BP could snap back, he doesn't think trying to make that risky call is in his clients' best interest.
"It's betting," he said. "Investing isn't really a bettor's game."
Sunday 13 June 2010
Learning to Love Hedge Funds
THE SATURDAY ESSAY
JUNE 12, 2010
Learning to Love Hedge Funds
![[Cover_Main]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_vPM7l0_iFngyC5VzOV8C-pxpJcdE_jnEcJMA0qdeXAbq2BtktKD1_LIswR2uc-GeE-UV_16YotfKR-JYjuuqCO28bWqzKO-2s7JY53WIgG8zfbglj2jhrTYdYaetEpxghzSg0XzHwj5xuFsdluBGnTlw=s0-d)
JT Morrow![[CovJump2]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_telhl-m1nQb4EIgEwB4Bg1gg9WjDGUWrqroVOxnwz_HEaiMviAgxpZmTm7sGBMR81Hwq9iFHi1N04DjOyPEoURPZbs5KB3iS-03snwk7mlCSSb489TBMtekNtgAFpthD1kC12M4QgxJuhdVubk1uuiP24=s0-d)
Harvard University
![[Hedge_Soros]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_vpMyzb9yYv5R-OAqA4vuKmxQ85bl8oOImo1xUW1YdJuR20jVVIb7E1D2Bd-0RscNMgqD8iJETVG0uAPtykHWj23H-azzlBvVxITON-nHHYdvgMin5sxmsOhD1kYnJXC60vX5amqMJgb7S-_xnW3OiD8NE=s0-d)
Getty Images
JUNE 12, 2010
Learning to Love Hedge Funds
Hedge funds have been reviled as slick opportunists that fanned the flames of the collapse. Yet Sebastian Mallaby argues that they hold the key to a more stable financial system
By SEBASTIAN MALLABY
The first hedge-fund manager, Alfred Winslow Jones, did not go to business school. He did not possess a Ph.D. in quantitative finance. He did not spend his formative years at Morgan Stanley, Goldman Sachs or any other incubator for masters of the universe. Instead, he studied at the Marxist Workers School in Berlin, ran secret missions for a clandestine anti-Nazi group called the Leninist Organization and reported on the civil war in Spain, where he hitch-hiked to the front lines in the company of Dorothy Parker. It was only at the advanced age of 48 that Mr. Jones raked together $100,000 to launch a "hedged fund," setting himself up in 1949 in a shabby office on Broad Street. Almost by accident, Mr. Jones improvised an investment structure that will survive for years to come.
JT MorrowHedge funds account for a huge share of trading in financial markets, and have grown to a scale that would have astonished Mr. Jones, amassing roughly $2 trillion in assets. Success has come with notoriety: the Securities and Exchange Commission is suspicious of hedge funds' fast trading algorithms, which some blame for last month's "flash crash" in U.S. stocks. Reformers in Congress are threatening to bring hedge funds to heel by forcing them to register with the SEC and perhaps to hold more capital. Hedge-fund managers such as Raj Rajaratnam of the Galleon Group are being investigated for insider trading, and recently Art Samberg and his late firm, Pequot Capital Management, settled a complaint with the SEC, agreeing to a fine of $28 million. But although hedge funds are often blamed for excesses, Mr. Jones's investment structure holds the key to a more stable finance, to an extent that Washington's reformers fail to understand.
After the 1929 crash, investors had fled the market in droves, and the bustling brokerages had fallen quiet; it was said that you could walk the famous canyons near the stock exchange and hear only the rattle of backgammon dice through the open windows. The few obstinate souls who opted to work in money management joined firms such as Fidelity and Prudential, which behaved as conservatively as their names implied. But Mr. Jones was cut from different cloth and he reinvented capitalism on Wall Street.
Mr. Jones's hedge fund, like most later hedge funds, embraced four features. To begin with, there was a performance fee. Mr. Jones reserved 20% of the fund's investment gains for himself and his team, invoking the Phoenician sea captains who kept a fifth of the profits from successful voyages. Mr. Jones's portfolio managers hustled harder than rivals at traditional money-management firms: They called more people, crunched more numbers and made decisions faster. At the same time, the Jones men were deterred from taking crazy risks. They were required to keep their own capital in the fund, so that mistakes would cost them personally.
Mr. Jones's second distinguishing feature was a conscious avoidance of regulation. In his previous life as an anti-Nazi agent, Mr. Jones had kept a low profile. As a hedge-fund manager, likewise, Mr. Jones escaped the attention of regulators by never advertizing his fund; he raised capital by word of mouth, which sometimes meant a word between mouthfuls at his dinner table. Unhindered by the government, Mr. Jones expected no help from it either. The Jones men knew that if they mismanaged their risks, their fund would blow up—and nobody would save them.
Harvard UniversityAlfred Winslow Jones's 1919 Harvard yearbook
Thirdly, Mr. Jones embraced short selling. In the 1950s as now, speculating on the prospect of corporate failure was seen as almost un-American. But Mr. Jones described it as "a little known procedure that scares away users for no good reason." By being "short" some stocks, he hedged his "long" investment in others.
By insulating his fund from market swings, Mr. Jones cleared the way for his fourth distinctive practice, which was later to become the most controversial one. Because he had hedged out market risk, he felt free to embrace more stock-specific risk, and so he magnified, or "leveraged," his bets with borrowed money. Between 1949 and 1968, Mr. Jones's partnership earned a cumulative return of just under 5,000%.
Mr. Jones inspired a wave of imitators in the late 1960s, including the compulsive trader Michael Steinhardt, who opened a small operation in 1967, and the Hungarian philosopher-financier George Soros, who started his own Jones-style fund two years later. As the successor hedge funds grew, they ad-libbed their own variations on Mr. Jones's original model. Mr. Steinhardt started out as a long/short stock investor, but he found his niche as a gun-slinging market maker for outsized blocks of stock. He was a human version of today's fast-trading computerized hedge funds—those "flash traders" that excite the SEC's suspicion. Mr. Soros evolved too, triggering a decline in value of foreign currencies from Britain to Thailand by selling them short.
As hedge funds improvised new ways of getting rich, they didn't always need the tools that Mr. Jones had relied on. Julian Robertson's storied Tiger Fund, launched in 1980, began as a faithful imitator of Mr. Jones; but when Tiger negotiated the purchase of the Russian government's entire stock of nongold precious metals in 1998, leverage mattered less than the security around the train that was to bring the palladium from Siberia. Four years later, a swashbuckling West Coast fund named Farallon swooped into Indonesia and bought the controlling stake of the country's largest bank. The chief ingredient for this trade was neither hedging nor leverage but nerves—Indonesia had recently experienced a currency collapse and a political revolution.
Light regulation has allowed Mr. Jones's descendants to seize opportunities as they arise—when Farallon was not buying a bank in Indonesia, it was speculating on corporate mergers, distressed debt or a water project in Colorado. Equally, the freedom to go long and short has permitted hedge funds to express investment views with precision. Rather than simply buying a stock or a bond whose performance will reflect currency shifts, interest rates, trends in the broad market, and so on, a hedge fund can hedge out the risks on which it has no view, isolating the particular risk on which it has a real insight.
In the 1960s, the Jones men would show up at the office of the Securities and Exchange Commission to read key releases the moment they came out, stealing a march on sleepier rivals who waited for the information to arrive in the mail. In the 1980s, likewise, Julian Robertson maintained two giant Rolodexes; when compromised Wall Street salesmen pitched a buy recommendation his way, he would pump information out of his network to get the real story on the company. Once, when a Robertson lieutenant heard that a car maker's latest model was prone to break down, he bought two of the suspect vehicles and had them independently tested. When the mechanic confirmed there was an engine flaw, Tiger took a short position in the manufacturer.
Other hedge-fund innovations have been bracingly complicated. James Simons, who emerged as the industry's top earner in the past decade, built his fortune on mathematics, particularly the sort used in military cryptography. By discerning patterns in price movements that were invisible to others, his team constructed a black box that earns billions of dollars annually.
Getty ImagesGeorge Soros in 2001
Because they are largely free of regulatory impediments, and because their reward structure has attracted the best brains, hedge funds have continued in the Jones tradition of outperforming rivals. Whereas mutual-fund managers, as a group, do not beat the market, the best analysis suggests that hedge funds deliver value to their clients. In a series of papers, Roger Ibbotson of the Yale School of Management has examined the performance of 8,400 hedge funds between 1995 and 2009. After correcting for various biases in the data, and after subtracting hedge funds' large fees, Mr. Ibbotson and his co-authors conclude that the average fund generates positive "alpha"—that is, profits that could not be earned from exposure to a market index. In the United States, only rich individuals and institutions are allowed to reap the benefits of hedge funds. But in Europe and Asia, they are increasingly marketed to ordinary savers.
Of course, neither endowments nor individuals should put all their money in hedge funds; like any investment, they can blow up spectacularly. The most famous hedge-fund collapse came in 1998, when Long-Term Capital Management lost almost $6 billion. Eight years later, a Ferrari-driving 32-year-old trader at a fund called Amaranth lost $6 billion on disastrous gas bets; a year after that, several quantitative funds hit trouble all at once, setting off a panic known as the "quant quake."
But even these exceptions to hedge funds' generally good performance serve to underline one of their virtues. When Amaranth failed, another hedge fund named Citadel swooped in to buy the remains of its portfolio—one hedge fund had caught fire, but a second stabilized markets by acting as the fireman, and taxpayers did not have to cover any of the losses. Likewise, the quant quake of 2007 was over even before the public realized it had begun. The one partial exception was Long-Term Capital, whose failure was destabilizing enough to cause the New York Fed to broker a $3.6 billion rescue. But even in this case, public resources played no part in the bailout: The Fed convened Long-Term's bankers and told them to cough up the money to stabilize the fund.
The independent culture of hedge funds stood them in good stead during the recent mortgage bust. Spurred by the carrot of the performance fee, a then-obscure manager named John Paulson created a $2 million budget to buy the largest mortgage database in the country and hire extra analysts to figure out patterns in default rates. Meanwhile, because of the stick of having their own savings at risk, hedge funds that did not undertake similar research at least had the wit to avoid buying subprime paper. Lazier investors piled into collateralized debt obligations on the strength of their triple-A seal of approval. But most hedge funds were too careful to rely on the advice of ratings agencies.
In 2007, the year the mortgage bubble burst, hedge funds were up 10%—not bad for a crisis. Even more remarkably, the subgroup of hedge funds specializing in mortgages and other asset-backed securities was flat for the year—in other words, the hedge funds that might have been expected to get hit generally dodged the bullet. In 2008, admittedly, the turmoil following the collapse of Lehman Brothers hurt hedge funds' returns. But even then, they did better than their peers. They were down 18 % by the end of the year, a decline half as severe as that of the stock market.
The real humiliation of 2008 did not befall hedge funds. It befell banks, insurers, government-chartered housing lenders, and money market funds—and especially the mightiest of all Wall Street titans: investment banks. Until the financial crisis, the brain-power of these behemoths was presumed to be the force that made global markets work. If you were impertinent enough to ask how trillions of dollars of exotic trades could slosh across borders without risking a breakdown, the answer was that Lehman Brothers and its ilk had designed the instruments, modeled the risks, and had all bases covered.
Now that this answer has been exposed as a lie, the puzzle is how to erect a new scaffolding for global finance. The leading answer in Washington, expressed in the reform package emerging from Congress, is to regulate the investment banks and other traditional risk takers. This is a worthy project that must be attempted, but it would be naïve to expect too much from it. The crisis proved the fallibility of regulators from the Securities and Exchange Commission to the respected Financial Services Authority in London to the highly professional Federal Reserve. When multiple overseers fail in multiple places, one must accept that even smart reforms may not change the pattern decisively.
The crisis also demonstrated flaws in large financial firms. These start with the too-big-to-fail problem. Large banks cannot be allowed to go down; knowing that, their creditors lend without monitoring their risks; as a result, their risk-taking is undisciplined. At the same time, each trading desk within a large banking supermarket has strong reason to load up on risk. If its bets come good, huge bonuses will ensue. If they go bad, the losses will be spread across the whole institution.
Given the difficulties with financial reform, legislators should embrace a complementary approach: As well as struggling to tame financial behemoths, they should promote boutique risk takers. With only a few exceptions, hedge funds have the powerful virtue of being small enough to fail; indeed, some 5,000 went out of business in the course of the past decade, and none imposed losses on taxpayers. Mythology notwithstanding, the average hedge fund's leverage is more sober than that of banks and investment banks.
The question for policy-makers is what kind of financial institution will absorb risk most efficiently—and do so without a backstop from taxpayers. The answer awaits discovery in the story of A.W. Jones and his descendants. The future of finance lies in the history of hedge funds.
Sebastian Mallaby is the Paul A. Volcker Senior Fellow for International Economics at the Council on Foreign Relations, where he directs the Maurice R. Greenberg Center for Geoeconomic Sudies. This article is adapted from "More Money Than God: Hedge Funds and the Making of a New Elite," to be published by the Penguin Press next week.
We embrace ‘inclusive politics’, says Khairy
We embrace ‘inclusive politics’, says Khairy
UPDATED @ 10:45:05 PM 12-06-2010
By Asrul Hadi Abdullah Sani
June 12, 2010
KUALA LUMPUR, June 12 — Barisan Nasional Youth Chief Khairy Jamaluddin said today that the ruling coalition could no longer depend on racial politics.
He said that Barisan Nasional Youth understood the importance of inclusive politics.
“This rally is to show that we not only support inclusive politics but also that we no longer identify ourselves with Umno, MCA, MIC other component parties but with Barisan Nasional.
“There is no place for racial and narrow politics,” he said at a 1 Malaysia Rally here today.
BN Youth brought in the stars today as young people from across the country almost filled up the 15,OOO capacity Putra Indoor Stadium.
Earlier local artists Sasi The Don, Yise Loo, and Aizat Amdan entertained the crowd while popular TV personality, Sarimah Ibrahim, hosted the rally.
Khairy added that the recent Hulu Selangor by-election showed that young voters are returning to BN.
“Our win in Hulu Selangor has shown that young voters have returned to Barisan Nasional. We are all ready to face change to ensure that 1Malaysia becomes a reality and we pray to God that we will experience a huge win in the next general election,” he said.
In press conference held later, Khairy said that BN must change its approach and become more inclusive.
“In the past, BN youth we moved very much on our own and in those days we defined courage very differently. For Umno, you have to be an ultra-Malay champion and courage for MIC is defined as champion for Indian issues. It gradually become very extreme and community centric.
“For us, courage is different. Courage is about fighting for everybody. We have to face criticisms from within and extreme groups. They don’t understand because you have to fight for all Malaysians,” he said.
He added the importance of Prime Minister Datuk Seri Najib Razak’s message of 1 Malaysia to not be lost in translation.
“I think the time has come and we are willing to stick our necks out. I have spoken to all the component’s youth chief and said that if we are not there are the forefront then who is going to help the prime minister,” he said.
He also admitted Najib’s 1 Malaysia’s main obstacle is the racist elements within and outside the party.
“We must sure that the center is bigger than the fringe and the fringe are the extremist at the side. It is not going to be easy but we want to tell everybody that the sum is greater than its parts and that together we are stronger,” he said.
He also stressed the government to make its stand on the sports betting controversy.
“That is why we are waiting and I hope the government could provide an explanation as soon as possible because of conflicting reports from the government and the concerned company,” he said.
The Finance Ministry has recently denied in parliament that it has awarded a sports betting license to tycoon Tan Sri Vincent Tan’s Ascot Sports Sdn Bhd.
However, Berjaya Corporation confirmed that the Finance Minister has awarded the license to Ascot in its announcement to Bursa Malaysia in its acquisition of the betting group.
----
Walk the talk, Encik Khairy — The Malaysian Insider
June 12, 2010
JUNE 12 — It could be World Cup fever but Umno Youth leader Khairy Jamaluddin today declared at a 1 Malaysia youth rally that there is no place for “racial and narrow politics”.
It is of course commendable that Khairy, who is also Barisan Nasional (BN) Youth chief by virtue of his Umno post, feels that way.
The reality is otherwise.
BN Youth like its parent organisation is made up of many parties, especially the race-based ones from the Malay peninsula.
At least some like Gerakan, PPP and those from Sabah and Sarawak actually eschew race in the make-up of their membership.
But these non-racial parties are weak.
The thing is, Encik Khairy, organising a rally, giving a few soundbites doesn’t mean everything is okay. It isn’t.
Ask K. Vasanthakumar who was briefly held by police earlier today when he wanted to pass a memorandum to Prime Minister Datuk Seri Najib Razak about getting more government scholarships for high-achieving Indian students.
The ex-Hindraf leader and one-time ISA detainee felt he had no choice but approach the PM about the plight of Indian students.
And that is the reality of racial quotas in Malaysia.
See, Encik Khairy, the more skeptical among Malaysians will see your statement today as nothing more than that of an Umno youth chief trying to jump on the 1 Malaysia bandwagon and score some points with Najib.
And even the more charitable will be unwilling to accept that political parties which owe their existence to race politics have suddenly decided to be inclusive as you had said today.
“This rally is to show that we not only support inclusive politics but also that we no longer identify ourselves with Umno, MCA, MIC other component parties but with Barisan Nasional.
“There is no place for racial and narrow politics,” you said at the 1 Malaysia Rally.
Again, we applaud you for what you say. It is something the other parties have said over the years but BN has rejected saying its system is the best.
But it’s just rhetoric until Malaysians see that the reality of what you say is displayed by the BN through its socio-economic policies.
Encik Khairy, you have to walk the talk first.
Otherwise, we’ll just put it down to the idle chatter most people engage in between the FIFA World Cup 2010 games in South Africa.
UPDATED @ 10:45:05 PM 12-06-2010
By Asrul Hadi Abdullah Sani
June 12, 2010
KUALA LUMPUR, June 12 — Barisan Nasional Youth Chief Khairy Jamaluddin said today that the ruling coalition could no longer depend on racial politics.
He said that Barisan Nasional Youth understood the importance of inclusive politics.
“This rally is to show that we not only support inclusive politics but also that we no longer identify ourselves with Umno, MCA, MIC other component parties but with Barisan Nasional.
“There is no place for racial and narrow politics,” he said at a 1 Malaysia Rally here today.
BN Youth brought in the stars today as young people from across the country almost filled up the 15,OOO capacity Putra Indoor Stadium.
Earlier local artists Sasi The Don, Yise Loo, and Aizat Amdan entertained the crowd while popular TV personality, Sarimah Ibrahim, hosted the rally.
Khairy added that the recent Hulu Selangor by-election showed that young voters are returning to BN.
“Our win in Hulu Selangor has shown that young voters have returned to Barisan Nasional. We are all ready to face change to ensure that 1Malaysia becomes a reality and we pray to God that we will experience a huge win in the next general election,” he said.
In press conference held later, Khairy said that BN must change its approach and become more inclusive.
“In the past, BN youth we moved very much on our own and in those days we defined courage very differently. For Umno, you have to be an ultra-Malay champion and courage for MIC is defined as champion for Indian issues. It gradually become very extreme and community centric.
“For us, courage is different. Courage is about fighting for everybody. We have to face criticisms from within and extreme groups. They don’t understand because you have to fight for all Malaysians,” he said.
He added the importance of Prime Minister Datuk Seri Najib Razak’s message of 1 Malaysia to not be lost in translation.
“I think the time has come and we are willing to stick our necks out. I have spoken to all the component’s youth chief and said that if we are not there are the forefront then who is going to help the prime minister,” he said.
He also admitted Najib’s 1 Malaysia’s main obstacle is the racist elements within and outside the party.
“We must sure that the center is bigger than the fringe and the fringe are the extremist at the side. It is not going to be easy but we want to tell everybody that the sum is greater than its parts and that together we are stronger,” he said.
He also stressed the government to make its stand on the sports betting controversy.
“That is why we are waiting and I hope the government could provide an explanation as soon as possible because of conflicting reports from the government and the concerned company,” he said.
The Finance Ministry has recently denied in parliament that it has awarded a sports betting license to tycoon Tan Sri Vincent Tan’s Ascot Sports Sdn Bhd.
However, Berjaya Corporation confirmed that the Finance Minister has awarded the license to Ascot in its announcement to Bursa Malaysia in its acquisition of the betting group.
----
Walk the talk, Encik Khairy — The Malaysian Insider
June 12, 2010
JUNE 12 — It could be World Cup fever but Umno Youth leader Khairy Jamaluddin today declared at a 1 Malaysia youth rally that there is no place for “racial and narrow politics”.
It is of course commendable that Khairy, who is also Barisan Nasional (BN) Youth chief by virtue of his Umno post, feels that way.
The reality is otherwise.
BN Youth like its parent organisation is made up of many parties, especially the race-based ones from the Malay peninsula.
At least some like Gerakan, PPP and those from Sabah and Sarawak actually eschew race in the make-up of their membership.
But these non-racial parties are weak.
The thing is, Encik Khairy, organising a rally, giving a few soundbites doesn’t mean everything is okay. It isn’t.
Ask K. Vasanthakumar who was briefly held by police earlier today when he wanted to pass a memorandum to Prime Minister Datuk Seri Najib Razak about getting more government scholarships for high-achieving Indian students.
The ex-Hindraf leader and one-time ISA detainee felt he had no choice but approach the PM about the plight of Indian students.
And that is the reality of racial quotas in Malaysia.
See, Encik Khairy, the more skeptical among Malaysians will see your statement today as nothing more than that of an Umno youth chief trying to jump on the 1 Malaysia bandwagon and score some points with Najib.
And even the more charitable will be unwilling to accept that political parties which owe their existence to race politics have suddenly decided to be inclusive as you had said today.
“This rally is to show that we not only support inclusive politics but also that we no longer identify ourselves with Umno, MCA, MIC other component parties but with Barisan Nasional.
“There is no place for racial and narrow politics,” you said at the 1 Malaysia Rally.
Again, we applaud you for what you say. It is something the other parties have said over the years but BN has rejected saying its system is the best.
But it’s just rhetoric until Malaysians see that the reality of what you say is displayed by the BN through its socio-economic policies.
Encik Khairy, you have to walk the talk first.
Otherwise, we’ll just put it down to the idle chatter most people engage in between the FIFA World Cup 2010 games in South Africa.
Saturday 12 June 2010
Beautiful South Africa
South Africa is located on the southern tip of Africa.
South Africa has 9 provinces: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Mpumulanga, Limpopo, Northern Cape, North West, and Western Cape.
The current flag of South Africa was adopted on April 27th 1994.
* The capital of South Africa is Pretoria
* The president of South Africa is Jacob Zuma.
* The largest diamond in the world (named The Star of Africa) was found in South Africa.
* The national anthem of South Africa is a combined version of two evocative but quite different songs, Nkosi Sikelel’ iAfrika (God Bless Africa) and The Call of South Africa (Die Stem van Suid-Afrika).
* South Africa has eleven national languages.
* South Africa's population is ranked 26th from the top in the world!
* The population is 44,344,136. (2005)
Pictures denoted above:
South Africa has 9 provinces: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Mpumulanga, Limpopo, Northern Cape, North West, and Western Cape.
The current flag of South Africa was adopted on April 27th 1994.
* The capital of South Africa is Pretoria
* The president of South Africa is Jacob Zuma.
* The largest diamond in the world (named The Star of Africa) was found in South Africa.
* The national anthem of South Africa is a combined version of two evocative but quite different songs, Nkosi Sikelel’ iAfrika (God Bless Africa) and The Call of South Africa (Die Stem van Suid-Afrika).
* South Africa has eleven national languages.
* South Africa's population is ranked 26th from the top in the world!
* The population is 44,344,136. (2005)
Pictures denoted above:
- Table Mountain
- When it is cloudy, the layer of clouds over the mountain is known as it's "Table Cloth"
- The national flower of South Africa: The King Protea
- The national animal of South Africa is the Springbok
- The national bird of South Africa is the Blue Crane
- The national fish of South Africa is the Galjoen
- The national tree of South Africa is the Real Yellowwood
Is our society changing for the better?
An important plan was released in the form of the 10 MP yesterday. Yet browsing the news today in the Star, there is hardly any relevant news of note to read. There isn't any intelligent views reported. If there were views expressed, perhaps the reporting was rather inadequate or superficial.
How can Malaysians hope to improve their society and their quality of living when news that are central to their living are being suppressed or alternate opinions kept away from intelligent scrutiny? Is this the society our present PM hope to nurture? It takes a brave and great leader to initiate change in society for the better and for all. Has such a man or woman appeared in our political scene?
How can Malaysians hope to improve their society and their quality of living when news that are central to their living are being suppressed or alternate opinions kept away from intelligent scrutiny? Is this the society our present PM hope to nurture? It takes a brave and great leader to initiate change in society for the better and for all. Has such a man or woman appeared in our political scene?
Friday 11 June 2010
Obligations of independent directors - Kenmark eye opener
Friday June 11, 2010
Obligations of independent directors - Kenmark eye opener
Whose business is it anyway - by John Zinkin
IN conversations since Sime Darby Bhd and Kenmark Industrial Co (M) Bhd hit the headlines, I was struck forcefully by how often the people I met did not realise fully what the obligations or liabilities of independent directors actually are.
Perhaps it is timely to restate in simple terms what independent directors are supposed to do; and why being an independent director should not be seen as a reward for past services that does not require an active involvement in the deliberations of the board.
It is a serious duty that requires much more than just being honest and attending the required number of board meetings. As such, directors must continuously upgrade their skills and understanding of the environment in which their companies operate, investing in training to do so.
Directors must act honestly and in good faith in the best interests of the company on whose board they sit. This means that if there is conflict between the interests of the company and the people they represent as nominees, they are required by law to think of the best interests of the company and not of the people who nominated them. This is easy to say, but often difficult to do.
Ethical behaviour does not just require directors to behave ethically personally; it also requires them to see to it that the company conducts its business in accordance with the law and with a high standard of commercial morality.
This raises interesting issues about whether a company should break the law and pay the associated fine because it costs less to do so in the short term than complying with the law. Ethical behaviour would suggest not breaking the law even if it was cheaper to do so.
It is also important to remember that directors’ fiduciary duty means that they must comply with the spirit of the law and not just the letter of the law – which explains why Goldman Sachs looked so bad when they were testifying to Congress, justifying their actions on the grounds that they were legal only. As the cross-examination demonstrated, fiduciary duty of directors is not just to shareholders, but also to customers and clients as well; all the more so, if what is being offered is highly technical, complex and opaque with the potential to lose clients their money.
Directors should remember this and insist on a wider fiduciary duty if they are serious about preserving the company’s “licence to operate” in the long term.
Being diligent
This does not just mean attending the requisite number of board meetings and preparing for each board meeting by reading the board papers. Directors must devote enough time to remain familiar with the changing nature of the company’s business and environment, including mastering the impact on the business and its risk profile of the evolving political, legal, social and competitive context in which the company operates.
They also must understand the asset intensity of the business and how it changes over time by being able to relate the balance sheet items to the amount of business they generate: for example, how much working capital is needed to generate a dollar of sales, how does it compare over time and with the competition?
Are there legitimate ways of reducing the asset intensity of the business and improving the return on capital employed, or are the means by which this is being done through the use of off-balance sheet items merely a form of dangerous financial engineering?
It also means that directors must personally know the first- and second-line managers of their company well enough to be able to contribute intelligently to the succession planning process for which they are responsible. They need to know this if they are to undertake that most difficult role of all – terminating the non-performing CEO without causing a major disruption to the business.
One of the most difficult roles is to ensure that minority shareholder rights are respected when there is a controlling shareholder – be it the founding family or the government. There are the obvious issues raised by differing perspectives on strategy caused by different risk appetites and time horizons of majority and minority shareholders.
There is also the issue of related party transactions which need to be vetted carefully to ensure that money invested by public shareholders is not being “upstreamed” or siphoned off to the advantage of the controlling shareholder via a related party transaction.
Directors must avoid all conflicts of interest wherever possible. Should a conflict arise, they must adhere scrupulously to the provisions laid down by the law and the constitution of the company in dealing with such conflicts. Should the conflict be continuous or material, the director involved should consider resigning after taking into account the impact of resignation on the other members of the board.
Directors cannot disclose confidential information without prior agreement from the board even if the people who nominated them require it – this is because their primary duty is to the company on whose board they sit.
It goes without saying that directors cannot abuse their access to confidential information and use such information for “insider trading”.
# The writer is CEO of Securities Industry Development Corp, the training and development arm of the Securities Commission.
Obligations of independent directors - Kenmark eye opener
Whose business is it anyway - by John Zinkin
IN conversations since Sime Darby Bhd and Kenmark Industrial Co (M) Bhd hit the headlines, I was struck forcefully by how often the people I met did not realise fully what the obligations or liabilities of independent directors actually are.
Perhaps it is timely to restate in simple terms what independent directors are supposed to do; and why being an independent director should not be seen as a reward for past services that does not require an active involvement in the deliberations of the board.
It is a serious duty that requires much more than just being honest and attending the required number of board meetings. As such, directors must continuously upgrade their skills and understanding of the environment in which their companies operate, investing in training to do so.
Directors must act honestly and in good faith in the best interests of the company on whose board they sit. This means that if there is conflict between the interests of the company and the people they represent as nominees, they are required by law to think of the best interests of the company and not of the people who nominated them. This is easy to say, but often difficult to do.
Ethical behaviour does not just require directors to behave ethically personally; it also requires them to see to it that the company conducts its business in accordance with the law and with a high standard of commercial morality.
This raises interesting issues about whether a company should break the law and pay the associated fine because it costs less to do so in the short term than complying with the law. Ethical behaviour would suggest not breaking the law even if it was cheaper to do so.
It is also important to remember that directors’ fiduciary duty means that they must comply with the spirit of the law and not just the letter of the law – which explains why Goldman Sachs looked so bad when they were testifying to Congress, justifying their actions on the grounds that they were legal only. As the cross-examination demonstrated, fiduciary duty of directors is not just to shareholders, but also to customers and clients as well; all the more so, if what is being offered is highly technical, complex and opaque with the potential to lose clients their money.
Directors should remember this and insist on a wider fiduciary duty if they are serious about preserving the company’s “licence to operate” in the long term.
Being diligent
This does not just mean attending the requisite number of board meetings and preparing for each board meeting by reading the board papers. Directors must devote enough time to remain familiar with the changing nature of the company’s business and environment, including mastering the impact on the business and its risk profile of the evolving political, legal, social and competitive context in which the company operates.
At a minimum this means directors must understand the make-up of the revenues and costs in the profit and loss account and be able to ask probing questions when the ratios show signs of changing as these are early warning indicators of eroding profitability.
They also must understand the asset intensity of the business and how it changes over time by being able to relate the balance sheet items to the amount of business they generate: for example, how much working capital is needed to generate a dollar of sales, how does it compare over time and with the competition?
Are there legitimate ways of reducing the asset intensity of the business and improving the return on capital employed, or are the means by which this is being done through the use of off-balance sheet items merely a form of dangerous financial engineering?
It also means that directors must personally know the first- and second-line managers of their company well enough to be able to contribute intelligently to the succession planning process for which they are responsible. They need to know this if they are to undertake that most difficult role of all – terminating the non-performing CEO without causing a major disruption to the business.
One of the most difficult roles is to ensure that minority shareholder rights are respected when there is a controlling shareholder – be it the founding family or the government. There are the obvious issues raised by differing perspectives on strategy caused by different risk appetites and time horizons of majority and minority shareholders.
There is also the issue of related party transactions which need to be vetted carefully to ensure that money invested by public shareholders is not being “upstreamed” or siphoned off to the advantage of the controlling shareholder via a related party transaction.
Directors must avoid all conflicts of interest wherever possible. Should a conflict arise, they must adhere scrupulously to the provisions laid down by the law and the constitution of the company in dealing with such conflicts. Should the conflict be continuous or material, the director involved should consider resigning after taking into account the impact of resignation on the other members of the board.
Directors cannot disclose confidential information without prior agreement from the board even if the people who nominated them require it – this is because their primary duty is to the company on whose board they sit.
It goes without saying that directors cannot abuse their access to confidential information and use such information for “insider trading”.
# The writer is CEO of Securities Industry Development Corp, the training and development arm of the Securities Commission.
Benefits Of Trailing Stops
Benefits Of Trailing Stops
Jun.08, 2010
One great way of playing the market is by using a trailing stop to simply follow the stock up. A trailing stop is ideal because it follows the stock up when the stock does go up, but it does not pull back as the stock pulls back. This allows you to limit your losses and secure your gains.
There are a ton of advantages to using trailing stops.
Everybody has wins and losses. They key is to limit any losses that you do have. This way any loss you do have will play a minimum role in your overall return.
If you decided to place a 10% stop for instance you would be risking only 10% of the investment that you just made. If the stock suddenly pulled back 50% you would get out near the top and could wait for it to turn around before getting back in.
A second advantage of using trailing stops is that it does not limit the potential gain of the position. If you bought a stock and placed a 10% stop loss on it you would not be limiting your gains, only your losses. The stock could double and you would still be in it. Only once the stock starts to turn around 10% or more would your stop be activated and your position would be sold.
Emotions have a big impact on our trading. We want to hold onto a stock when it is going up and we want to keep holding on and convince ourselves everything will be ok when it is crashing.
Sometimes you can create your own plan of action and end up side stepping that plan because you got scared. Well the great thing about trailing stops is that they are automated. You just have to set them up and then forget about them.
The trailing stop will follow the stock up and the trailing stop will eventually get you out of the position (hopefully for a profit). The only thing you need to do is to figure out how far behind you want to trail the stock and then walk away.
This is a perfect way to “stick to the game plan” when you cannot trust yourself to do it.
Jun.08, 2010
One great way of playing the market is by using a trailing stop to simply follow the stock up. A trailing stop is ideal because it follows the stock up when the stock does go up, but it does not pull back as the stock pulls back. This allows you to limit your losses and secure your gains.
There are a ton of advantages to using trailing stops.
1. It Limits Your Losses
Everybody has wins and losses. They key is to limit any losses that you do have. This way any loss you do have will play a minimum role in your overall return.
If you decided to place a 10% stop for instance you would be risking only 10% of the investment that you just made. If the stock suddenly pulled back 50% you would get out near the top and could wait for it to turn around before getting back in.
2. It Does Not Limit Gains
A second advantage of using trailing stops is that it does not limit the potential gain of the position. If you bought a stock and placed a 10% stop loss on it you would not be limiting your gains, only your losses. The stock could double and you would still be in it. Only once the stock starts to turn around 10% or more would your stop be activated and your position would be sold.
3. Takes Emotions Out
Emotions have a big impact on our trading. We want to hold onto a stock when it is going up and we want to keep holding on and convince ourselves everything will be ok when it is crashing.
Sometimes you can create your own plan of action and end up side stepping that plan because you got scared. Well the great thing about trailing stops is that they are automated. You just have to set them up and then forget about them.
The trailing stop will follow the stock up and the trailing stop will eventually get you out of the position (hopefully for a profit). The only thing you need to do is to figure out how far behind you want to trail the stock and then walk away.
This is a perfect way to “stick to the game plan” when you cannot trust yourself to do it.
3 Questions to Ask Yourself When Buying a Stock
3 Questions to Ask Yourself When Buying a Stock
May.03, 2010
Trading in the stock market can be a very emotional experience. It can be hard to focus on logic and actually make rash decisions when your money is on the line. That is why, whenever you are thinking about investing into a stock you should ask yourself these three questions.
1. Why Am I Getting Into This Stock
Why are you actually getting into the stock? Is it because you heard somewhere that it is going to go up and you didn’t want to “miss out”? Or you have some fundamental or technical reason for getting into the stock. Unless there is something solid backing your decision it may be better to just walk away.
2. How Am I Going to Limit My Risk
Even if you have found a stock which you believe with 100% confidence will make you money, you may be wrong. Something may change. It happens, a lot of successful traders invest into bad stocks the trick is limiting your losses.
Maybe you want to only risk a small portion of your account on that one stock, or maybe you want to place some sort of stop to get you out of the position if the stock falls against you too much. Either way, it is important to limit your risk; otherwise you will lose all of your money on the first bad trade you make.
3. When Will I Get Out?
Something that people often forget is their exit strategy. Sure it is important to know when to enter, but even the best entry signal in the world will not help you out that much if you lose it all by holding onto the stock for too long. Figure out what you are trying to accomplish beforehand.
May.03, 2010
Trading in the stock market can be a very emotional experience. It can be hard to focus on logic and actually make rash decisions when your money is on the line. That is why, whenever you are thinking about investing into a stock you should ask yourself these three questions.
1. Why Am I Getting Into This Stock
Why are you actually getting into the stock? Is it because you heard somewhere that it is going to go up and you didn’t want to “miss out”? Or you have some fundamental or technical reason for getting into the stock. Unless there is something solid backing your decision it may be better to just walk away.
2. How Am I Going to Limit My Risk
Even if you have found a stock which you believe with 100% confidence will make you money, you may be wrong. Something may change. It happens, a lot of successful traders invest into bad stocks the trick is limiting your losses.
Maybe you want to only risk a small portion of your account on that one stock, or maybe you want to place some sort of stop to get you out of the position if the stock falls against you too much. Either way, it is important to limit your risk; otherwise you will lose all of your money on the first bad trade you make.
3. When Will I Get Out?
Something that people often forget is their exit strategy. Sure it is important to know when to enter, but even the best entry signal in the world will not help you out that much if you lose it all by holding onto the stock for too long. Figure out what you are trying to accomplish beforehand.
Why Would Someone Start Trading Stocks
Why Would Someone Start Trading Stocks
Apr.20, 2010
Trading in the stock market is a fantastic way to gain some extra money, grow your long term wealth, and to keep your mind sharp. There is basically no limit to the amount of money that a stock trader can make off of their investment and this can translate into unbelievable wealth.
What are the reasons to trade in the stock market? Below are the 4 reasons why someone would want to trade in the stock market.
1. It Can Be Very Profitable
There is no limit to the amount of money that someone can make in the stock market. There is also really no limit to how fast someone can make money. This is why you hear stories about people turning small amounts of money into millions of dollars in just a couple years.
Of course that is not the norm, but it does happen from time to time.
2. Extra Cash Flow
It is always nice to have some extra income and the stock market is one of those places that people can go about getting it. The only thing to remember is that it the extra income it brings is a byproduct of months or even years of experience. If you need the extra income tomorrow this is not the best way to get it.
3. Early Retirement
The Stock Market can make you a lot of money and in many cases it can even lead to financial freedom. All you need is the ability to make a decent return on the money and the ability to get enough money together and you can trade away living off of the money that you make off of the market alone.
4. Keeping Your Mind Sharp
When you trade the stock market you are constantly learning from your mistakes. This helps to challenge you a little bit and keep your mind sharp, which can actually be a good thing and help you have a quicker mind well into old age.
Apr.20, 2010
Trading in the stock market is a fantastic way to gain some extra money, grow your long term wealth, and to keep your mind sharp. There is basically no limit to the amount of money that a stock trader can make off of their investment and this can translate into unbelievable wealth.
What are the reasons to trade in the stock market? Below are the 4 reasons why someone would want to trade in the stock market.
1. It Can Be Very Profitable
There is no limit to the amount of money that someone can make in the stock market. There is also really no limit to how fast someone can make money. This is why you hear stories about people turning small amounts of money into millions of dollars in just a couple years.
Of course that is not the norm, but it does happen from time to time.
2. Extra Cash Flow
It is always nice to have some extra income and the stock market is one of those places that people can go about getting it. The only thing to remember is that it the extra income it brings is a byproduct of months or even years of experience. If you need the extra income tomorrow this is not the best way to get it.
3. Early Retirement
The Stock Market can make you a lot of money and in many cases it can even lead to financial freedom. All you need is the ability to make a decent return on the money and the ability to get enough money together and you can trade away living off of the money that you make off of the market alone.
4. Keeping Your Mind Sharp
When you trade the stock market you are constantly learning from your mistakes. This helps to challenge you a little bit and keep your mind sharp, which can actually be a good thing and help you have a quicker mind well into old age.
Should You Start Stock Trading?
Should You Start Stock Trading?
Jun.10, 2010
The stock market can be a terrific place to grow your money and to grow your overall wealth. Trading stocks can be extremely powerful and can lead to large gains. But it is not for everyone, most people will quit after they find out how much work is involved in learning to trade.
In addition to all the effort that it takes to make it big in the stock market there are also a few things that you will need to have in order to be successful trading stocks.
1. A lot of Confidence
A trader needs to be confident in themselves and in their own trading method in order to make it big in the stock market. Most newbies fail because instead of making decisions for themselves they listen to everyone else. The problem with this is that they never learn from their mistakes or even know why they are buying the stock in the first place. If you make your own decisions you may have losses here and then, but at least you can learn from them and try to do better next time.
So confidence can help you get past any problems you may have.
2. The Ability to Control Your Emotions
Trading in the stock market can definitely be an emotional thing. If your stock goes up you automatically want to hold onto it forever and you dream of becoming a millionaire. If stocks are going down you start panic selling and just try to get out without losing your shirt. Really whenever money is involved our emotions are going to be connected with it and they will impact how we make decisions.
Having the ability to control your emotions is an essential thing for all traders.
3. Eager to Learn
There are always going to be bumps in the road when it comes to the stock market, or really when it comes to anything in life. The best thing that you can do is to continue to learn from your mistakes and improve over time.
If you lose money, figure out why. If you make money also look at what that was. The more you learn the better you will do in the future so being a little curious can be a good thing in life.
Jun.10, 2010
The stock market can be a terrific place to grow your money and to grow your overall wealth. Trading stocks can be extremely powerful and can lead to large gains. But it is not for everyone, most people will quit after they find out how much work is involved in learning to trade.
In addition to all the effort that it takes to make it big in the stock market there are also a few things that you will need to have in order to be successful trading stocks.
1. A lot of Confidence
A trader needs to be confident in themselves and in their own trading method in order to make it big in the stock market. Most newbies fail because instead of making decisions for themselves they listen to everyone else. The problem with this is that they never learn from their mistakes or even know why they are buying the stock in the first place. If you make your own decisions you may have losses here and then, but at least you can learn from them and try to do better next time.
So confidence can help you get past any problems you may have.
2. The Ability to Control Your Emotions
Trading in the stock market can definitely be an emotional thing. If your stock goes up you automatically want to hold onto it forever and you dream of becoming a millionaire. If stocks are going down you start panic selling and just try to get out without losing your shirt. Really whenever money is involved our emotions are going to be connected with it and they will impact how we make decisions.
Having the ability to control your emotions is an essential thing for all traders.
3. Eager to Learn
There are always going to be bumps in the road when it comes to the stock market, or really when it comes to anything in life. The best thing that you can do is to continue to learn from your mistakes and improve over time.
If you lose money, figure out why. If you make money also look at what that was. The more you learn the better you will do in the future so being a little curious can be a good thing in life.
Long Term Investing Vs Short Term Trading
Long Term Investing Vs Short Term Trading
Jun.10, 2010
Investing into stocks over the long term and trading stocks are two conflicting points of view. So, which one is better? Well this really depends; each strategy has its advantages and disadvantages.
Long term investing is simply the process of buying strong companies and holding onto them for the long term. Because the companies are fundamentally strong they are unlikely to go out of business any time soon and in fact they are very likely to increase in price as time goes by.
Trading stocks in the short term is actually a completely different strategy. Instead of holding onto stocks for the long term short term traders tend to use things such as chart patterns and technical indicators to attempt to catch the short term movements of stocks and hopefully make a larger profit then if they were to simply buy and hold the stock.
Which strategy is best? There are defiantly advantages and disadvantages to each method. The best strategy for you really depends on you and where you are at.
Trading stocks in the short term does have a lot more potential then buying and holding. If you can make short term gains relatively consistent over the long term then you can do pretty well for yourself. However it does take a lot of work and there are no guarantees that you will make any money. It is like starting a business most people will fail their first time around, but those who can keep getting back up and learning from their mistakes will likely do well eventually.
If you are willing to put all of the time and energy into short term trading the rewards can be pretty nice.
However if you just want something that is considered to be safe yet does have some potential then you can take a look at long term investing. The main advantages of long term investing are that it is passive and it is a relatively secure way of making a decent return over the span of a couple decades.
Basically it comes down to this, if you want to earn a relatively safe return passively then investing in the stock market can be a great idea. If however you want to attempt to increase your returns and put some extra time into it then trading stock might be better suited for you.
Jun.10, 2010
Investing into stocks over the long term and trading stocks are two conflicting points of view. So, which one is better? Well this really depends; each strategy has its advantages and disadvantages.
Long term investing is simply the process of buying strong companies and holding onto them for the long term. Because the companies are fundamentally strong they are unlikely to go out of business any time soon and in fact they are very likely to increase in price as time goes by.
Trading stocks in the short term is actually a completely different strategy. Instead of holding onto stocks for the long term short term traders tend to use things such as chart patterns and technical indicators to attempt to catch the short term movements of stocks and hopefully make a larger profit then if they were to simply buy and hold the stock.
Which strategy is best? There are defiantly advantages and disadvantages to each method. The best strategy for you really depends on you and where you are at.
Trading stocks in the short term does have a lot more potential then buying and holding. If you can make short term gains relatively consistent over the long term then you can do pretty well for yourself. However it does take a lot of work and there are no guarantees that you will make any money. It is like starting a business most people will fail their first time around, but those who can keep getting back up and learning from their mistakes will likely do well eventually.
If you are willing to put all of the time and energy into short term trading the rewards can be pretty nice.
However if you just want something that is considered to be safe yet does have some potential then you can take a look at long term investing. The main advantages of long term investing are that it is passive and it is a relatively secure way of making a decent return over the span of a couple decades.
Basically it comes down to this, if you want to earn a relatively safe return passively then investing in the stock market can be a great idea. If however you want to attempt to increase your returns and put some extra time into it then trading stock might be better suited for you.
What Are the Advantages of Long Term Investing?
What Are the Advantages of Long Term Investing?
Apr.19, 2010
Long term investing is a simple strategy that lets you make money over the long term. The only thing you need to do to take advantage of this is to buy stocks in strong companies and hold onto them for as long as you can.
There are a few big benefits to doing this.
1. This is backed by History
While over the short term there is no guarantee of making money in the stock market, over the long term it can actually be relatively safe and likely to make you money. Time after time strong stocks have gone up over the long term and it is likely to stay that way for the foreseeable future.
Over time this slowly but surely investment style can actually add up pretty nicely.
2. Low Maintenance
A second advantage of long term investing is that you don’t need to constantly watch the market and be active in the day to day news. In fact doing so will only stress you out and have next to no affect on what your portfolio is actually doing. Instead, the only thing you really need to do in order to invest into the long term property and hopefully build a lot of wealth is to buy a 20 or more stocks in companies that you really believe in and just hang onto them over the long term.
3. Dividends
The last advantage of investing into stocks over the long term is that many of them will pay their investors a nice consistent passive cash flow in the form of a dividend. Dividends can add up over time, in fact many professional investors consider dividends to be the part of the investment that makes them the most money. Regardless of that, it can be a nice way to make some passive income.
Apr.19, 2010
Long term investing is a simple strategy that lets you make money over the long term. The only thing you need to do to take advantage of this is to buy stocks in strong companies and hold onto them for as long as you can.
There are a few big benefits to doing this.
1. This is backed by History
While over the short term there is no guarantee of making money in the stock market, over the long term it can actually be relatively safe and likely to make you money. Time after time strong stocks have gone up over the long term and it is likely to stay that way for the foreseeable future.
Over time this slowly but surely investment style can actually add up pretty nicely.
2. Low Maintenance
A second advantage of long term investing is that you don’t need to constantly watch the market and be active in the day to day news. In fact doing so will only stress you out and have next to no affect on what your portfolio is actually doing. Instead, the only thing you really need to do in order to invest into the long term property and hopefully build a lot of wealth is to buy a 20 or more stocks in companies that you really believe in and just hang onto them over the long term.
3. Dividends
The last advantage of investing into stocks over the long term is that many of them will pay their investors a nice consistent passive cash flow in the form of a dividend. Dividends can add up over time, in fact many professional investors consider dividends to be the part of the investment that makes them the most money. Regardless of that, it can be a nice way to make some passive income.
Common Stock Market Mistakes
Common Stock Market Mistakes
Jun.02, 2010
Stock market trading can be an interesting way of building your wealth and can lead to a lot of interesting learning experiences. There are a few mistakes that most newbie’s tend to repeat over and over again which harm their returns.
The first mistake that people tend to make when investing into the stock market is watching the news. The only thing the news is good for is making you panic and bringing emotions into the mix. You don’t need to watch the news to be a great trader. In fact staying away from other opinions and trusting yourself can be a bonus in the market.
The news has the tendency of pushing your emotional button and makes you do foolish things that you will regret later on. Instead of making decisions based on fear and greed conduct your own research to see how strong a company is yourself and create a game plan for what qualifies as a good buy,
One other mistake that people tend to make is to second guess themselves. They may enter into a position for one reason but get out for a completely different reason and not follow their original game plan. This is not always a bad thing. If you got into a stock because it was a hot stock tip and you really had no reason to get into it in the first place, (which you should never do), then of course second guessing that decision is important.
But if you actually have a plan that is another story. If you bought a stock at $50 and planed to exit out at $65 or cut your losses short at $45 there is no point in getting out at $49 just because you are scared that you might actually lose more money. Create a plan and stick with it.
The last major mistake that people make is not limiting their losses. Having some plan on limiting your losses whether it be through diversification or stop losses and money management every successful market participant limits their losses.
If you work hard at it there is no limit to what you can do with the stock market. It can be a very powerful tool for creating wealth.
Jun.02, 2010
Stock market trading can be an interesting way of building your wealth and can lead to a lot of interesting learning experiences. There are a few mistakes that most newbie’s tend to repeat over and over again which harm their returns.
The first mistake that people tend to make when investing into the stock market is watching the news. The only thing the news is good for is making you panic and bringing emotions into the mix. You don’t need to watch the news to be a great trader. In fact staying away from other opinions and trusting yourself can be a bonus in the market.
The news has the tendency of pushing your emotional button and makes you do foolish things that you will regret later on. Instead of making decisions based on fear and greed conduct your own research to see how strong a company is yourself and create a game plan for what qualifies as a good buy,
One other mistake that people tend to make is to second guess themselves. They may enter into a position for one reason but get out for a completely different reason and not follow their original game plan. This is not always a bad thing. If you got into a stock because it was a hot stock tip and you really had no reason to get into it in the first place, (which you should never do), then of course second guessing that decision is important.
But if you actually have a plan that is another story. If you bought a stock at $50 and planed to exit out at $65 or cut your losses short at $45 there is no point in getting out at $49 just because you are scared that you might actually lose more money. Create a plan and stick with it.
The last major mistake that people make is not limiting their losses. Having some plan on limiting your losses whether it be through diversification or stop losses and money management every successful market participant limits their losses.
If you work hard at it there is no limit to what you can do with the stock market. It can be a very powerful tool for creating wealth.
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