Investment Articles

The land feared by many because of their aggressive horseback riding nomadic warriors led by the great Mongol Emperor Genghis Khan back in 13th Century which nearly occupied the most of central Asia has gone through several economic reforms past few years.

This landlocked country, sandwiched between People’s Republic of China and Russia, has a population of approximately of about 2,736,800. The country popular for its nomadic population where the per capita income of approximately $3,300(2010 est.) has moved from state controlled economy to free market economy after the downfall of Soviet Union.

Although, this landlocked nation situated in the steppes with only one trading partner, China, which received three fourths of Mongolia’s exports where most of the trades was controlled by China is now trying to reduce its dependence on the Chinese Market.

With its vast mining resources, Mongolia has projected itself as an emerging market in the mining industry among other Central Asian states. “In October 2009, the government passed long-awaited legislation on an investment agreement to develop Mongolia’s Oyu Tolgoi mine, considered to be one of the world’s largest untapped copper deposits” (CIA factbook).

However, for this emerging nation one of the biggest hurdles in its mining development has been lack of proper infrastructure, namely transportation. To overcome this development issue and develop its mining industry, Mongolian Government has recently set up a Development Bank under the supervision of Development Bank of Korea and Development Bank of Japan.

The reason behind this establishment is to improve its railway network to open up its vast mining resources thereby creating job market for the local unemployed population. With an aim to attract foreign investments, the Development Bank of Mongolia has planned to issue 800bn (in Tugriks) government bonds, which is equivalent to US $700,000,000, to build its railway industry to further explore the mining area. The bonds being issued are rated “B1 by Moody’s which is below the investment grade.”

However, with rising foreign investment, recent contract with US and Japan Government to establish a newer international airport and development of the mining industry, Mongolian government expects that the average Mongolian is expected to become wealthier than the average Shanghainese by 2014 due to a proposed sharing of equity to all Mongolian nationals in state-owned assets due to be privatized at that time.

Similarly, the recently established Mongolian Stock Exchange has been going through several reforms with the help of London Stock Exchange and Hong Kong Stock Exchange. This overall restructuring of country’s economic outlook is giving Mongols hope for better financial future.

The Emerging Market Scholar

http://www.pennysniff.com

A put option is the right, but not the obligation, to sell a stock. It is, in essence, an insurance policy on a financial market security.

There are two reasons why an individual or institution might buy a put option;

(a) to protect a stock position (i.e. a protective put);

Let’s say that I hold (i.e. long) a stock currently priced at $100. Now, let’s say that the lowest price that I want to receive for that stock at some stage in the future (strike date) is $80 (strike price). Options are traded in block of 100 shares in the US market. I could pay a premium (e.g. $1 x 100) to lock in that price via buying a put option. I am buying the right, but not the obligation, to sell that block of 100 stocks at $8000 ($80 x 100) on a certain date in the future. As a result, I have put a “floor” under my stock. Ideally, of course, I don’t use (exercise) that option at expiry. I would prefer if the stock rises in value and I can sell the security to the market at a higher price!

(b) To make a return in a falling market;

If a market participant has bought the put option, they are said to be “long” in this transaction. Using the insurance policy analogy, the more risky the scenario insured, the more valuable the insurance contract or “floor” is. As a result, if the stock is falling, the price of the put option goes up. This is a “bearish” strategy i.e. you would only buy a put option if you felt the market was going to fall. This is referred to a “naked” trade if you don’t own the underlying stock and the only reason that you had the option is to make money on the basis that the stock would fall and hence the value of the option would rise.

The maximum amount of loss that a put buyer can have is the premium that they pay at the beginning of the contract. In the numerical example above, all that you can lose is $10 plus your transaction cost. The is an upward limit also – the furthest the share can fall is to $0, at which you would make the maximum of $8000, as this is the difference between the strike price and the market price. In practice, there are a number of things to take into account throughout the life of the option.

Firstly, you need to decide the “strike price” to buy. This is the price that you have the right, but not the obligation to sell at. You might buy an option that is “out-of-the-money” or the strike price is below the current market price. In the above example, you would choose a strike price anywhere below $100. If the stock goes up in value or is still at $100 by the time of the expiry of the option, you will lose your premium and hence, invoke the maximum loss. You may also buy an option that is “at-the-money”, i.e. the strike price is the same as that of the market. Again, if the stock rises or trades flat by the time of expiry, you will lose your premium. However, a trade might start off either “out” or “at” the money and the stock price could fall below the strike price. In the above example, the price of the share falls below $80. Now this contract is “in-the-money” and you can “exercise” your option. This means that you could sell the stock at the strike price, which is higher than the market price. Have you actually made a profit? Indeed, you might have made money in the difference between the strike and market prices, but you also need to take away the premium that you paid as well as the transaction cost of doing so. Let’s say the market fell to $75 per share. You sold your holding at $80, since you had the put option to exercise. You made a gross profit of $5, but you need to subtract the $1 premium to find the net effect. In fact, you made $4 less the transaction cost from buying this put option.

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When it comes to bond yields, sometimes less is more. While municipal bonds, or “munis,” usually have a stated yield several percentage points below those on comparable corporate or government bonds, the interest paid on municipal issues is generally exempt from federal and, in some cases, state and local taxes. For that reason, a muni may actually provide a similar or higher yield than those other options after taxes are taken into account.

Are Munis Right for You?

You can easily compare the yield on a muni with a taxable investment to help determine whether tax-exempt investing might benefit you. For example, if your income tax rate is 25%, a $1,000 municipal bond yielding 6% may actually be a better investment than a taxable bond yielding 7.9%. Why? While the taxable bond will provide $79 in interest per year, federal taxes will leave you with $59.25. The muni, on the other hand, may pay $60 a year free of taxes.

To determine whether you might come out ahead with a muni, use this formula to calculate its taxable-equivalent yield:

Municipal bond fund yield / (1 – your marginal tax rate) = taxable-equivalent yield

For example: 6.0% / (1 -.25) = 8.0%. In this instance, if you are in the 25% federal tax bracket, a taxable investment needs to yield 8.0% to equal the lower, but tax-exempt, return offered by a municipal bond that currently yields 6%.

How Should You Invest in Munis?

In addition to the thousands of municipal bond issues that are outstanding at any one time, professionally managed funds offer you additional alternatives for investing in munis. Municipal bond funds generally invest in a diversified mix of high-quality bonds whose interest income may be exempt from federal and state taxes. In addition, with initial investment requirements that are generally lower that those for individual municipal bonds, funds that invest in them may make it easier for more investors to participate in the muni market.

Note that investments in Municipal bonds are subject availability and change in price. Market and interest rate risks exist if sold prior to maturity. Bond values will decline as interest rate rise.

If you’d like help determining whether you might benefit from an investment in a municipal bond or bond fund, be sure to consult a qualified financial professional.

Investors should consider the investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus contains this and other information about the investment company. You can obtain a prospectus from your financial representative. Read carefully before investing.

Income from some municipal bonds may be taxable under alternative minimum tax rules. Capital gains are taxable.

Lower maximum tax rates on capital gains, dividends and other income would make the return of the taxable investment more favorable, thereby reducing the difference in performance between the accounts shown. Also, changes in lax rates and tax treatment of investment earrings may impact the comparative results and investors should consider their personal investment horizon and income lax bracket, both current and anticipated before making an investment decision.

Arthur Kaplan invites you to visit http://kappatrade.com to learn more about the stock market and what the financial world is currently undergoing. Feel free to write us directly on our website for any help and/or suggestions.

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In financial management studies, an effective financial goal should have 5 characteristics which could be easily remembered as S-M-A-R-T. The following paragraphs explain all the 5 characteristics:

1) Specific

We might be thinking of being financially free but do you know what it takes? This goal is seems to be too general. Our goal needs to be specific so that we can focus particularly in each area of financial planning and easily to manage our own expectations. Specific goal normally has only one outcome.

For example, goal to invest RM200 per month in unit trust and accumulate at least RM2400 in a year; or spend within our budget every month. These specific goals are going to have different outcomes but when combined, they will ensure our cash flow to be healthy. When each specific goal is accomplished, we are getting nearer to financial freedom.

2) Measurable

We might be working very hard, but how do we know whether our goal is achieved? Therefore, our financial goals should be quantifiable.

For instances, we want to invest and accumulate RM50,000 in 2 years and the progress can be easily quantified by looking at our investment account statement.

In fact, we must be able to measure or review the progress of achieving the goal such as calculating our current net worth, debt-to-income ratio and reviewing, return-on-investment (ROI) and our current insurance policy. It is good if we can keep a journal and review our current planning.

3) Achievable

Many people are influenced by the ‘Law of Attraction’ and believe that ‘nothing is impossible’. Because of this, we’re tend to set difficult goals which require great effort. However, are these goals realistic and achievable? It’s important to know whether the goal is within our potential and logical norm.

For example, if your target is to achieve RM1 million in a year by only investing RM1000 per month in any scheme. How likely can these be achieved? In fact, such investment scheme will require very high ROI within a short duration and often comes with very high risk. You might lost your capital easily.

The most importantly, we should not stretch ourselves to achieve unrealistic goals. This is to avoid frustration over failure which could ended up in great disappointment.

4) Rewarding

We want to achieve a goal because want to get something in return or else nobody will work hard. While working towards goal achievement, we must be certain on the outcome to be achieved and it’s importance to our life. In fact, it must be meaningful and enjoyable.

For example, a man wants to invest his money to accumulate education fund for his son in 20 years. In the future, this goal will be rewarding because his son will be able to enroll into higher education.

However, the rewards could be in any form such as material, financial, relationship and spiritual.

5) Time-bounded

We need adequate time to achieve our goals. It could be short-term, medium-term or long-term, depending on the type of goals to be achieved. Timeliness has been an important aspect in life. Therefore, we should allocate a time frame to avoid procrastination. It will be good if we can set a schedule for everything to be done.

For instances, saving for retirement would require many years because it is a long-term planning and involved huge sum of money. Therefore, planning for retirement in a short-term (1 to 5 years) could be unrealistic unless someone is willing to have huge commitment on this.

In brief, time is priceless because it gives chances for development and create greater outcomes. Therefore, the wise man always said, ’start early and stop procrastinating’.

Summary

An effective financial goal would always has these SMART characteristics; Specific, Measurable, Achievable, Rewarding and Time-bounded. This is to ensure that our goals are meaningful and get us closer to financial freedom. Good luck in your goal setting.

To achieve your financial goals, you may consider investing your money in appropriate funds. Visit ING Funds (Malaysia) to seek for greater investment opportunities and exposures, as well as further guides on investment planning.

Are you a conservative investor? Almost everyone is to some degree but if you are always concerned about not losing, about retaining your hard-earned cash, then you probably fit the mold for a true conservative investor. The good news is that there are sound strategies for conservative investors that can still grow your money, maybe not like a bamboo tree but surely like a solid oak tree.

And there is nothing wrong with saying you are conservative investor, that you want to leave the risky stock investing to others. When retirement comes, or a rainy day, conservative investors are confident they have money to meet their future needs.

There are degrees of conservative investing and it is important to recognize where you stand. These degrees include:

1. Totally concerned and committed to just about not risking a penny of your cash but desiring to at least keep even with inflation.
2. Committed to minimal risk of your money but desiring to see it grow a little more than inflation.
3. Conservative in most cases but willing to use a small portion of your cash to grow faster than inflation but not to the extent of taking wild risks.

If you fall in the #1 category, safe investments can be found:

• Bonds, bond ETFs or bond mutual funds
• Some stocks (companies) with a 10 year or longer history of paying strong dividends, ETFs or mutual funds based on dividend paying stocks
• US treasuries, ETFs or mutual funds based on treasuries

If you fit the profile for the #2 category you should invest similarly to those in the #1 category but put more of your funds into dividend paying stocks, funds or ETFs. This will enable your portfolio to grow a bit more than inflation as dividend payouts from strong companies are usually greater than inflation and there is also a good likelihood the price of the stock or ETF or fund is also appreciating.

For those of you in the #3 category of basically conservative investors, the majority of your portfolio should be invested as if you were in category #1. But like those in category #2 you should hold investments in dividend paying stocks, funds or ETFs to help grow your portfolio and beat inflation, but in your case this portion of your portfolio should be a strong minority.

You should also invest a smaller minority of your cash into strong, stable companies whose growth may be slow but sure. This can be achieved by either investing directly in stocks or ETFs or mutual funds based primarily on large companies (called large caps).

Another option for those in category #3 is to take that small minority of funds and invest in ETFs or mutual fund sectors which represent those portions of the economy that are growing.

In all situations, for all conservative investors it is still important that you keep on top of the market to some degree. Do you have to watch it daily? No, but taking a glance every week or for sure every three or four weeks is a good idea.

Just because your investments are conservative doesn’t mean that once you buy them you should hold on forever. Situations change and you may need to make adjustments. For example, you may want to switch from long-term bonds to short or mid-term bonds. Or maybe one of your dividend paying stocks is paying 3.5% but there is another paying 4.7%.

You can place your investments yourself; work with an investment advisor firm, or a financial planner. If you want to do it yourself, I would suggest using a software program based on technical analysis, not necessarily just charts, which gives you recommendations that can be set to fit these three categories and your particular objectives. By spending a few moments and updating such a software program every week or few weeks you will keep up with your choices and be able to make changes that protect your money while allowing it to grow at the pace you desire.

Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He has been investing in the markets since his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana.

View his software at: http://www.dynamicinvestorpro.com

No one style of investing fits all people, but I subscribe to the 45/45/10 Investing Method. 45% of your investing should in CASH FLOW strategies, 45% growth strategies, 10% (or less) in higher risk, higher reward strategies.

One of the first “systems” I learned in my twenties, was the “CANSLIM” method of investing. A system developed by the founder of “IBD”, Investors Business Daily. This system works very well in an up-trending market, OK in a flat market, and poorly in a down trending market.

All stocks, are companies, and have financials. Some good, some bad, but never equal. O’Neil found that just before a company did very well financially, and in terms of stock growth, there were common characteristics. Common elements, in their financial statistics, that often can predict, stock growth. In addition, he noted some more subjective, but measurable activities, that were good indicators of future stock growth. A very strong indicator of future gains.

Many of these indicators are pure financial bench marks; we can look for in a company, such as: sales growth, and earnings over time. Some a little more subjective, but still quantifiable. For example: product development, being a leader or laggard in the sector (industry) and institutional buying.

Thus O’Neil developed the CAN SLIM method of picking stocks, which has served me and many other investors very well. A checklist of seven common elements that indicate a stock is going to have solid gains in the future. This strategy can reduce risk and increase returns when picking stocks for long- term growth.

“CANSLIM” is an acronym that stands for: Current Earnings. Annual Earnings. New Products. Supply and Demand. Leader or Laggard. Institutional Investing. Market Direction.

The system uses key numbers, and characteristics of the company to check a stock before you buy.

C= Current earnings per share must be up 25%. Accelerating in recent quarters. Quarterly sales should also be up 25% or more.

A= Annual earnings must be up 25% or more in the last three years. Annual return on equity must be at least 17% or more.

N= The company should have new products or services that drive earnings. At this point, you might check the chart of the stock, and see if there is new upward trending or positive pattern (for example: breaking resistance or new highs).

S= Supply and demand. Shares outstanding are large or small. But as the stock price increases, there must be increase in the trading volume too.

L= Leader or laggard. The stock must be in the top 20 percent of the industry or sector analysis. Therefore, you need a Relative Price Strength Rating of 80 or higher.

I= Institutional buying (mutual funds, investment houses) must be increasing. The big boys are buying more of the stock, and therefore, demand is increasing, and supply decreasing.

M= The market needs to be going up. Indexes: Dow, S&P 500, RUT and NASDAQ are positive and moving up. Remember three out of four stocks trend with the market.

Ok. Great what do I do now. Well most on-line brokers, web sites and financial software programs, allow you to do searches based on “parameters”. Therefore, you can drop by a web site like Yahoo Finance, and use their stock screener to find the companies that have these specific elements.

http://screener.finance.yahoo.com/newscreener.html

Jim Francis is an expert in building wealth. He has taken a company public. Plays the real estate game. Invests regular. He loves Credit Spreads. http://www.m2spread.com

A lot of people are not aware that there are certain risks involved when investing in tax lien or foreclosed properties. They simply forget that they need to protect their other assets as well. If the intention is to do business then as an individual this is a dangerous thing to go into. What an investor can do is form a Limited Liability Company or LLC. With the formation of an LLC and placing the tax lien property business under this, the investor is protected especially his other assets.

LLC Formation Myth

Contrary to what people think, formation of an LLC is faster than other types of business organization. People also believe that an LLC formation will cost so much. This is completely the opposite. An LLC is the least expensive of business organization.

Benefits of an LLC

Members of the LLC are provided with limited liability protection. What this means is that in the event debts or liabilities, they are not personal accountable. The personal assets of the members are not part of the LLC and thus cannot be sequestered should problems arise.
LLCs do not pay taxes like other business organizations.
Being part of an LLC shows that the investor is a “serious” business person thus credibility is higher than sole proprietors.
LLCs have fewer compliance requirements so establishing one is faster than a sole proprietorship or a corporation. LLCs also have less reporting requirements.
Corporations have controlled number of incorporators. For LLCs, organization is more flexible.

Negative Side of an LLC

As in anything, there is always an opposite side. When organizing an LLC there is no getting away from expenses. There are initial fees. Most states also require an annual reporting fee.

There are also mandatory reports to be filed yearly.

Adding members or owners to the LLC is not as easy as in a corporation where shares can be sold to other people. There is also some difficulty when transferring ownership when it comes to LLCs. Thus it is important to be sure who to include as LLC members.

LLC formation rules and regulations vary from state to state. It is vital to get a firm to give you guidance on this matter else you will be wasting time and money.

Find a good real estate lawyer or firm to represent you especially when you are not from the state where you have tax lien properties.

Read more about tax lien certificates at http://taxlieninvestingonline.com

Bidding on tax lien certificates is the initial process in its acquisition. Knowing how to bid properly is crucial to the success of acquiring the property that you want. This type of auction is different from the usual property auction because the one bided on is the amount of delinquent taxes to be paid. The property is not the focal point of the bid.

Methods for Tax Lien Bidding

1. Interest Rate

In this method, the interest rate for the lien is set by the bidders before the tax lien certificate is purchased. Since the property owner will be purchasing back the lien from the bidder or investor, the interest rate should be one that will give a considerable return of investment. Some state laws guarantee an interest rate set for the investor.

2. Ownership

This type of bidding is the least preferable method. Investors are given an option to bid down the percentage of future ownership as they purchase tax lien certificates. This amount of ownership is a factor for the amount or percentage of the final profits. Investors must see to it that they will get a fair share of the profits. The investor will get a certain amount of profit percentage and the property owner will take the rest of the share.

3. Random Selection

While bidding down ownership is the least preferred bidding method, random selection is the most preferred one. The bidders are given a chance to access all properties for bidding before the sale. Bidders are given numbers. A draw will be made for each property and once a bidder’s number is called, he or she can accept or decline the property. The price of the bid is the delinquent or unpaid tax value.

4. Straight Bidding

This method is also called premium bidding. The winning bidder is the one who bids highest over the amount of the lien. Many states only allow interest to be charged to the amount of the lien and not on the actual amount paid by the bidder or investor.

5. Over The Counter Sale

There are counties that allow the direct selling of tax lien deeds or certificates. An investor can go to the local tax collection office for this. However, the interested party should first make research or check out the property before purchase. Most of these properties are the ones that were not sold during auction and they might have setbacks. This can be disadvantageous for the investor. Direct sale is the easiest way to procure tax lien properties.

For more information about tax lien properties investing, check out http://taxlieninvestingonline.com

A lot of foreign investors are now looking into tax lien investing as a means to get into the American real estate business. These investors are convinced that this type of activity can gain a high yield of profits if done the right way. This is the reason why they partner with a property management companies for guidance and advice on such investment opportunity. Such partnership is crucial to the success of the venture.

Foreign nationals who want to own a US property or offer property rental is at a disadvantage. The first consideration is distance. A foreign investor cannot easily manage the property for a longer term due to visa limitations. The investor is most certain to be unfamiliar with the rules and regulations governing tax liens. This is where a property management consultant or company is most needed.

A Partnership That Will Make a Difference

Here are some guidelines when looking for a property management firm to partner with:

1. Find out what firms are operating within the location of the tax lien property.

Communication is vital for any partnership. The investor may not be physically available to manage the property thus it is vital for the partner firm to be at close proximity with the property. The firm should be able to be in touch with the tenant and be able to transmit any messages from the investor to the tenant and vice versa.

2. Check on the communication facilities and responsiveness of the firm.

The foreign investor should also check on the availability of the firm considering that there will be different time zones. Will the firm be able to respond to emails or phone calls immediately or will there be a time delay?

3. What services are provided by these firms? List them down to be clear on who offers what type of service.

The property management firm should be able to provide services that will have the security and protection of the foreign investor. Do they have experience in dealing with foreigners? Check on the details of each service to be sure that the best firm is chosen. What is the track record when it comes to tax liens?

4. What are the costs involved. Make a comparison of charges or rates.

There should be synergy of scales to allow the investor to negotiate charges or rates against the volume of partnership that is offered. The more properties to be managed, the lower the service rates should be.

The Big Advantage

The guide given will surely help foreign nationals to decide which property management firm to partner with when it comes to tax liens advising and management. The more experienced the partner is then it is more advantageous for the investor.

Knowing how to go about tax liens investing is the best protection against an unsuccessful investment. To know more about this type of investment, check out http://taxlieninvestingonline.com

There is no doubt that tax lien properties is a worthwhile investment. One way to gain profit is through rental income that these properties can have. However, you need to bear in mind that there are costs to be incurred with these type of investment.

Fixed Costs for Rental Properties

The following are expected expenses by tenants when they rent properties:

1. Electric and gas
2. Telephone
3. Internet
4. Cable

There utilities are anticipated ones to be used by the tenants and are for their account in most cases. Tax lien properties should have these utilities available in order for the rental property to be attractive to interested parties.

Tax lien property owners normally pay for the costs of:

1. Water
2. Sewer
3. Trash collection

Real estate taxes are yearly obligations is always paid for by the property owner. Repairs and maintenance expense for the upkeep of the property is also an expense to be expected. If the property has a lawn or grounds then this should be maintained to include sprinkler systems to assure that the grass and other plants will have sufficient water especially during summer. Structural and plumbing repairs and maintenance is another anticipated expense.

When the property is vacant, all costs for utilities and other expenses will be supported by the property owner.

Determining Return of Investment from the Tax Lien Property

In determining how much rental the tax lien property would generate, be mindful of the fixed costs mentioned in the proceeding section. Consider the period when the property did not have a tenant and how much has been spent. To derive profit numbers, decide on the appropriate rental amount and deduct all expenses both incurred and anticipated. Another factor to take into account is how long the property should be rented out. The longer the property will be rented, the more advantageous it s for the property owner. Being aware of these factors should generate a fair rental rate and an idea of how much the return of investment would be.

Tax lien investing is a great way to make money but the investor should know how to manage the investment. It is not profitable to blindly decide on the rental rate without doing research. There are factors to consider on how much and how long the contract would be to get the most return of investment. A good investor considers everything.

Get to know more about tax lien investing. Visit http://taxlieninvestingonline.com