Making cash has never been easier providing you employ forex auto trading software - why not enhance your financial situation by giving it a go? With the right tools at hand, it is easy to be able to work at odd hours to supplement your income. forex auto trader is more than capable of helping to provide you with a supplemental source of income without much concern and time spent fretting.
No one will be shocked to learn that it takes market traders many years of instruction and experience to to be confident enough to work the market floor to deliver a lucrative return. Such a job, however, is a full-time commitment and isn’t for everyone. There is no real need to work that hard as long as you combine forex auto trading software with a good financial plan of action.
As bleeding edge as forex auto trading is, beneficial results can only be obtained if the user is experienced enough to get them - it is recommended that you make a few dummy runs before starting on the real thing. You’ll have the time and the luxury to make and learn from your misunderstandings before you start risking real cash.
The next stage is when you configure your preferences, limits, and other particulars into the auto forex trader to maximize your earning potential. As soon as the criteria has been filled in, you can leave the system to run automatically. You should know one or two things before you start using a forex robot, however. The forex trader is still a system that can only operate once given specific parameters, therefore it is still possible to suffer losses or to gain only minimal benefits. Providing it is correctly deployed, it is a useful tool that can improve your time management; it is still not as reactive as a human is to market fluctuations. You can trade when your shares go up, instead of when you have time. It does require semi-regular monitoring. A forex auto system can spare you the bother of earning your cash on the exchange floor; nonetheless, you still need to commit just a few minutes of your time to stay aware and on the ball.
In conclusion, providing you use the forex auto trader properly, you should be able to get around the obvious pitfalls. Adopt a gradual and steady approach. So, to cut out the stress of modern day trading, always remember that you can do it another way using the forex auto trader.
The primary thing you must try to accomplish if you can is to take advantage of a worldwide automobile hire agency and reserve your car ahead of your departure.
This is basically because you can’t be certain if you will find the manner of assistance (and attention) which you would find wherever you reside, in this latest locale that you’re travelling to.
A significant global company would effectuate the reservation for you, through the internet or over the phone, and you must ensure that you take a duplicate of the reservation application along; prominently displaying the business’ name, the make and model of the car that has been held in reserve for your use, the duration of the booking as well as the price fixed in both Euros as well as the local currency.
As soon as you collect the vehicle you should inspect it with care and must not accept the automobile if it isn’t in a good state. If there is any trivial damage to the vehicle then ensure that this be noticed by the charter firm in written and that you hold on to a duplicate of any specification report. Another essential thing is to drive the car around nearby as soon as you pick it up so that if it isn’t running well you can take it straight back and get the problem sorted out. Having borrowed lots of vehicles over the years I can verify to the fact that it is not uncommon with smaller hire companies overseas to unearth that the air conditioning refuses to work or one of the indicator bulbs is broken.
One more facet to look into is what your choices will be in case of some untoward occurrence like a crash.
In no way take facets such as insurance lightly and never refrain from paying some extra money for full insurance shield. The last thing you need is to get entwined in a nasty legal fight overseas as you were not adequately covered.
Breakdown can also be a big annoyance if you intend to go any considerable distance from your vacation hotel, and specially if you expect to go out into rough country. Enure you identify what should be done and who to call in the event that you do break down.
Therefore, it is always recommended that you employ a trusted and reliable global vehicle rental corporation when you go across borders, and just bearing in mind the points mentioned in this article ought to take many of your vehicle hire problems away.
While in many ways in the modern world it seems like a pretty straightforward step, before now the sale of bank loan portfolios has occured through multiple markets without a one-stop shop. They can now be acquired using a strategy made popular by the rise of online commerce — the Internet-based bidding system patterned after Ebay.
Packages put together for sale on this national platform are put up for bid at respectable discounts to maximize your buying power. Small packages thus become a smart purchase, meaning the market becomes open to more investors.
Enhance your access to banks and investors by utilizing the ability to reach a wider audience characteristic of any Internet business — take care that you’ve publicized your loans to investors. Substantial savings can be made following a conversion to a modern business model to which location and time are of less importance, allowing firms truly international scope for their activities. Before selling anything you need possible leads who might buy, and you have to locate and contact these in quantity. Consequently, by registering with our marketplace and listing packages, you’re granted all the information required, at any time. Selling loan portfolios will become a whole lot less problematic, and a lot more economic.
The truest course to turn a profit derives from collecting and understanding of targeted information. During consideration of any loan package, data transparency gives you a clearer sense of what you’re bidding on and thereby reduces the risk you carry. Using the new transparency and standardization this system offers you can handling your investments entirely on your own with no need for a third party broker. Both sides of each transaction will profit from direct negotiation, with the full actionable information to deal in portfolios entirely on the table and in the open.
Consumer and subprime loans are standardized instead of fragmented, making it quicker to find exactly what you’re looking for. Identifying the optimum package immediately means that both buyer and seller waste less time and therefore money. A system of open bidding provides plenty of opportunity for the best deal possible, to say nothing of an opportunity to increase profits, using contact between seller and buyer.
Online sales is able to exploit the boundless opportunities of online commerce. Sure, there’s no smarter way to shop, they say, than using the Internet — the thing that few people understand is that by the same token there’s no smarter way to sell, either…
Never before have people intending to sell distressed loan portfolios been able to use just a one for all marketplace. Now they can be bought and sold using a technology made popular as a result of the rise of e-commerce — the online bidding approach patterned after Ebay.
To learn more, you are advised to review our prime webpage for debt transations facts
Having built a customer base as a national platform, loans are assembled into packages which are then purchased typically at respectable prices. Selling portfolio packages in this way standardizes the data and paves the way for minor packages. Size and credit quality are finally no longer barriers to investment. As with all web companies, offering subprime and consumer loans for sale via this system can reach a wider range of potential investors than traditional methods. Time and location are no longer of significant importance and business can be conducted at any time of day or night, which saves a respectable quantity of both money and time.
Making contact with as many customers as possible is the key to the sale of any product. Accordingly, by signing up with this website and listing loans, you’re granted any necessary data, at any time. The sale of loan portfolios is becoming so much smoother, and a lot more streamlined. The better the information at your disposal, the easier and more profitable it will be to sell whatever you want to market. The fuller the transparency of the available information on available portfolios is, the greater your ability to avoid risk and make the best of your investment. This level of accessibility of information makes it more possible than ever to manage transactions for yourself rather than needing to funnel some of your returns to a third party so as to handle it on your behalf. Open discourse with full disclosure puts you in a position in which both buyer and seller can equally benefit. Preventing fragmentation in packages keeps things painless in terms of identifying the right package. We therefore waste less time for both buyers and sellers by quickly identifying the best deal to suit you. Along with this information, the use of a bidding system creates the chance for everyone involved to strike the deals they desired.
Develop the capability of your investments vastly by taking full advantage of the awesome advancements in web commerce. With a larger reach, dependable standardization of data, and an opportunity to put your hands on a package tooled to your requirements, why not venture online?
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Endowments and endowment mortgages have received a lot of bad press in recent years, amid concerns over falling policy values and accusations of endowment miss-selling.
This article attempts to answer some of the questions and concerns you may have about the way endowments work, what’s happening to them, and what you can do to ensure your mortgage is paid off at the end of the term if you have an endowment
mortgage.
What is an endowment mortgage?
There are two basic types of mortgage. The first is a repayment mortgage, where you make one monthly payment to the lender which is part interest and part repayment of the original capital.
Then there are interest-only mortgages, where your monthly payment to the lender is just the interest on the original loan and the mortgage debt remains unchanged. You then make separate payments into an investment scheme (such as an endowment), with
the idea being that at the end of the mortgage term this investment will have grown sufficiently to repay the mortgage.
An online mortgage calculator can give you an idea of the difference in payments to your lender between an interest-only mortgage and a repayment mortgage.
Interest-only endowment mortgages were very popular in the 1980s and 1990s and were often chosen in the belief that the endowment would end up being large enough to clear the mortgage and still leave a tidy sum of money left over as a bonus.
How do endowments work?
An endowment is a long-term savings policy, typically running for ten to twenty-five years. An endowment plan has what is known as a “sum assured” value. If the policyholder dies during the life of the endowment, it pays out the sum assured. In the case of endowments linked to mortgages, the sum assured is equal to the size of the mortgage. The payout in the event of the death of the policyholder is guaranteed but, if the policyholder survives, the final value of the endowment at the end of its term is not guaranteed.
Endowments can be unit linked, which means that you buy units in a fund, or they can be “with profits”.
How does money grow in a with profits endowment?
There are two ways in which a with profits endowment can increase in value. Firstly, the insurance company may add a bonus to your policy each year. This is known as a reversionary bonus and is usually a percentage of the amount of profit made by the fund over the previous years.
The amount added in this way may only be a small amount. However, once added, these bonuses cannot be taken away - hence the name reversionary bonus - and will belong to you when the policy matures.
Then there is the terminal bonus. This is a separate sum of money which the insurance company can add to your endowment policy when it matures. These terminal bonuses are discretionary and may not be applied at all.
What are the advantages of with profits endowments?
The idea of a with profits endowment is to smooth out fluctuations in the stockmarket.
With a non-with profits endowment, your investment is linked 100% to the stockmarket. Therefore, there is always the possibility that the investment value could fall just at the time when you need the money.
By using with profits endowments, insurance companies get round this problem by giving you a slightly smaller percentage of any fund growth as an annual bonus and try to smooth out future annual bonus declarations.
The point of this is to try to ensure that, no matter what happens to the returns of the fund, you are guaranteed a certain minimum amount when then endowment policy matures.
Why don’t you get the entire year’s gains as a bonus?
On the one hand, the insurance companies and their fund managers want you to have as much security as possible - hence the reversionary bonuses which cannot be taken away at a later date.
On the other hand, they are also trying to maximise long-term growth by investing your money in stocks and shares, property, gilts, and cash. All of these involve a degree of risk.
What is the problem with endowments?
Anyone taking out an endowment policy, whether on a with profits or unit linked basis, has to be given a written illustration by the insurance company of how much the policy might be worth at maturity. When providing these illustrations, insurers have to make an assumption as to the rate of growth per annum that will apply to the money you are paying into the endowment. This assumed rate is known as the projected rate, and there is no guarantee that this rate will be met in reality.
Until a few years ago, the projections were usually based on a mid-range growth rate of 7.5% per annum. In the early 1980s, the assumed growth rates used in the illustrations were even higher. Therefore, the monthly endowment premiums were low by today’s
standards, because they were set to reflect these high projected growth rates.
Interest rates and other economic factors, such as stock market growth and interest rates, are much lower now than they were in the 1980s and 1990s, so it has now been necessary to reduce projected rates of growth for people taking out a new endowment policy today. As a result, the monthly premiums for a new endowment policy today will be higher than they were in previous decades.
How does this affect existing policyholders?
Because actual growth rates have been lower than the projected 7.5% rate, an endowment policy taken out in the 1980s or 1990s may now not be worth enough at maturity to pay off the interest-only mortgage to which it is linked.
Insurance companies are therefore assessing the state of people’s policies and contacting them to advise what action they should take now to avoid a potential shortfall at the end of their mortgage.
How will I be affected?
In most cases, if you took out a with-profits endowment in the mid-1980s or earlier, the fund should be sufficient at maturity to pay off the mortgage. This is because the money in your endowment policy will have benefited from the higher rates of interest and better stock market growth of the 1980s.
But, the shorter the length of time your endowment has been running, the greater the potential for a shortfall at maturity.
It is impossible to predict exactly how large this shortfall may be, as so much depends on future fund performance between now and the time when your endowment matures. Insurance companies are trying to assess the issue by looking at how much has been
accumulated in your fund so far and making more conservative estimates about future growth.
What can I do now?
There are a number of options:
1. You can increase payments into your existing endowment policy (subject to Inland Revenue rules), or take out additional endowment policy with the same insurer or a different insurer. However, you may decide you don’t want to be tied into another
endowment.
2. You can ask to extend the term of your endowment policy, subject to your mortgage lender agreeing. This is probably not a good idea if it means your policy would continue beyond your retirement age.
3. You can set up an additional investment, such as an individual savings account (ISA). An ISA may be cheaper and can offer a wide range of investment choices to suit your attitude to risk.
4. You can ask your mortgage lender to switch part of your mortgage (equivalent to the projected shortfall on your endowment) to a repayment mortgage. You can get an idea of the costs of the new repayment part of your mortgage by using an online mortgage calculator.
5. You can use any other spare lump sum to pay off part of your mortgage. You will need to check first to see if this would make you liable for any early redemption penalties from your lender.
Which is the best option?
Everyone’s situation is different, and everyone has their own particular preferences. If you are unsure what to do, you should take professional mortgage advice to help you review your options and come to a decision as to what to do.
Should I just cash in my endowment?
This would almost certainly be a mistake. Many endowment policies are structured such that the management charges are highest in the early years. If you surrender the policy early on, the amount you get back may well be less than the amount you have paid in up
until now.
Also, you need to bear in mind that a large proportion of the final value of a with profits endowment depends on its terminal bonus. The size of this bonus will not be known until the policy matures.
So, the best strategy is normally to keep the endowment in place. If you need to cut down on your monthly outgoings, you can leave a policy “paid up” (although you may incur penalties for doing this). This means that you do not pay any more money into the
endowment, but leave it to mature on the original date for a lower amount. If you do this, you will need to make sure you still have sufficient life cover to protect your mortgage.
It is possible to sell endowment policies on the second-hand endowment market. The amount you get will depend on the policy and how long it has left to run. Again, this is an area where you would be well-advised to talk to a professional before taking any
action.
Please note that this article is for general guidance only and does not constitute financial advice. You should seek professional advice with respect to your own specific circumstances.
——
Copyright 2004 David Miles. You are welcome to reproduce this article on your website, so long as it is published “as is” (unedited) and with the author’s bio paragraph (resource box) and copyright information included. In addition, all links to external websites must be left in place.
David Miles is the editor of a number of personal finance websites including UK Mortgages & Remortgages and The Cash Clinic - a UK Personal Finance Portal.
Would you like to receive 15% to 50% return on investment (ROI) guaranteed by the government? Tax lien certificates (TLC) offered in many states and counties in the U.S., U.S Virgin Islands and Puerto Rico offer returns that high. While most states offer less than 50% your investment may be safe because it is secured with real property. A TLC is a note issued by the county or municipality on properties that are in arrears with their property tax. Some states allow these notes to be senior to all other mortgages and liens, including federal tax liens. These notes are sold at auction by the individual counties, municipalities and/or states that issue them. Investors receive a fixed amount of interest monthly written on the note for a specific time period. This amount is state mandated. If the outstanding debt is paid before the term of the loan ends, the government will send the investor a check for the initial investment and all outstanding interest due. These note terms typically run for one to three years. If the property owner does not pay, you may have foreclosure rights; the government may send you the deed to the property. This means you may realize a huge ROI.
There is some risk involved with the purchase of TLC’s. The purchase of tax sale liens of properties under the control of Federal Deposit Insurance Corporation (FDIC) and those affected by the Drug Enforcement Administration (DEA), or if the owner files bankruptcy could possibly result in the loss of your investment. With due diligence, this risk can be reduced. Remember, not all TLC’s are equal, some are better than others. Sometimes you will have to fight it out in court with other lien holders if it gets to the foreclosure stage. Proper title and bankruptcy research should be done or your tax lien may end up worthless. Inspect the property to insure you are getting some value. I heard of a man in Texas who found the property the lien was written on flooded twice a year. His research saved his investment. Don’t trust the description of the property, have a look for yourself. TLC’s can be lucrative, but it may take quite some time to realize and you are sometimes responsible for the tax payments during the foreclosure. Again, do your research on the property, legalities and taxes.
Anyone who can legally own property in the U.S. may purchase a tax lien. These sales are conducted by lot for cash, either on the spot or within a time frame of within 48 hours. There may be a pre-registration requirement before the sale. There are also rules of sale to be studied. Online sales are available. This is a time, labor and money intensive investment that is best done locally. The sales and auctions vary widely state to state. More information is available from the county offices. A list of unsold TLC’s may be available from the county as well. Research of public records is to be expected for due diligence.
With three startup businesses before he was 21 years old, Matt Fox has the experience to help you create your own businesses for your financial future. See his blog at http://www.bizmaker.blogspot.com.
The American Football season just came to an end with my team getting close to the championship but falling short again. I am a big fan of the Indianapolis Colts and we keep having a groundhog day season year after year but it is still fun to watch. We have one of the better quarterbacks in the league named Peyton Manning who is renowned for his hard work ethic as well as his mental and physical ability on the field.
One of the things he is known for is beginning each play with up to three possible plays to run and trying to switch into the best one at the line of scrimmage based on the formation that the defense of the other team is in prior to the ball being snapped. He will check out the other team and then let his team know what the play will be using different code words and hand signals. This is called an audible for you International readers.
When he is done calling the play and the ball is snapped they do their best to execute the play and move the ball forward. When the audible results in a good play everybody loves the quarterback and says how great and smart he is. When the play turns out poorly or if he has a series of poor plays he is the biggest sham in the league and everybody cant understand why he just doesn’t go up and just start the play instead of changing it every time.
Manning’s philosophy regarding making so many play changes is that he doesn’t want to waste a play. If the original play that the coaches called doesn’t look like it will work against the formation the defense is showing he will switch out of it into a higher percentage play. I for one am happy to have that asset on my team as are the coaches. When you watch other teams play without such capability you see a lot of wasted plays.
Well, we as short-term traders have similar tools that we can use to keep us out of wasted trades and they are called divergences. I locate the divergences I use with a MACD indicator but the idea is applicable to most indicators. Many systems have been designed based on divergences alone and they can be quite successful.
The way I use divergences is mostly as a warning system. Divergences tell me two things about possible market conditions. First is that the trend I am following could be coming to an end. The second is that the trend I am following may be a very strong trend and possibly worth milking for a large trade.
Every trend will end in a divergence on some time frame the question is what do you do about it. I follow a trend following system usually in my short-term futures trading. Those who follow my system (http://www.wattstrading.com/Scalpingtheeminis.html) know that there are a series of rules that need to be met before a trade is entered. Approximately 70% of the time that those rules are met and a trade is entered it will be a winner. There are times though that a trade is doomed from the beginning just because it is fighting a divergence that is telling us that the trend is coming to an end. It is hard to incorporate divergences into a rule set because by nature they are more subjective and not everyone will see them.
One way to improve the results of any trading system is by becoming aware of divergences and when they come along make a discretionary decision not to take a trade setup.
Lets assume we are using a basic trend following system where we buy or sell short pullbacks to a 21-period simple moving average on a daily chart based on whether the price is above or below the moving average. Follow this link to the chart used in the examples below http://www.wattstrading.com/NDX_Divergence.JPG
We can see in late April the price closed below the 21-sma at which point using the system we might be waiting for a pullback in order to get SHORT the market. If we follow the system blindly we would sell blindly at the end of May when price worked its way back up to the moving average. That trade would quickly turn into a loss as the price advances over the 21-sma. If however we noticed that the MACD formed a positive divergence we would have the choice to not take the SHORT trade and wait for another trade. That particular setup is not the best example since the period where the divergence set up is rather short but the idea still holds.
We next see how the price advance steadily in June before pulling back to the moving average and allowing a LONG trade. At the end of the LONG trade another divergence is formed warning us of a possible trend change. That being the case we have the option to not take the next trade which also would have been a loser. Price declines in July and pulls back to the moving average in August setting up a SHORT trade. It too formed a divergence with MACD at the end of the trade which led to an extended advance through the rest of 2005.
In the beginning phases of that extended advance a negative divergence was formed which did lead to a penetration of the moving average, however brief, but not a trend change. This is the second information that we can learn from divergences. When there is a clear divergence and a trend change does not occur then there is a strong possibility that a strong extended trend is underway.
Us traders of the 1-minute NQ see this all the time when we are in runaway mode. There can be divergences all the way up the advance and the thing to learn from the information is that there is more safety in finding a place to get on the trend rather than picking a top or bottom whatever it may be.
The extended trend in the chart example eventually does end with a divergence in December but only after several more smaller divergences throughout the year. This chart or theoretical system may not provide the best example but I think there is something useful in learning how to recognize divergences that can keep us out of poor trades. Here are a few of my observations regarding divergences. Hopefully they can be of some use to you.
1. MACD Divergences are most reliable when they cross the zero line in between the peak and the failure peak. Such as the two in June and August in the chart.
2. When you take a divergence signal and trade counter trend and end up getting stopped out there is a good chance that a strong trend is underway. Change your thinking of trying t find a top or bottom and see if there is a place to get on board the trend. The worst that can happen is that you will be wrong, but getting onboard a runaway trend early is worth the risk. (provided your system allows for such trading)
3. A MACD divergence on a time frame five times higher than your time frame is hard to overcome and it can feel like a battle trying to trade against it.
4. Allowing a trade to pass because of a divergence and having that trade work out the way it was suppose to anyway is not really a terrible thing. (see number 2). We should not place too much mental weight on any one trade but instead look at the collection as a whole.
Recognizing and applying divergence discretion to your trading system can be a valuable tool and worth the time and effort to learn. Trade well!
Ryan Watts is a full-time technical trader, money manager, and trading coach with over ten years experience in short-term trading. For more information on his services and trading system visit http://www.wattstrading.com. He can also be contacted by email at info@wattstrading.com.
Have you ever started an exercise regimen, only to see that you aren’t getting the results you wanted? It’s awful common, yet sometimes the real reason eludes the person. I remember being in a gym, where a young man of about 30 was trying to add some muscle and definition. He’d do three sets of this, and three sets of that. He’d split train his upper half one day, then his lower half the next. He worked so hard, and yet he wasn’t getting the results he wanted. He was getting stronger, and tighter, but his muscles wouldn’t grow in size the way he wanted.
This guy was indeed becoming frustrated, and of course because everyone seems to be an expert when you’re at the gym, I heard people telling him to do carbo loading, protein loading, work more on the “negative” side of the exercise, do super sets, you name it. The one thing I didn’t hear anyone suggest was that maybe he was over training. He was taking his routines from magazines like Muscle and Fitness, written by world class body builders. Was he a world class body builder? No, he was “Mike” a painter. I didn’t find it surprising that he wasn’t getting the results he wanted, he was training his body as if he was a true world class body builder, but in all reality he wasn’t.
I am not an expert on body building, but I’ve done my share, and I have a fairly good dose of common sense. So, one day I mentioned to him that maybe he was pushing too hard. His body didn’t have the years of recuperative experience that the guys in the muscle mags have. I suggested that he was stressing his muscles to the point where they should have been rebuilding even bigger and stronger, but before they could do any growing he was pounding them again. For what ever reason, he figured he had nothing else to lose, so he scaled back his intensity, and frequency of workouts. Almost immediately the results were noticeable. Within a month of his more laid back regimen, his arms, chest and legs had grown measurably. Doing less got him more.
Sometimes it’s the same thing in the market. Sometimes we push so hard, over analyze so much, that we find ourself doing more harm than good. Staring at a screen watching every tick higher or lower, starts to get your mind racing about every conceivable possibility on earth. Pretty soon a small downdraft has you mashing the sell button for a loss, and then five minutes later it’s back above where you bought it. Sometimes you can do so much research that you get information overload and then you do absolutely nothing instead of making a play. Because we are humans, our emotions usually rule us. But, in the investing game, emotions will rip you to shreds. The best traders and investors I have ever met have mastered the art of removing emotion from their investing.
This is not an easy thing to do. When you hit the buy button, money, real money that you’ve worked, for is now on the line. We don’t like to lose money, so our brain kicks into high gear. Instantly a completely normal ten cent downdraft is the end of the world. Panic sets in. You are convinced that you just bought the evil stock from hell, determined to see to it that you lose all your money. You sell out with a loss and sit back trembling. Whew, glad that’s over, you say. But more times than not, you look later and the stock is comfortably higher than it was when you bought it. You lost money, on a winning trade because you “over did it”. You over analyzed. You pushed too hard.
In a trending market, you want to look for reasons to leave a stock in play. If there is a sound reason for it to weaken, then certainly you have to bail out and move on. But sometimes a stocks weakness is not because the stock did anything wrong, it’s some outside factor that influenced the problem. That’s what happened one Wed to a lot of traders. The market was supposed to be up. But even after tremendously strong numbers it was weak. So, it stands to reason that individual stocks were weak too. But was that a reason to sell out? Or would the appropriate thing to do, be trying to find out why the overall market was weak, and then make a decision as to what to do? Obviously the second choice makes the most sense.
The moral of this story folks is that sometimes it’s better to take a more relaxed approach. We aren’t in the business of scalping for pennies here. We are trying to enter stocks that are breaking out, showing momentum, or moving on news or product development. Sure there are going to be times when you enter a trade that seems to make sense and it will go haywire on you. Absolutely. But if the reason for the trade was sound, and all of a sudden you see the stock going the wrong way, it’s often best to sit back and try and find out if it’s stock specific or there is a wider situation going on. That Wed the market weakness was the result of a rumor that there had been some form of “incident” concerning a subway. Terror fears flared up. Stocks sold a bit. It would have been easy to just hit the sell buttons and bail out. It took some discipline to sit back, survey the overall land scape and decide that the trend was still intact.
Try your best not to over do it folks. Don’t stare at every tick. Don’t over analyze. This isn’t easy to do by any means. But I absolutely believe that you can all increase your winning percentages if you do indeed take a more relaxed stance. Sure you still want stops in case there is some calamity going down. But even stops aren’t written in stone. If something is about to stop you out, sit back a moment, look at the overall market, was there a rumor? Was there a report? Are the other stocks in the sector weak too? Downdrafts happen. Sell programs happen. They key is not panicking when they do. Don’t over think it. It’s not easy, but it’s necessary.
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Micro-cap Stocks are much maligned for being too volatile for the average investor. But, as experienced investors know, highly volatile investments can yield the best investment returns. A quick look at the best-performing stocks of 2005 proves this fact.
The Best Stocks of 2005 Were All Micro-caps
Of the 25 stocks that performed best in 2005, only Nutri/System (NTRI) had a market cap of $100 million at the start of the year. Ocean West Holding (OWHC), which was up an astounding 2,170% for calendar year 2005, ended the year with a mere $59 million market cap (that’s after returning 2700%).
To be sure, micro-caps are volatile, (Ocean West is down over 50% after the first quarter of 2006, erasing most of 2005’s incredible gains), but the potential returns still make them a worthwhile risk for a small portion of your investment portfolio.
Of the 25 top-performing stocks of 2005, all of which returned at least 510%, 13 were down as of this writing (April 15, 2006), and 12 were up. The average stock that was down had lost 19.93%, which represents about one-quarter of its 2005 gains.
Of the 12 stocks that were up in the Year-to-Date period, the average return was 88.68%. Half of those stocks had already returned over 100% returns (CanWest Petroleum; U.S. Gold; BioTransplant; Warrior Energy Service; Stem Cell Innovations; and Transnational Automotive Group).
An equal investment in all 25 of these stocks on January 1, 2006 would have yielded a 32.20% return by April 15.
Don’t Let Your Guard Down
Much of the criticisms of micro-caps are true: they are highly volatile; they are potentially the targets of pump-and-dump schemes; they can be difficult to liquidate due to low trading volume.
For these reasons, due diligence is extremely important. A company whose SEC filings are habitually late, or one that issues amendment after amendment for important filings like the quarterly or annual reports is usually not a solid investment.
But these are just red flags, and the company’s fundamentals are the ultimate arbiter of its worth. In times of rising interest rates, the balance sheet is particularly important, since high levels of long-term debt can cripple small companies as rates rise.
Finally, micro-caps should not represent more than 10% of any individual portfolio, but ignoring these tiny gems will deprive investors of potential breakouts.
B. Patrick Regan is a freelance writer and a staff writer at StocksAndMutualFunds.com.
