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Dividend reinvestment plans

admin — Wed, 27 Jan 2010 05:22:08 +0000

he DRP system is a system that allows for shareholders and investors alike to directly purchase stocks on a regular basis from the respective company, usually through a third party such as a transfer agent, in high or small volumes. Already paid dividends are used to reinvested in additional stock, therefore the derivative of the system’s “Dividend Reinvestment Plan” name.

The specifications of each plan dictate the obligation to either reinvest the dividend or not, and only a small amount of cash is required to initiate the process.
In fact, in most cases it is sufficient to own a minimum of one single share to be able to partake in a DRP. These plans are an efficient way for Fools to put their dividends to much better use, instead of either spending them or leaving them inactive in a money market account.

Furthermore, most DRPs do not even charge to have the dividends reinvested, while many companies offer the option to investors to buy extra shares for a small amount, if indeed at all.
Stock Purchase Plans (SPPs), often known as Optional Cash Purchase Plans (OCPs) enable any investor to put in cash ranging from $10 to $50 to buy stock at a lower rate than the market value, usually a discount that amounts to around one to ten percent. DRPs effectively put an obligation on investors to frequently purchase stock and to guard it.
It encourages a more deep-rooted financial vision from investors through the consistent investment of a measured amount of money which does not necessarily have to be a huge, as long as it is indeed consistent.

These consistent investments are encouraged to be made by companies through this system of DRPs, which can be taken through the direct debiting from the bank account of shareholders and investors.

California tax free municipal bonds or califoRnia muni bonds

admin — Wed, 27 Jan 2010 05:13:59 +0000

Municipal bonds can be viewed in two ways. The first is the type that is issued by the federal states to bolster specific streams of revenue. These types of bonds can raise investments in the financial infrastructure of a particular state. The second type of municipal bond can be raised for further developments in major construction projects. For example a place like Chicago Airport with investments by United Airlines. There are many pros and cons to investing in municipal bonds.

Considering the current recession, it is often argued as to whether having tax free investments is a good thing. The municipal bonds certainly don’t attract any federal or state taxes, so the investor makes a huge long term saving on that. These type of bonds are usually considered to be good credit because they offer much better value than corporate bonds as well as taxable bonds. If you live in California then they are known as Califo bonds.

In the present climate Califo municipal bonds is the way forward, as they look really solid and can give you a good return. This is because California has the highest rate of tax and it makes sense to avoid paying excessively high tax at any cost. If you have a huge amount of cash to spare then it prudent to invest it so your money works for you earning interest. There is a marvelous opportunity to invest in Californian tax free bonds or the California tax free municipal. It does not matter which part of the country you live in, state is unimportant. Anyone living anywhere in the USA can afford to invest. This way you can avoid federal taxes, but not the local taxes. You can apply to invest in municipal bonds in any state where you reside.

The process is simple:

a/ You open up an account with the TreasuryDirect.gov and buy directly.

b/ Or you can go through the mutual funds and invest through them.

For (a) Municipal Income Fidelity is a good choice. The best way to invest is through the municipal bonds, as they are discounted in recessionary times.

For investment (b) there are many companies such as American Funds RTCFX, TAFTX,TECFX, The Vanguard CA tax free- VCADX, The Schwab tax free- SWCAX. There are also the electronically traded funds called ETF’s which are also tax free.

When considering any kind of investment make sure you ask for the yield on tax free bonds. The yield totally depends on the state of the economy, and these municipal bonds do incur some amount of interest rate risk. There are some options available like fixed rate bonds funds or the floating rate muni bonds. Generally speaking the state free munis bonds are considered to be highly rated as much as triple AAA. They have the backing of the state government these states can go into default and it could make the bonds a risky venture.

The other option to be considered is the Zero Coupon Bonds, which have little interest value, but they a nevertheless good value as they have a deep discount value.

Oil India listing price – Investors may gain 10-12% with the Oil India Share price

admin — Fri, 11 Sep 2009 02:05:28 +0000

Oil India IPO is currently on and there are chances that the pricing by the government is done correctly as opposed to the NHPC listing price or the Adani power listing price and the reason being that both of them listed at just above issue price and the slipped below the issue price. That dismal show as has disappointed the investors and they are now wondering whether they need to invest in other IPO’s like the Pipavav shipyard IPO or the upcoming Indiabulls power IPO. So hopefully the Oil India listing will not disappoint the investors

It has been three days since the IPO has opened and the heavy bidding has been done by the QIB or the qualified institutional buyers. These are the big institutional folks who want to invest in the oil company stocks.

The issue has been priced Rs 950-1050 per equity share and it will raise around Rs 2,512 – Rs 2,777 crore.

A lot of analysts that are there in the stock market are saying that this is a commodity stock and ultimately it will be up to the investors to decide if they want to invest in the commodity stocks or not. The oil prices are a big factor here and if the oil prices rise the company will make good profits whereas if the oil prices declines then the company will not make good profits.

A lot of people who are there are comparing it with ONGC and considering that ONGC is a Navratna it makes sense to buy into ONGC as opposed to Oil India.

The challenge here is that investing in Oil India IPO would help if they price the issue at the lower range and then give some listing gains. If you are able to make 12% to 15% gains on the listing then on an annualized basis it is a very good return.

The government subsidy is a big factor but that can be a big plus till the time the government considers the opening up of the oil industry into a free pricing system.

Buy Canadian stock or the Buy stock TSX

admin — Wed, 19 Aug 2009 14:46:47 +0000

We always tell the investors to diversify your portfolio and in one of my earlier posts I urged that you should buy international stocks. One of the countries close to us is Canada and it has some great companies which are listed on the Canadian Exchanges and hence you should definitely buy the Canadian Stocks.

Your can invest in some good companies using the Canadian venture exchange and hence the name is TSX Venture Exchange. If you want to trade in the futures markets then you can go to the NGX market.

Similar to SEC there is the SEDAR or System for Electronic Document Analysis and Retrieval.

There are a lot of people who ask how to buy the Canadian stocks and the answer is that there are a lot of specialized international brokers which can help you buy stock in practically any stock exchanges in the world and TSX the Montreal Stock Exchange is definitely closer home.

Apart from this other discount stock brokers like E*TRADE or Fidelity also have the facility to buy the stocks listed on the TSX. Then you can also buy the stocks through a specific Canadian stock broker.

As far as the Canadian stock trading strategies go there are several things that you need to fine tune for the Canadian stock picking. I will not be going in detail for this now as that will be major part of the overall trading strategy and portfolio diversification.

The Canadian stock brokers which are the best ones are

Questrade

OptionsXpress

Interactive brokers

Scotia iTrade

Penntrade

Rbcdirectinvesting

Bollinger bands explained and the Bollinger bands charts

admin — Wed, 05 Aug 2009 08:46:30 +0000

Bollinger bands charts are a helpful way to determine when the market price of a share will be reversed and it also helps in determining a good trading strategy using the breakout of the price on the either side.The Bollinger bands strategy has been primarily used in the forex trading but it can be used in the context of the stock market.

Now you may ask that why use this trading strategy and what help it will give to you as a stock market beginner. If you need to know more about charts then you can read my guide on reading stock charts for dummies

Bollinger bands basics

The two bands represent the upper and the lower band in between which the stock market will trade. Once the market price will start moving towards one band then you can assume that it will go till the time it hits the band and then either the trend will be reversed or the breakout will happen. Now if the breakout happens then that will mean that the two bands will be more part than earlier. The more closer the bands are and it will suggest that the stock price is less volatile.

They have a central line which represents the moving average and the upper and the lower bands represent the standard deviation multiplied by a factor.

Bollinger Bands interpretation

The simple interpretation of the Bollinger Bands is that they will never tell you whether the price is high or low as every thing is relative. The upper band is the standard deviation multiplied with a factor above the moving average and the lower band is the standard deviation multiplied by the same factor in the other side of the moving average.

All said the Bollinger bands are an indication of the volatility of the market.

How to use Bollinger bands as a trading stragey.

When the price reaches the upper band then sell the stock and when the stock movement reaches the lower band then buy. Most analysts though do not even buy or sell and guess the overbought and the oversold position through this trend. They rather use this tool to determine the larger trend in the stock movement.

A good technical analysis is presented here for candlestick analysis

Gas stocks to buy right now

admin — Tue, 04 Aug 2009 03:55:58 +0000

There is no dearth of good gas stocks to buy right now. The oil and gas industry is never going to go out of favor. The demand for oil may dip and may go down again but the fact remains that energy is what we need to thrive as a country and even in the international markets every country particularly India and Chin have huge requirements for gas.

Oil stocks are generally very volatile so if you want to invest in a safe sector then I will suggest that you buy gold stock.

That means that when gas prices are going to go up then you should look at gas stocks to buy which are pure exploration and refining type of stocks like Exxon Mobil (XOM)

Factors governing the oil gas stocks are

Worldwide demand of oil will increase by leaps and bounds

Worldwide reserves will decline each year by a huge percentage.

Some large cap stocks to buy

Schlumberger(SLB)

Bake Hughes(BHI)

PetroChina(PTR)

When the oil prices hit $100 a barrel people were rushing to buy stocks like ExxonMobil (XOM) but after the recession the stock has come down from the highs and now is available for picking.In general the oil companies are a screaming buy right now.However it is advisable that you know that understanding the stock market is not easy and same holds true for gas stocks. You need to monitor the stock as well the overall economy for the potential impact on the oil industry and subsequently the oil stocks.

Time to invest in natural gas stocks

A lot of people are suggesting that it is better to invest in the natural energy stocks than the Ethanol alternative energy stocks and that is definitely the best strategy to have if you are betting big on the demand for the alternative energy sources to pick up anytime soon.

Go international.

If you are only looking at the US gas companies then you are missing the strong gas stocks from the other countries.Canada is one where the natural gas companies are making good and one of these is TransCanada(TRO) and also China with PetroChina(PTR) being the stock that will benefit most form the demand in China.

Another way to invest in the oil and natural gas stocks is to make sure that you invest in the companies that are serving the oil drilling companies. There are a lot of tools and specialized services that are needed for drilling oil and these companies fortunes go up and down with the oil gas company’s stocks. The first thing that will come to your mind are the oil rigs and just imagine the rental rates for one day of the oil rig and these are $427000 a day. Yes a day. That is why Transocean(RIG) is one of the very good oil stocks to own. Another good stock is Diamond Offshore (DO) and then another one is the Patterson-UTI Energy ( PTEN )

Then another stock industry which will help you make good investments and is primarily recession proof are the oil pipeline stocks. The benefit is that oil pipelines will never go out of business and will have oil to pump come what may in terms of the crude oil prices. These have very good contracts for carrying oil and hence the vagaries of the oil demand do not hit these companies hard and also they have very stable earnings.

Some of the very good stocks in the gas pipeline are

Genesis Energy (GEL)

TC Pipelines (TCLP)

Spectra Energy Corp (SE)

Good natural gas energy stocks to buy which always benefit form the cold winter and the focus on the non use of coal are

Chesapeake Energy (CHK)

Ultra Petroleum (UPL)

Devon Energy Corp. (NYSE: DVN) – This is the best natural gas energy stock to have.

That said I will suggest the stock market for beginners to invest their time and energy in doing Fundamental analysis of stocks

Buy International stocks – Go investing in foreign stocks

admin — Thu, 30 Jul 2009 15:02:39 +0000

If you have not heard of the emerging markets or the stocks of the foreign companies in the BRIC economies then you need to understand those fast and then buy International stocks. The reason is very simple. There are economies which are growing much faster than the US economies. The companies there are doing amazing business and have returns which are unheard of in the US stock market.

BRIC countries Brazil, India, China and Russia have now got huge economies and they have good markets with robust stock exchanges doing good business.

Chinese companies have grown huge and they have a large number of ADR’s that are listed in NYSE and NASDAQ. You want to trade in Chinese stocks then this is the best way. The huge middle class population in China is spurring growth. Same holds true for India with the large Indian middle class give huge growth momentum to the stocks as well as there are companies which are doing great with outsourcing and of course IT stocks are simple doing wonderful like Infosys(INFY).

How to buy international stocks or the foreign stocks?

You can buy ADR or the American depository receipts of the foreign stocks like Infosys (INFY). These ADR’s trade based on the underlying share value of the domestically listed stock. Before investing in these stocks please do some fundamental analysis on these stocks

Secondly you can invest in emerging markets mutual funds. These mutual funds track the foreign stocks .There is a lot of emerging market mutual funds which are out there which have been doing great over the last few years.

These are

Dodge & Cox International Stock (DODFX)

American Century Intl Growth (TWIEX)

Oakmark International (OAKIX)

Vanguard Total International Stock Index Fund (VGTSX)

Vanguard Emerging Markets Stock Index Fund

SSgA Emerging Markets (SSEMX)

Thirdly invest in global market ETFs. Then there are international ETF and the country specific ETF which you can trade.

Then lastly you can buy the stocks directly from the big name traders like the E*trade and the Schwab’s of the world. But before you place the order make sure that you know the local prices of the stock if you are trying to buy the stock in that market. Then ask what commission will be charge as generally it is very tough to get lower commissions on these discount stock brokers.

Then there are certain specialized stock brokers who only trade in the foreign stocks and they have the best system in place. You can them and they will give all sorts of advice and also they are much more transparent.

Some good internal stocks that are listed here are

H&M (HMRZF)

Embraer(ERJ)

Nintendo(NTDOY)

Dr. Reddy’s Laboratories(RDY)

BAIDU(BDY)

BHP Billiton Limited (BHP)

PetroChina(PTR)

Rio Tinto (RTP)

Statoil (STO)

Nestle (NSRG.Y)

Glaxo SmithKline (GSK)

Sanofi Aventis (SNY)

Turkcell Iletisim Hizmetleri(TKC)

Exeter Resource (XRA)

That said there are risks involved in the investing of the stocks and these two major risks are the currency risk which can happen because of the dollar versus the other currency ration going bad.

Also the other risk is because of the country. Countries like China do not have a democratic form of government and hence the chances of them having unrest and other political issues can cause the economy to go bad and in turn causing the shares to go bad.

So if you want to get rich off the stocks then make sure that you diversify into the international stocks.

Buy gold stock

admin — Wed, 29 Jul 2009 14:18:58 +0000

Gold as a hedging strategy and buy gold stock

Guess how much of gold is produced each year and that amount of gold is 2500 metric tones approximately and the demand is far greater than this supply. No doubt gold mining stocks are doing absolutely wonderful nowadays.

The estimated demand in the world is about five thousand ton.

India and china are the two biggest countries fuelling this demand. The reason is jewelry and gold as an investment. In India gold as jewelry is much more common than in America. This has spurred gold demand so much that demand far outstrips the supply.

The reason is simple can you imagine how much those Australian gold mining companies or the Chinese gold mining companies invest to mine gold. And how much do they charge for each ounce of gold.The last decade was the worst performing for the gold index called the HUI . But this decade has seen the gold demand rising and the HUI performing the best.

How to invest in gold?

You buy the gold exchange traded funds called the GDX ETF and that way you do not have to track the individual gold mining stocks. This GDX has about 34 companies which have interest in gold mining and or silver mining. It is also known as the market vectors Gold Mines ETF.

The other ETF is streetTRACKS Gold Shares (GLD)

Another one is iShares COMEX Gold Trust (IAU)

Then you can also buy gold in bullions and coins. There are a lot of dealers who sell gold bullion bars. These bars can weigh from 1 ounce to 100 ounces. Then you can buy American Eagle gold coins from a lot of brokerages.

You can invest in mutual funds which invest in metal companies and some part of their investment is in Gold.

Best Gold mining stocks are

I wanted to list the top 10 gold stocks but this list is much more encompassing of all types of gold mining companies.

These are the best stocks because as the miners they have the production cost which is locked down and whenever the gold prices reach the levels which are not heard of then these companies make wonderful profits.

GoldCorp(GG) -

Barrick Gold (ABX)

Newmont Mining(NEM)

IAMGOLD(IAG)

Harmony Gol(HMY)

Yamana Gold(AUY)

Eldorado Gold(EGO)

Gold Fields(GFI)

Anglogold Ashanti(AU)

Compañia de Minas Beunaventura(BVN)

Agnico-Eagle Mines(AEM)

Randgold Resources(GOLD)

Kinross Gold(KGC)

Placer Gold(PDG)

What is HUI?

HUI is the words best gold index and has the best performing 15 gold stocks. Each of these gold stocks is unique and hence it is better to research on your own a bit if you want to invest in the individual companies. This is an index maintained by AMEX. It is like a gold index much like Dow Jones index is to normal stocks.

Gold vs stocks market

In general the perception is that when the market is falling then investors rush to have gold in their portfolio so that they can have an effective hedge against the falling markets. On the other hand gold buying increases in the developing countries like India and China when these economies are doing good hence the direct correlation with stock market per se is not possible but yes gold as always shows a way out of the bear market.Most people invest in gold to get that hedge against inflation and also when the dollar is declining in value.

Another reason that gold stocks are rising is that in the last decade the central banks will dish out the gold to make up for the demand for gold. Since 2001 the central governments do not sell out gold which means that there is huge gap between gold supply and demand and that means the gold prices will be higher for a longer period of time.

The price of gold per ounce a few days ago was 940 and the HUI was at 350. The gold stocks are still the bets to invest in 2009 with the gold price as high.

How to buy stocks online

admin — Wed, 29 Jul 2009 14:12:41 +0000

How Do I buy stocks online is the most common question that most stock investors ask. The reason is simple as there is ease of buying the stocks while sitting in front of you computer and easily punching in the trades.

Well the procedure of buying the stocks is the same as earlier going through a broker in the offline world. The only thing that has changed is that the broker is now a company which has an online website via which you can trade easily and this website is your entry into the stock markets.

Before I begin the step by step guide process about buying stocks online there is some things that you will need to know especially about brokers.

Full service brokers charge more fees and give investment advice and also have a investment advisors that will call you if they have a tip and also they will advice you on tax planning as well as other aspects of your portfolio. So you can open an account with a full service brokerage firm sitting in front of the computer. Since these are full service brokers the fees will be heavy as they provide you with specialized service.

Discount Stock brokers are the brokers that will have a website where you can log on and set up an account. In these discount brokerage firms there are no investment advisors and no tax advice. They do not even tell about which stock to buy. Some of these have stock research reports sent by email to all the clients. That is the max they will do. Of course this is the reason they are called discount brokerage houses and they will charge less. Their commissions are very less on each trade.

Tips before you open an account

Make sure that to check if they allow international stocks to be traded.

Also check if the brokerage allows you to trade in penny stocks.

Also check what the margin requirements for the broker are.

Also check if they allow pre-market trading and after hours trading

Check if they allow the options and future also with this account

Check is they allow mutual funds to be bought from the same account.

But stocks online for free is not a reality but you can definitely have the initial 10 or 20 trade free.

Some brokers allow systematic purchase plans to be set up for a specified amount each month. Make sure that you check this facility.

Step by step guide to open an account

Fill up the form

Do not gloss over the options account. Sign up and you may end up using this later.

Set up direct debit facility for funding the account with some amount. A lot of brokers have requirement of a minimum amount.

Once the account is funded then you can start trading

Things that you should know are market order, limit order as well as good till cancel.

The main thing that you should be doing is the stock research to buy stocks yourself. That can two forms and these are picking the stocks based on the fundamental analysis of stocks or the technical analysis of stocks

Do not time the market

If you are thinking that you will wait for the appropriate time to buy a particular stock and sell a particular stock then you need to understand that there is no clear answer to the question about when to buy stocks .

Build a portfolio.

I will suggest that you should diversify and build a good portfolio of stocks based on the best stocks that you can buy. This diversification will be achieved by identifying various stocks in variety of industries and that will help to build a good stock portfolio.

Get knowledge about stock exchanges.

Now most of these discount brokers or the full service brokers have the option for you trade in either exchange that is the NASDAQ or the NYSE. Each of the stock exchanges that you have will have specific set of technology and each ahs its own index. Before you invest understanding the dow jones industrial average as well as getting know the definition of nasdaq is a must.

Good luck with your trading.

Unitech Share price

admin — Tue, 28 Jul 2009 23:03:11 +0000

Unitech share price was once the toast of the Indian stock market. It gave more than normal returns to the investors.

Unitech is the company which was the leader of the real estate stocks when the Indian Market as hot and everyone in India were investing in the real estate. Unitech then represented a goldmine opportunity for Indian and foreign investors both. However, now the situation is that the Unitech is struggling with all the debt that it had taken on its books.

The Unitech share price today was 98 on 07/28/2009.

This is still better than when this had fallen to Rs.20 in the aftermath of the recession and the global meltdown. The property prices came down tumbling as well as there were no buyers for the existing properties.

Unitech then raised about 1620 crore through QIP route. QIP means the qualified institutional placement of shares. After that QIP it has about 7800 crore of debt on its books. They are also focusing on more affordable housing projects to retain retail interest in residential properties.

So if you want to invest in the Unitech share prices then now is the best time. Chances are that it will go up very soon and will make you decent money.

Other companies in this area are the DLF and the OMAXE. Of these DLF is the one which has struggled but regained after it reduced the promoter holding to repay a large portion of the debt.