Archive for March, 2009
The Short Interest Ratio and Technical Analysis
The short interest ratio or “short ratio” is a sentiment indicator primarily used by technical investors to represent how many days of average volume it would take for all short positions to be repurchased. The ratio is calculated as the total number of shares sold short (short interest) divided by average daily volume. As [...]
The Impact of the Business Cycle on Interest Rates
and Stock Investing
The business or economic cycle refers to the changes in economic activity or production experienced by the economy as a whole over several months or years. The fluctuations are measured by the growth rate in gross domestic product (GDP) and these shorter business cycles are what make up the longer-term growth trend. Many investors [...]
Evaluate Your Financial Situation Using the
Debt-to-Income Ratio
Most people have some kind of debt, whether it is in the form of a mortgage, student or auto loans or credit card debt. It’s important to understand that not all debt is bad. Carrying a mortgage, for example, can make perfect financial sense and help you to enjoy the benefits of home ownership [...]
Tax Strategies for Mutual Fund Investing
Some investors make the mistake of selecting mutual funds for investment based solely on advertised returns. The problem with this approach is that many funds pay out all or a portion of earnings to the fund shareholders and these distributions are subject to taxation. This can dramatically reduce your actual return. The [...]
The Benefits of Bond Investing
A bond is a debt security through which the investor essentially lends money to a corporation, a municipality, a government organization. The bond “issuer” agrees to pay the lender a specified interest rate during the life of the bond and the repayment of the face value of the bond at maturity - when the [...]
The Impact of Monetary Policy on the Stock Market
Monetary policy is the set of actions taken by the Federal Reserve (the “Fed”) to influence the cost and availability of money and credit. At any time, the Fed may initiate “expansionary policy” (to increase the money supply) or ”contractionary policy” (to decrease the money supply) as a means to promote overall economic goals. [...]
Small-Cap Investing in a Bear Market
While the definition of a small-cap stock can vary, it is generally considered to be a company with market capitalization of $300 million and $2 billion. The appeal of small-cap stock investing is in the potential returns they offer. While the larger-caps and thoroughly followed and reported on by Wall Street analysts, small-caps [...]
Finding Stocks for a
Contrarian Investing Strategy
A contrarian investor looks for stock pricing inefficiencies that result from the “herd mentality” among investors. Contrarian investing is similar to a value investing approach in that the contrarian is seeking mispriced stocks and acquiring those that would seem to be undervalued. A contrarian is well aware that excessive pessimism regarding a stock can [...]
A Process to Conduct Fundamental Analysis
Fundamental analysis is a stock valuation process under which the investor examines company financials and operations. Under this process, the investor will pay particular attention to the company’s sales and, earnings (as well as growth potential), the company’s assets and liabilities, its management team, product line and competitors. Unlike technical investors, the fundamental investor [...]
Using the Price-Earnings Ratio to Assess Stock Value
The Price-Earnings Ratio is a valuation ratio to measure a company’s current share price against its earnings per-share. Often referred to as the “multiple”, the measure indicates how much investors are paying for each dollar of the company’s earnings. Generally speaking, a high P/E indicates that investors expect the company to achieve higher earnings [...]