Author: Ho KhinwaiKhin Wai is a Year 3 Banking and Financial Services student from the School of Business Management (SBM). He started his foray in finance in 2011 and has his roots in value investing. Archives
December 2013
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In our first-ever in-house article here at NYPIC’s website, we talked about what stocks actually are. We mentioned that they are more than just “trading counters” that you buy and sell at whim. Behind every stock counter, there is a business that operates every single working day, generating revenue and profit. As a person who focuses mainly on growth and value investing, you may realize that many of my articles are skewed towards understanding the business fundamentals behind each stock, instead of looking at indicators and trading strategies. However, I am not going to leave hardcore supporters of trading and technical analysis aside. In this article, both supporters of Fundamental Analysis and Technical Analysis can benefit from what I have to share with you today. We know how the stock market can run up and down every single day. We also know that these market fluctuations are fundamentally caused by the forces of demand and supply. If there are more people who wants to buy a particular stock than there are people who are selling the stock (Demand>Supply), the stock price will go up. And, the opposite is also true. But, have you ever thought of what goes on in the minds of these investors who buy stocks at that particular time, and those who dump stocks at the same time? Have you also thought about how some very few people are able to make tons of money from the stock market, while many others see their invested capital being flushed down the abyss of nothingness? One differentiator about the successful investors and traders is that they stick to their strategies like how a screw is driven into a wall. They stay calm and collective, and don’t get flustered over market movements. They understand the emotional impact a market movement can do to them, and they simply do what needs to be done (or don’t do anything at all), in alignment with their investing strategy. The stock market kind of like a battlefield that really tests your hardiness and mental strength, and those who do not waver amidst crises stay on top of the game. Once you understand that you will certainly face some psychological weaknesses during your investing journey, you can then move on to overcoming them. To overcome your weaknesses, you need to have FAITH in your strategies, and BE HUMBLE ENOUGH TO LEARN FROM YOUR MISTAKES if you realize something is not working or you aren’t getting the results you expected. “Well,” you say. “That seems easier said than done.” Exactly. This is the part where money is being made, and it does involve quite a bit of mental work. This is the turning point that differentiates successful investors and traders from the rest of the herd. Warren Buffett once quipped, “Success in investing doesn't correlate with IQ once you're above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.” I am personally invested in the stock market at this point in writing this article. I, too, have been dealt with the psychological effects that stock market gyrations bring about, and I succumbed to it. As a result of this folly, I have lost out in a few potential gains. The process of facing your weaknesses head-on is scary at first, but it is a necessary step to take if you want to be successful in investing. And, you can't complete it in one day. It is a learning process that takes time, effort, and staying invested in the stock market. It’s something that all investors must go through, as the value of what I say here will not be lasting until you truly experience it for yourself. Sometimes, you can actually avoid many of these follies made by investors in the past by understanding some of them in a field of study known as Behavioral Finance. We will be touching on some of these follies studied in behavioral finance in our upcoming articles, so stay tuned. Well, it has been a long article. As some say, with every experience comes a little bit of gold to take away. We hope you will have the unshakable faith to stick to your investing guns and know that you can either let market fluctuations break you, or make you stronger.
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Understanding Stock Market Lingo20/9/2013 Have you ever been on a stock trading platform or on SGX.com and found that there are some pretty confusing stock terminology that you stop to think for a moment about why you even bother to invest in the first place? You’re not alone. Entering the stock market can be a daunting task, with quite a steep learning curve. If you’re blindly invested without having sufficient knowledge about investing, you could potentially be burned by your mistakes – and you may not even know it. Warren Buffett gives us a piece of wisdom, “Only when the tide goes out do you discover who’s been swimming naked”. NCPS NCPS stands for Non-Cumulative, Non-Convertible Preference Shares. You may be wondering what this means. As with all technical jargon, let’s break it down. Preference Shares are shares which carry a higher priority and standing over normal shareholders. Preferred shareholders who have these shares get the right of dividend payment during the lifetime of the company, if anytime the company decides to issue dividends. If the company winds up (hopefully not), preferred shareholders will receive their part of the liquidation amounts before normal shareholders. Also, preferred shares usually have a fixed rate of dividend. So what this means is that you can consider preference shares as a bond, which pays you periodically, and at a fixed rate. Non-Convertible basically means that the holders of the preferred shares are barred from any additional rights to CONVERT their preference shares into ordinary (normal) shares. As you might have guessed, CONVERTIBLE preferred shares will receive this extra option. As such, convertible preference shares will most likely be priced higher than non-convertibles. This is as convertibles give the investor BOTH the (1) assurance of a fixed rate of dividend, plus (2) the opportunity for capital appreciation, while non-convertibles only provide the investor with (1). Non-Cumulative indicates that the shareholder is not entitled to any arrears of dividends (the dividends that are “owed” by the company to the investor, for the years the company did not pay out dividends – hence it accumulates). This means that if the company did not pay dividends in 2013, NCPS investors will not get dividends as well for that year. Again, cumulative shares tend to be pricier. So now we have explained the whole term, you might be wondering “Is this type of equity available in our Singapore market?” The answer is yes! One of our more familiar NCPS is: OCBC Bank’s 5.1%NCPS 100 (Ticker: F4B.SI). 5.1% indicates the fixed rate of dividend per annum (year). The 100 at the end indicates trading size of 100 shares. This means the minimum buying of 1 lot will be equivalent to owning 100 NCPS shares of the company. There are also other variations of preference shares like Hyflux’s CPS. (Hyflux 6%CPS 10). You may have guessed it – CPS stands for Cumulative (Non-Convertible) Preferred Shares. Preference shares also vary in terms of redeemable/irredeemable, participating/non-participating, classes, lot size, maturity, voting rights, etc… CD/XD This is a more commonly seen remark on stock screens. Let’s take a closer look… A CD is not your old circular disk that contains your files and documents. CD in stock market lingo stands for Cum-Dividend. A stock with a “CD” sign in the next column of your stock screener means that that stock is entitled to receive a dividend that has been declared, but not paid out yet. So, if you buy a stock with a CD, you will receive the dividends that they have declared for that period. A little language nugget here – “cum” basically means “with” in Latin. XD comes right after a CD period. XD stands for Ex-Dividend. XD is the cut-off date that the company sets to end the entitlement of dividends to shareholders for that period. This means anyone who owns the shares before the XD date will be entitled to the dividends, while investors who have just bought on or after the XD date will not receive the dividends. ADR ADR stands for American Depository Receipts. ADRs are basically stocks that trade in the United States, but the companies of these stocks are not incorporated in America. Let’s take Baidu for example (Baidu is a Chinese web-services company incorporated in China). If Americans wanted to trade Baidu shares, they would have to go to China and open a trading account with them to buy the shares. This ridiculous process is simplified with ADRs, where Americans can now buy a bundle of Baidu shares (as one lot), using their own American trading accounts and paying with their own currency. In Singapore, this process is the same. One such ADR listed on SGX is from Baidu. BIDU ADR 10US$+ (Ticker: K3SD.SI). BIDU represents the name of the company – Baidu. For example, if Baidu is trading at US$150 per share, one ADR would cost US$150 X 10 = US$1500. 10 refer to 10 shares of Baidu that equal one lot. US$ refers to the trading currency of the ADR. + refers to single-listed ADRs. This means that the Baidu ADR stock is only listed on the US stock exchange, NASDAQ, and no other stock exchange. ------------------------- So, now you know three of the many jargons and abbreviations used in the stock market! Understanding some of these lingoes will definitely help you in your investing journey by broadening your knowledge on the different types of equity. Came across any other terminologies not listed here? Leave a comment down below, and we might answer it on our next article!
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Quote Of The Day19/9/2013 A little satirical cartoon to lighten up your Friday! - by Daniel Kurtzman
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Quote Of The Day17/9/2013 A business that makes nothing but money is a poor business. ~Henry Ford
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Author: riyarai The financial market is bubbling with opportunities for investors to invest their money in. People turn towards various means of investment instruments such as bonds, debentures, equity shares, mutual funds and fixed deposits for their investments. However, the most sought after method of investment remains mutual funds; which are also one of the most lucrative methods of gaining returns. A mutual fund is the collective pool of money from many investors in bonds, stocks and other assets; which belong to different industries as well as regions of the world. It is a diversified portfolio of securities and which raise their money by selling the different units to the public or even a section of the public. They are also known to help save on tax, having a number of tax exemptions that are allowed on different units of the funds. There are many different types of mutual funds and may be classified under different categories: by structure, geographical classification, by nature and by investment objectives. By structure, they are classified as open-ended, close-ended and interval schemes. The open-ended type refers to all those which do not limit the number of units or shares that are issued by the fund. There is no restriction on them and investors can buy and sell whenever they want to. On the other hand, closed-ended ones have a limited number of shares. They do not redeem their units and are traded in the securities market. They are available only for a specific period of time. Interval schemes combine both the features of open-ended as well as closed-ended funds. Another popular classification is made by geographical location. There are generally two different types of classifications: domestic and offshore. Domestic funds refer to those which are mobilised within the country. The market area is limited only to the boundaries of the nation. Offshore ones are those which can be cross-traded across the border. They permit open-domestic capital market to international investors. By nature, mutual funds can be classified as equity funds. Equity funds refer to all those funds which are invested primarily in equity shares of different companies. They may be of different types such as large cap, mid cap, equity linked savings scheme, sector and index funds. Mutual funds can also be classified depending on their investment objectives. They may be growth schemes, income schemes, balanced fund schemes, money market schemes and index schemes. Growth schemes refer to those funds which aim at generating wealth for long term investors. Income schemes are opportunities for those people to invest in the market, where investments are primarily made in debt instruments. Balanced transfer refers to those funds which aim at investing in both debt as well as equity instruments in equal proportion. They aim at balancing the safety of capital, capital appreciation and income. Money market schemes are the ones which are invested in short term investments. They provide a high amount of liquidity. Article Source: http://www.articlesbase.com/investing-articles/making-money-in-a-volatile-market-mutual-funds-6757081.html
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Quote Of The Day15/9/2013 "A man who both spends and saves money is the happiest man, because he has both enjoyments." Quote Samuel Johnson: British author
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Quote Of The Day14/9/2013 There's no shame in losing money on a stock. Everybody does it. What is shameful is to hold on to a stock, or, worse, to buy more of it, when the fundamentals are deteriorating. Quote by Peter Lynch
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Quote Of The Day12/9/2013 No one can foresee the consequences of trivia and accident, and for that reason alone, the future will forever be filled with surprises. Quote by Dan Gardner.
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Quote Of The Day11/9/2013 Give a man a fish and he eats for a day. Teach a man to fish and he eats for a lifetime. Quote by Lao Tzu - Founder of Taoism
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