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Archive for October, 2011

Investment timing is the bread and butter of traders seeking to cream off a few points difference between buying and selling. But what of investors, looking to buy and hold over the relatively long term?

For those focusing upon the longer-term, timing investing is less critical.

What’s your motivation?

The investor’s decision to buy or sell may spring from a number of reasons:

a)  a gut feeling that market is lower/higher than it ought to be

b) having some money available to invest

c) needing some money to finance a particular commitment

In the case of a) remember that current market prices represent the massed intellect of the world’s financial community, albeit with a give-or-take factor (that can be quite significant, in the light of recent market volatility).

In the cases of b) and c) consider whether the market is really the best source or destination for the available/required funds.

Weigh the market’s merits/demerits against the options, eg cash savings, loans etc.

The actual moment of making your investment can unleash a lot of emotion for investors, probably more so than for traders who may “pull the trigger” several times a day. Rather it’s something the investor may do several times a year.

Making the trade

The natural tendency is to watch the screen, trying to gauge the exact moment to hit the button. In reality it probably doesn’t matter too much; unless you’re extremely lucky you’re never going to get the absolute low/high. As an investor, you’re looking to hold the position for some time; its long-term benefits will far outweigh any pennies you might gain by precise timing.

If you’ve made a considered decision to invest, your decision has been made at current prices, or thereabouts.

Set yourself a limit of what you think the stock (or other position) of interest is worth. If it’s something you really want, the limit will be close to current price. If it’s more speculative the limit might be further away. Most brokers accept limit orders (to buy/sell if/when the price hits your pre-determined value), so you can place your decision on auto-pilot. But keep it under review if it doesn’t execute – is it still on your wish list? Is the limit too high/low?

Finally, once you’ve bought/sold stop looking at the price for a few days/weeks. As soon as the deal is done you’ll inevitably think you’ve traded the wrong side of an all-time high/low, which is highly unlikely. In reality you’ve bought/sold your chosen stock at your chosen price.

For investors the bottom line is to concentrate on the bigger picture, ie are you happy to buy/sell at a broad price level, given the competing alternatives. If the answer is yes, go for it and don’t sweat the pennies.

A big part of managing your credit is understanding what helps and hurts your credit score. If you have a good grasp of these things, you can slowly build the type of score that creates opportunities for you and saves you lots of money through lower interest rates on major purchases, such as homes and cars. There’s a lot of misinformation out there about credit scores, and one of the more common pieces of misinformation is that canceling old or otherwise unnecessary credit cards will help your score. That’s not necessarily true – here’s why:

You want your debt-to-credit ratio to work for rather than against your score. Your debt-to-credit ratio is the amount of available debt you’re currently using divided by the total amount of available credit. This ratio tends to help your score if you use less than half of your total available credit. When you cancel a card, you’re removing the credit limit on that card from your available credit.

To better illustrate this point, let’s say that you have a balance of $ 5,000 on a credit card with a credit limit of $ 10,000.

Five thousand divided by ten thousand equals a debt-to-credit ratio of 50 percent. This can helps your credit score, but if you purchase a new refrigerator by charging $ 1,000 on the same card, your debt-to-credit ratio climbs to 60 percent and starts working against your score. If you max out that card, the percentage goes up to 100, which can really hurt your score.

In addition, your debt-to-credit ratio works the same way across all credit accounts. The credit bureaus look at your aggregate credit limit and how much of the total limit you are currently using; and if it’s at 50 percent or lower, it’s helping your score.

If your ratio is anything over 50 percent, lenders start to get itchy about your risk of default. Lenders are itchy by nature, so you don’t want to further provoke their capacity for itchiness by going over 50 percent.

When you cancel a credit card or merchant card that you never use anymore, you’re reducing your amount of available credit. To keep these credit limits active, use them every once in a while; just be sure to pay them off quickly. (If you don’t use a card, the issuer will eventually cancel it anyway.)

Hopefully, this has dispelled one of the more common myths about credit scores and canceling credit cards. Hold on to those lines of credit, use them occasionally, and pay them off immediately, and they’ll keep working for your score.

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Banking is one of the most governing segments of the fiscal zone. Banking refers to the act of storing money for savings, issuing loans and credit, checking accounts or for exchange. It simply is the transactions done between an individual and a bank. Banks provide various facilities for an individual. Some of the prominent ones are creation of bank accounts to store money, credit creation, issuing of loans, investments in policies and liquid assets, issuing credit and debit cards etc. In the Indian financial sector, in the field of banking, another facility has been included which caters to the specific needs of the Non Resident Indians or NRI’s. With quite a few Indian citizens moving up and migrating to different parts of the world it became necessary to formulate rules and regulations for the control of their bank accounts. The banks could not lose out on customers just because they were moving out of the country.

Facilities were set up to facilitate their accounts through the Indian banks. The government of India set up the Non Resident Account Rules that were governed by the Exchange Control Regulations.

In order to maintain Non Resident Indian Accounts the concerned banks need to require an authorised dealer’s license from the RBI i.e. Reserve bank of India. These licensed banks maintain the accounts for the NRI citizens and help facilitate their returns. The government has extend the Non Resident Indian Accounts to Regional Rural Banks or RRB’s too since a lot of the people from rural areas of states like Bihar, Kerala, Jharkhand etc. work overseas. NRI accounts have the authority to allow accounts to be maintained in both Indian Rupees (INR) and in foreign currency, by authorised dealers.  Based on the laws regulated by the Foreign Exchange Management ACT, 1999 regarding the foreign exchange, NRI’s are enlisted to three types of deposit schemes.

Foreign Currency Non Resident Account Scheme (FCNR)

Non Resident (EXTERNAL) Rupee Account

Non Resident (ORDINARY) Rupee Account

NRI’s can invest in any of the following schemes according to their best suitability. They can even open joint accounts with other non-residents.  FCNR is a term deposit while NRE and NRO accounts can be operated as savings, fixed, recurring and other types of deposits. Funds stored in NRE accounts can be forwarded abroad while those stored in NRO accounts can only be used for making local expenditures and cannot be dispatched to foreign accounts. Therefore all the funds that do not meet the requirements under the Exchange Controls Act need to be accredited to NRO accounts. The rates of interest for NRO are determined by the banks while for FCNR and NRO accounts they are subject to a cap. In order to boost the NRI Account creation banks offer rewarding facilities and privileges like excellent interest rates, VIP facilities during banking etc.

Insurance is a promise of compensation for specific potential future loss in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual, company or other entity in the case of unexpected loss.

We all know about insurance but many times we ignore some basic features of insurance policy.

Here we will try to explain some of the words which your agent normally use while explaining any insurance policy.

By explaining the below terms we want to make you familiar with your insurance policy.

Sum assured (also known as Cover) – This refers to the amount paid out on a policy if you die within the Term of insurance plan. In case of an endowment policy Sum Assured can be paid out on maturity along with the bonus and in case of Money back policies a part of Sum Assured is paid out on regular intervals and on maturity along with the bonus.on regular intervals.

Endowment policy It is the guaranteed amount to be paid out at maturity with or without Bonus (Depend upon the policy).

Premium – The owner usually pays a fixed premium amount in exchange for the insurance company’s guarantee to cover any economic losses incurred under the scope of the agreement of insurance.

Bonus – It is the amount added to the basic sum assured under a with-profit life insurance policy.
Surrender value – The amount payable by the insurer to the owner of an investment-based plan in case he opts to terminate the policy after three years (the mandatory lock-in period) but before its maturity date. The surrender value will be the premium paid till date minus surrender charges and any outstanding loans due.

Endowment Policy – In this plan the amount is paid to a policyholder if he lives survives the term even after the tenure of the insurance contract or to the beneficiary if the insured person dies before the date on which the policy matures.

Term Insurance – Term life insurance is a life insurance plan in which person can get the huge insurance coverage with fewer lower premium.

In this plan beneficiary will get the cover amount only if the insured person dies within the policy term. Unlike Endowment policy policyholder don’t get any amount if insured person lives even after the policy expires. One should have atleast one Term Insurance policy. One can consult a financial planner for the best possible insurance solution.

Whole Life Insurance – A life insurance policy where benefits are payable to a beneficiary on death of the insured, whenever that occurs. The premium payment can happen for a specified number of years or throughout life.

ULIP – It is an abbreviation for Unit Linked Insurance Policy. A ULIP is a life insurance policy which provides a combination of risk cover and investment. Some part of the amount invested in ULIP is used to provide the insurance cover and the remaining is invested in equity and debt investments and denoted as units.
Money Back Plan – A plan in which part of the sum assured is paid back to the policyholder at regular intervals and a part of sum assured is paid at maturity along with bonuses.

Rider – An add-on benefit available at the option of the policyholders that may alter certain features of a policy by increasing or restricting benefits.

Survival benefits – The amount payable to a policyholder under an investment-based plan if he survives the policy term. Typically, it is the sum assured plus returns (guaranteed additions / bonus) accrued.

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Bond investing basics are simple. When you buy a bond, the bond issuer – either a government or corporation – pays you an agreed-upon rate of interest known as the coupon rate. In addition, you get your original investment back when the bond reaches a maturity date.

Bonds come in many flavors: taxable and tax-exempt, long- and short-term, AAA-rated and junk, inflation-protected, fixed-rate and variable-rate.

Before investing in a bond issue, you should consider several factors.

Do you want to go long- or short-term? Normally, longer-term bonds pay higher interest than shorter-term bonds. However, monetary policy and inflation expectations vary with time, so sometimes the normal yield curve may flatten (meaning short- and long-term rates are equal) or invert (short-term rates are higher than long-term rates).1 When this occurs, it can be very hard to sell a long-term bond because investors can get the same or higher rate investing short-term.

The big question here is: where do you want to be on the yield curve? How long do you want to invest your money for a given return on your investment?

How much risk do you want to assume? As interest rates go down, the value of a bond goes up and when interest rates climb, a bond’s value falls. If an investor wants less risk, he might choose to buy a short bond, as its value will fluctuate less when interest rates vary. Long bonds usually offer higher interest rates because they typically carry more risk.

If an investor wants no risk, short-term U.S. Treasuries may be a good choice. After all, Uncle Sam backs them up – but they pay a comparatively low rate of return.

A bond’s duration relates to risk. (The duration of a bond is a measurement of how long it will take for the price of a bond to be recouped by internal cash flow.) A debt instrument with a 1-year duration is not very sensitive to interest rate fluctuations, while a really long bond with a 35-year duration will have its value fluctuate sharply with even a small interest rate change. Generally, a bond that pays a higher interest rate and has a longer term will have a higher duration.2

How important is the rating to you? Investors usually look to Standard & Poors or Moodys for bond ratings. Government bonds are perceived as less risky than private sector bonds. Some bond investors do have relatively high risk appetites, with some even buying “high yield” or “junk” bonds from troubled firms whose interest payments are in doubt. The riskier a bond, the higher the interest rate investors will demand.3

Do you want a tax-free or taxable bond? Many federal and municipal bonds are tax-exempt to some degree. Correspondingly, their coupon rates are lower than corporate bonds. You need to compare muni bond and corporate bond rates on an after-tax basis. You do this by calculating the tax-equivalent yield, which equals the tax-free interest rate divided by (1 investor’s federal tax rate, or federal tax bracket).4

Consider two investors. Investor A pays a 25% federal tax rate while Investor B is in the 35% federal bracket. Should they buy a municipal bond paying 4%, or a highly rated corporate bond paying 6%?

Well, the real question becomes: What will they take home after taxes?

They run the numbers on the muni bond. Investor A calculates his after-tax yield as 5.33% (4%/(1-.25) = 5.33%). Investor B gets 6.15% (4%/(1-.35) = 6.15%) after taxes.

Investor B chooses the muni bond. However, Investor A figures out that the tax exemption saves her less, so she selects a corporate bond and pays taxes on it.

Other options include inflation protection and variable rates. Treasury Inflation-Protected Securities (TIPS) are issued by the U.S. Treasury, and their principal depends upon the Consumer Price Index. Their principal increases with inflation and decreases with deflation. TIPS appeal to investors who fear that inflation could erode the value of their investment. When TIPS mature, the investor redeems either the original value of the security or the inflation-adjusted value, whichever is greater.5

Investors who can tolerate varying interest payments may decide to buy a variable-rate bond. The return on these bonds reflects the general level of inflation, and commonly rises with rising interest rates.6

Bond investing demands educated decision-making. Fortunately, bonds come in enough varieties that investors can find bonds appropriate for their tax situation, time horizon, and risk tolerance.

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Information from your credit report to creditors in order to measure the risk factor in lending money to you. Credit Report provides general information about your identity and how regularly you pay your bills. Credit report is considered the decisive factor of the creditors used when you apply for credit facility.

- Free Credit Report

Therefore, it is important that you maintain a good credit-conscious report. Incorrect information about your> Report could negatively dramatically on the duration and impact on your purchasing power. It is therefore necessary to monitor and ensure that your information will be updated with the credit bureaus and are correct.

- Free Credit Report

In case of discrepancies in your information or evaluation, you can dispute the credit report information using the Fair Credit Reporting Act or the FCRA.

Review Your Credit Report
The first step in Review your credit report is to obtain a copy of one.

According to federal law, you are entitled to a copy of your credit report from each of bodies a year. Upon receipt of your credit report, go through them thoroughly to ensure that the information is correct or not. In the case of incorrect information you can use the same argument with the help of the Fair Credit Reporting Act or the FCRA.

File A Credit> Report Dispute
After finding inaccurate information in your credit report is the first step should be to the Credit Bureau awake and the source of information in written form.

This takes you to dispute on the way to the wrong information.

The next step is related evidence supporting your claim. These include statements or checks, which was canceled. Along with this, it is a good idea of your personal information such as name, now include a valid postalAddress, and information on dispute resolution and explains why the information is wrong. To give a clear picture, you may obtain a copy of credit report highlighting the disputed information.

These documents must be sent by certified mail containing the request for a return receipt requested. This will ensure you have the proof of your e-mail has been received from the Credit Bureau. It is very important to send a copy of all the documents you send them to keep.

READ MORE http://www.freecrditreport.pannipa.com/2009/10/13/disputing-credit-report-information/

Reverse mortgages provide financial security to the elders and senior citizens by enabling them to receive a steady source of income so that they can lead a better quality of life.

These kinds of home mortgage loans provide you with a source of cash in advance against the value of your owned property. This means that owners can make use of their home equity to cover their finances without making any payments to the lenders. This works in the favor of the home owners as they can avail of additional retirement income and at the same time, continue to own the house by paying all the necessary taxes like property tax, maintenance tax along with the insurance as before.

Reverse mortgage loans are very popular all across the United States and large number of people are opting for such schemes which enable the senior citizens to meet their medical expenses and even make home improvements.

One has to be above 62 years of age to avail of the reverse mortgage scheme and must be owner of a house to avail of the benefits of this scheme.

You can be also eligible for this scheme if you have a small amount left towards the balance repayment of your home mortgage and even use the proceeds from the reverse mortgage loan to repay your old debt.

Important things you need to know about mortgage loan

One of the best things about these kinds of mortgage schemes is that it does not differentiate between owners who have a good credit score versus those who have a bad credit score. Hence, based on the scheme, you can receive cash in the form of monthly payments or using a line of credit and even as hefty payments. However, one has to remember that there are associated costs which are involved in these kind of loans which involves mortgage insurance and closing costs including high interest costs.

Many people consider reverse mortgage to be a lucrative option but fail to realize that once they leave this world, it can hit their children hard when the entire burden of repaying the balance amount and the high interest falls on them.

If they are unable to fulfill the promises to the lender, then it could lead to foreclosure of their homes by the banks or the lending institutions.

You also need to think whether you really need an equity mortgage, if your needs are short term in nature. If you are planning for a vacation trip or want to purchase some small items for your home, then this scheme may not be the best option to consider. For such cases, you can use home equity loans which work out to be a cheaper option for borrowing money to finance your needs. Again, if you have serious health issues and think that you cannot manage the costs involved in this scheme, then it is better to stay away from such schemes.

Before opting for any kind of mortgage schemes, including reverse mortgage loans it is in your best interest to analyze the situation carefully and think about the pros and cons to get the maximum benefits of using any scheme.

Bank Notes

National Bank Notes make up the most plentiful and extensive series in the history of American paper currency. These notes were issued from 1863 through 1929, and were produced by literally thousands of individual banks through the United States and its territories.

The bank note series is so extensive that almost no collector could ever even hope to own a truly “complete” collection. Today, the most popular and practical way to collect these notes is to attain one note from each variety, issued by a wide-array of different banks. This will give you a collection with many, many different notes, with different denominations, different designs, artwork, portraits… and with the names and locations of many different historic banks.

You could also choose to collect only notes from one specific region, state, city, or even one specific bank. Although, the more specific you become in your search, the more effort it will take, and the more money it will undoubtedly cost.

National Bank Notes came into being by passage of the National Banking Act of 1863, which was later expanded by the Act of June 3, 1864.

These National Bank Notes, although issued by individual banks, are nevertheless conventional United States paper money, meaning they were fully-negotiable, and were printed under the same conditions as regular U.S. Treasury issues by the Bureau of Engraving and Printing; the same source as all of today’s U.S.-issue paper currency.

The primary designs of each issue of National Bank Notes are the same for all banks. The only differences are in the name of the issuing bank, the bank’s charter number (which appears on all bank notes issued after 1875), the bank officers’ signatures, and the coat of arms for the state in which the bank was located.

The Bank Note Series of 1902 remains among the most popular with collectors today. These notes have classic and detailed portraits of American heroes such as William McKinley and Benjamin Harrison, and feature incredibly intricate designs on the reverse-sides of the notes, depicting many classic allegorical figures, and the $ 5 Harrison notes actually features the Landing of the Pilgrims.

The final issue of National Bank Notes was in 1929, with the Unites States first-ever “small-size” currency notes; notes that remain our standard size even today.

There are so many accidents people can have with their cars in daily life, in these cases liability insurance is beneficial to the user. In comparation between liability insurance and car insurance, liability insurance is compulsory giving more complete services than car insurance. In those cases, the insurance company would cover a percentage of the damages done to the person. The compensation for damages done to property is less significant.  There are some services offered: travel assistance, legal support and driver’s insurance.

In Spain driving insurance is compulsory and required by law. This has been done to avoid further problems when car accidents happen. For instance, liability insurance would cover a third party in case of an accident. Auto Insurance is highly important because even if the responsible for the accident claims bankruptcy, the third party involved will be compensated by the insurance company.

Auto insurance covers the driver of the vehicle from the damages that may be caused to third party drivers and their property.

This type of insurance covers the liability of the driver and the vehicle owner. This means that any person who drives will be covered even if it someone else is driving the vehicle. But if the driver is younger than 25 years and has a driver’s license that expired two years ago the insurance company may reduce the compensation if an incident occurs.

Some countries, like Spain, require liability insurance by law. This means that in order to drive your car you need to have it. This insurance guarantees that the insured will pay, through the insurance company, for the damage done to a third party.

Advantages: the insurance company pays for property and personal damage with the compensation limits set by law.

Nevertheless, liability insurance does not cover what happens to the car of the insured in the accident.

Who buys only Auto insurance? Those who have an impeccable driving record and are convinced they have little chance of an accident. Generally, they look for insurance that is not very expensive and that covers third parties in case of accident. If you buy a new vehicle, this insurance will not be enough because liability insurance does not give protection for the damages caused to your own car.

Liability insurance will not give coverage if the insured was involved in an accident while under the influence of alcohol or drugs or if the car was stolen.

Bond investing basics are simple. When you buy a bond, the bond issuer – either a government or corporation – pays you an agreed-upon rate of interest known as the coupon rate. In addition, you get your original investment back when the bond reaches a maturity date.

Bonds come in many flavors: taxable and tax-exempt, long- and short-term, AAA-rated and junk, inflation-protected, fixed-rate and variable-rate.

Before investing in a bond issue, you should consider several factors.

Do you want to go long- or short-term? Normally, longer-term bonds pay higher interest than shorter-term bonds. However, monetary policy and inflation expectations vary with time, so sometimes the normal yield curve may flatten (meaning short- and long-term rates are equal) or invert (short-term rates are higher than long-term rates).1 When this occurs, it can be very hard to sell a long-term bond because investors can get the same or higher rate investing short-term.

The big question here is: where do you want to be on the yield curve? How long do you want to invest your money for a given return on your investment?

How much risk do you want to assume? As interest rates go down, the value of a bond goes up and when interest rates climb, a bond’s value falls. If an investor wants less risk, he might choose to buy a short bond, as its value will fluctuate less when interest rates vary. Long bonds usually offer higher interest rates because they typically carry more risk.

If an investor wants no risk, short-term U.S. Treasuries may be a good choice. After all, Uncle Sam backs them up – but they pay a comparatively low rate of return.

A bond’s duration relates to risk. (The duration of a bond is a measurement of how long it will take for the price of a bond to be recouped by internal cash flow.) A debt instrument with a 1-year duration is not very sensitive to interest rate fluctuations, while a really long bond with a 35-year duration will have its value fluctuate sharply with even a small interest rate change. Generally, a bond that pays a higher interest rate and has a longer term will have a higher duration.2

How important is the rating to you? Investors usually look to Standard & Poors or Moodys for bond ratings. Government bonds are perceived as less risky than private sector bonds. Some bond investors do have relatively high risk appetites, with some even buying “high yield” or “junk” bonds from troubled firms whose interest payments are in doubt. The riskier a bond, the higher the interest rate investors will demand.3

Do you want a tax-free or taxable bond? Many federal and municipal bonds are tax-exempt to some degree. Correspondingly, their coupon rates are lower than corporate bonds. You need to compare muni bond and corporate bond rates on an after-tax basis. You do this by calculating the tax-equivalent yield, which equals the tax-free interest rate divided by (1 investor’s federal tax rate, or federal tax bracket).4

Consider two investors. Investor A pays a 25% federal tax rate while Investor B is in the 35% federal bracket. Should they buy a municipal bond paying 4%, or a highly rated corporate bond paying 6%?

Well, the real question becomes: What will they take home after taxes?

They run the numbers on the muni bond. Investor A calculates his after-tax yield as 5.33% (4%/(1-.25) = 5.33%). Investor B gets 6.15% (4%/(1-.35) = 6.15%) after taxes.

Investor B chooses the muni bond. However, Investor A figures out that the tax exemption saves her less, so she selects a corporate bond and pays taxes on it.

Other options include inflation protection and variable rates. Treasury Inflation-Protected Securities (TIPS) are issued by the U.S. Treasury, and their principal depends upon the Consumer Price Index. Their principal increases with inflation and decreases with deflation. TIPS appeal to investors who fear that inflation could erode the value of their investment. When TIPS mature, the investor redeems either the original value of the security or the inflation-adjusted value, whichever is greater.5

Investors who can tolerate varying interest payments may decide to buy a variable-rate bond. The return on these bonds reflects the general level of inflation, and commonly rises with rising interest rates.6

Bond investing demands educated decision-making. Fortunately, bonds come in enough varieties that investors can find bonds appropriate for their tax situation, time horizon, and risk tolerance.

More Investing Articles