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Starting up your own business is a good way to increase your quality of life. Finding a good job is not easy and most people stuck in low-level job far from their real capability. If you can start your own business, you can use all your capabilities to develop your business to be a big one in the world. The problem is, every business needs funding, even the small business. However, there is no problem without solution and your solution can be angel investors.

Private investors can be your angel to help you reach your dream. Individual investors come with terms that are more convenient both for you and for them because they invest their own money. They judge your business individually and commonly they may okay with lack of experience. They are very different with venture capitalist that requires access to executive seniors and intense help from expert to build the company. Angel investor is also better option for small business investing if you compare it with venture capitalist because they commonly provide capital with less access to your business. You can easily speak with your angel and negotiate the investment to find win and win solution so you can develop your business in your hand without giving up much. Angel investor is also better than friend and family to fund your business because they act as your business partner with skill and ability to help your business. They can be your mentor to start and build your business. You can learn a lot from them.

To find your angel, you can start your research online because the world is turning the way into online living. Numerous individual angels or groups of angle offer their investment capital online. There is also network for entrepreneurs and private angle investors to meet each other and build the business together.

Investment Portfolios

Since investors like to increase their expected wealth and like to avoid risk or uncertainty, it is possible to imagine different combinations of expected gain and risk which are valued equally by an investor. That is, an investor will be willing to assume greater risk, if he achieves greater expected wealth.

The individual investor is now conceptually prepared to select the optimum portfolio from those constituting the efficient set. The optimum portfolio (i.e., the one which maximizes expected utility) is the one at the point of tangency between the efficient frontier and an indifference curve. In images it can be seen that the investor can do no better than choose the portfolio at point A on the efficient frontier, since no other portfolio is on as high an indifference. Another escape is to say that concavity does not necessarily imply that the relationship is quadratic and that other equations can preserve the concavity without ever implying a maximum value from which utility will decline as wealth increases.

The difficulty with these other curves is that efficiency in terms of the mean and variance of a portfolio does not necessarily imply maximization of expected utility. Markowitz has shown, however, that many utility functions can be reasonably approximated by the quadratic.

A different line of criticism has been advanced by Arditti and others. They argue that investors may be interested in characteristics of distributions of rates of return additional to the mean and variance. In particular, they argue that skewness may be of importance. That is, if the rates of return on the portfolios have the same mean and variance, but different skewness, investors may prefer the distribution which is more skewed to the right. One is not excused from reaching tentative conclusions simply because the theoretical development of a field is still rudimentary.

A conclusion which is consistent with much that has been observed in the real world and which is satisfying theoretically is the one with which we started: namely, that portfolios which are efficient in terms of their means and variances necessarily maximize expected utility which can be represented by a quadratic equation. Markowitz, perhaps, does the best job of showing that his efficient portfolios are very close to optimum or come very close to maximizing expected utility, even if things other than the mean and variance of the distributions of returns make a difference to or affect the expected utility of inves tors. Even if the investor is concerned about the magnitude of the expected loss, the maximum expected loss, the probability of a loss, or other attributes of the distribution, the portfolios selected according to those criteria will be very similar to portfolios selected according to their means and variances.

Investment Portfolios

Since investors like to increase their expected wealth and like to avoid risk or uncertainty, it is possible to imagine different combinations of expected gain and risk which are valued equally by an investor. That is, an investor will be willing to assume greater risk, if he achieves greater expected wealth.

The individual investor is now conceptually prepared to select the optimum portfolio from those constituting the efficient set. The optimum portfolio (i.e., the one which maximizes expected utility) is the one at the point of tangency between the efficient frontier and an indifference curve. In images it can be seen that the investor can do no better than choose the portfolio at point A on the efficient frontier, since no other portfolio is on as high an indifference. Another escape is to say that concavity does not necessarily imply that the relationship is quadratic and that other equations can preserve the concavity without ever implying a maximum value from which utility will decline as wealth increases.

The difficulty with these other curves is that efficiency in terms of the mean and variance of a portfolio does not necessarily imply maximization of expected utility. Markowitz has shown, however, that many utility functions can be reasonably approximated by the quadratic.

A different line of criticism has been advanced by Arditti and others. They argue that investors may be interested in characteristics of distributions of rates of return additional to the mean and variance. In particular, they argue that skewness may be of importance. That is, if the rates of return on the portfolios have the same mean and variance, but different skewness, investors may prefer the distribution which is more skewed to the right. One is not excused from reaching tentative conclusions simply because the theoretical development of a field is still rudimentary.

A conclusion which is consistent with much that has been observed in the real world and which is satisfying theoretically is the one with which we started: namely, that portfolios which are efficient in terms of their means and variances necessarily maximize expected utility which can be represented by a quadratic equation. Markowitz, perhaps, does the best job of showing that his efficient portfolios are very close to optimum or come very close to maximizing expected utility, even if things other than the mean and variance of the distributions of returns make a difference to or affect the expected utility of inves tors. Even if the investor is concerned about the magnitude of the expected loss, the maximum expected loss, the probability of a loss, or other attributes of the distribution, the portfolios selected according to those criteria will be very similar to portfolios selected according to their means and variances.

More Investing Articles

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.

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

There are various kinds of investment strategies followed by different investors. Each strategy is underlined by the same principle of earning returns on the stocks invested in. One such strategy is quality investing. Here, only those securities the show above-average quality characteristics are chosen for investment. Although the basic principle of quality investment originates from the real estate world, it applies very well to the stock market too. In share trading, fundamentals analysis and active stock picking are used as strategies to identify quality stocks. Quality investors only chose those securities that are “attractively valued.”

Quality investment is quite independent and different from other types of investment strategies such as growth investing and value investing. In growth investing, investors choose stocks of those companies that show the signs of having an above-average growth.

These stocks are characterized by high price-to-earning (P/E) or price-to-book ratios. However, only these high growth factors will not attract a quality investor. A stock’s high earnings growth should also be characterized by good fundamentals of the company invested in for its price to be justified by a quality investor.

In value investing, an investor picks a stock that is believed to be trading at less than its intrinsic value or is undervalued. The stocks ideal for value investing are characterized by low P/E ratio, low price-to-sales ratio, low price to cash flow, low price-to-book ratio, and high dividend yield. In contrast, a quality investor will never buy a company’s stock just because it is undervalued. Such an investor looks for stocks that are of an excellent company and is also attractively valued.

Benjamin Graham, who is also known as the “father” of value investing, recognized the value of quality stocks.

He observed that losses resulting from stock market trading were not more due to buying quality at an excessively high price, but more from buying low-quality stocks at a price that seems good value. Hence, the importance of quality investment was recognized. Quality Investing gained prominence after the stock market “bubble burst” of 2001 characterized by bankruptcy, balance sheet manipulation, and other financial frauds. This cautioned the investors to go for targeted selection of quality stocks.

There are several criteria that can help an investor to select quality stocks:

Financial condition of a company:

Financial condition can be gauged by examining a company’s balance sheet, earnings, cash flow, free cash flow, debt, income stream, etc. The more income a company can generate with its core business, the better is its quality. Also, when reviewed in comparison with other peers in the same sector, the quality of the stocks can be well judged.

Top management:

A company is believed to be as good as the quality of the people who run the company. Low turnover rates, stability in the management system, and more can speak volumes about the quality of the stocks of a particular company.

Price potential of the stock:

In quality investing, quality and attractive valuation are linked. Quality helps to prevent share price losses in bearish market conditions and attractive valuation ensures that the stocks outperform the market. Factors such as discounted cash flow, price/earning ratio, and price/book ratio in caparison to the market averages gives the investor a measure of the stock’s quality.

Business model:

A company’s business model is also a good indicator of the quality of its stocks. Factors such as competitive advantage, diversification, and business trends give an estimate of the business model’s earnings potential.

Market environment:

The potential size of the market and the company’s position within it gives a correct evaluation of the quality of a stock.