$$$$ MONEY MAKERS$$$$: July 2008

Thursday, July 31, 2008

Opening a trading account

Often brokers will insist that you open a trading account in order to trade with them. This is usually a cash management trust that has sufficient funds in it for you to conduct trades. When you buy shares, the cost of the shares plus your transaction (brokerage) fee and stamp duty will be deducted automatically.

Share trades in Australia operate under a T+3 system. This means from the day you buy or sell your shares you have three business days to settle your trade. Share traders previously had five business days in which to settle but that was when we were more reliant on cheques. Brokers favour electronic settlement, which is why in many cases you have to set up a trading account. Broker sponsored

Broker sponsored means the broker with whom you are dealing provides you with a Holder Identification Number (HIN) for all the stocks you hold. Then when you want to sell shares, you just give the directive and it can be executed. Most brokers prefer you to be sponsored just by them. However, it is possible to be sponsored by a number of brokers although if you are selling shares controlled by another broker, you will have to provide the selling broker with a signed CHESS sponsorship form and wait for the shares to be transferred. In addition, having more than one sponsoring broker can make the monitoring of your share portfolio more complex. Take for instance changing address - with only one sponsoring broker you just make that single contact; with several you have to advise each one.

What's CHESS?

CHESS stands for Clearing House Electronic Sub-register System. Its introduction in 1994 means that you no longer have to hold share scrip (documentation) to prove ownership of your shareholding. Instead your ownership is electronically registered either with your stockbroker or with the company. If you sell your shares, your holding is electronically transferred from your broker to the buyer's broker. You can either be broker sponsored or issuer sponsored. But you need to be sponsored in order to trade.

Issuer sponsored

Another acronym you may have heard of is SRN – Shareholder Registration Number which identifies your registration on an Issuer Sponsored Subregister. An SRN registers your shareholding in a single listed company. If you choose to be Issuer Sponsored you will need a separate SRN for each shareholding.

Selecting shares

The decision about which shares to invest in ultimately comes down to you so make sure you research any company you’re interested in. During the recent tech boom, many people invested in technology stocks merely because everyone else was and history has shown what happened to this sector. While it doesn’t hurt to listen to people’s recommendations, make sure your decision to invest is based on sound reasons. You should look at previous annual reports, talk with your broker, read the financial press and check out ASX announcements.

There are two approaches with buying and selling shares that stockbrokers adopt. These are fundamental analysis and technical analysis.

Fundamental analysis considers factors such as the economy and the company’s balance sheet and outlook. Technical analysis identifies patterns relating to a company’s share price. Particular patterns suggest the likely behaviour of a share price and decisions to invest are based on these expectations.

Employee share scheme

Before you decide to participate, it is important to understand how they work as they can carry unexpected income tax and capital gains tax (CGT) implications. One is a salary-sacrifice arrangement that allows employees to buy the shares at market value. The other allows employees to buy them from after-tax salary but at a discount to the market price. Check woth your employee to see if they offer such a scheme.

Buying shares

When you put in an order to buy shares, your broker will place your order on the market. If your broker has direct-through trading this should happen fairly promptly although with some brokers it can take up to half an hour. Orders are queued and traded depending on price and time - the better-priced bids will have priority. If there are several bids at the one price, then the one placed first will have priority. When placing your order you can choose to buy at a specific price - 'at limit' or 'at market'. At market is what it says - the price current at the time of your transaction. You can also put a time limit on your order so that it is cancelled if it is not executed within the given time. Most brokers will put a limit on the number of days an order can stand.

Brokers talk in numbers of shares not dollars. If you only want to spend $10,000 work out the approximate number of shares otherwise you might find yourself buying 10,000 BHP shares for instance - and that' will cost you around $100,000!

For further information on Buying shares go to the - Buying shares factsheet.

Stock Exchange Automated Trading System

SEATS stands for Stock Exchange Automated Trading System. All share transactions are now carried out electronically and SEATS is the system in which your broker will relay your buy or sell order. Only brokers have access to SEATS. Your order will join a queue of other buyers and sellers until the transaction is completed. If you are trading online, your order is sent to your broker’s office and entered into SEATS.

While you can call your broker any time with an order, the market only trades from Monday to Friday and from 10am – 4pm.

Selling shares

When you plan to sell shares you need to advise your broker of your ownership of the stock. If you are dealing with your sponsoring broker, they will already have the confirmation to hand. You can then request that your broker sell shares either at a particular price or at market. If you have bought the shares in a float you may need to transfer CHESS registration to your broker.

Make sure you store safely any CHESS documentation you receive when you buy or sell shares.

Tracking your investments

While many people talk about buying shares and putting them in the bottom drawer, it is a better strategy to regularly monitor them to keep track of how your assets are performing. Investing for the long term should not mean clinging on to shares that are never going to recover the value you paid for them. If your shares are under-performing, you may need to make some hard decisions about what to do with them.

What is an IPO?

The first time a company lists, it is undergoing an IPO or Initial Public Offering. They are also called floats in Australia. In recent years, there have been many major floats including Telstra, the Commonwealth Bank and Qantas and this has increased the number of Australians who have become shareholders.

If a company wants to offer shares to the public, it needs to issue a prospectus. You can only apply for the shares through the application form in the prospectus, which you send off with your cheque to the broker organising the float. A financial benefit of buying shares through IPOs is that you do not pay any stamp duty or brokerage fees. You also apply for the shares at a fixed price. If a listing is expected to be popular, you may not receive all or even any of the shares you wanted and you will be sent a refund.

Not all floats are a success. It's vital that you read the prospectus carefully and you understand the company and its business. You should use the same investment criteria as you would if you were buying shares of already listed companies. Some smaller or highly prized floats are only available if you are a client of a full-service broker who receives an allocation although some discount brokers also have allocations. (See full service brokers).

What makes share prices move?

The Australian Stock Exchange is a marketplace and like all marketplaces, the price at which the shares trade are determined by supply and demand. If there are more buyers than sellers, then the price will rise and if there are more sellers than buyers it will fall. In turn that supply and demand is determined by a number of other factors including:

General market sentiment
Movements on international markets, particularly Wall St, as was evidenced by the September 11 attacks
Economic events
Company news
Interest rates
Speculation and rumour

What are indexes?

There are a number of indices on the Australian market that are calculated by Standard and Poor's. The indices comprise a list of the securities are broadly known as the ASX S&P 50, 100, 200 and 300. Each index represents the number of stocks included on it. For example, the S&P 50 includes the top 50 companies traded on the stock exchange.

The market benchmark for how the Australian equity market has performed is the ASX 200. It used to be the All Ordinaries Index.

Checking up on your shares

Once you become a part owner in a company through buying shares, you will want to keep tabs on how your shares are performing. You can do this either on the internet where there are a number of sites that offer delayed – usually 20 minutes - share prices. Or you can check the previous day’s close in the financial pages of daily newspapers. The newspapers can generally also provide you with the highest and lowest sale price of the day, the 52-week high and low, PE ratios, and dividend yields.

What is a stockbroker?

A stockbroker is person who is licensed to trade in shares. They also have direct access to the sharemarket and can act as your agent in share transactions. For this service they charge a fee. Stockbrokers can also offer additional services such as:

advice on shares, debentures, government bonds and listed property trusts
investment advice on a wide range of non-listed investment options (cash management trusts, property and equity trusts)
planning, implementing and monitoring of your investment portfolio
research on national and international trends to help maximise your returns and minimise risk.

What kind of stockbroker do I want?

There are two types of stockbroker - a full service broker (advisory) and a discount broker (non-advisory).

A full-service broker will provide you with advice on which stocks to trade. They can often operate as financial planners and help with other aspects of your investment portfolio. Because they offer advice, a full service broker usually charge more than discount brokers. Go to Moneymanger's online brokers fees and services comparison to get a general idea on the charges.

A discount broker will execute your trades but will not provide you with any advice. As a result brokerage charges are low. In many cases less than $20 for each transaction depending on the number of shares or amount you are buying. Discount brokers generally operate via the telephone, Internet or both. Examples of discount brokers include: E*Trade, Charles Schwab Australia and Commonwealth Securities.

Normally brokers only handle minimum amounts, such as $1000. Shares are also bought and sold in marketable parcels. For example, while you can place an order for 1000 shares, it is unlikely you will be able to trade 1050.

The type of broker you choose will depend on your own confidence in trading shares. Often investors who know exactly what they want to buy, will go to a discount broker to enact the trade but they will use a full-service one if they are interested in shares of a company they are unsure about.

Where do I find a broker?

Choosing a stockbroker is just as important as choosing any professional that acts on your behalf. There are a number of places you can go to when researching the most appropriate one for you. Following up recommendations from friends is very common as is choosing one that has a good reputation in the market. The Australian Stock Exchange has a Broker Referral Service provides a list of brokers, both full service and discount.

Unless you are dealing with an Internet broker, it makes sense to choose one who is based close to you. There's no point having a broker in Perth when you live in Sydney - the phone costs wouldn’t justify it and there is a time difference. When choosing a broker make sure you shop around and understand just what service your broker will provide.

What to ask a discount broker

How much do you charge to buy and sell shares?
Can I deal with you over the telephone and Internet?
Do you have a monthly subscription fee?
Do you have frequent trader discounts? (For example, do you charge lower fees if I trade more than 10 times a month?)
Do you offer any value added services, such as company research, price alerts, and dynamic market data?
Do I need to set up a special cash management account to conduct trades?
How do you place buy and sell orders?

What to ask a full service broker

What's your investment style? Check whether it matches yours.
How do you charge for your services?
What are your firm's research capabilities?
How do you communicate with clients? For example, do clients get sent newsletters? Are they called on a regular basis?
Do you have access to floats?
How often will you review my portfolio?

Building a share portfolio

Because a large number of investors received shares through being members of companies that listed, such as AMP and NRMA, in many cases this means investors aren’t diversified enough. Most market watchers believe a portfolio of 10 companies is enough to give you adequate diversification without monitoring them being too big a task.

Ideally you should spread your investments among a variety of industries although you might choose to have two companies in the same industry if their business is sufficiently different to give you diversification.
It is an advantage to invest in companies that you know something about as you will have a more comprehensive knowledge of what factors are affecting the industry.

Learn more: Go forth and diversify to beat blues , The Sun Herald, 09 Feb 2003
Reckon you'd be crazy to go out and buy shares right now? Well, think again. Business editor David Potts shows how to turn these gloomy times to your advantage.

When to buy. When to sell.

Knowing when to buy and sell shares is the million dollar question. If you are investing for the long-term the right time to buy is now. Of course if the shares were to drop 20 per cent tomorrow, you would be sorry you had not waited a day, but many an investor has missed out on good opportunities by trying to pick the market.

Don’t try and be a bottom picker. If you continue to wait before investing in the sharemarket, you will never invest and consequently miss many opportunities.

Dollar cost averaging

Dollar cost averaging is a technique that helps you iron out the swings in the market. If you buy $1000 worth of shares in a company every month for a year you would find that some months you got more shares than others. That is, when the price was high you bought fewer shares, and when the price was low you bought more. If you averaged out what you paid for each share during the course of the year, the fluctuations should have largely been ironed out.

Dummy portfolios (watchlists)

If you're hesitant about which shares should make up your portfolio, why don't you monitor a dummy portfolio for six months and see how you go? Meanwhile you can be accumulating funds to invest as well as learning about how to invest.

Create a shares watchlist on Moneymanager and monitor the performance of the shares you’re interested in over a set period such as six months.

Share clubs

Joining a share investment club can be a good way to learn about the sharemarket and hopefully make money at the same time. Share clubs have been springing up around the country and involve a group of friends or acquaintances who get together to discuss share investing with the aim of investing in a number of shares. Each member contributes money and carries out research on stocks. The downside is that sometimes you may not be in agreement about what stocks to invest in so consider this option carefully.

Borrowing to invest

Using the equity in your home as leverage to invest in the sharemarket is becoming a popular strategy. However, the bottom line is that you are borrowing the money- a practice called gearing. If the value of your investment falls you will still have to pay back your loan and you may also be up for a margin call from the company you borrowed the money from.

Building a share portfolio

Learn more: Go forth and diversify to beat blues , The Sun Herald, 09 Feb 2003
Reckon you'd be crazy to go out and buy shares right now? Well, think again. Business editor David Potts shows how to turn these gloomy times to your advantage.

When to buy. When to sell.

Don’t try and be a bottom picker. If you continue to wait before investing in the sharemarket, you will never invest and consequently miss many opportunities.

Dollar cost averaging

Dummy portfolios (watchlists)

Create a shares watchlist on Moneymanager and monitor the performance of the shares you’re interested in over a set period such as six months.

Share clubs

Borrowing to invest

Margin lending

A margin loan is a special type of interest-bearing loan secured by shares. Such loans are available from banks, but they are also marketed by organisations associated with some stockbrokers. A minimum loan size is usually imposed.

Whether such a loan is suitable for you depends on your circumstances. Margin loans are usually marketed on the basis that they will enable you to acquire a much bigger portfolio of shares than if you used only your own money. If the shares go up, then you will make a much bigger profit. Quite true - but this is only part of the story. If the shares go down, you will also make a much bigger loss. Leverage is always a two-edged sword so you might be in for a margin call.

A margin call is a formal demand for some remedial action by you. This can take the form of "topping up" your portfolio with shares or cash or, conversely, selling some of the shares. If it drops so that the amount of cover falls below a defined ratio, then the lender makes a margin call. For example, if the original maximum loan was 70 per cent of the value of a parcel of shares, a call might be made if the "loan to value" ratio goes over, say, 75 per cent.

What you'll learn in this step: As taxation applies to all investments, it helps to be aware of elements such as capital gains tax and franking credits.

The money we make from shares usually comes in the form of dividends or capital growth. The dividends you receive need to be included in your annual tax return as does the capital gain or loss you may have incurred upon selling shares.

Dividends and franking credits

In 1987 dividend imputation was introduced. Before that date companies would pay tax on their income, then pay your dividend from their net profit. You would then have to pay tax on your dividend. In effect, the Tax Office was taxing the money twice. Franking means that if the company in which you have invested has paid tax at the full corporate rate of 30 per cent, you in turn will get a tax credit on your dividends for the tax the company has already paid.
Some companies don't pay the full tax rate in which case your dividend payments are only partly franked.
Franking credits on your dividends can make shares a very attractive investment option.

When filling in your tax return, don’t forget to claim any of your imputation (franking) credits. You can find out this amount from the dividend statements that you receive. If you do not normally lodge a tax return, you can claim a refund on these credits from the Tax Office.

Some companies offer dividend reinvestment plans where your dividend is automatically used to purchase shares in the company. Some people view this as a form of enforced saving. Even though you haven’t received the dividend in your hand, you must still include the amount in your tax return.

International shares

The Australian sharemarket only comprises 2 per cent of the global sharemarket so you should have exposure to overseas markets if you want to be where the action is. While there are a number of brokers such as TD Waterhouse and the Commonwealth Bank through which you can buy international shares, the easiest way to invest in overseas shares is through managed funds.

Speculative investments

Speculative investments should only be made with money you don't mind losing and should never amount to more than about 10 per cent of your total portfolio. The recent rout of technology stocks should be a lesson to all investors who invested blindly in speculative stocks.

Traders and investors

Some people choose to be traders rather than investors. Traders only hold stock for a short period of time, trading in and out of the market while trying to capture profits. Being a trader requires a lot of time, energy, understanding and research and usually people give up their day job to trade full-time.

Capital gains tax

The slashing in half of capital gains tax has made growth shares an attractive proposition. If you hold onto shares for more than 12 months before you sell them and you are on the top marginal tax rate, your capital gains tax rate has dropped effectively from 48.5 per cent to 24.25 per cent.

When you are filing your tax return, you must include details on any capital gains or losses. Remember capital losses can only be offset against capital gains. Remember to keep all your documents. You need to have comprehensive records in order to calculate what you owe.

What are shares?

What you'll learn in this step: Obtain definitions of the many types of shares around and learn how to read newspaper tables. Find out more in this step.

Investing in shares has many benefits including a high level of liquidity which unlike property, gives you ready access to your money. There are more than 1200 companies on the stockmarket in which you can buy shares so there are plenty to choose from to match your investment needs.

Buying shares in a company provide you with a “share” of it, making you a partial owner along with the other shareholders. Companies issue shares to the public for a number of reasons such as to raise money to fund growth or a takeover. Around 40 per cent of Australians are now shareholders, largely through the listings of companies such as the Commonwealth Bank and Telstra. By becoming a shareholder, you have the right to a say in how the company is being run by asking questions at annual meetings, and a share in its profits.

Companies in which you can buy and sell shares are called listed companies and they can be found on the Australian Stock Exchange. You trade in shares on the stock exchange via a stockbroker. You can either call your stockbroker with an order or trade through them over the Internet.

If a company is listing for the first time – known as floating - you can apply to buy shares by completing the application form in the company’s prospectus. (see What is an IPO?). These new shares are offered to the public at a set price. After the company lists, you can only trade the shares through a broker.

Learn more: Making sense of the jargon, Ron Marney, The Age, 24 April 2003
If the jargon is a barrier to investing, maybe it is time to clear a few things up, writes Gabrielle Costa.

Making money from shares

The most common form of shares is ordinary shares. You can also buy preference shares, options and partly paid shares.

There are a number of different types of shares such as ordinary or preference shares which have different properties. For more experienced investors, derivatives such as options and warrants provide further diversification. However, when the majority of investors invest in shares, they buy ordinary shares.

We invest in shares to make money – either through a share’s capital growth, i.e. the amount by which the share price increases in value over time, or through the dividends it pays to its shareholders. Dividends are payments made by companies to shareholders from their profits. Not all companies pay dividends. Dividends are usually paid twice a year and are in effect the yield from your investment. Some growth companies plough most of their profits back into generating more business rather than paying out dividends to investors.

calculated and what does it say about the company? Ron Marney explains.

Friday, July 25, 2008

Reserve Bank of India (RBI)

State Bank of India and Associates

State Bank of Bikaner and Jaipur (SBBJ)

State Bank of Hyderabad (SBH)

State Bank of India (SBI)

State Bank of Indore (SBIR)

State Bank of Mysore (SBM)

State Bank of Patiala (SBP)

State Bank of Saurashtra (SBS)

State Bank of Travancore (SBT)

Nationalised Banks

Central Bank of India

Oriental Bank of Commerce (OBC)

Punjab and Sind Bank

Punjab National Bank (PNB)

Syndicate Bank

UCO Bank

Union Bank of India

United Bank of India (UBI)

Vijaya Bank

Co-Operative, Agricultural and Rural Banks

Bihar State Co-operative Bank Limited (BSCB)

District Co-operative Central Bank Limited, Bidar, Karnataka

Haryana State Co-operative Apex Bank Limited (HARCOBANK)

National Federation of State Co-operative Banks Limited (NAFSCOB)

Orissa State Co-operative Bank Limited (OSCB)

Repatriates Co-operative Finance and Development Bank Limited

Agriculture Planning and Information Bank (APIB)

National Bank for Agriculture and Rural Development (NABARD)

Financial Institutions

Andhra Pradesh State Financial Corporation (APSFC)

Andhra Pradesh State Minorities Finance Corporation Limited (APMFC)

Credit Guarantee Fund Trust for Small Industries (CGTSI)

Delhi SC/ST/OBC, Minorities and Handicapped Finance and Development Corporation Limited (DSFDC)

Economic Development Corporation Limited, Goa

Export-Import Bank of India

Himachal Pradesh Financial Corporation (HPFC)

Indian Railway Finance Corporation Limited (IRFC)

Indian Renewable Energy Development Agency Limited (IREDA)

Industrial Development Bank of India (IDBI)

Industrial Investment Bank of India Limited (IIBI)

Madhya Pradesh Financial Corporation (MPFC)

National Minorities Development and Finance Corporation (NMDFC)

National Safai Karamcharis Finance and Development Corporation (NSKFDC)

National Scheduled Castes Finance and Development Corporatioin (NSFDC)

North Eastern Development Finance Corporation (NEDFI)

Power Finance Corporation Limited

Rajasthan Finance Corporation (RFC)

Rural Electrification Corporation Limited

Scheduled Caste/Scheduled Tribes, Other Backward Classes, Minorities and Handicapped Financial and Development Corporation Limited, Dadra and Nagar Haveli, Daman and Diu

Small Industries Development Bank of India (SIDBI)

Tamil Nadu Industrial Investment Corporation Limited

Unit Trust of India (UTI)

Uttar Pradesh Financial Corporation (UPFC)

Insurance Companies

Agriculture Insurance Company of India Limited

Employees’ State Insurance Corporation (ESIC)

Export Credit Guarantee Corporation of India Limited (ECGC)

General Insurance Corporation of India (GIC)

Insurance Regulatory and Development Authority

Life Insurance Corporation of India (LIC)

National Insurance Company Limited (NICL)

New India Assurance Company Limited (NIACL)

Oriental Insurance Company Limited (OICL)

SBI Life Insurance Company Limited (SBI LIFE)

United India Insurance Company Limited

Securities and Exchanges

Others

Core Banking

Core Banking is normally defined as the business conducted by a banking institution with its retail and small business customers. Many banks treat the retail customers as their core banking customers, and have a separate line of business to manage small businesses. Larger businesses are managed via the Corporate Banking division of the institution.Core banking basically is depositing and lending of money.

Normal core banking functions will include deposit accounts, loans, mortgages and payments. Banks make these services available across multiple channels like ATMs, Internet banking, and branches.

Core Banking Solutions

Core Banking Solutions is new jargon frequently used in banking circles. The advancement in technology especially internet and information technology has led to new way of doing business in banking. The technologies have cut down time, working simultaneously on different issues and increased efficiency. The platform where communication technology and information technology are merged to suit core needs of banking is known as Core Banking Solutions. Here computer software is developed to perform core operations of banking like recording of transactions, passbook maintenance, interest calculations on loans and deposits, customer records, balance of payments and withdrawal are done. This software is installed at different branches of bank and then interconnected by means of communication lines like telephones, satellite, internet etc. It allows the user (customers) to operate accounts from any branch if it has installed core banking solutions. This new platform has changed the way banks are working. Now many advanced features like regulatory requirements and other specialised services like share (stock) trading are being provided. Core banking solutions are very helpful to SME industries.

Around the world

In countries such as India and Hong Kong that were a part of the British empire, it is only recently that core banking has caught on. This is mainly due to the restrictions by the UK government on free movement of money throughout the region. Also, the IT infrastructure necessary for such services did not exist in these countries until recently. After Britain chose to give these countries their freedom, the economies of these countries went through a drastic change - thus the demand for such services increased and the need to meet such demand were met with today's technologies. Most of the nationalized banks in India for example: State Bank of India, Punjab National Bank, Allahabad Bank, HDFC and ICICI Bank today supports core banking. As of 2007, many Cooperative banks in India such as Jain Urban Cooperative Bank, Kangra Central Cooperative Bank, Udaipur Urban Cooperative Bank, Kollam District Cooperative Bank, Kerala State Cooperative Bank and Panchsheel Mercantile Cooperative Bank have started to use and offer centralized Core Banking too. The Four standard software tools used are Intellect Suite from POLARIS, Flexcube from iFlex Solutions, Finacle from Infosys and B@ncs from TATA Consultancy Services.

In countries such as Japan, core banking is still in its early stages. Although having autonomous reign over their currency for over half a century, the consumers themselves do not see much use for such services - low demand, thus less services. It is only within the last decade that banks started placing ATMs outside the bank premises. Many of the bank services must be done in person at the account holder's registered branch. Japanese banks rely heavily on paperwork and physical evidence, such as the personal chop or Inkan - thus rendering core banking impractical.

Tuesday, July 15, 2008

What is a Mutual Fund?

A mutual fund is a pool of money put together by a group of investors, who stand to benefit or loose from that pool to the extent they have invested.

This pool is created since small individual investments have limited power and ability to influence the outcome of the investment. On the other hand, when the investment is large, the investor can have greater control on the outcome of the investment.

Thus, many small investors gather their individual small investments into a larger investment to take advantage of the opportunities offered by large investments. This is called a mutual fund.

What does the Mutual fund invest in?

Mutual funds can be created for investing in anything. The investments that the mutual fund is going to make are discussed in the mutual fund's offer document.

Typically, mutual funds invest in investment opportunities that have a trading market around it, such as stocks and shares, bonds and debentures, etc.

How does the investors benefit?

The most important factors in choosing who to have a deposit with, is the safety of the deposit, and the rate of interest that is paid on the deposit.

How does a Mutual funds works?

A mutual fund is managed by an Asset Management Company (AMC). Professional investors, who study where and when to make investments staff the AMC. The AMC creates a mutual fund, and invites the public to subscribe in the mutual fund with their investment. The funds collected are then invested by the AMC and are continually managed.

Unlike other investments, the mutual fund itself is not traded nor does it offer guaranteed returns like a deposit. The mutual fund's Net Asset Value (NAV) determines the value of the investment. Investors redeem their investments in the mutual fund on the basis of the NAV from the mutual fund itself.

Equally, when investors want to buy, they buy into the mutual fund on the basis of the NAV.

The investments are managed by professionals who know more about deciding what to buy and sell and when to buy and sell

The risks and rewards of investments are spread across a large number of individuals, so losses are minimized

Access to funds is quick, since there is no need to sell or buy from the market

What is Net Asset value?

The Net Asset Value of a mutual fund is the total market value of the holdings of the mutual fund less its liabilities, such as expenses, management fees, etc. This is calculated on a daily basis.

What this means is, if the mutual fund were to be dissolved or liquidated, by selling off all the assets in the fund, on that specified date, the Net Asset Value is what all the holders of the mutual fund will collectively own and will be given this amount in proportion to their holdings.

You can estimate your share of the holding of the mutual fund by the Net Asset Value per unit. This is the value represented by the ownership of one unit in the fund. It is calculated simply by dividing the Net Asset Value of the fund by the number of units.

Commonly Net Asset Value is always referred by its unit value rather than by the total Net Asset Value of the fund.

How is Net Asset value calculated?

Net Asset Value is calculated as follows:

Net Asset Value = (Market value of shares/debentures + Liquid assets/cash held, if any + Dividends/interest accrued) - (Amount due on unpaid assets + Expenses incurred but not paid + Management and other fees)

This is how the above are calculated

Valuation of marketable shares/debentures: The last or closing market price on the principal exchange where the security is traded

Valuation of illiquid and unlisted and/or thinly traded shares/debentures: For shares, this could be the book value per share or an estimated market price based on performance of other shares in the industry. For debentures and bonds, value is estimated on the basis of yields of comparable liquid securities after adjusting for illiquidity

Accrued dividends/interest: Companies announce dividends, however, pay it at a later date. If a dividend is announced, then the announced dividend is taken as the accrued dividend. Similarly, interest is payable on debentures/bonds in a pre determined frequency at a pre determined rate. Therefore for every passing day, interest is said to be accrued, at the daily interest rate, which is calculated by dividing the periodic interest payment with the number of days in each period. Thus, accrued interest on a particular day is equal to the daily interest rate multiplied by the number of days since the last interest payment date.

Expenses including management fees, custody charges etc. are calculated on a daily basis. The management fees is as per the declaration in the offer document of the mutual fund.

What is equity trading?

It is simply buying and selling of equities. However, unlike other commodities, equities are not traded everywhere, and are traded only in special market places called exchanges.

What is an exchange?

An exchange is a mechanism through which buyers and sellers of equities are brought together. These days, this is largely electronic and done with computers.

Investors cannot, however, participate directly in the exchange and can participate only through members of the exchange, popularly referred to as brokers.

How does the exchange works?

An exchange has pre-specified timings. During that time, all the members of the exchange link up to a central computer through their remote terminals. The members then place bids to buy equities, or make offers to sell equities. Other members who can match the bid or the offer confirm their acceptance, and the transaction is completed.

Members of stock exchanges place bids and offers on behalf of their clients, who are the investors.

Why are brokers required?

Investing in equities is quite risky. The broker is a professional, who knows the risk and can advise the investor accordingly. Secondly, an exchange will become an unwieldy mechanism if the entire universe of investors were to go and start making bids and offers. Reducing the number of individuals is a way of keeping control.

Third, equity trading can also be abused. To prevent these abuses, exchanges as well as the Government has a number of regulations in place. Restricting activity to the members of the exchange will enable the regulations to be followed, preventing abuse of the system.

How are shares traded?

Like in any other buying or selling, once the broker confirms the trade, if you are buying the share, you pay the broker the value of the shares and take delivery of the shares. If you are selling the shares, you hand over the equities to the broker and the broker will pay you for your shares.

When settlement does happen?

Each exchange has its own settlement period within which the entire process of delivery and purchase should be completed. Typically, the process is completed in a week to ten days time.

Which shares to Buy and sell?

An index is an indicator of how the stock market is doing on the whole. An index comprises a basket of stocks. The collective value of these stocks on a given date is taken and given a score of 100. From that day onwards, the value of these stocks is tracked and its score relative to 100 is computed.

The stocks selected are based upon a number of parameters that the creators of the index decide. Equally, the valuation is also done using complex mathematical principles. Periodically, the list of shares used for computing the index also undergoes a change. These changes are decided by the index creators based on the parameters they have set for the stocks for inclusion.

An index shows whether the stock market, on the whole, is appreciating in value or declining in value.

The movement of the index itself is no indicator for individual shares. You may find that a particular share may be increasing in its price even when the index is down and vice versa. The index is only an indicator of the general trend

The common indexes in Indian stock markets are the SENSEX, the index for stocks listed on the Bombay Stock Exchange and Nifty, the index for stocks listed on the National Stock Exchange.

What is an index?

Buying and selling shares involve a fair amount of research. These involve assessing how well the company is managed, how the company is performing compared to others in the industry, how the industry itself is doing, the financial performance of the company, the interest of the lay public in the company, etc.

It is best that you consult an expert in such analysis, before you decided to buy or sell a particular share. Such investment advice is also provided by your share brokers.

How Long to hold on the shares?

Historically, it has been demonstrated that investments in equities offer the best long term returns and hence the highest opportunity to enhance your capital. Thus, the longer you stay invested in the equity markets, the better will be your returns.

However, this holds true for the equity market as a whole, and not necessarily for shares of individual companies. The value of shares of specific companies are subject to various pulls and pressures which could cause a share that is highly valued one day, to drop its value overnight, as a result of unpredictable factors ranging from Government policy to acts of omission and commission by the management of the company.

It is advisable that you periodically, at least once in a year, evaluate your holdings and decide whether to continue with them or change them.

However, one very important thumb rule which the professionals offer is, never to get emotional about a share. In other words, do not hold on to the share of a company whose value is declining, just because its history has been very good!

Are investment in shares safe?

Any investment is prone to a certain degree of risk. Shares, as a class of investment have the highest element of risk. The only services riskier than shares are lotteries and other games of chance.

These risks arise as a result of factors described earlier.

However, today there is strong legislation, procedures and a regulatory authority - Securities Exchange Board of India (SEBI), which to a large extent prevents risk as a result of misleading the investing public.

NOTE:- There is no risk involved if you follow our calls and then invest as our tips are very useful.


(U.S. National Historic Landmark)
The American Stock Exchange
Location:	86 Trinity Pl, Lower Manhattan, New York City, New York^[1]
Coordinates:	40°42′30″N 74°00′48″W / 40.70833, -74.01333Coordinates: 40°42′30″N 74°00′48″W / 40.70833, -74.01333
Built/Founded:	1921, expanded in 1931 ^[2]
Architectural style(s):	Art Deco^[2]
Designated as NHL:	June 2, 1978 ^[2]
Added to NRHP:	June 2, 1978 ^[3]
NRHP Reference#:	78001867
Governing body:	American Stock Exchange

The American Stock Exchange (AMEX) is an American stock exchange situated in New York. AMEX is a mutual organization, owned by its members. Until 1929 it was known as the New York Curb Exchange.^[4] On 2008-01-17, NYSE Euronext announced it would acquire the American Stock Exchange for $260 million in stock.^[5]

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History

The Exchange traces its roots back to colonial times when stock brokers created outdoor markets in New York City to trade new government issued securities. The AMEX started out in 1842 as such a market at the curbstone on Broad Street near Exchange Place. The curb brokers gathered around the lamp posts and mail boxes, resisting wind and weather, putting up lists of stocks for sale. As trading activity increased so did the volume of the transactions; the shouting reached such a high level that stock hand signals had to be introduced so that the brokers could continue trading over the din. In 1921 the market was moved indoors into the building at 86 Trinity Place, Manhattan, where it still resides. The hand signals remained in place for decades even after the move, as a means of covenient communication. The building was declared a National Historic Landmark in 1978.^[2]^[6]

Market

AMEX's core business has shifted over the years from stocks to options and Exchange-traded funds, although it continues to trade small to mid-size stocks. An effort in the mid-1990s to initiate an Emerging Company Marketplace ended in failure, as the reduced listing standards (beyond the existing lenient AMEX standards) caused penny stock promoters to move their scams to a national exchange. In the mid 1990s the exchange was dogged by allegations of trading improprieties, which were highlighted by BusinessWeek in 1999.^[7]. In 1998, the American Stock Exchange merged with the National Association of Securities Dealers (operators of NASDAQ) to create "The Nasdaq-Amex Market Group" where AMEX is an independent entity of the NASD parent company. After tension between the NASD and AMEX members, the latter group bought out the NASD and acquired control of the AMEX in 2004.

Out of the three major American stock exchanges, the AMEX is known to have the most liberal policies concerning company listing, as most of its companies are generally smaller compared to the NYSE and NASDAQ. The Amex also specialises in the trading of ETFs, and hybrid/structured securities. The majority of US listed ETF's are traded at the AMEX including the SPDR and most Powershares.

In 2005, the AMEX attempted to popularize an American implementation of the Canadian income trust model. Listed Equity Income Hybrid Securities, (more commonly known as Income Deposit Securities) listed on the AMEX are B & G Foods Holding Corp. (BGF), Centerplate, Inc. (CVP), Coinmach Service Corp. (DRY), and Otelco Inc. (OTT). Recently Coinmach Service Corp, has been attempting to restructure itself away from being an income trust.

The large companies listed on the AMEX include British American Tobacco (ADR) (BTI), Imperial Oil Limited (IMO), Seaboard Corporation (SEB) and Bio-Rad Laboratories (BIO). Seaboard is notable for not having split its shares since becoming publicly listed; shares of SEB trade for around $1,590 (2008-03-26).

The AMEX also produces stock market indices; perhaps the most notable of these is an index of stocks of internet companies now known as the Inter@ctive Week Internet Index. Recently, the AMEX has also developed a unique set of indices known as Intellidexes, which attempt to gain alpha by creating indices weighted on fundamental factors. The AMEX Composite, a value-weighted index of all stocks listed on the exchange, established a record monthly close of 2,069.16 points on November 30, 2006.

Located near the World Trade Center, the operation of the AMEX was temporarily affected by the September 11, 2001 attacks. The Exchange's operations were temporarily shifted to the Philadelphia Stock Exchange.

Sunday, July 6, 2008

STOCK- EXCHANGE

Major stock exchanges

Twenty Major Stock Exchanges In The World: Market Capitalization & Year-to-date Turnover at the end of October 2007

Region	Stock Exchange	Market Value (trillions of US dollars)	Total Share Turnover (trillions of US dollars)
Africa	Johannesburg Securities Exchange	$0.940	$0.349
Americas	NASDAQ	$4.39	$12.4
Americas	São Paulo Stock Exchange	$1.40	$0.476
Americas	Toronto Stock Exchange	$2.29	$1.36
Americas/Europe	NYSE Euronext	$20.7	$28.7
Asia-Pacific	Australian Securities Exchange	$1.45³	$1.00³
South Asia	Bombay Stock Exchange	$1.61	$0.263
Asia-Pacific	Hong Kong Stock Exchange	$2.97	$1.70
Asia-Pacific	Korea Exchange	$1.26	$1.66
South Asia	National Stock Exchange of India	$1.46	$0.564
Asia-Pacific	Shanghai Stock Exchange	$3.02	$3.56
Asia-Pacific	Shenzhen Stock Exchange	$0.741	$1.86
Asia-Pacific	Tokyo Stock Exchange	$4.63	$5.45
Europe	Frankfurt Stock Exchange (Deutsche Börse)	$2.12	$3.64
Europe	London Stock Exchange	$4.21	$9.14
Europe	Madrid Stock Exchange (Bolsas y Mercados Españoles)	$1.83	$2.49
Europe	Milan Stock Exchange (Borsa Italiana)	$1.13	$1.98
Europe	Moscow Interbank Currency Exchange (MICEX)	$0.965²	$0.488²
Europe	Nordic Stock Exchange Group OMX¹	$1.38	$1.60
Europe	Swiss Exchange	$1.33	$1.58

Note 1: includes the Copenhagen, Helsinki, Iceland, Stockholm, Tallinn, Riga and Vilnius Stock Exchanges
Note 2: latest data available is at the end of June 2007
Note 3: latest data available is at the end of September 2007

Sources: World Federation of Exchanges - Statistics/Monthly
Remarks: There are 2 pending major mergers: NASDAQ with OMX; and London Stock Exchange with Milan Stock Exchange

The main stock exchanges

$$$$ MONEY MAKERS$$$$

Blog Archive

About Me

Thursday, July 31, 2008

Opening a trading account

Selecting shares

Selling shares

Tracking your investments

What is an IPO?

What makes share prices move?

What are indexes?

Checking up on your shares

What is a stockbroker?

Where do I find a broker?

What to ask a discount broker

Building a share portfolio

When to buy. When to sell.

Dollar cost averaging

Dummy portfolios (watchlists)

Share clubs

Borrowing to invest

Building a share portfolio

When to buy. When to sell.

Dollar cost averaging

Dummy portfolios (watchlists)

Share clubs

Borrowing to invest

Dividends and franking credits

International shares

Speculative investments

Traders and investors

Capital gains tax

Friday, July 25, 2008

Core Banking

Core Banking Solutions

Around the world

Tuesday, July 15, 2008

Contents

History

Market

Sunday, July 6, 2008

STOCK- EXCHANGE

Major stock exchanges