Wednesday, December 19, 2012

2013 FRM files Free Download

Download the following 2013 FRM files for free here

2013 FRM Study guide
2013 FRM prep handbook
2013 FRM Study guide changes
2013 FRM aim statements
2013 FRM candidate guide

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Saturday, December 15, 2012

8 Tips to Financial Success

Managing finances has become more important than ever. Costs of items such as food, a college education and travel have been increasing rapidly. Saving for retirement has become more difficult for many. If you understand and follow some basic tips about buying, saving, investing, spending wisely and managing debt, you will more easily achieve financial success

Saving Habit
  • Saving for unexpected emergencies and retirement is one important key for financial success. Practice saving money. Pay yourself first even if it is a small amount. Set up your paycheck deductions or your bank account to contribute a set percent of your income. If you have kids, teach them the saving habit and how to manage their finances.

Impulse Buying

  • Everyone is competing for a share of your wallet. Persuasive advertising sometimes tempts you to buy items you may not really need. Supermarket displays entice you to buy food you didn’t intend to buy. When you see an item you didn’t plan to buy, don’t buy it immediately. Give yourself a day to think it over. After your initial impulse, without immediate buying, you may decide you don’t need the item. When grocery shopping, prepare a list first of what you really need and stick to the list. Don’t shop at a grocery store when you are hungry.
    Evaluate and Budget
  • Controlling and understanding where you spend your money is an important task because if you aren’t in command of your finances someone else will be and the outcome may not be what you want. Analyze your expenses for a month or two to understand where your money is going. Question each category of expense and determine if the expenses are really needed. Eliminate expenditures that aren’t needed. Decide if the money you are spending can be spent more wisely. For example, look at your phone bill. If you aren’t using Internet-based phone services, switch from traditional phone services to Internet-based services. Savings can be substantial.


  • One primary way to secure financial security is by smart investing for the coming years. If you are young and don’t need to save for retirement, you can invest part of your money in more risky but higher-return investments.

Debt Control

  • Your financial future can become a failure if you aren’t carefully managing any debt you must incur. If you use a credit card, use it wisely and pay off your bill totally each month. If you don't, you may have to pay substantial late fees. When you sign up for a card, examine the terms closely. For example, if the card promotes a low interest rate, find out if the rate is for a limited period only and what the rate will be after that. Shop carefully for credit cards and get the best deal you can.

Bill Management

  • Paying bills on time is a good financial habit. Pay bills immediately. For recurring expenses that are the same amount each month, set up automatic deductions from your bank account. Past-due bills can hurt your credit rating.

Credit Reporting

  • Your credit score affects the interest rate you will pay for necessary expenses such as a mortgage. Check your credit score each year. When looking at your credit report, check it for accuracy and that it doesn’t include past-due amounts from someone else. You can get a free credit report from a Federal Trade Commission-approved site,


  • Read about personal finance in magazines and recommended books. Attend a seminar about managing money. Often your local library provides such a program free.
    Carolyn Gray started writing in 2009. Her work history includes line and staff management in the Finance and Controller's Department of New York Telephone and NYNEX. Gray has a Bachelor of Arts in government from Clark University and a Master of Business Administration from New York University's Stern School of Business in Management and Organization Behavior

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Friday, December 7, 2012

Six Steps to Retire Rich

1. Time is money; start today
The most important key to retiring rich is to start saving as early as possible. Many workers, strapped for cash or eying a major purchase, tell themselves they can make up for lost time by making higher contributions in future years. Unfortunately, money doesn’t work that way. Thanks to the power of compound interest, cash invested today has a disproportional impact on your wealth level at retirement.

To put the matter into perspective, consider two possible scenarios; both assume a retirement age of 65 and an annual compounded rate of return of 10%.
John is 40 years old and invests $20,000 a year for retirement. Charlotte is 21 years old and invests $5,000 a year for retirement. By the time each of these individuals retire, they will have invested $400,000 and $220,000 respectively. Yet, because of the power of compound interest, John would retire with half the money as Charlotte despite investing twice as much! (John would retire with $1.97 million, Charlotte with $3.26 million).
The moral of the story? Stop robbing your future to pay for today.

2. Max out the annual contribution limit on your IRA
When it comes to IRA contribution limits, Uncle Sam’s motto seems to be “use it or lose it”. Workers that haven’t made the maximum permissible contribution to their Traditional or Roth IRA by the cut-off date are flat out of luck unless they are in their mid-fifties and qualify for catch-up contributions.

3. Take full advantage of employer matching funds
Many companies will match up to fifty-percent of the contributions employees make to their 401k and other retirement accounts. If you are fortunate enough to work for such a business (and millions of Americans are), take advantage to the fullest! If you don’t, you are literally walking away from free money.

4. Don’t cash out of your retirement when you change jobs.
If you are anything like the average American worker, the odds are fairly substantial you are going to change jobs at some point during your career. When this occurs, the most foolish thing you could possibly do is to cash out of your retirement plan. Instead, roll over the proceeds into an IRA or your new employer’s 401k plan. In addition to avoiding the significant tax penalties, you will be able to keep your money working for you tax-free. Given enough time (you already saw the power a few decades can have on seemingly small amounts of money), this literally could mean the difference between vacationing in Tahiti and having to take a job at the Golden Arches to supplement your income

5. Avoid IRA withdrawal fees
There are numerous ways to withdrawal money from your retirement account in the event of an emergency. Before you even think about doing so, make absolutely certain that you have done everything required to qualify - otherwise, you will get a very unpleasant and expensive wake up call when you are hit with possibly thousands of dollars in fees and penalties.

6. Expand the Pie
Don't just cut expenses - find a way to make more money! By taking on side work or turning a hobby into a business enterprise, you can create additional streams of income to help fund your retirement. In many cases, this is an excellent alternative to cutting costs because it allows you to maintain your current standard of living while providing for your future.

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Wednesday, December 5, 2012

Ecommerce Stocks vs. Mutual Funds

Although many sectors have been experiencing financial turbulence, ecommerce businesses have been doing quite well in the past few years. According to Forrester Research, the ecommerce industry is expected to continue growing at a rate of 60% by 2015, to total $279 billion in value.

However, investing in ecommerce can be somewhat confusing for individual investors. Ecommerce stocks don't constitute a sector of their own, but are instead spread across other industries such as retail, travel, and entertainment.  This leaves investors with a variety of options. In addition to starting up your own ecommerce business using free POS software, it's possible to pick and choose individual stocks that look promising or invest in managed mutual funds.
Ecommerce Stocks
By mixing stocks from a wide range of different industries, you can protect your portfolio from sudden dips in specific sectors. Choosing to invest in ecommerce businesses with an eye towards the future can be a good long-term investment. Large retail or entertainment businesses such as and Netflix are some of the most popular choices for ecommerce investors, while online travel businesses like and Expedia have also done quite well.
The key to choosing the best ecommerce stocks is to research how the business has embraced changing trends in online retailing. Some of the top trends to take note of include whether or not the business has made the move into mobile marketing and sales, and the user-friendliness of their website. Businesses that combine professional platforms like a Shopify online payment gateway with high-quality products will generate more sales.  You'll also want to research their growth patterns and forecasts for the future, as well as take a wider look at the industry that they are part of. As with any stock purchase, research is vital when investing in ecommerce stocks.
Mutual Funds
Another option for investors is to take a look at ecommerce mutual funds. These are professionally managed by experts in the finance industry, who have a strong working knowledge of investment data and trends. Although investing in individual stocks has the benefit of allowing you to back your favourite companies and exercise a high level of control over your portfolio, it also carries a certain degree of risk.
One of the main benefits of choosing to invest in mutual funds is that they involve less risk. Not only is the fund professionally managed, but because a variety of ecommerce stocks are included in the fund, the overall value won't be dragged down too far should one of the companies start to fall. Because your money is combined with the money of other mutual fund investors, the manager has greater buying power which can yield discounts and access to more exclusive ecommerce stocks. This will help you earn potentially larger rewards.
There are certainly pros and cons to investing in both ecommerce stocks and mutual funds. To succeed with either type of investment, you'll need to follow ecommerce trends closely and spend some time on research.
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Monday, December 3, 2012

Buying a House With No Money Down

Buying A House With No Money DownBuying a house with no money down is possible for many people, and there are a number of options that can help you manage this. Real estate investing has become very popular, and many individuals purchase homes each year. With a zero down payment the rate paid will be higher, but if you have excellent credit then this is not a problem as far as approval is concerned.

A land contract may also be arranged between the buyer and seller, and this method of buying a house with no money down may be possible regardless of your credit rating or credit history.

There are many methods and steps to buying a house, and some lenders advertise loans with no down payment required. If a seller is motivated and there is an existing mortgage then it may be possible to assume the mortgage, without the need for additional financing. This method of buying a house with no money down may require lender approval, and this may not always be an option for some home seekers. It is possible to take out a loan against your retirement account, and using 401k to buy a house outright is common. This will allow you to pay the entire purchase price, instead of making a down payment and then having a monthly mortgage payment.
If you have poor credit then the 30 year fixed mortgage rates my be outrageous, if you even qualify for this loan type. Your only option may be buying a house with no money down using alternative methods instead. The best thing to do is to evaluate all of the options that are available, and then choose which of them are the best in your specific circumstances and situation. If the best home mortgage lenders will not offer a loan with no down payment, do not despair, there are other ways to achieve home ownership.

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Friday, November 30, 2012

Stock Option Trading Strategies

Stock options are derivatives whose values are based on the market value of a stock. When an option is sold, a contract exists between the seller, also known as the writer, and the buyer. This contract gives the buyer the choice of either buying from or selling to the writer the stock in question. Following is some more information about stock options and option trading strategies.
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Tuesday, November 27, 2012

Surviving and Thriving in the New American Retirement System

For decades, there was a social contract in America between workers and businesses. In exchange for a lifetime of service, companies provided their long-term associates with pension plans and health care benefits, creating a safety net that when combined with social security helped ensure a comfortable retirement. Today, however, the middle class face nothing short of a crisis – social security is failing, the traditional pension has gone by the wayside, and the rising cost of health care have made it almost impossible for most businesses to afford decent coverage while withstanding calls from investors to maintain their profitability.
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Good Investments Vs Bad Investments

Financial education will allow you to decide which ones are good and bad investments. You need to identify the good, and the bad investment, since it is going to be your very own source of passive income. Remember that anything that happens to your investments may also affect your life and even your very own future.

If you have committed an error on investing in a bad investment, you would have learnt that you may need to work a lot harder. These are the consequences of a bad decision-making resulting bad investments. In contrast to this scenario, you can also look at the requirement of good investments.
Good investments, on the other hand, will yield positive results for you and your family. If you will come to think of it, good investments may even turn out to reduce your working years. You need to understand on how to distinguish the good from the bad.
There are different types of investments. All of these things may turn out to be a good investment or a bad investment depending on the timing. A background in financial education will tell you that it is all about timing, and research in order to come up with a good decision.
Stocks, commodities, and currencies are the common sources of passive income otherwise known as investments. If you are going to have an investment, make sure that you have done your research, in order to time all of them correctly, and of course, it is also essential that you take some amounts of risk.
If you are going to have stocks, commodities or even currencies as your investment, you should first consider if you are going to have it for a very long time or you are simply going to have it for the next 3 years. This decision is significant because primarily, if you want to have a short-term goal with investments, it only makes a good investment if it rises up in value within a short time.
On the other hand, if you are going to have the shares for the next 20-30 years, you need to think of things in the long run. Is this investment still going to be beneficial 20 years down the road? One of the things you need to remember if you are not planning to cash in anytime soon is to make sure that you purchase during recession.
It makes sense when buying stocks, commodities and currencies during the recession since everyone knows that its value would decrease. This means that you have to spend less for each share that you are going to have. Since the economy gets to recover for every plunge, the stocks, currencies and even commodities by then would normalize 20 years later. This is an example of speculation. Though not all speculations are successful, you should try this on some of your investments.
A bad investment, on the other hand, is when you do not practice speculation at all but rather just listen with the press releases made on news networks. Whether investing on stocks, commodities or currencies, if you are not doing your own research, you will be blindsided by a great number of things.
Among the many factors that may affect your investment is the fictitious press releases made by news networks. There are times when brokerage firms announce a sudden drop on stocks' value just for you to sell your share. Once you sold them your share, you would be surprised when the next thing that would happen is a sudden increase in value.
This only means that you need to learn, and have a background on financial education, in order to determine which ones are turning out to be good and bad investments. From this premise, you can even increase your chance of financial success.

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Monday, November 26, 2012

Inventory Management Software

The introduction of microcomputers revolutionized business processes related to inventory management. For the first time, automated tools that assist warehouse and inventory managers with asset tracking, barcoding, order management, and service management were available in nearly every work environment.

Businesses that were quick to invest in inventory management software enjoyed enormous competitive advantage compared to those that were hesitant to modernize. Today, investment in reliable, innovative inventory management software is key to the success of businesses everywhere.

Who needs inventory management?
For businesses that deal with tangible products, inventory management is a key element of that business’s success. Keeping tabs on where products are being stored, which vendors they come from, and how long they have been sitting on warehouse shelves are all key elements to successful asset management for businesses, no matter how small or large they might be.

Regardless of whether or not the products that one’s business sells are perishable, keeping a good sense of where they’re resting, how long they’ve been there, and how quickly they should be out the door is a crucial factor in maximizing productivity and keeping inventory upkeep, storage, and associated costs low. 

If your business has an inventory, you should be concerned with the performance, efficacy, efficiency, and reliability of the inventory management software your business uses. If your business doesn’t use software to manage inventory – then you should be seriously concerned about losses in revenue and productivity that are probably affecting your business. Simply stated: almost every business needs some kind of inventory management software like ERP software, no matter how big or small the firm might happen to be.

What does inventory management software do?
The specifics associated with a particular brand of inventory management software, or the implementation of a certain software package, can depend largely upon the kind of assets that are being managed. However, there are a few general rules of thumb regarding inventory management software capabilities. First, the software is key to helping businesses ensure that they are able to stick to an ideal balance between having an overstock of inventory, and having too little inventory to fulfill demands.

Second, businesses with multiple locations and / or particularly large warehousing facilities depend upon a unified inventory management system in order to allow staff and management at remote locations to determine where supplies or assets they require are located, and to manage the transfer for assets between one point to the next. This makes acquisition of necessary items within the firm more streamlined, and also helps prohibit the loss of inventory as a result of graft.

In addition, most warehouse and receiving dock managers find that inventory management software that can handle rapid entry of new assets being received is a key element to maintaining efficiency. Further, in modern warehouse environments, inventory management software and systems play an essential role in managing the rate at which items are picked, packed, and shipped.
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Thursday, November 22, 2012

Return On Equity Vs. Return On Capital

Return on Equity indicates how well a company is doing with the money it has now, whereas Return on Capital indicates how well it will do with further Capital.

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Monday, November 19, 2012

Saver Or Investor - Which Is Best?

What's the difference between a Saver and an Investor and who is the most successful?
Taking a closer look at this question there is no doubt that there is a close relationship between being a successful investor and a good saver. While many successful investors may 'flaunt' their wealth, the most successful tend to be very astute and conscious of where every dollar is being spent and hence showing all the traits of a successful saver.

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Saturday, November 17, 2012

7 Ways Not To Go Into Debt This Christmas

Things are rough this year for many families across the country, but that doesn’t mean that you should add to your debt to make up for it this holiday season. It is okay to tell your children that Santa is broke this year. They probably already know that something is up either thanks to the news on TV or their incredible sixth sense about how grownups are feeling. One of the worst things that you can do though is trying to keep up with the status quo. Here are seven great ways to avoid adding to your debt this Christmas.

1. Use Your Credit Card Reward Points – My wife and I love to earn reward points with our credit card. We use the points at the end of each year as a way to get free gift cards that we ultimately give to our friends and family members each Christmas. Throughout the year my wife and I use our PerkStreet Financial debt card and Simmons FirstVisa Platinum Rewards credit card to earn reward points. Those reward points that we earned throughout the year help supplement our gift giving and helps to keep us from going into debt this Christmas and every holiday season.
2. Earn Free Gift Cards – One thing that I love during the holidays are the deals that retailers and especially restaurants give when you purchase gift cards to give as gifts. Many national restaurant chains offer deals such as giving away a free $10 gift card when you purchase $25 worth of gift cards. These can be great ways to get gift cards to give to your loved ones during the holidays doing something that you normally do anyway (go out to eat). You can also use these gift cards to save you money while eating out at restaurants as well. Whether you give these extra gift cards to friends or save them for yourself, they can be a great way to save money and avoid debt this Christmas.
3. Comparison Shop Online & With Smart Phone – One thing that a friend said to me recently really struck a chord. He said that he never pays retail prices online for anything. He taught me that he always looks for deals and checks comparison sites before making a purchase. He also checks websites like to find some of the best online coupons before buying any items or even services online. This was a great tip that has ultimately saved me a lot of money over the past year or so. Now you can also compare prices right on your smart phone as well.

4. Buy And Sell Unwanted Gift Cards – There are several websites such as that let you buy and sell unwanted gift cards. Most of the time, you can purchase gift cards for a discounted price. Recently on, you could buy a $25 gift card for $20 or less at certain retailers. There are several other websites that let you buy, sell, and trade unwanted gift cards as well such as and Some current deals on gift cards on Plastic Jungle let you buy gift cards at the following discounts for these retailers: 15% off at JC Penny, 20% off at Boston Market, 10% at Pottery Barn, and many other national brands.
5. Make Hard Cuts To Your List – Do your aunts and cousins really need a Christmas gift from you this year? Would they understand if you told them that you are only giving gifts to your immediate family this year in order to save money and avoid adding to your debt this Christmas season? They will most likely understand your plight because we have all been struggling these past few years.
6. Layaway Is Making A Comeback – Wal-Mart hit the mark this holiday season by bringing back layaway, and they are leading the charge among other retailers bringing back the once popular holiday staple. Using layaway is a great way to force you to space out the payments for your gifts this holiday season. Instead of going further into debt this Christmas, using layaway can help you purchase your gifts this year with payments that you can afford.
7. Set Spending Limits This Year – The hardest word to say in the English language is no. No! But, it is a critical one in my family when it comes to staying out of debt this Christmas. My wife and I set a spending limit for the holidays and all of the gifts we give. While budgeting is not a fun topic for anyone, it is incredibly important. You have to have a spending plan and set a limit to keep yourself and your family out of debt this Christmas.
Did you already miss the boat this year? Now is the time to start thinking about next year. Do you spend the average $500 during the holidays on gifts? If you saved $40 per month or $20 per paycheck, you could have a debt free Christmas next year. It is time to bring back the Christmas Club Savings Accounts, or you can just create your own.

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Thursday, November 15, 2012

Introduction to HEDGE FUNDS

This Video lesson from KhanAcademy talks about introduction to HEDGE FUNDS

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Wednesday, November 14, 2012

FRM 2013 Handbook + Test Bank: FRM Part I/Part II

Financial Risk Manager Handbook + Test Bank: FRM Part I / Part II (Wiley Finance) by Philippe Jorion and GARP (Global Association of Risk Professionals)
English | 2010-12-28 | ISBN: 0470904011 | 812 pages | PDF | 141 MB

Filled with in-depth insights and practical advice, the Financial Risk Manager Handbook is the core text for risk management training programs worldwide. Presented in a clear and consistent fashion, this completely updated Sixth Edition, mirrors recent updates to the new two-level Financial Risk Manager (FRM) exam, and is fully supported by GARP as the trusted way to prepare for the rigorous and renowned FRM certification. This valuable new edition includes an exclusive collection of interactive multiple-choice questions from recent FRM exams.

Financial Risk Manager Handbook, Sixth Edition supports candidates studying for the Global Association of Risk Professional's (GARP) annual FRM exam and prepares you to assess and control risk in today's rapidly changing financial world. Authored by renowned risk management expert Philippe Jorion, with the full support of GARP, this definitive guide summarizes the core body of knowledge for financial risk managers.

- Offers valuable insights on managing market, credit, operational, and liquidity risk;
- Examines the importance of structured products, futures, options, and other derivative instruments;
- Contains new material on extreme value theory, techniques in operational risk management, and corporate risk management.

Financial Risk Manager Handbook is the most comprehensive guide on this subject, and will help you stay current on best practices in this evolving field. The FRM Handbook is the official reference book for GARP's FRM certification program

Financial Risk Manager Handbook + Test Bank: FRM Part I/Part II


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Friday, November 9, 2012

Tips for Investing in Residential Property

The real estate market has historically been one of the safest places to put your money, despite recent fluctuations. When looked at over a long-term perspective, residential property can yield profits on two different levels. Home owners can rent their property out as a side source of income, before selling the property down the road at a profit. However, there are several tips to keep in mind before investing.

Take your Time
Many first-time investors get carried away in their eagerness to get started. It's important to take your time and research all of your options carefully before you invest in real estate. Talk to others who have successfully invested in residential property, read forums, and learn more about different neighbourhoods. It's a buyer's market out there, which means you have the time to find the right investment rather than grasping at the first suitable property.

Search for Undervalued Property
The fundamental idea behind any investment is to buy low and sell high. One of the best ways to ensure that you'll make a tidy profit from your real estate investment is by seeking out undervalued property. If you suspect a property is listed for less than what it's worth, compare it to similar properties in the same neighbourhood to see how the prices match up. Homes that have been on the market for a longer time period may be reduced in price, which can lead you to a bargain. Don’t be afraid to negotiate a lower price with the seller whenever possible.

Prepare for Property Management Costs
In addition to the cost of the property itself, you can expect to pay some fees. Stamp duty and legal fees will be costs incurred up front. Further fees to consider include the price of interest on what you have borrowed, homeowner's insurance, and the cost of repairs. As a landlord, you will be responsible for fixing faulty appliances and repairing damages in the home. There may be additional marketing costs associated with finding tenants, such as putting your listing up on a property finder website or placing ads in your local newspaper. 

Know Your Rights as a Landlord
If you plan on renting your property to tenants, it pays to familiarize yourself with landlord and tenant rights. These can vary depending on the state and city you live in. Use a legal professional to draft your lease, which should clearly state all information pertaining to late fees, rent charges, and deposits. This will protect you should there be any legal dispute with a tenant.

Boost Property Value with Renovations
In addition to purchasing buy-to-rent property, you can also look for houses or flats that can be renovated. By putting in new kitchen features or upgrading the flooring, these properties can then be sold at a higher price. Choose your renovations carefully to add value. Modernizing kitchen and bathroom features are the most lucrative types of repairs.

It's important to approach property investment with time, research, and a cool head for the best results. By keeping these tips in mind, you'll be sure to find a bargain with maximum investment potential. 
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Saturday, October 20, 2012

Top 10 No Fee IRA Accounts

1. OptionsXpress – OptionsXpress offers a no fee IRA, and you can choose from a traditional, Roth, or Rollover account type. There is no fee to set up an IRA account, and also no annual fee either.

2. Scottrade- Scottrade offers one of the best IRA accounts if you are looking for an IRA with no fees or high account expenses. No set up or annual fee keeps the costs of this IRA down.

3. OptionsHouse- Whether a traditional, Roth, or rollover IRA is desired OptionsHouse offers an account with zero fees, both for the account setup and the annual fee that some other accounts may charge.

4. Merrill Edge- Merrill Edge offers no fee IRA accounts with numerous features, and best of all there are no expensive fees to worry about.

5. Fidelity- Fidelity offers a no fee Roth IRA, as well as traditional, rollover, SEP. SIMPLE, and inherited plans that do not have brokerage account fees either.

6. Vanguard- Vanguard is a trusted name for financial and retirement accounts, and they offer IRA choices which are fee free. There are several IRA account types to choose from, and a reputation for sound financial advice to rely on.

7. Etrade Roth IRA- Etrade offers a no fee IRA with many features and benefits. There are no annual or inactivity fees charged, and the minimum amount needed to set up an account is one thousand dollars.

8. ShareBuilder- Sharebuilder offers IRAs that allow you to manage your retirement cash flow without paying a lot of fees to do this. No annual or inactivity fees make this one of the top ten.

9. TDAmeritrade- A no fee IRA from TDAmeritrade is one that is considered a sound choice. No matter what type of IRA you are looking for this choice can help you achieve these goals for less.

10. Ing- Ing is another trusted name in IRA plans. While all accounts must follow the IRA rollover rules, the plans from Ing offer a great deal of flexibility in other areas.

Source :- Investment Advisor Tips
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Friday, October 19, 2012

Analyze Investments Quickly With Ratios

Ratios can be an invaluable tool for making an investment decision. Even so, many new investors would rather leave their decisions to fate than try to deal with the intimidation of financial ratios. The truth is that ratios aren't that intimidating, even if you don't have a degree in business or finance. Using ratios to make informed decisions about an investment makes a lot of sense, once you know how use them. 

There are a large variety of ratios out there, but financial ratios can be broken up into four major categories: profitability ratiosliquidity ratios, solvency ratios and valuation ratios. In this article, we'll take a look at each of the four differing categories and provide an example of a simple-to-use ratio from each of them. 

Profitability Ratios
Profitability is a key piece of information that should be analyzed when you're considering investing in a company. This is because high revenues alone don't necessarily translate into dividends for investors (or increased stock prices, for that matter) unless a company is able to clear all of its expenses and costs. 

Profitability ratios are used to give us an idea of how likely it is that a company will turn a profit, as well as how that profit relates to other important information about the company.

One example of an important profitability ratio is the profit margin

The profit margin is calculated as follows:

In general, the higher a company's profit margin the better but, as with most ratios, it is not enough to look at it in isolation. It is important to compare it to the company's past levels, to the market average and to its competitors.

There are a couple of red flags you should watch out for with the profit margin, especially where the company is seeing decreasing profit margins year over year. This can suggest changing market conditions or where the company is seeing increasing competition or rising costs. Also, if a company's profit margin is out of line compared to the rest of its industry, it is worth the extra effort to find out why.

If a company has a really low profit margin, it could mean the company will land in a bad position if market conditions change. A really high profit margin relative to an industry could mean that the company has arrangements or advantages that might not last. 

Other profitability ratios include operating margin and gross margin

Liquidity Ratios
Liquidity is a measure of how quickly a company's assets can be converted to cash. Liquidity ratios can give investors an idea of how capable a company will be at raising cash to purchase additional assets or to repay creditors quickly, either in an emergency situation, or in the course of normal business. 

The receivables turnover ratio is a liquidity ratio that measures a company's ability to collect on debts and accounts owed to them. 

Receivables turnover is calculated as follows:

This ratio represents the number of times in the period that the payments owed to a company will be collected. If you divide 365 by the receivables turnover ratio, you will find the average number of days that it takes a company to collect on receivables, or the number of days between the time it takes a company to make a credit sale and the time that it receives a cash payment.. 

In the case of this ratio, a higher number means that the company collects more frequently (good liquidity), whereas a low ratio may mean that clients are not paying up in a timely manner. Like most ratios, the true value of the information isn't really there unless you make a comparison across the industry.

Other liquidity ratios include working capital turnoverinventory turnover and current ratio

Solvency Ratios
Solvency ratios are used by investors to get a picture of how well a company can deal with its long-term financial obligations and develop future assets. As you might expect, a company weighed down with debt is probably a less favorable investment than one with a minimal amount of debt on its books. 

The total debt to total assets ratio is used to determine how many of a company's assets were paid for with debt.

Total debt to total assets is calculated as follows:

When using this ratio to make an analysis of a company, it can be really helpful to look at the company's as well as making industry comparisons. It's not unrealistic for a younger company to have a debt to total assets ratio closer to "1" (more assets were financed by debt), as it hasn't yet had a chance to eliminate its debt.

As a general rule, a number close to zero is generally better, because it means that more assets were paid for without debt. Remember, lenders have first claim on a company's assets if they're forced to liquidate. But again, it will depend on the industry, as those with highly capital intensive operations will have a higher relative debt level.

Other solvency ratios include times interest earned and free cash flow (FCF). 

Valuation Ratios
Valuation ratios are used to analyze the attractiveness of an investment in a company. The idea is that by using these ratios investors can gain an understanding of how cheap or expensive a company company's current stock price is compared to several different measures. In general, the less expensive a company is, the more attractive an investment in that company becomes. 

The price to earnings (P/E) ratio is the most well-known valuation ratio that compares the company's stock price to the amount of earnings it generates on a per-share basis. An easy way to think about the P/E ratio is that it's a pretty good indicator of investors' expectations of a company's future income. That is, it's the premium that the market is willing to pay for a particular security's earnings.

The P/E ratio is calculated as follows: 

The ratio can be compared to past levels for the company along with industry competitors and the overall market. It transforms any company's earnings into an easily comparable measure. Basically, it will tell you how much an investor are willing to pay for $1 of earnings in that company - the higher the ration, the more they are willing to spend. But don't think that a higher P/E ratio for one company necessarily suggests that its stock is overpriced. Different industries have substantially different P/E ratios, so the P/E really shouldn't be used for inter-industry comparisons. 

Other valuation ratios include price-to-bookprice-to-sales and price-to-cash flow.

What You Need to Know
Ratios are comparison points for companies. They can be used to evaluate one stock in an industry versus another in the same field. Likewise, they can be used to measure a company today against its historical numbers. It's essential to remember, though, that when using ratios to make analyses, the comparisons need to make sense. Expecting the same P/E or profitability ratio out of a textile company that you do out of a software company isn't going to help you make any valuable inferences about either company in its respective market. 

Think of each industry as having a map-like scale - you wouldn't take a ruler to a globe and to a map of your hometown and expect an inch to represent the same distance on both. Keep your scales (and industries) straight and the numbers can reveal a lot.

The information you need to calculate ratios is easy to come by: Every single number or figure you need can be found in a company's financial statements (which can be found online on the company's website or on most stock quote sites). Once you have the raw data, you can plug in right into your financial analysis and put those numbers to work for you. 

Everyone wants an edge in investing but one of the best tools out there frequently is frequently misunderstood and avoided by new investors. When you understand what ratios tell you, as well as where to find all the information you need to compute them, there's no reason why you shouldn't be able to make the numbers work in your favor

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