Throughout the entire year in 2013, we seemed to see highs everywhere we looked. Unfortunately, the year 2014 hasn’t been so friendly.

The simple fact is, for the last month and a half we’ve watched as emerging markets seemed to crash, Apple reported that it couldn’t sell its flagship product, and more and more stock values going down. These are the types of things that generally scare people when it comes to investing. That’s why few want to invest in a down market. However, that fear of loss is what’s stopping so many people from realizing profits.

Why Investing In a Down Market Is a Good Idea

Let’s think about the reason you’re investing in the first place. You want to put one dollar in, and pull out two, then put the two in and pull out four. You’re not investing because you think it’s cool when the line on the chart points to the upper right corner of your screen, you’re investing because when it does so, you make money. We invest for profits. Now, let’s think about how we make profits. Drum roll please…we make profits by buying low and selling high!

The answer to the big question, “Why should I invest in a down market?” is simple. Investing while the market is low gives you the opportunity to buy at incredibly low prices. When else are you going to get a 10% discount on stocks? Although the market may be down when you buy the stock, it’s not going to be down forever. By making the right decisions with regard to what to buy, you stand to make a killing off of the down market!

Making the Right Decisions

Now here’s your key. No matter if the market is up or down, you’re going to have a hard time realizing profits if you’re not making the right investment decisions. In a down market, that’s even more important. The simple fact is, most companies are going to bounce back from hard times, but some will not. If you put your nest egg into companies that have a low likelihood of bouncing back, chances are you’re going to lose. That being said, here are a few tips that should help you make the right investment decisions.

Think About The Companies That Make Survival Possible – OK, so we would survive without companies, we did it before civilization reared its nasty head! However, surviving wouldn’t be half as fun for many people if it wasn’t for companies like Wal-Mart, Google, and Ford. If it wasn’t for Wal-Mart, where would we get our food and such; if it wasn’t for Google, we’d have a hard time finding information we need; and if it wasn’t for good ole Henry Ford, we’d still be riding behind horses, not enjoying horse power! When you invest in a down market, think of the companies that have no choice but to bounce back!

Watch The News – Ever since I first got interested in investing, I found this one shocking, but true. The truth is, no matter how great, or bad a company is doing, the news changes the views of that company from the eyes of the investor. If big stories come out saying something negative about a company, chances are, its stocks are going to fall faster than a penny dropped from the Empire State Building and vice versa. So, watch the news and look for opportunities to capitalize on.

Don’t Use Knee Jerk Reactions As An Investment Tactic – I’ve seen this one way too much. At the slightest change some investors will either buy or sell. It’s important to remember that profiting from investing usually happens over time. Throughout this time, you’ll see ups, downs and static moments. In most cases, it’s OK, just ride the roller coaster and enjoy the fruits of your labor when you’ve made an educated decision that now is the best time to sell.

Final Thoughts

Down markets shouldn’t scare you out of the market, it should do the exact opposite. When the markets are down, your eyes should open with excitement because you see opportunity. I hope that my tips will help that to happen.

Reader Question

Do you have any other tips that you would give newbie investors with regard to investing in down markets?

Author Bio: This article about debt settlement was written by Joshua Rodriguez, proud owner and founder of http://CNAFinance.com and avid personal finance journalist. Also to learn where he writes or to hire him for writing, check out http://www.JRodWrites.com.

The post Don’t Be Afraid To Invest In Down Markets appeared first on Modest Money.

The following is a guest post about spread betting. If interested in submitting a guest post please read my guest post policy and then contact me.

Spread betting is an interesting investment alternative available to novices and experienced professionals alike. During the actual spread bet, shares or futures contracts are not purchased. What traders do in a spread bet is simply place a wager on the direction of market movement for a chosen asset. The bet is made per point movement or per penny in the underlying market. The stake is the nominal amount that a trader wishes to bet. This figure can be as low as $1/£1/€1 per point. Information is key to spread betting success.

Options Available to Spread Bettors

Traders have two ‘investment’ options available to them including the following: a bet that the market will fall or a bet that the market will rise. Correct financial predictions yield a profit in the form of the betting stake x every point of market movement. Alternatively, losses can also be incurred if the market movement works against you. Losses are calculated by the betting stake multiplied by every point of movement against the trader.

There are many tools and resources available to traders to mitigate losses. These come in the form of an automatic stop-loss, which limits potential losses to a pre-agreed amount. This amount will be determined once a bet has been opened. It’s important for new traders to understand that automatic stop-loss is not a default security feature available to protect against negative market movements. Traders can for example opt for a guaranteed stop-loss by paying a premium at their preferred online brokerage.

There are inherent risks in spread betting, but these are limited to the position that that a trader takes. Risk of capital loss is always a possibility, so traders are advised to limit their investments to what they can afford to lose. Margin trading is a useful tool, but use of it opens the trader up to elevated losses if market movements work against you. It is important to understand the full risk/reward component to spread betting.

Benefits Available to Traders with Spread Betting

The literature on spread betting is vast, and the more newbies learn about it the more curious they become. Spread betting provides an opportunity for relative novices to immerse themselves in the financial markets and to generate healthy profits when the markets move in their favour. When profits accrue, there are several inherent benefits to spread betting. These include the fact that winnings in spread betting are regarded as gambling winnings. In the United Kingdom, all gambling winnings are tax exempt – for income tax and for capital gains tax purposes. This is one of the primary drivers of the burgeoning popularity of spread betting in the United Kingdom. There are many other benefits including the following: no commissions/fees, trade on margin, no stamp duty, easy alternative to stockbroking and a wide range of assets to choose from.

Tips for Effective Spread Betting Practices

If at all possible, newbie traders are encouraged to register with a spread betting platform that provides a demo account. The demo account will allow traders to practice spread betting strategies, methodologies and techniques online – without risking a cent of their bankroll. Multiple resources are available to traders in the form of user manuals, videos, webinars, guru guides and market commentary. Regulated spread betting and CFD trading providers are preferred, since traders can enjoy hassle-free deposits and easy withdrawals of their winnings.

 Author Bio:  Brett Chatz was born in Johannesburg, Gauteng, South Africa. He attended the internationally accredited University of South Africa, where he completed the prestigious Bachelor of Commerce degree, with Economics and Strategic management as his major subjects. In concert with the primary degree, he completed several Bachelor of Arts courses, most notably English poetry and literature. In addition he enrolled at the University of Haifa in Israel to complete a post-graduate year in the Bachelor of Arts discipline. Nowadays Brett contributes informative essays for the globally renowned spread betting and CFD trading provider, InterTrader.

The post Your Quick Guide to the Mechanics of Spread Betting appeared first on Modest Money.

The following is a guest post about investment. If interested in submitting a guest post please read my guest post policy and then contact me.

With prices of higher education skyrocketing by about 1000% since 1976 and greatly outpacing inflation rates, many are wondering whether higher education is actually a bubble.
While college degree holders typically earn more than non-degree holders, the gap is narrowing. In addition, the crippling amount of student debt one must take on to go to college might not justify the increased earnings. The below post provides a framework for evaluating the decision to go to college along with some analysis on key considerations.

How to Evaluate an Investment Decision

Discounted Cash Flow analysis is one of the most common methodologies used to evaluate investment decisions. It is calculated as:

DCF Value = future cash flow / (1 + discount rate)^number of periods

Future cash flow in the case of a degree is the additional wages earned above that of not having a degree and net of debt repayments. In the case of, for example, buying a house as in investment, the future cash flow would be in the form of the sale price at a future date and the rental income generated.

The discount rate in the formula is the Opportunity Cost. The opportunity cost accounts for the Time Value of Money. According to the time value of money, a dollar today is worth more than a dollar tomorrow because you can earn income on it. In the case of higher education, the opportunity cost is the sum of the wages forgone while studying, and the interest that could be earned on the cost of the degree.

Let’s examine each of these factors for determining value in more detail and in the context of deciding to go to college.

1. Price

The price of higher education decreases cash flow. It is either an upfront cost, or, more frequently, paid off over several years.

Supply of low interest rate student loans by government and private lenders has increased demand for higher education and a corresponding increase in price.

The price of higher education has increased by about 1,000% since 1975. Yes that’s thousand — four digits. Let’s assume a price of $30,000 per year to go to college. Some schools cost more, some cost less.

Key takeaway: Higher education is really expensive.

2. Wages

Many (all?) people attend college because of the added job opportunities and corresponding wages. Studies show the gap between degree holders and non-degree holders is narrowing by measures of unemployment and wages.

Intended to increase supply of educated labor, the abundance of supply of student loans at artificially low interest rates may have increased supply too far. Labor markets may have misallocated themselves to jobs requiring degrees. The resulting increased supply leads to lower prices (wages), and the decreased supply of non degree requiring price leads to higher prices (wages).

Increases in wage earnings potential may also vary from school to school. For example, from my personal perspective, it seems like graduating from Harvard still presents amazing opportunities, while a degree from the bottom 75% or so of schools seems to be a “non-differentiator” that just lumps people in to the large population of other people that have degrees.

Key takeaway: a college degree may still increase wage earning potential, but it may be decreasing and/or the opportunity cost may be increasing.

3. Opportunity Cost

The $30,000 per year could be invested in the stock market, bonds, or savings, to earn returns

The time could be used to earn wages. The time could be used to learn and otherwise acquire the value propositions that higher education offers.

Key takeaway: Higher education requires a huge investment of both time and money. The time and money could be allocated to other opportunities to generate value.

4. Asset Value

A degree has no intrinsic value. You can’t sell your degree when you’re done with it. Conversely, when you own a company’s stock, or real estate, you can sell it with some degree of ease. A degree only has value, in the form of added wage potential, because employers think it has value.

5. Forecasting Risk

If employers stop perceiving the degree to be valuable, it may not generate the forecasted increase in wages.

People may not consider the price of higher education when making the investment decision. They instead assume college is “what you do,” and pay for it regardless of price. Therefore, the price of higher education may not match it’s value, and may not be a fair value.

There may be some variances in additional earnings potential between graduates of different schools. For example, a student who graduates from an Ivy League school may be able to earn more than someone who graduates from a “mid-tier” school. Therefore, one should consider the increased earnings potential on a school by school basis, and not based on college as a whole.

Key takeaway: Lack of information may have lead to poor decision making assumptions and forecasting inputs. Poor evaluation methods and/or input assumptions may have lead to ineffective decision making and/or a divergence between a degree’s price and value.

Conclusion

I do not think a college education is really a good investment for a student’s financial future. The additional cash flow from college does not exceed the cost and opportunity cost. While college may still enable greater wage earnings potential, the inflation in the price of higher education has offset it.

Author Bio: Mike Fishbein is the author of Popping the Higher Education Bubble and the Founder of Startup College.

The post Is College Still a Wise Investment? appeared first on Modest Money.

Are you an investor? If so, you know how hard it can be to find a decent research tool. Even paid tools seem to have some sort of bias towards one option or another. So, we’ve been on the hunt for a tool that gives you the honest ability to research without some sort of commission based agenda behind the tool. Today, we’re going to look at 5iResearch to see if they fit the bill!

What Is 5iResearch?

5iResearch is a sister company of Canadian MoneySaver that is designed for normal people like you and I to get access to honest investment advice. The big key with 5iResearch is that users are the only people that pay them. Therefore, you don’t have to worry about commission based decisions that may be good for them, but not you. They provide a wide range of educational articles as well as question and answer forums and other tools.

How Reliable Is The Information Provided?

Let’s face it; no one has a crystal ball that allows them to look into the future. However, by following trends, you can get pretty close. So, I went digging through the question and answer section to see exactly how accurate the answers were. I’ve got to say, I was pretty surprised. I don’t think I could have answered the questions better myself!

What Kind Of Questions Can You Ask?

This is one of my favorite parts of the service. There doesn’t seem to be an investment based question that you can’t get answered. Reading through the questions, I saw things like “How would you rate this investment?” as well as “I don’t have this type of investment in my portfolio, should I add it? If so, what percentage of my portfolio should it encompass?” However, out of all the questions I read, this one really caught my eye…

“I am in the final throws of my decision to buy some Stella Jones stock. I understand from your report that they essentially profit from constructing some of the hard assets for rail roads (amoung other pressure treated wood products for tel-cos, utilities, etc.).

Focussing in on the rail part a bit, does this mean that they should see increased business for replacement ties, etc. as rail is used more and more heavily for shipping oil? It seems like this could act like a bit of a hedge to exposure to oil pipelines.

It seems like a good business (not sexy) and required business. I’d love your thoughts on what makes this thing grow.

Thanks!

5i Research Answer:

You have got the general idea of the company, utility poles and railway ties make up the large majority of revenues. We think increased traffic from oil by rail would have a slight positive impact but we would not base the investment around that thesis. It won’t hurt business but is unlikely to create a significant increase in demand. We think the real growth for Stella Jones will will come from dividend growth and acquistions in a fragmented industry. The more scale and reach the company builds, the better and more reliable of a supplier they become to large railroad companies.

View 5i Reports on this Company”

Why did that catch my eye? Well, when you look at investment research, everything seems to be based on numbers, history, etc… However, in this question, it was more about anticipating the need for a specific asset in the future. As you get further and further into investing, it starts to become clear that looking into future demand of assets is incredibly important. I looked into the advice given and did quite a bit of research myself. It was on point! Oh, and yes, that means you may want to look into Stella Jones!

Who Can Read Your Questions?

When it comes to forums like this, most of them are pretty public. You may have to log in, but everyone that’s logged in can see the question and answer. With 5iResearch, that’s not the case. You can choose to ask a public question and get a public answer or you can choose to hide your questions from everyone and have your answer or answers emailed to you. I love the privacy they provide with this tool.

What Other Tools Do They Provide?

 OK, so I’ve gone over the Q & A portion of their service quite a bit, and for good reason. It’s the main piece of their service. However, they do offer other important tools. For instance they offer in depth research reports on some of the hottest investment options, FAQ, and model portfolios.

What about Cost?

Unfortunately, you’re not going to come across a non-biased investment research tool for free. The good news is, this one really doesn’t cost much at all. As a matter of fact, they charge a flat fee of $119.95 per year which breaks out to a little less than $10 per month!

Final Thoughts

Overall, I’m incredibly impressed with the 5iResearch product. I’ve been through a few of their reports and the information is incredibly accurate. However, I’ve got to say, I’m most impressed with their question and answer tool. It’s amazing how much of a broad range of questions you can ask and get reliable answers to. For just under $10 a month, you can’t go wrong!

Author Bio: This article about 5iResearch Review was written by Joshua Rodriguez, proud owner and founder of CNAFinance.com and avid personal finance journalist. Also to learn where he writes or to hire him for writing, check out http://JRodWrites.com.

The post 5iResearch Review appeared first on Modest Money.

The following is a guest post about celebrity fashion lines. If interested in submitting a guest post please read my guest post policy and then contact me.

When Kanye West started down the well-trodden catwalk of music-to-fashion riches at Paris Fashion Week a couple of years ago, he made waves for being the first male musician to try his hand at female couture. He certainly wasn’t the first musician to venture into clothing and accessories, and he’s by no means the most successful.

Wander through any department store and you’re likely to find something with a singer or actor’s name and image attached to it – and more often than not these days they’re not just vanity projects. Whether you go for an edgy fusion of Asian fashion and formal wear from No Doubt singer Gwen Stefani or a smart jacket from eBay, almost any clothing or cosmetics line has been influenced by someone from the entertainment world.

And although some celebrities find less favour with fashion critics, there’s no denying the sway a big name and some sharp designs has with the public. Here are some of the most successful examples.

Diddy : Clothing value: $250m

Hip hop mogul, producer, serial name-changer and now clothing magnate. Before he was Puff Daddy, P Diddy and most recently Diddy, he was plain old Sean John Combs – and this back to basics approach is reflected in his simple, classic Sean John line of shirts, jackets and trousers. Having studied business at Howard University in Washington DC (where he was awarded an honorary doctorate, reports the Daily Mail) before entering the music industry, he’s now putting those skills to work. A series of recruitments from firms such as Old Navy and investments in other fashion labels, combined with an audacious ad campaign for his fragrance label, I Am King, has pushed Diddy’s clothing empire to a quarter-billion-dollar operation.

 Jessica Simpson : Clothing value: $750m

 You’d be forgiven for forgetting about Jessica Simpson. Perhaps best known for her role as Daisy in 2005’s Dukes of Hazard movie, and less so for her singing career, Simpson has evaded the limelight somewhat by focusing on her wildly successful fashion label. Covering everything from affordable shoes, clothing and fragrances to diamond jewellery, Simpson’s ranges have an every-girl appeal. Every girl seems to be buying into it, too: Simpson’s operation earned her a “$1 billion girl” tag from New York Magazine.

 Victoria Beckham : Clothing value: $95m

 Her singing career may have stalled, but the one-time Spice Girl’s clothing range is flying high. Worn by the likes of Kate Winslet and Kim Kardashian, Victoria Beckham’s designs are that rare thing: complimented by fashion writers, popular with the masses. Her denim, dresses and accessories collections amass almost 100 million dollars each year.

Justin Timberlake : Clothing value: $50m

 From Disney T-shirts on The Mickey Mouse Club in the 1990s to classic American denim, the multi-talented Timberlake is quickly becoming a respected clothing designer. Along with his childhood friend Trace Ayala, Timberlake set up the William Rast collection – an amalgam of both guys’ grandfathers’ names. The look is one of American heritage – hence the name – although Timberlake also dabbles in high-end designs, even showing at New York Fashion Week. It’s popular too, turning over some 50 million dollars.

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