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Structured Finance – Investing in Structured Finance Requires Knowledge

When learning basic investing, most people can grasp the concept of a company’s equity and debt. They can also grasp the concept of leveraging the company’s equity with debt to finance expansion and other positive growth activities. However, when you throw the term “structured finance” into the mix the problems arise. Most people do not understand how structured finance allows a company or individual to leverage their equity.

The term structured finance is actually a broad one. It covers all sorts of financial arrangements where an investor attempts to increase profit by refinancing and hedging profitable economic activities. The many different types of financial instrument that can be utilized in structured financing make this a tantalizing area of investing. These types of financial arrangements can be quite profitable over time. However, they also pose a great deal of risk to the investor who is not careful.

Let’s look at a common example of structured finance to see how it works. When someone gets a mortgage to buy a new home or commercial building, that mortgage becomes an asset to the bank or lending institution to whom it belongs. However, it can pose a risk they do not want to carry for very long. They sell the mortgage for a price into a structured finance product.

The managers of the structured finance product take that mortgage and split its value among different claimants. So, if you have a $100,000 mortgage, the structured product may have 100 slices of that $100,000 mortgages in its mixture. Each slice has a different level of risk associated with it. The slices with lower risk will have lower profits given to the investor. The slices with higher risk have higher profits. This structure allows the mortgage investor to determine the acceptable level of risk they are willing to face.

The idea behind structured finance is to take a potentially risky investment and making it into something that offers safe investing opportunities for many. The structured finance products often contain different types of bond, loans, and other collateralized debt structures. Some structure products focus solely on one form of these debt structures. Others contain a mixture.

It is important to know what you are investing in before you make the leap into structured finance. The help of a financing expert is important unless you are experienced with this type of investment. You will be in a better position to make an informed decision after you speak with an expert.

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Put Calendar Spreads – Using Put Calendar Spreads to Steady Your Portfolio

Market volatility can scare many inexperienced investors out of the market. However, there are ways to protect your portfolio value. One of the common tools employed by experienced investors is options. One particular strategy for using options is called the put calendar spread. This strategy can help keep your portfolio neutral to the market volatility and, optionally, begin moving your portfolio in a new direction.

The put calendar strategy is generally used during bearish markets. However, it begins with a position of neutrality. The investor wants to maintain short-term neutrality in their portfolio. As part of that strategy, the investor puts money into short-term put options on critical stock. If the stock remains neutral in that time frame, they have the option of renewing their put options or of taking a chance on the long term direction of the stock.

Put calendar spreads are a great tool for the experienced investor. In order to make them work, however, the investor needs to determine the market sentiment. Is the market bearish, bullish, or neutral at this time? Will that continue for the coming months? What might change? This sentiment will help determine the proper strategy to use in protecting the portfolio. In most cases, if the market is bearish and appears to want to remain that way for the next few months, a put calendar spread is the way to go.

You can use the put calendar spread on stocks, ETFs, and indices. It is best to use it on financial instruments, which usually have a narrow gap between bid and ask price. If the stock appears to be having short term oversell problems, but long term profit potential, this strategy is even better for investors.

The philosophy is to buy or sell put options based on their expiry dates as well as the market position. For example, if you think the market will be very bearish in the next few weeks, you would buy short-term puts to cover the next month. In a month, you can consider adding additional short-term puts or choose to invest in puts that are three months out instead. This balance requires careful investing and analysis to work properly.

It is best to plan the entire strategy around managing risk. That means planning for the worst case scenario if the strategy is completely wrong. Minimizing the costs and potential losses will help keep the risk to a minimum.

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Over the Counter (OTC) – Going OTC Can Provide Good Returns at a Higher Risk

When most people think about purchasing stock, they think they have to purchase a stock through a formal exchange like the NY Stock Exchange or the NASDAQ. However, there is an alternative known as “over the counter” or OTC.

The OTC market is where an investor can buy different financial instruments directly with another party instead of through the stock exchange. You can get bonds, stocks, derivatives, and commodities through this market. There is a certain amount of risk associated with the over the counter market. Not all assets exchanged on the OTC market have standard reporting requirements.

Here are a few things to consider when looking at OTC traded financial instruments:

  1. In order to be traded on the stock exchanges, company stocks have to meet certain guidelines. Not all companies are large enough to meet those guidelines. However, they still have stock to sell and exchange. They are often the ones you can get on the OTC market.
  1. When a company’s stock value falls below a certain value, they no longer meet the guidelines for exchange markets. These so-called “penny” stocks are still tradable. However, these particular stocks can be quite risky since they come from companies with an unstable history on the market. When considering delisted stocks, it is important to do serious investigation first.
  1. Bonds are considered OTC products because they are not traded on the exchanges formally. They make up the backbone of many portfolios. Many investment groups will do the work behind the scenes to sell or purchase the bonds directly from the bank. A single investor can do the same thing.

One of the best places to do research on OTC products is through one of the inter-dealer quotation systems: the OTC Bulletin Board or the Pink Quote. The OTC Bulletin Board operates under the auspices of the Financial Industry Regulatory Authority or FINRA. Pink Quote is a service run by Pink OTC Markets, Inc. Each has their own requirements. The OTC Bulletin Board requires all companies on their boards to file financial reports with the SEC or other regulators. Pink Quote does not have that requirement. Most companies on Pink Quote are closely held, thinly traded, or very small.

When looking at OTC securities, doing the initial investigation is all important. Once you are ready to make the exchange, you can get up to date quotes from one of the inter-dealer quotation systems. Once purchased, you can then sell them later by getting an updated quote and finding a buyer.

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Option Futures – Use Option Futures to Keep Your Portfolio Healthy in a Volatile Market

One of the terms you may have caught on various financial forums or magazines is the use of the term “option futures.” This is an investment vehicle that the experienced investor can use to keep their portfolio valuable even in a fluctuating market. To understand what they are though, you need to know some underlying concepts.

Most people have a portfolio with a mixture of stocks and bonds in it. In a few cases, the investors may have thought about adding options to their portfolio. An option is a financial instrument that allows the investor to sell a security at a specified price by a certain date.

For example, you can buy an option to sell 100 shares of XYZ Co at $100 per share by March 31. If you see the price of XYZ Co stock down to $90, you can choose to exercise the option and sell those 100 shares at $100 apiece. You pocket the $10 profit on each of those shares. However, if you do not exercise the option before March 31, you do not gain anything from the transaction. This is an instrument often used to hedge the bets against a volatile market.

What are futures? Futures are contracts where one party agrees to buy an asset from another party in the future at a specified price. The investor is hoping that the value of the asset will be higher in the future than the specified price of the future. Examples make this concept a bit easier.

Let’s say that today you get a futures contract on gold at $1500 per ounce for 100 ounces. The future will come due on December 31. You know the price of gold if fluctuating all over the place. When you buy that future, you are betting that the price of gold will be higher than $1500 on December 31. When December 31 arrives, you buy the gold for $1500 per ounces for 100 ounces. If the price is $1600 per ounce on December 31st, you are automatically $100 richer per ounce. If the price is $1400 per ounce on that day, you are down $100 per ounce.

Now bring those two concepts together for option futures. When you buy an option on futures, you purchase the right to sell futures at a given price by a certain date. So, if you own an option on those 100 ounces at $1500, you can exercise it on or before the December 31st date, depending on the value of the gold.

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MT760 Explained – The MT760 Explained in Terms You Can Understand

You might have heard about an MT760 message. It is a term that you may relate to various financial transactions. However, what it is exactly?

To understand exactly what an MT760 message is, you need to know a bit about the history behind it. Back in 1973, in order to facilitate transfer of money between banks, a group of 239 banks created the Society of Worldwide Interbank Financial Telecommunication, or SWIFT. The initial focus of SWIFT was to develop standard protocols and methods for transferring money between one bank and another. They established operating procedures and rules. The first message sent was in 1977. It revolutionized the banking industry and the way the financial markets worked.

In order to transfer messages, SWIFT developed nine different types of messages. The MT760 is one of those messaging options. Usually, it is a message sent at the request of the account holder, from one bank to another. The account holder wants to show the other bank there are funds available to cover a particular transaction. In order to make this message happen, the account holder agrees that their bank will hold the same amount of funds as security for the transaction. This security feature makes the MT760 a cash-backed financial instrument.

Some banks in the United States do not willingly issue MT760 messages. Before initiating such a transaction, you need to verify that your bank will handle those transactions. There are fees associated with these transactions. It can run as high as 0.05% of the transaction amount. This transaction is common for amounts of $1,000,000 or above.

A common use for the MT760 transaction is to back up large orders of product. The guarantee of funds gives the supplier confidence of payment for the order. However, there is one problem. Once the MT760 transaction is issued, the amount is set. If there are any changes to the order, there has to be new transactions or other negotiations around that MT760 transaction.

Another common use of the MT760 is to back up large projects of many different sorts. To get that, you need to have a good project to begin with. Then you need to have a bank willing to issue the MT760. You will have to cover all the costs of the fees associated with it. You also need to know how you will handle closing the transaction at the end of the project.

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Medium Term Fixed Income Securities – Using Medium Term Fixed Income Securities for Ten Year Growth

When looking for investing options, many take the time to plan for short, medium, and long range situations. Short term strategies usually look for quick cash investments that give a good return in less than a year. Long term strategies usually look at potential returns out over 10 or more years. In between the short and long, is the medium term. Most investors consider these investments anything that will come to maturity between 1 and 10 years out from the current point.

Fixed income securities are those that will give you a set amount of income over a certain period. There are short, medium, and long term fixed income securities on the market at any given time. Bonds are the most commonly thought of financial instrument that fits into this definition. And there are bonds that are short, medium, and long term in nature. Other financial instruments fit into this category though.

Why invest in medium-term fixed income securities? When you are looking at your portfolio, the experienced investor knows that a certain percentage of any portfolio needs to look at stabilization. Stocks can be quite volatile. To keep a core of the portfolio stable, investing in fixed-income securities is one way to go. The medium-term securities offer a steady source of income for the portfolio in the next five to ten years.

Diversification of a portfolio needs to happen in multiple directions. For example, you need to have both stocks and bonds in a portfolio to keep stock market fluctuations from bombing a portfolio’s value. Another form of diversification is getting different types of bonds or stocks. Having too much stock in one company can kill a portfolio if the company gets into trouble. Another form of diversification is to get a mixture of short, medium, and long term fixed income securities. These can help stabilize the portfolio’s value in different time frames.

Medium term fixed income securities are a good way to maintain stability for the next few years if you see the market getting bearish or going through wild fluctuations that would give you heart palpitations. These investments can happen directly on the OTC market. You can also find funds that invest in these fixed income securities. They will give you the stability you require without the need to manage these investments closely.

Keep your portfolio healthy with a diverse arrangement of investments. Put medium term fixed income securities in the mix today.

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Investing in Wind Power – Let the Wind Blow with Investing in Wind Power

Today, renewable energy is a big opportunity for investors. Investing in wind power is one option.

What does the term wind power cover? Wind power is any energy derived from wind based sources. The most common form of wind power generation is through turbines or windmills. When it comes down to it, sails offer a wind power resource to those out on sail boats. Wind farms can exist on land or over the ocean. Homeowners can add turbines to their own properties if they choose. The only requirement is a steady source of wind that will keep the turbines turning consistently.

What are the investment opportunities available in wind power? With wind, you have some choices in investment opportunities. You can invest in the energy companies that are putting up wind farms to capture wind energy. You can invest in the companies that make the wind turbines and other wind power generation equipment. You can invest in companies that specialize in homeowner based wind generation equipment. You can invest in companies researching new ways of utilizing wind power. When you invest in the wind industry, you are truly investing in a renewable industry. Wind provides a steady source of energy. It can also provide a good source of income.

What else do you need to know about wind power before investing? Wind power companies come in two varieties these days. There are the large companies that do wind power as a part of their portfolio of products. Other companies do wind power as their only product. These smaller companies tend to be more volatile than their larger competitors. Yet, the emerging market for wind power tends to make them good investments with good returns, despite the risk they present. If you want to invest in renewable resources, give wind power a chance.

How do you get started with investing in wind power? The easiest way might be to find who is making the wind turbines at your local wind farm. However, that is not the only way to do it. That will only give you the starting point. If you want to do serious investing, you need information on the companies in this market and the way they are doing things. You can do this yourself. However if you do not have enough time, you can bring in an experienced advisor instead. That will give you the information you need without taking the time to do it yourself.

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Investing in Utilities – Slow and Steady Is the Name of the Game When You Are Investing in Utilities

Do you take your water, gas, and electricity power for granted? If you do, then these utilities are doing their job. Investing in utilities offers a steady investment option for many investors.

What does the term “utilities” cover in the world of investing? In general, utilities cover a wide range of common services such as water, electricity, and natural gas. Some also consider phones a utility, but nowadays, that is usually covered in the area of telecommunications investing. Utilities are often regulated by the government, but do operate in a profit making model. This combination makes them a steady investment that does not provide huge gains, but steady returns.

What are the investment opportunities available in utilities? Utilities are a mainstay throughout North America. There are large regional utility companies as well as much smaller ones at the local level. You can choose at what level to invest. Some utility companies have the legal authority to issue their own bond offerings. Others offer stocks to their investors. These different entities provide options for those who want to invest in utilities. You can choose from water, gas, or electricity companies. With these options, utilities make a great addition to most portfolios.

What else do you need to know about utilities before investing? Utility companies are usually regulated as to how much profit they can make. Their rates go through review of regulatory boards. When they need to grow in size, they have to go through regulators. This means that the investments are not going to return great profits. However, these utilities usually have steady profits that will buildup over time. They offer a great option for those who want good growth without volatility or risk in their portfolio. Just do not expect to get a huge surge in profit with the vast majority of these investments.

How do you get started with investing in utilities? In order to understand which companies provide the best returns, you need to understand the regulatory structures that monitor these companies. If you understand those agencies, then you can predict how the companies’ profits will react to regulatory changes. If you do not have the time or expertise to do it yourself, you need to bring in an advisor to do the legwork for you before you invest your money. You will get a list of potential utilities in which to invest. The advisor can make recommendations but you make the final decisions on your investments.

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Investing in Small Businesses – Give Someone a Boost by Investing in Small Businesses

Investing in small businesses offers both financial opportunity as well as philanthropic power. You can help someone find his or her dreams coming true.

In investment terms, what does the term “small businesses” cover? When it comes to defining a small business, the definitions can vary among investing professionals. For the sake of this article, look at the SBA definition. It is a small business concern that is independently owned and operated, run for profit, and not a big player in the industry. In terms of employees and sales, the numbers vary from industry to industry as well as product to product. When it comes to investing, you have multiple opportunities.

What are the investment opportunities available in small businesses? For small businesses, many forms of traditional business investment are not available. The banks and other lending institutions are not willing to forward the funds to them because of the perceived risk they present. To address this, many small business owners turn to the private investing market for capital. That is where the investment opportunities arise. Some issue OTC stock. Others seek private loans from capital investors. These both present opportunities to the investors. The risks may be a bit higher than traditional stock markets and loans. To offset that risk though, the returns are usually higher.

What else do you need to know about small businesses before investing? Small businesses have a high rate of failure within the first few years of operation. This poses a risk to anyone making the investment in them. You can take steps to minimize the risk by becoming a priority stockholder or to have collateral behind the investment. You can also choose to invest in small companies that have been in business for many years. That often gives the companies the investment money they need for expansion. You get a great return and help others realize their dreams.

How do you get started with investing in small businesses? The options here are quite diverse. You can find small business owners looking for investors in your own town. You also can find them on OTC markets offering company stock. Some small companies use brokers to find investors also. These are just a few options for investing in small businesses. You can find out more about these options as well as others if you talk with a professional advisor in the area of small business investment.

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Investing in Radio – The Waves Are Good When You Are Investing in Radio

With the internet becoming a major player in the world of advertising, some think that television and radio are things of the past. However, today, investing in radio remains a great idea.

What does the term radio cover when it comes to investing? Radio continues to be a major player in most markets around the US. People listen to the radio throughout the day in different formats. Streaming radio on the internet offers a relatively new outlet for the media. This continuing popularity and even new growth offers opportunities for investors who want to diversify their portfolio. Many find the major radio companies own multiple stations in many markets around the country. That large regional spread offers some stability not found in other media markets.

What are the investment opportunities available in radio? Radio stations exist from the cold environs of Alaska to the warm shores of Florida. They also exist around the world. Large companies usually own multiple stations in different markets around the country. A good radio company will have stations offering music and programming to different segments of the radio market. Investors can choose to invest in these large companies. They can also invest in the marketing companies that work with radio stations to put together advertising. These are just a couple options for investing in radio.

What else do you need to know about radio before investing? Radio provides a good place for investors. The biggest volatility in this market is the ever changing face of radio ownership. Today, a good mix of large companies owns many stations and a number of companies own a few. You need to find a company that matches your volatility comfort level. Many companies tend to add and shed different radio stations quite often. They are trying to optimize their mix of audience and marketing profits. That is why the radio world can seem volatile at times.

How do you get started with investing in radio? Do you want to invest in one of the big national companies? Do you want to invest in a smaller regional one? That is just a couple of options when it comes to investing in radio. In order to make your decision clear, you need to know about the industry first. The best option is to bring in a professional who knows this industry well. That will give you the information in making your decision clearer and easier.

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