MONEY MASTER

One of the asset class that's not mentioned as often in this blog is property. Today, we will try to talk a bit about one of the common metric that's being used to evaluate the value of a piece of investment property. EFFECTIVE GROSS INCOME is a metric commonly used to evaluate the value of a piece of investment property. It's calculated by adding the amount of income produced by the piece of property and the miscellaneous income, less vacancy costs and collection losses.  Here is an example: A condominium has an income of $1,000,000 if it is able to rent out all of its units (full occupancy). Historically, the condominium is unable to fill 10% of its units, meaning that it is unable to collect $100,000 ($1,000,000 * 0.1).  The Effective Gross Income for the property is $1,000,000 - $100,000, = $900,000 Some things to ponder when calculating EGI is the factors that can influence the vacancy costs and collection losses for a piece of property. The...

Today, we are going to look at one of the technical indicator commonly used by financial analysts.... RELATIVE STRENGTH INDEX (RSI) Some people feel that technical indicator cannot be used alone while others follow the chart and pattern religiously. Generally, Relative Strength Index (RSI) is a momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset.  The formula is pretty easy for one to remember: RSI = 100 - 100/(1+RS*),  where RS* = average of x days up of shares when market close/ average of x days down of shares when market close The best way to look at the relative strength index is by plotting a graph.... As you can see, the RSI ranges from 0 to 100....an asset is generally deemed to be overbought when the RSI approaches the 70 level (overvalued) while when it dropped to 30, it is viewed as oversold and therefore undervalued. It is im...

Today, we gonna go back to basics and talk about one of the most fundamental analysis that we look at in investment of a stock... EARNINGS PER SHARE (EPS) This is in fact one of the most carefully followed metrics in investing. Earnings per share generally means the portion of the company's profit that is allocated to each outstanding share of common stock. It is what investors look at to gauge the profitability of a company. EPS = net income - dividend to preferred shareholders                          average outstanding shares In practice, the weighted average number of shares is more accurate because the number of shares outstanding can change over time.  There is also the diluted EPS which takes into consideration of the shares of convertibles or warrants outstanding in the outstanding shares number. Here is an important note to EPS that we feel readers/invest...

If you have been mixing with people who are into investment, you will probably heard some people talking about buying stocks with good fundamentals or good prospects etc. There are also others who are looking into the technical chart to try and predict the market movement.  Well, there is a way for you to answer some of the questions like: a) How is the company being run? b) Is it generating profits? c) Is there a growth in the performance? d) How does the company fare in comparison to the peers? That way is what some people called: Profitability ratios Profitability ratios measures the ability of a company to generate profits relative to sales, assets and equity. These ratios are useful to to measure a company's performance over the years and also in comparison to the peers.  Here are 5 ratios that I would love to share with you today: 1) Gross Profit Margin (GPM)   Gross Profit Margin (GPM) is calculated with the fo...

I'm not a believer of technical analysis but I heard a lot of people in the investment industry look at the technical analysis and try to understand the trend and behaviour of the stock moving forward by looking at the chart.  Well, I'm no expert to it but if you are interested, here is one term that you should understand: Trade Volume Index (TVI) .  A technical indicator that measures the amount of money flowing in and out of an asset. Unlike many technical indicators, the TVI is generally created using intraday price data. The underlying assumption of this indicator is that there is buying pressure when the price trades near the asking price and selling pressure when it trades near the bid. The TVI is actually very similar to the on balance volume indicator but it takes the volume attributable to every trade instead of just the closing volume.  Generally, TVI helps investors to identify which security is being accumulated (buy) and which are being di...

It's Sunday again....I'm excited to learn another new term here...and this will be something familiar to the people staying at the States. The Wal-Mart effect... Heard of the Wal-Mart effect? If you have not heard of it, buy the book...there is actually a book on Wal-Mart effect by Charles Fishman.  Anyway, in this post, I will give you a brief understanding of what the Wal-Mart effect is...it is the economical impact felt by local businesses when a large firm such as Wal-Mart opens in the area. The effect can be seen as it forces the smaller firms to run out of business or the reduction in wages for competitors' employees.  These are the main reasons why local stores are against the introduction of Wal-Marts into their areas. However, there are some positives from these effects...as Wal-Mart effect helps to curb inflation and keep productivity at an optimum level. 

During most of the studies related to investment, some risks will be mentioned such as credit risks, liquidity risks, and many more.  Here is one new term that I learned throughout this week though...the "reputational risk" .  If you have not heard of it, this will be important because reputational risk is a hidden danger that can hurt and pose a threat of survival to even the biggest and best-run companies. The problem with reputational risk is that it could erupt out of nowhere without much sign to investors. It is difficult to quantify the risk as well but it is important. Reputational risk can also arise from the actions of errant employees, such as the massive trading losses disclosed by some of the world's biggest financial institutions from time to time. In an increasingly globalized environment, reputational risk can arise even in a peripheral region. There are a few ways for investors to look at when considering reputational risk. Look at how th...

Well, now that I'm in the Investment department, I decided that maybe it's time to share some of the investment terms that I've learned....hopefully, there will be those of you out there who could share more in the process as well, so that we can learn together. Anyway, today I learned about this term:  'Maastricht Treaty' , formerly known as the Treaty on European Union (TEU) Well, it is an important term because this is a treaty that is responsible and lead us to what is known as today, the "European Union". It's known as Maastricht Treaty because it was signed in Maastricht, a city in the Netherlands, on February 7, 1992, by the leaders of 12 member nations. This treaty signifies the serious intentions for all countries to create a common economic and monetary union. The treaty required voters in each country to approve the European Union, which proved to be a hotly debated topic in many areas. The agreement took effect on Novemb...