Understanding The Most Important Investment Concepts

It’s always good to have at least a basic foundation of fundamental investment knowledge whether you’re a beginner to investing or working with a professional financial advisor. The reason is simple: You are likely to be more comfortable in investing your money if you understand the lingo and basic principles of investing. Combining the basics with what you want to get out of your investment strategy, you will be empowered to make financial decisions yourself more confidently and also be more engaged and interactive with your financial advisor.Below are a few basic principles that you should be able to understand and apply when you are looking to potentially invest your money or evaluate an investment opportunity. You’ll find that the most important points pertaining to investing are quite logical and require just good common sense. The first step is to make the decision to start investing. If you’ve never invested your money, you’re probably not comfortable with make any investment decisions or moves in the market because you have little or no experience. It’s always difficult to find somewhere to begin. Even if you find a trusted financial advisor, it is still worth your time to educate yourself, so you can participate in the process of investing your money and so that you may be able to ask good questions. The more you understand the reasons behind the advice you’re getting, the more comfortable you will be with the direction you’ve chosen.Don’t Be Intimidated by the Financial Lingo If you turn on the TV to some financial network, don’t worry that you can’t understand the financial professionals right away. A lot of what they say can actually boil down to simple financial concepts. Make sure you ask your financial advisor the questions that concern you so you become more comfortable when investing.IRAs Are Containers to Hold Investments-They Aren’t Investments Themselves The first area of confusions that most new investors get confused about is around their retirement vehicles and plans that they may have. If an investor has an individual retirement accounts (IRA), a 401(k) plan from work, or any other retirement-type plan at work, you should understand the differences between all the accounts you have and the actual investments you have within those accounts. Your IRA or 401(k) is just a container that houses your investments that brings with it some tax-advantages.Understand Stocks and Bonds Almost every portfolio contains these kinds of asset classes. If you buy a stock in a company, you are buying a share of the company’s earnings. You become a shareholder and an owner at the same time of the company. This simply means that you have equity in the company and the company’s future – ready to go up and down with the company’s ups and downs. If the company is doing well, then your shares will be doing well and increase in value. If the company is not doing well or fails, then you can lose value in your investment.If you buy bonds, you become a creditor of the company. You are simply lending money to the company. So you don’t become a shareholder or owner of the company/bond-issuer. If the company fails, then you will lose the amount of your loan to the company. However, the risk of losing your investment to bondholder is less then the risk to owners/shareholders. The reasoning behind this is that to stay in business and have access to funds to finance future expansion or growth, the company must have a good credit rating. Furthermore, the law protects a company’s bondholders over its shareholders if the company goes bankrupt.Stocks are considered to be equity investments, because they give the investor an equity stake in the company, while bonds are referred to as fixed-income investments or debt instruments. A mutual fund, for instance, can invest in any number or combination of stocks and bonds.Don’t Put All Your Eggs in One Basket An important investment principle of all is not to invest all or most of your money into one investment.Include multiple and varying types of investments in your portfolio. There are many asset classes such as stocks, bonds, precious metals, commodities, art, real estate, and so on. Cash, in fact, is also an asset class. It includes currency, cash alternatives, and money-market instruments. Individual asset classes are also broken down into more precise investments such as small company stocks, large company stocks, or bonds issued by municipalities, or bonds issued by the U.S. Treasury.The various asset classes go up and down at different times and at different speeds. The purpose of a diversified portfolio is to mitigate the ups and downs by smoothing out the volatility in a portfolio. If some investments are losing value at some particular period, others will be increasing in value at the same time. So the overarching objective is to make sure that the gainers offset the losers, which may minimize the impact of overall losses in your portfolio from any single investment. The goal that you will have with your financial advisor is to help find the right balance between the asset classes in your portfolio given your investment objectives, risk tolerance, and investment time horizon. This process is commonly referred to as asset allocation.As mentioned earlier, each asset class can be internally diversified further with investment options within that class. For example, if you decide to invest in a financial company, but are worried that you may lose your money by putting everything into one single company, consider making investments into other companies ( Company A, Company B, and Company C) rather than putting all your eggs in one basket. Even though diversification alone doesn’t guarantee that you will make a profit or ensure that you won’t lose value in your portfolio, it can still help you manage the amount of risk you are taking or are willing to take. Recognize the Tradeoff Between an Investment’s Risk and Return Risk is generally looked at as the possibility of losing money from your investments. Return is looked at as the reward you receive for making the investment. Returns can be found by measuring the increase in value of your investment from your original investment principal.There is a relationship between risk and reward in finance. If you have a low risk-tolerance, then you will take on less risk when investing, which will result in a lower possible return at any given time, relatively. The highest risk investment will offer the chance to make high returns.Between taking on the highest risk and the lowest risk, most investors seek to find the right balance of risk and returns that he/she feels comfortable with. So, if someone advises you to get in on an investment that has a high return and it is risk-free, then it may be too good to be true.Understand the Difference Between Investing for Growth and Investing for Income Once you make the decision to invest, you may want to consider whether the objective of your portfolio is have it increase in value by growing overtime, or is it to produce a fixed income stream for you to supplement your current income, or is it maybe a combination of the two?Based on your decision, you will either target growth oriented investments or income oriented ones. U.S. Treasury bills, for instance, provide a regular income stream for investors through regular interest payments, and the value of your initial principal tends to be more stable and secure as opposed to a bond issued by a new software company. Likewise, an equity investment in a larger company such as an IBM is generally less risky than a new company. Furthermore, IBM may provide dividends every quarter to their investors which can be used as an income stream as well. Typically, newer companies reinvest any income back into the business to make it grow. However, if a new company becomes successful, then the value of your equities in that company may grow at a much higher rate than an established company. This increase is typically referred to as capital appreciation.Whether you are looking for growth, income, or both, your decision will fully depend on your individual financial and investment objectives and needs. And, each type may play its own part in your portfolio.Understand the Power of Compounding on Your Investment Returns Compounding is an important investment principle. When you reinvest any dividends or other investment returns, you begin to earn returns on your past returns.Consider a simple example of a plain bank certificate of deposit (CD) that is rolled over to a new CD including its past returns each time it matures. Interest that is earned over the lifetime of the CD becomes part of the next period’s sum on which interest is assessed on. At the beginning, when you initially invest your money compounding may seem like only a little snowball; however, as time goes by, that little snowball gets larger because of interest compounding upon interest. This helps your portfolio grow much faster. You Don’t Have to Go at It Alone Your Financial Advisor can give you the investment guidance that you need so that you don’t have to stop yourself from investing in the market because you feel like you don’t know enough yet. Knowing the basic financial principles, having good common sense, and having your Financial Advisor guide you along the way can help you start evaluating investment opportunities for your portfolio and help get you closer toward achieving your financial goals.

S&P 500 Biotech Giant Vertex Leads 5 Stocks Showing Strength

Your stocks to watch for the week ahead are Cheniere Energy (LNG), S&P 500 biotech giant Vertex Pharmaceuticals (VRTX), Cardinal Health (CAH), Steel Dynamics (STLD) and Genuine Parts (GPC).

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While the market remains in correction, with analysts and investors wary of an economic downturn, these five stocks are worth adding to watchlists. S&P 500 medical giants Vertex and Cardinal Health have been holding up, as health-care related plays tend to do well in down markets.

Steel Dynamics and Genuine Parts are both coming off strong earnings as both the steel and auto parts industries report optimistic outlooks. Meanwhile, Cheniere Energy saw sales boom in the second quarter as demand in Europe for natural gas continues to grow.

Major indexes have been making rally attempts with the Dow Jones and S&P 500 testing weekly support on Friday. With market uncertainty, investors should be ready for follow-through day breakouts and keep an eye on these stocks.

Cheniere Energy, Cardinal Health and VRTX stock are all on IBD Leaderboard.

Cheniere Energy Stock
LNG shares rose 1.1% to 175.79 during Friday’s market trading. On the week, the stock advanced 3.1%, not from highs, bouncing from its 21-day and 10-week lines earlier in the week.

Cheniere Energy has been consolidating since mid-September, but needs another week to forge a proper base, with a potential 182.72 buy point formed on Aug. 10.

Houston-based Cheniere Energy was IBD Stock Of The Day on Thursday, as the largest U.S. producer of liquefied natural gas eyes strong demand in Europe.

Even though natural gas prices are plunging in the U.S. and Europe, investors still see strong LNG demand for Cheniere and others.

The U.K. government confirmed last week that it is in talks for an LNG purchase agreement with a number of companies, including Cheniere.

In the first half of 2021, less than 40% of Cheniere’s cargoes of LNG landed in Europe. That jumped to more than 70% through this year’s second quarter, even as the company ramped up new export capacity. The urgency of Europe’s natural gas shortage only intensified last month. That is when an explosion disabled the Nord Stream 1 pipeline from Russia that had once supplied 40% of the European Union’s natural gas.

In Q2, sales increased 165% to $8 billion and LNG earned $2.90 per share, up from a net loss of $1.30 per share in Q2 2021. The company will report Q3 earnings Nov. 3, with investors seeing booming profits for the next few quarters.

Cheniere Energy has a Composite Rating of 84. It has a 98 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share price movement with a 1 to 99 score. The rating shows how a stock’s performance over the last 52 weeks holds up against all the other stocks in IBD’s database. The EPS rating is 41.

Vertex Stock
VRTX stock jumped 3.4% to 300 on Friday, rebounding from a test of its 50-day moving average. Shares climbed 2.2% for the week. Vertex stock has formed a tight flat base with an official buy point of 306.05, according to MarketSmith analysis.

The stock has remained consistent over recent weeks, while the relative strength line has trended higher. The RS line tracks a stock’s performance vs. the S&P 500 index.

Vertex Q3 earnings are on due Oct. 27. Analysts see EPS edging up 1% to $3.61 per share with sales increasing 16% to $2.2 billion, according to FactSet.

The Boston-based global biotech company dominates the cystic fibrosis treatment market. Vertex also has other products in late-stage clinical development that target sickle cell disease, Type 1 diabetes and certain genetically caused kidney diseases. That includes a gene-editing partnership with Crispr Therapeutics (CRSP).

In early August, Vertex reported better-than-expected second-quarter results and raised full-year sales targets.

S&P 500 stock Vertex ranks second in the Medical-Biomed/Biotech industry group. VRTX has a 99 Composite Rating. Its Relative Strength Rating is 94 and its EPS Rating is 99.

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Cardinal Health Stock
CAH stock advanced 3.2% to 73.03 Friday, clearing a 71.22 buy point from a shallow cup-with-handle base and hitting a record high. But volume was light on the breakout. CAH stock leapt 7.3% for the week.

Cardinal Health stock’s relative strength line has also been trending up for months.

The cup-with-handle base is part of a base-on-base pattern, forming just above a cup base cleared on Aug. 11.

Cardinal Health, based in Dublin, Ohio, offers a wide assortment of health care services and medical supplies to hospitals, labs, pharmacies and long-term care facilities. The company reports that it serves around 90% of hospitals and 60,000 pharmacies in the U.S.

S&P 500 stock Cardinal Health will report Q1 2023 earnings on Nov. 4. Analysts forecast earnings falling 26% to 96 cents per share. Sales are expected to increase 10% to $48.3 billion, according to FactSet.

Cardinal Health stock ranks first in the Medical-Wholesale Drug/Supplies industry group, ahead of McKesson (MCK), which is also showing positive action. CAH stock has a 94 Composite Rating out of 99. It has a 97 Relative Strength Rating and an EPS rating of 73.

Steel Dynamics Stock
STLD shares shot up 8.5% to 92.92 on Friday and soared 19% on the week, coming off a Steel Dynamics earnings beat Wednesday night.

Shares blasted above an 88.72 consolidation buy point Friday after clearing a trendline Thursday. STLD stock is 17% above its 50-day line, definitely extended from that key average.

Steel Dynamics’ latest consolidation could be seen as part of a larger base going back six months.

Steel Dynamics topped Q3 earnings views with EPS rising 10% to $5.46 while revenue grew 11% to $5.65 billion. The steel producer’s outlook is optimistic despite weaker flat rolled steel pricing. STLD reports its order activity and backlogs remain solid.

The Fort Wayne, Indiana-based company is among the largest producers of carbon steel products in the U.S. It engages in metal recycling operations along with steel fabrication and produces myriad steel products.

How Millett Grew Steel Dynamics From A Three Employee Business

STLD stock ranks first in the Steel-Producers industry group. STLD stock has a 96 Composite Rating out of 99. It has a 90 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share-price movement that tops at 99. The rating shows how a stock’s performance over the last 52 weeks holds up against all the other stocks in IBD’s database. The EPS rating is 98.

Genuine Parts Stock
GPC stock gained 2.8% to 162.35 Friday after the company topped earnings views with its Q3 results on Thursday. For the week GPC advanced 5.1% as the stock held its 50-day line and is in a flat base.

GPC has an official 165.09 flat-base buy point after a three-week rally, according to MarketSmith analysis.

The relative strength line for Genuine Parts stock has rallied sharply to highs over the past several months.

On Thursday, the Atlanta-based auto parts company raised its full-year guidance on growth across its automotive and industrial sales.

Genuine Parts earnings per share advanced 19% to $2.23 and revenue grew 18% to $5.675 billion in Q3. GPC’s full-year guidance is now calling for EPS of $8.05-$8.15, up from $7.80-$7.95. The company now forecasts revenue growth of 15%-16%, up from the earlier 12%-14%.

During the Covid pandemic, supply chain constraints caused a major upheaval in the auto industry, sending prices for new and used cars to record levels. This has made consumers more likely to hang on to their existing vehicles for longer, driving mileage higher and boosting demand for auto replacement parts.

Fellow auto stocks O’Reilly Auto Parts (ORLY) and AutoZone (AZO) have also rallied near buy points amid the struggling market. O’Reilly reports on Oct. 26.

IBD ranks Genuine Parts first in the Retail/Wholesale-Auto Parts industry group. GPC stock has a 96 Composite Rating. Its Relative Strength Rating is 94 and it has an EPS Rating of 89.

Business Loans In Canada: Financing Solutions Via Alternative Finance & Traditional Funding

Business loans and finance for a business just may have gotten good again? The pursuit of credit and funding of cash flow solutions for your business often seems like an eternal challenge, even in the best of times, let alone any industry or economic crisis. Let’s dig in.

Since the 2008 financial crisis there’s been a lot of change in finance options from lenders for corporate loans. Canadian business owners and financial managers have excess from everything from peer-to-peer company loans, varied alternative finance solutions, as well of course as the traditional financing offered by Canadian chartered banks.

Those online business loans referenced above are popular and arose out of the merchant cash advance programs in the United States. Loans are based on a percentage of your annual sales, typically in the 15-20% range. The loans are certainly expensive but are viewed as easy to obtain by many small businesses, including retailers who sell on a cash or credit card basis.

Depending on your firm’s circumstances and your ability to truly understand the different choices available to firms searching for SME COMMERCIAL FINANCE options. Those small to medium sized companies ( the definition of ‘ small business ‘ certainly varies as to what is small – often defined as businesses with less than 500 employees! )

How then do we create our road map for external financing techniques and solutions? A simpler way to look at it is to categorize these different financing options under:

Debt / Loans

Asset Based Financing

Alternative Hybrid type solutions

Many top experts maintain that the alternative financing solutions currently available to your firm, in fact are on par with Canadian chartered bank financing when it comes to a full spectrum of funding. The alternative lender is typically a private commercial finance company with a niche in one of the various asset finance areas

If there is one significant trend that’s ‘ sticking ‘it’s Asset Based Finance. The ability of firms to obtain funding via assets such as accounts receivable, inventory and fixed assets with no major emphasis on balance sheet structure and profits and cash flow ( those three elements drive bank financing approval in no small measure ) is the key to success in ABL ( Asset Based Lending ).

Factoring, aka ‘ Receivable Finance ‘ is the other huge driver in trade finance in Canada. In some cases, it’s the only way for firms to be able to sell and finance clients in other geographies/countries.

The rise of ‘ online finance ‘ also can’t be diminished. Whether it’s accessing ‘ crowdfunding’ or sourcing working capital term loans, the technological pace continues at what seems a feverish pace. One only has to read a business daily such as the Globe & Mail or Financial Post to understand the challenge of small business accessing business capital.

Business owners/financial mgrs often find their company at a ‘ turning point ‘ in their history – that time when financing is needed or opportunities and risks can’t be taken. While putting or getting new equity in the business is often impossible, the reality is that the majority of businesses with SME commercial finance needs aren’t, shall we say, ‘ suited’ to this type of funding and capital raising. Business loan interest rates vary with non-traditional financing but offer more flexibility and ease of access to capital.

We’re also the first to remind clients that they should not forget govt solutions in business capital. Two of the best programs are the GovernmentSmall Business Loan Canada (maximum availability = $ 1,000,000.00) as well as the SR&ED program which allows business owners to recapture R&D capital costs. Sred credits can also be financed once they are filed.

Those latter two finance alternatives are often very well suited to business start up loans. We should not forget that asset finance, often called ‘ ABL ‘ by those Bay Street guys, can even be used as a loan to buy a business.

If you’re looking to get the right balance of liquidity and risk coupled with the flexibility to grow your business seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success who can assist you with your funding needs.