Tag Archives: stock ideas


What is a Credit Score & How Does It Work?

The following is a guest contribution by Patrick Ward:

Whenever you make an application for loans, one of the factors that will be used for qualifying you is the credit score. A credit score is the number that is used to determine the risk associated with lending money to you. This is the number that tells the banks, credit card companies, and other financial institutions whether you have the ability to pay off your debts.

In the United States, the most common credit scoring system used is called FICO. FICO scores range from 300 to 850. The scores are classified as follows

  • Excellent credit: This is anything above 720
  • Good credit: Between 690 and 720
  • Average credit: Between 630 and 690
  • Poor credit: anything under 630

The other credit scoring system used is the vantage score

Several factors determine the FICO credit score. Here is how credit scores are arrived at. They include:

  1. Payment history: Making payments on time results into a higher credit score. Payment history accounts for 35% of credit score.
  2. Amounts owed and available credit: The amount owned in relation to available credit accounts for 30% of the score.
  3. New credit: When you open a new account, it proves that you are creditworthy and thus improves your credit score. This accounts for 10%
  4. Type of credit: With a mixture of different types of credit, you improve your score. It accounts for 10% of the credit score.
  5. Recent credit: Your open accounts and account activity account for 15% of the credit score.

Application of credit scores:

  • Leases

A landlord may check the credit scores of a tenant to help determine how much money they will charge them.

  • Approval for financial products

Financing bodies will look at your credit score to determine if they will approve your loan application.

  • Interest rates

The interest rates you get can also be determined by your credit scores. With a higher FICO score, you are likely to be approved for credit with lower interest rates. However, with a lower FICO score, your chances of being disqualified are high and if you are approved, the interest rates may be raised.

  • Best credit cards and lucrative credit card rewards

If you want to get invitations from the best credit card companies, you should work on attaining a good credit score. Attaining a good credit score is not that easy since you can harm your credit without being aware of it. The bottom-line of this is that you must give importance on your credit score and see to it that it shows good standing; overlooking this can be very detrimental to your financial health. Thus, being aware of how your credit score is calculated is necessary.

Usually, the best cards and reward programs are given to those with very high credit score ratings. Because getting high credit score ratings means lower interest rates, approval of higher limits and more rewards. It results to lower interest rates because a lender takes note of your credit history. Relying on your credit score, lenders will determine what kind of risk you expose them. According to financial theory, increased credit risk entails additional risk premium added to the price of money borrowed. The higher the credit risk, the higher the risk premium added.

Next, it also results to approval of higher limits. Lenders will be more willing to lend you larger amounts of money with a good credit score because they know you have a good credit standing. It does not only help you have greater purchasing power, but it also allows you to potentially raise your credit score.

Moreover, such lenders offer the best cash back, travel points and other rewards. Even some offer dollars worth of bonuses for spending certain amount of money in an allotted time. By following tips and suggestions, you should be able to maintain or improve your credit score. Again, getting approved and garner such perks, however, requires you to have a favorable credit score.

Keeping good your credit score with making wise credit decisions and developing healthy credit habits will lead you into raising your credit score and maintaining it. Because of all the benefits, a good credit score is something to feel good about and to take good care of, since it influences your financial freedom.

Author Bio:

Patrick Ward is a legal researcher specializing in finance, loans and debt analysis, and bankruptcy law. He has a decade of experience in analyzing the legalities involved in the dynamics between local and global financial institutions. He is also passionate in helping individuals overcome their financial challenges. Follow on twitter @blgbankruptcy


Commerce in the Modern Era: Trading Online Worldwide

The following is a third-party contribution:

It has become increasingly clear in the past few years that economic markets are volatile and nothing should be taken for granted. We have seen fluctuations in markets across the globe that have proven that even the most diversified and well invested portfolio is not immune to market changes.

While traditional stock and bond trading remains a relatively popular investment option, new trading markets have evolved. One of those is the currency market, also known as the forex market. This market has grown exponentially over the years and is closely linked to the growth of the internet.

For a deeper explanation about trading on the currency markets and trading online worldwide, visit this page.

Online Currency Trading: What It Is and How It Works?

While you may have a real thorough understanding of stocks and how the stock markets work, you may have never even heard of online currency trading. The basic idea behind the market is relatively simple; like stocks, the values of currencies fluctuate over time based on supply and demand.

Traders buy and sell these currencies, making profits by buying low and selling high, just like stocks. The tricky part to forex trading is that you have to understand how currency markets are likely to react to different events, circumstances, and the results of trading online worldwide.

For example, the recent presidential elections in the United States had a huge impact on the value of the Mexican Peso, United States Dollar, Japanese Yen, and many other currencies. Traders that had an inkling about these changes had the opportunity to make a lot of money by purchasing or selling the right currencies at the right time.

Trading Online Worldwide with Major Brokers

The nicest part of the forex markets is that they enable trading online worldwide since the market is decentralized and accessed via the internet. This means that traders do not need to move from their couch in order to perform a trade.

A lot of people like the level of freedom that online trading awards them because they can trade whenever they have some free time or a spare moment. It doesn’t matter whether you spend your weekend trading or take a moment off during work to make a few quick trades, since the market is accessed from the web, it is extremely easy to access and execute trades.

The largest brokers are the best to use when trading forex online because they offer a handful of benefits that can’t be found anywhere else. For example, most of the major brokers are regulated by international agencies. This ensures that you are protected as a consumer and that you won’t be scammed out of your investments.

Lastly, the best brokers offer you a treasure trove of information to help educate yourself about the forex markets and how to successfully trade on them. You need to have a good understanding of online trading if you want to truly be successful, meaning that you need to invest time and effort into learning about the industry.

Overall, if you are looking for a different trading option that doesn’t involve stocks and the traditional markets, look to forex trading. Who knows, may even make it big and hit the jackpot by trading currencies online.

Financial Services in Canada: Fintech vs. The Bank

Ernst & Young is out with a new report about Canadian consumer banking highlights. I really think the Canadian financial services landscape is at a very interesting point. On one hand, the big banks are making record profits.  But on the other…

Financial technology (fintech) companies are nipping at their heels like never before. I don’t think financial services in Canada have been this ripe for disruption in a long time. One of the key drivers, as shown below, is that Canadians are (finally) getting more comfortable with digital banking and online financial services. Can the banks adapt?

Curious to learn more? Check out the executive summary. Or take a look at the infographic below…




Investing In Alternative Trading

The following is a third-party contribution:

You have to face facts – the currency market is becoming more difficult for traders. The markets are battling to make money as liquidity is drying up and investors are reluctant to take risks, which amounts to quicker currency terms. Where it once took weeks and sometimes months for prices to adjust, now in 2016 it is happening very quickly, creating stress for traders.

This is why it is so important to choose your broker carefully. In forex trading, for instance, there are a host of issues that confront traders. A trader therefore wants their broker to have a responsive customer service department – those who will attend to your requests promptly.

The Potential to Make Profit with Falling Market Prices

With spread betting you want answers and CMC Markets, a UK-based financial derivatives dealer, offers online trading in spread betting, a tax-efficient way of leveraging the financial markets. CMC Markets will predict where a price of anything will stand at a specified time in the future. The prediction is in the form of a spread which is the range between low and high estimates. The trader than bets on those prices, buying at the high price if they believe the price will rise from current levels and selling at the low price if they believe it will fall.

Spread-betting profits aren’t liable for capital gains tax, but spread-betting losses can’t be set against other gains to reduce tax.

A financial spread bet is known as a derivative – it isn’t regarded as live share. Traders can take a position against the value of an underlying financial instrument moving down- or upwards in the market place. With spread betting, the trader doesn’t actually own the stock they are betting on – they simply speculate on the direction that the spread of the price of that stock will move.

Trade on Wide Range of Markets

The advantage in this is that the trader can also make money on a stock that goes down. With spread betting, apart from stocks and shares, there are other money market instruments like currencies, indices, gold, oil etc that have spreads to bet on.

The main benefit is being able to bet on things going down – to make money during the good and the bad times. Spread betting offers leverage or margin so that when placing a bet, you don’t have to put down the full value of the bet – you only have to put down a fraction of the total value of the transaction. What this does is it frees up the rest of your money to spend as you wish elsewhere. You can therefore have many bets placed at the same time, as opposed to having all your money put on one single action. Spread betting allows for potentially greater gains.

You can make a bet without taking down the full value of the position. Your funds are not tied up in one trade, and you can use the rest for other investments. Some other benefits of spread betting are:

  • spread bets are designed for short-term trading. They gave advantages over normal dealing such as the ability to trade on margin and the ability to go short.
  • no fees or commissions
  • thousands of markets to trade online
  • 24 hours dealing
  • mobile trading – apps give you an advantage to trade from anywhere.
  • spread betting providers are regulated
  • limit your losses – a risk management system means you’re able to manage your account easily. The simple order functionality means that limiting losses and maximising returns is as easy as ever

Spread bets are a simple but effective way to invest in financial markets. It is particularly attractive for those investors who don’t have pots of risk-capital available. Its advantage lies in that fact that it offers trades a stake in a larger number of shares, meaning the gains can be far higher than if they just bought the actual shares.

Get Going – without Large amounts of Money

If you’re new to trading and still getting into trading, spread betting is a great way of gaining trading experience. This is one of the huge benefits of spread betting for beginners – simply it doesn’t require you to bet with large amounts of money.

How Do Gold, Bitcoin and the US Dollar Stack Up?

Rosland Capital recently released an informative infographic which I posted below. It shows some of the ways that Gold, the US Dollar, and bitcoin compare based on information from their page on precious metals IRAs. Given the big moves in gold and the growing prominence of bitcoin, it makes sense to try and learn get educated about them, especially with the US Presidential coming. Enjoy!



What’s the Difference Between Spread Betting and Stock Investing?

The following is a 3rd party contribution:

If you look at spread betting and traditional stock investment casually, it might be difficult to understand the difference. In reality, these two investment types couldn’t be more different. They both have their place in the life of the smart investor, but it’s important to understand what the differences are so that you can include them in your portfolio appropriately.

First of all, spread betting and stock market investment may have a lot of the same stocks involved, but this doesn’t mean that they are the same thing. With stock market investment, you are buying up small pieces of different companies. With stock, you are a real owner of a portion of a company. With spread betting, there is no ownership whatsoever. You are making financial speculations about the way a stock’s value is going to change (spread betting also included things like currencies, indices, commodities, and other financial entities).

Second, stock investing and spread betting are totally different in the risk incurred when waiting for that return. With stocks, prices can and do fluctuate very quickly. But most sound investors don’t invest in just one or two stocks at a time. Instead, they diversify, so that if one stock tanks the other ones’ growth balances out that loss. Spread betting is totally different. Since there is no ownership, diversification doesn’t matter in the same way. No matter how many stocks you are focused on (you might be betting on the whole stock market!), you are only concerned with a single price: does it rise or does it fall, and did the value change in the direction that you picked?

Third, stock market investment and spread betting take place in entirely different platforms. Trusted spread betting platforms like ETX Capital allows you to trade on Forex as well as commodities and indices, but (again) they’re not actually selling you ownership in anything. As such, they are regulated completely differently than traditional stock brokers are. If you want to buy stocks, you’ll have to go through a company that is licensed and regulated for the sale of stocks and bonds.

Finally, stocks take time to make money for their investors, especially if the investor is well diversified. Some people strike it rich by picking winners in the stock market, but most people know that this is extremely risky and opt instead for diversified funds. These usually take decades to grow to great levels. On the flipside, spread betting investments can resolve in minutes, hours, days, or weeks. The time period is almost immaterial because you are just concerned with the direction the price changes, beyond the limits of the buy and sell spread.

At the end of the day, stock market investment and spread betting couldn’t be more different, even though they both focus on many of the same financial options. There are investors who prefer one or the other, and many who like both. Both investment forms have their place. At their best, spread betting can provide fast growth and stock investment can give sure, steady growth. Why not try both?

Stock Market Variability and Volatility in 2016

One of my favourite weekly read is the updates from 361 Capital’s Blaine Rollins. The other day, when reading the most recent edition, there was a graph that jumped out at me. I’ll share it with you in a second.

But first, let me set it up for you.

Think about your stock portfolio. And in particular, think about how much it swings around on any given day. Does that get a reaction from you? Should it?

Well, as I was saying, I saw an interesting graph (source)…


Do you see what that means? Essentially, in the US, over 70% of daily price movement in equity markets is due to macro variance. Talk about correlations!

Basically, that means it doesn’t matter what stock you pick. 7 times out of 10, your fate is going to be dictated by something outside the company.

And while we’re at it, here’s another interesting chart from Eddy Elfenbein at Crossing Wall Street that shows volatile days are not spread out. When it rains it pours.

screen-shot-2016-09-13-at-9-49-03-pm So what does it all mean? Is it actionable? Well, not really.

First of all, I think it’s Just something to be aware of. When times get crazy, it’s not necessarily because you’ve done anything wrong. It’s just the way it goes. Emotions take over, everything moves in a convoy and it all happens at once.

The other thing that’s not mentioned is magnitude: If during the 30% of the time your stocks are moving on their own accord they are steamrolling higher by huge margins, well, then maybe this isn’t so horrible after all.

As with everything in investing, there are nuances, quirks and

Finance Your Canadian Lifestyle

A friend of mine sent me a great infographic, originally created by the folks at RateHub. They’re a wonderful resources for anyone interested in finance (especially when it comes to credit card deals and mortgage rates).

Anyways, without too much more comment here is the infographic. It shares some great tips for financing your life in Canada using registered accounts. Check it out!

Best savings accounts to meet your savings goals
Finance Your Life infographic by RateHub.ca.


harvest season

Harvest Season

It’s that time of year: Back to school. Back to work. And time time to tend to the crop.

There’s something about the pending end of summer that always gets me. It probably has something to do with 20 years in the educational-industrial complex.

Nonetheless, after months of fun, frolicking in the sun, my attention starts to turn. I’m focused on productivity, output and grinding my way through the incoming winter months. It’s time to get busy. Seriously.

So here’s to a good September. To pushing yourself. To committing to a course of action and seeing it through – even when things get tough. You can change your direction to your goals, but not your decision to achieve them.

Now let’s make this fall count: With your work, your investments, and your family. Define your priorities, and focus on them ruthlessly. Cut the noise. Build your peloton. And live your life.

I hope you had fun while the sun was shining. But now, the days are getting shorter. Are you ready for it?

Do you feel a change of atmosphere when September rolls around? What are you going to be harvesting in this upcoming semester?


Investing and Trading Rule #1

Recently, I wrote about the most important part of stock trading. And today, I want to expand on that.

Because when it comes down to it, the critical concept of positive expectancy I previously espoused on, is based on trading and investing rule #1. So what is this rule?


Trading and investing rule #1 is: don’t lose money.

Of course, in risky and speculative activities like trading and investing, this is impossible. There’s no reward without risk. But as long as you don’t lose A LOT of money, then you’re doing well. It’s about avoiding the crippling losses that can take a big bite out of your account.

Now, this advice to not lose money is pretty basic. And some of you might even scoff at it. But keeping losses small (and risk in check) is key to lasting success in the stock market. Plain and simple.

So here are some of the common ways people lose a lot of money on their stock trades and investment strategies:

— not having an exit plan
— not sticking to their exit plan, often due to emotional shortcomings or a lack of discipline
— not using stop losses
— changing a stop loss after the order has been placed
— falling in love with a stock or security
— holding a stock in a downtrend
— averaging down into a losing stock
— ignoring data that refutes your hypothesis
— not wanting to admit you were wrong

As you might have guessed, it usually comes down to that last reason. Your ego wants to be right; often, more than it wants to make money. Seriously.

So the question becomes: are you controlling your ego, or is it controlling you?

If you’re not sure, just look at your portfolio. If you’re holding any big unrealized losses then the answer is likely to be yes. Even if you tell yourself it’s a (mis)adventure in fundamental investing, well, are you sure your initial thesis hasn’t changed?

Think about risk management. Like they say in the book What I Learned Losing a Million Dollars: there are only a couple reasons people lose money. There are infinite ways to make bank. But only a couple ways to lose it.

So don’t lose money. Keep losses small. And survive to fight again another day.

You need money management skills the REST OF YOUR LIFE. Take it seriously. And don’t lose a lot of money.

No stock trading methodology is perfect 100% of the time. So you need to know how to lose before you can consistently win. Do you?

And finally, sitting on the sidelines isn’t an option either. Sure, inflation is low right now. But that can change and over the long term, stuffing your cash in a mattress isn’t a viable strategy. The risk of inaction is the greatest risk of all.

Maybe that robo-advisor isn’t such a bad idea after all. At least they’re not likely to lose your money. Can you say the same thing about your trading?

I hope so.