Posts Tagged ‘should’

What Should You In Invest In? Money Market, Banker’s Acceptance Or Treasury Bills

What Should You In Invest In? Money Market, Banker’s Acceptance Or Treasury Bills

Money Market Account Interest

When working with a Money Market account it is important to remember that it is very similar to using a standard savings account. The process that is involved with opening and using this type of account is almost identical. The way it works is that an investor will open a money market account at a bank or credit union, and then the financial institution will pay the investor interest based on deposits that are put into the account. In turn, the financial institution will issue bank loans to other individuals, but at a higher interest rate than they paid the investor.

One of the best aspects of a money market account is that the interest is compounded on a daily basis and paid to the investor monthly. It is important to remember that interest rates can vary between financial institutions. One of the major differences between a money market account and a more traditional savings or checking account is that the more money that is deposited, the higher the interest rate will be. It is important for the potential investor to first speak to their financial institution about fluctuations in interest rates, and always shop around for the best deals possible.

Banker’s Acceptance

Banker’s Acceptances are formed by non-financial institutions, which are also considered short-term credit investments. The advantage of this type of investment is that they are usually traded below face value in a secondary market, and that banks are guaranteed to make payments. The way this works is that a banker’s acceptance is like a negotiable time draft, which finances various transactions for corporations. This is usually used when a foreign trade partner’s creditworthiness is in question. This type of investment does not necessarily need to be held to maturity.

Treasury Bills

Treasury Bills are very popular as they are marketable money market securities. The reason for their popularity is because of their overall simplicity. They are short-term securities that mature one year after the date that they were issued. The interest that they incur is the difference between the purchase price and the price the investor receives at maturity. These are purchased on a non-competitive bid process, by the bidder receiving the full amount or a competitive amount where the bidder is required to specify his or her desired rate of return; if the desired rate of return is too high, the bidder will not receive any or all of their desired securities.

One reason that Treasury Bills are popular is their affordability and their risk free nature. They are also exempted from both state and local taxes. The one disadvantage is low returns on investment. The rate of return on a Treasury Bill is not as high as one would receive from other traditional investments. It is also important to remember that there are penalties for cashing out before the maturity date.

Treasury Bills are also sold cash management bills. This is done by re-opening sales of bills that have matured at the same time and are considered outstanding. Many large investors purchase this type of bill through a commercial book entry system. For those who are individual bidders, there is a non-competitive holding system called Treasury Direct that is designed for small investors who hold their investments until maturity.

If an investor wants to sell their bill before it matures, this can only be done if he or she first transfers their securities to the commercial book entry system. This can only happen with a depository institution that also holds an account with the Federal Reserve Bank.

Index Fund Trading Using Technical Stock Market Analysis – What Every Trader Should Know

Index Fund Trading Using Technical Stock Market Analysis – What Every Trader Should Know

Index Fund trading using technical stock market analysis can be one of the most profitable…or most costly exercises you will ever undertake.

While trading a basket of stocks has it’s advantages, such as removing the risk of any single company you own going bust and taking all of your money with it, stock indexes (on which index funds are based) can tend to be highly volatile, especially the smaller ones.

The S&P 500 is probably one of the worlds best know stock indexes, and it has a long history of strong trends that have made and lost traders fortunes over the years. By trading a managed fund that tracks the index, options over the index, futures contracts over the index or Contracts For Difference (CFD’s), we can participate in the movements of the market.

The easiest way to do this (and the system that many mom and dad investors use) is to simply buy a managed fund like the Vanguard 500 Index Fund. This works fine when the trend is up, but what about when the trend is heading in the other direction? There are several mutual funds that trade inversely to their respective index. One of these can be used to trade the downside when prices are falling, as they do from time to time, sometimes quite spectacularly.

The problem with most of these funds is you have no leverage. This is why many traders move on to index fund trading through derivatives such as futures contracts as an alternative to simply buying and holding mutual funds. While the margin for the full S&P 500 futures contract is too high for the average trader, a smaller contract is available called the S&P Emini; which mirrors the larger contract, but is only 1/10th the size. This allows anyone with an adequate account to safely trade this liquid, often strongly trending market.

The S&P Emini futures contract gives you tremendous leverage to movements in the underlying market. Of course, if you have no idea how to trade, this leverage is a double edged sword (and you’ll most likely get cut). Index Fund trading means you MUST have a good understanding of technical analysis and have clearly defined trading rules to make it work. It can be very profitable, but you have to learn how to do it right.

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This is why learning how to trade profitably is far more important than the vehicle you use. You must possess the skills of profitable trading before the Emini futures market or any other financial product is going to help you create wealth. This is especially true when the concept of leverage is introduced, as it is with futures contracts.

The solution? Make it your goal to find a mentor with a successful track record as a trader who can teach you what he (or she) knows, and you will be in a position to trade profitably. You need to know the difference between trends and counter trends – and then only trade trends. Once you have this training you will know, with a high degree of certainty, what the trend is and how to trade it. The lessons apply equally to both stocks and indexes, and will give you a good grounding in how to trade trending markets

By understanding trends (and understanding technical analysis will teach you this), you will be in a position to enter and exit trades with a high probability of success in any futures market or stock index you choose to trade.

Some of the common mistakes and attitudes that uneducated traders and investors make are:

* Not knowing where to start in trading or investing

* Holding losing trades, hoping they will go back up so they can get out without a loss

* Buying on rumor, tips or gut feel – always a great way to the poor house

* Continually trying to land a ‘home run’ to make back previous losses

* Closing out positions early as soon as they start to become profitable

* A feeling that the market is against you. The market has no memory; it doesn’t know or care about you

* Buying expensive software analysis programs that don’t work

All too often, people jump into index futures trading head first without a thorough understanding of exactly how they are going to approach the market. The result is usually nothing short of disastrous. A successful trader treats trading as a business. The first step in the process of becoming a profitable trader is to construct a business plan, much like one that you would use for a conventional business.

A business plan to a trader is known as a trading system, and like a business plan it is used to define the exact strategy of actions that are used to create a profit. The key to successful trading is a properly implemented strategy, not subjective decisions based on your opinion of the market or the news of the day. The three key ingredients to becoming a successful share trader are:

1. A proven trading system; look for RESULTS not hype when choosing a coach or mentor to teach you how to trade. Personal one-on-one coaching is best, so search out a coach who will be there for you

2. The tools to implement the system; don’t reinvent the wheel. Use the proven tools your mentor shares with you and get started the right way

3. The ability to implement the system. Profitably trading, especially trading the Emini futures contract, requires a mindset that only a good teacher can install. Without this mindset, you will most likely fail to make it as a trader in this fast paced market.

Learn these three things and you have a wonderful opportunity to build a profitable Emini trading business. Without them, no matter whether you are trading index funds, options or futures, you’ll always struggle to make it as a trader.

Related Vanguard Money Market Interest Articles

Where should you invest a down payment for a mortgage?

Where should you invest a down payment for a mortgage?

Purchasing a home is one of the most exciting things a family can do, but such a long-term commitment requires a long-term savings plan and a reasonably strict budget. It takes some discipline and patience for you to reach this goal, especially when you consider the significant amount of money you’ll have to come up with as a down payment.

When it comes to the amount for a down payment, the typical lender prefers about 20% of the total purchase price for your property. Anything less than 20% will make it more difficult for you to obtain the loan, or at the very least you’ll have to pay higher fees. This could include higher interest rates over the life of the loan, higher processing fees from the mortgage company, and a requirement that you purchase private mortgage insurance.

When you consider the amount of money involved, it’s obvious you will need to save money for some time before you will be able to afford a down payment. Unless you’re independently wealthy, you’ll probably have to follow a consistent savings plan from month to month so you can reach your down payment goals. But how should you invest this money? Should you use a simple savings account, or should you take a higher risk and go for higher returns?

It really depends on what length of time we’re talking about. If you’re investing this money for the long-term, you can afford to be a little bolder and choose investments that are more volatile but that also tend to be higher earners. On the other hand, if you need to access this money for a down payment within the next five years, you may want to consider a more stable approach.

Look at the stock market, for example. In the 1990s things were going great, and you could have been getting returns of 10%, 15% or 20% per year on your investment. On the other hand, if you placed your savings into the stock market during the mid-2000s, your money could have been wiped out during the financial crisis of 2007 and 2008.

Assuming you wish to buy a new home within the next five years, we would highly recommend a safer approach such as a money market mutual fund account. This kind of account will safeguard your principal (which is the original amount of money invested), and it will provide some interest along the way even though this interest rate tends to fluctuate.

Although the interest rates may not be very attractive at times depending on economic conditions and monetary policy, a money market funds account should at least beat a traditional savings account at your local bank.

The Vanguard’s Prime Money Market Account is one option you should consider when looking for a place to park your down payment money in the short term. At the time of this writing, this particular company only requires 00 to open an account. Another option is to use an online company with few branches like Etrade. The low number of branches helps reduce overhead and increase interest rates.

Find More Vanguard Prime Money Market Interest Rate Articles

What Every Consumer Should Know About Checking Account Rates

What Every Consumer Should Know About Checking Account Rates

What if, instead of just a regular checking account, you had an account which paid you back?  It’s possible when you open an account with interest, allowing you to take advantage of competitive checking account rates.  But how can you be sure you’re getting a good deal?  Here’s what to look for if you are considering opening an interest bearing checking account.

How to Get the Highest Rates

The highest checking account rates aren’t hard to find.  There are plenty of Web sites which make it easy to compare the interest amounts on these types of accounts.  Be sure to also check the particular terms, as there may be a minimum balance involved to maintain the competitive interest rate or a monthly fee if you fall below a certain amount in your account.  Ideally, you should keep a minimum balance of ,000 in your account to avoid monthly charges and maintenance fees.  Having this minimum balance will also help you take advantage of better checking account rates.

Look Beyond the Numbers

A checking account with interest is about more than just the numbers.  You’ll also want to look for other convenient features such as a free check card (debit card) that you can use anywhere credit cards are accepted. Also, be sure to ask your bank if the checking account rates are compounded daily and posted to your account monthly.  This lets you benefit from compound interest where, the more you save, the more you can earn.  Be sure that you have the ability to access your account online, 24 hours a day, 7 days a week.  This free online access will let you manage your account from anywhere – making it easy to see how much you’re earning with competitive checking account rates.

Greater Convenience

Your bank also shouldn’t restrict how many checks you can write.  Look for unlimited withdrawals and written checks along with the ability to link your checking account to other accounts for overdraft protection if desired.  One choice of bank that will let you take advantage of competitive market rates while giving you all of these flexible features is the interest checking account at Aurora Bank (Equal Housing Lender, Member FDIC).   But no matter which account you choose, getting the best checking account rates is only the start. 

Be sure to look into savings accounts, CDs and money market accounts if you’re looking to save for short term or long term purchases.  Having an account that pays high interest rates is just one way to make your money work harder while giving you easy, streamlined access to your cash when you need it, along with all of the features you’d expect from the best checking accounts.

First-time Buyers – Why you Should Spend Less Than you Can Afford for your New House

First-time Buyers – Why you Should Spend Less Than you Can Afford for your New House

Almost all first-time home buyers find that their income will only allow them to qualify for a fixed-rate mortgage that will buy a house that is smaller or less desirable than the house they’ve been dreaming about. When they discover this limitation, many young couples start talking to their loan officer about an adjustable rate mortgage with a low starting interest rate. This may allow the buyers to qualify for a loan on a nicer house, but they’ll still struggle to make enough money to cover the low initial monthly payments. Most people assume they will be making more money by the time the interest rates begin to rise, but history has shown that this is quite often an unreasonable assumption.

In the last few years, many mortgage lenders and brokers have heavily marketed to people who aren’t truly able to afford the financial burden of their loans. Customers are lured in by low initial interest rates that last only for a few months – long enough for the buyers to qualify, but not long enough for them to find additional sources of income to cover the increasing monthly payments. These folks then find themselves part of the statistics in the sub-prime mortgage crisis, losing their dream homes to foreclosure.

The most rational alternative is to look for a loan first, long before you begin looking for a house. Shop around for the fixed-rate mortgage that has the lowest interest rate and closing costs. Then go looking for a house that actually costs less than the loan you’re prequalified for. This means you will be approaching the home buying process more like a true investment or business venture, instead of allowing your emotions and dreams to make unwise financial decisions for you.

Unfortunately, few people would agree with this advice. The difference between the money they are allowed to borrow and the house they’ve long dreamed of owning is already startling. If they begin to look at houses that are listed for less than the loan they qualify for, they may become so discouraged that they give up the idea of home ownership completely.

The housing market propped up the US economy for many months, and there is now deep concern that the slowdown in the housing market could cause significant slowdown in the economy as a whole. The fall in the value of the dollar against the Euro is thought to be caused, in part, to international worries about the subprime lending crisis in this country, which was caused by the excessive number of loans given to people who couldn’t really afford them. There has been a frenzy to buy overpriced homes on inadequate income, and many people can’t bear to consider the possibility of living in the kind of house they can actually afford.

An alternative philosophy is beginning to take hold in the small house movement. Some people are beginning to realize the full environmental costs of building, operating and maintaining large houses, and other people are beginning to realize that they are more comfortable in smaller rooms, which are also easier and less expensive to decorate and furnish. If a smaller home is an option, it’s almost always possible to find one that costs less than the amount you qualify for. The lower listing price will also reduce your down payment and closing costs, so you may have a bit left over in your bank account as a cushion in case something comes up. If your car needs repairs or you have a few medical bills, you’ll still be able to make those monthly mortgage payments.

If you cannot abide with the idea of finding a smaller house than you qualify for, another option is to purchase the larger house you want, but in a less desirable neighborhood. A house in a working class neighborhood may not impress your professional friends, but the lower mortgage payments may be worth the move – and you could be the vanguard of a ‘gentrification’ movement in the neighborhood.

You can also save on the initial price of a house by finding one in less than perfect condition. Many homes are sold for far less than they are truly worth simply because the seller failed to paint the walls before listing the house, or the home has been left empty without proper upkeep on the lawn. Perhaps a new carpet is needed, or the wood floors beneath the old, grungy carpet could be refinished. Perhaps you can see that the outdated fixtures in the bathroom could be replaced relatively cheaply, but the seller just didn’t want to bother doing it.

Although living in a house that is being remodeled could be an unwelcome strain on any couple’s relationship, most people can survive the few days it takes to paint a room or two. If you’re willing to do it, you could knock thousands of dollars off the loan you have to sign for, and that will result in many more thousands of dollars in interest payments that you never have to make.

It just doesn’t pay to set yourself up for the heartbreak of foreclosure. Try to ignore the positive, bubbling marketing efforts of your mortgage broker and real estate agent (who are both looking for a bigger commission), and find a house you can truly afford – even if you don’t get that raise next year.

Top 10 Small Business Calculators Every Entrepreneur Should Have

Top 10 Small Business Calculators Every Entrepreneur Should Have

How much money do you need to start your new business?

Should you get a loan, line of credit, or credit card?

How will you decide the effectiveness of each of your marketing campaigns?

These are just a few of the key questions that successful startups and growing companies ask so they can make confident financial decisions.

Are you prepared to answer questions like these? Do you have a system in place or tools that can help you get the answers you’re looking for?

Not to worry because whether you’re in the early stages of starting a business or growing one, there are free small business calculators that can help you in evaluating different aspects of your business so you can get the answers you need quickly and efficiently.

Here are my top ten free calculators for entrepreneurs:

1) Starting Costs Calculator – Estimate your startup costs using this simple calculator and avoid missing some of the most common expenses that get missed.

2) Cash Flow Calculator – This calculator shows you how business-t0-business sales, carrying inventory, and fast growth can absorb your company’s money. By changing variables you can see the immediate impact it can make on your cash flow.

3) Credit Card Calculator – You should always know firsthand how long it will take to pay off your company’s credit card debt. If you have business debts on your personal credit cards then you should consider transferring the balance to a business credit card instead.

4) Business Loan Calculator – If you are considering on obtaining a loan utilize this easy loan calculator so you can determine what your payment terms will be based on loan amount, interest rate, and terms.

5) Business Lease Calculator – Thinking about financing business equipment? Estimate what your monthly payment would be if you decide to lease instead of getting a loan.

6) Investor Offering Calculator – This is a great tool for showing what both sides will get after leaving from the investment table.

7) Email ROI Calculator – If you plan on utilizing email campaigns to drive traffic to your site or landing page then this is a great calculator to help determine your return on investment.

Pay Per Click ROI Calculator – Whether you use Google, Yahoo, AOL or Microsoft for your pay per click campaign you’ll definitely find this calculator a lifesaver.

9) Direct Mail Marketing ROI Calculator – This simple calculator makes it easy to see your return on investment when implementing a direct mail marketing campaign. This tool works hand in hand with your other marketing campaigns so you can better manage your marketing budget.

10) Conversion Rate Calculator – Increasing your website conversions is something you will always be striving to improve and what better way to review that then with this handy calculator. While there are many other calculations, formulas, and scenarios you can conduct with free calculators nothing will replace good common sense and insight. Use these calculators as tools not as replacements because the bottom line is your mind is the most powerful tool of all!

So add these small business calculators to your tool chest so you can get fast answers to the key questions that make a significant impact to the future and success of your business.

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