Hoss Cents Free Financial Money Magazine

Excel Funds Launches BRIC Fund

2009-11-14T10:03:00.000-08:00

On Nov. 3, 2009 Excel Funds, a Mississauga Ontario-based fund company that focuses on investment opportunities in emerging markets launched a new fund named Excel BRIC Fund. The new fund is made up from four existing Excel funds: Excel Latin America, Excel China, Excel India and Excel Emerging Europe.

The four Excel Funds are sub-advised by: Baring Asset Management (Asia) Ltd. in Hong Kong, China managing the Excel China Fund; Birla Sun Life AMC Ltd. in Mumbai, India managing the Excel India Fund; Banco Itau – Unibanco in Sao Paulo, Brazil managing the Excel Latin America Fund; and Baring International Investment Ltd in London, England managing the Excel Emerging Europe Fund.

This combining of four existing funds with proven track records provides investors the opportunity to purchase one fund instead of four.

"The BRIC nations represent more than 40% of the world's population and are among the fastest growing economies," says company President and CEO, Bhim D. Asdhir. "Yet, on the whole, Canadian investors have less than 1% of their investment portfolios invested in these economies. These markets are too big to ignore, as the combined GDP of the BRIC nations now exceed the GDP of the United States of America."

The management fee is scheduled to be 2.5% which is the same as each of the four current funds.

The fund may be purchased with a $500 minimum investment and has both-front end and deferred sales charge options. Speak to your financial advisor if you are interested in making an investment in this fund.

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: Nov.21, 2009
Return to previous post from Excel Funds Launches BRIC Fund

Related Posts:

How Do Mutual Funds Work The Loads

Defintion of Mutual Funds

Alternative Energy Mutual Funds

Green Mutual Fund Investing

Index Mutual Funds

Tax Free Savings Account

Investment Strategy Dollar Cost Averaging

Market Timing

The Best Mutual Funds

Finding the Best Mutual Fund

Excel Funds Launches BRIC Fund
BMO Introduces Nine New ETFs
PH&N Bond Fund Series D: A Best Bet Mutual Fund

GrowthWorks and Seamark Asset Management Agree to Merger Plans

2009-11-08T06:41:00.000-08:00

GrowthWorks Capital Ltd. and Seamark Asset Management Ltd. announced plans to execute a share swap which will result in a new publicly traded company to be called Matrix Asset Management Inc. The new company will control about $3 billion in assets, $2 billion of which comes from Seamark.

The deal is subject to the approval by the shareholders of the two companies, regulatory authorities and the TSX.

David Levi, founder, president and CEO of GrowthWorks said “We already have support agreements from 53 per cent of the shareholders of Seamark, and 74 per cent of from the shareholders of GrowthWorks supporting it.”

Earlier this year GrowthWorks purchased Mavrix Funds Management for $2.2 million, not to be confused with the newly formed company Matrix Asset Management Inc.

There had been lots of speculation that Seamark was a takeover candidate due to a high number of redemptions and the loss lost of some clients earlier this year.

According to Mr. Levi, Seamark shareholders will end up with 25 per cent of Matrix, while GrowthWorks shareholders will wind up with 75 per cent.

Under Matrix, the Seamark unit will continue with the institutional fund management business and GrowthWorks will work on the venture capital side.

Current plans are for Mr. Levi to become president and CEO of the merged company while current Seamark CEO Brent Barrie will retain his position and Seamark founder, Peter Marshall will serve on the board with both Mr. Levi and Mr. Barrie.

It will be interesting to watch the progress of this new company in the upcoming year. It is not often two companies, on opposite ends of the continent, merge to form one. GrowthWorks is Vancouver-based and Seamark is Halifax-based.

Stay on track,

The Hoss
Next Hoss Cents Free Financial Money Magazine Post: Nov.15, 2009
Return to previous post from GrowthWorks and Seamark Asset Management Agree to Merger Plans

Related Posts:

How Do Mutual Funds Work The Loads

Defintion of Mutual Funds

Alternative Energy Mutual Funds

Green Mutual Fund Investing

Index Mutual Funds

Tax Free Savings Account

Investment Strategy Dollar Cost Averaging

Market Timing

The Best Mutual Funds

Finding the Best Mutual Fund

BMO Introduces Nine New ETFs

2009-11-01T08:10:00.000-08:00

Image via Wikipedia

Bank of Montreal (BMO) on Oct 26, 2009 added nine new funds to their stable of Exchange Traded Funds (ETFs). This brings the total of ETFs in the BMO barn to thirteen.

The new ETFs are comprised of an exacta of industry diversified funds:

BMO International Equity Hedged to CAD Index
BMO Emerging Markets Equity Index

A trifecta of "equal weight" industry sector funds:

BMO S&P/TSX Equal Weight Banks Index
BMO S&P/TSX Equal Weight Oil & Gas Index
BMO S&P/TSX Equal Weight Global Base Metals Hedged to CAD Index

The remaining four new ETFs are fixed income funds. Three of these fixed income funds invest in federal, provincial and corporate issues, and the fourth is hedged to the Canadian Dollar.

BMO Short Federal Bond Index
BMO Short Provincial Bond Index
BMO Short Corporate Bond Index
BMO High Yield U.S. Corporate Bond Hedged to CAD

The following document provides the investor with the names, symbols and current management expense ratio (MER) for these nine new BMO exchange traded funds.

Investors may find these new additions to the BMO stable of EFTs a worthwhile bet.

Stay on track,

The Hoss
Next Hoss Cents Free Financial Money Magazine Post: Nov.08, 2009
Return to previous post from BMO Introduces Nine New ETFs

Related Posts:

How Do Mutual Funds Work The Loads

Defintion of Mutual Funds

Alternative Energy Mutual Funds

Green Mutual Fund Investing

Index Mutual Funds

Tax Free Savings Account

Investment Strategy Dollar Cost Averaging

Market Timing

The Best Mutual Funds

Finding the Best Mutual Fund

PH&N Bond Fund Series D: A Best Bet Mutual Fund

2009-10-11T12:47:00.000-07:00

Another Hoss's best bet mutual fund is The PH&N Series D bond fund. This is another fund that the Hoss and Mrs. Hoss hold in their portfolio.

The PH&N bond fund is a fixed income fund whose fundamental investment objectives are to provide relatively high yields and stability of capital by investing primarily in a well-diversified portfolio of fixed income securities issued by Canadian governments and corporations. This fund is suitable for investors with a low tolerance for risk.

According to the PH&N website, annualized compound rates of return As of September 30 2009, are as follows:

1 year 13.6%

3 years 5.3%

4 years 5%

5 years 5.7%

10 years 6.5%

As of September 30, 2009 the top ten holdings were:

Prov. of Ontario Return: 7.60% Matures: Jun 02/27 (Total % of fund 12.2%)

Prov. of Ontario Return: 4.30% Matures: Mar 08/17 (Total % of fund 4.7%)

Canada Housing Trust Return: 3.15% Matures: Jul 15/14 (Total % of fund 3.4%)

The Toronto-Dominion Bank Return: 5.38% Matures: Nov 01/12/17 (Total % of fund 3.3%)

Morgan Stanley Group Inc. Return: 4.50% Matures: Feb 23/12 (Total % of fund 2.6%)

Prov. of Ontario Return: 4.40% Matures: Jun 02/19 (Total % of fund 2.5%)

Canada Housing Trust Return: 4.10% Matures: Dec 15/18 (Total % of fund 2.3%)

The Bear Stearns Companies Inc. Return: 4.35% Matures Jul 20/12 (Total % of fund 2.1%)

Wells Fargo Financial Canada Corp Return: 5.20% Matures: Sep 13/12 (Total % of fund 2.0%)

Canadian Imperial Bank of Commerce Return: 5.00% Matures: Sep 10/12 (Total % of fund 2.0%)

The fund pays interest dividends quarterly and capital gains (if any) yearly.

For more information on this fund visit PH&N

Stay on track,

The Hoss
Next Hoss Cents Free Financial Money Magazine Post: Oct.18, 2009
Return to previous post from PH&N Bond Fund Series D: A Best Bet Mutual Fund

Related Posts:

How Do Mutual Funds Work The Loads

Defintion of Mutual Funds

Alternative Energy Mutual Funds

Green Mutual Fund Investing

Index Mutual Funds

Tax Free Savings Account

Investment Strategy Dollar Cost Averaging

Market Timing

The Best Mutual Funds

Finding the Best Mutual Fund

Hoss's Best Bet Mutual Funds: Bond Funds

2009-10-04T08:36:00.000-07:00

PH&N High Yield Bond Fund

Starting with today's edition, Money Magazine Hoss will begin a series of posts in which he reviews his best bet mutual funds.

Fixed income Bond Funds are the first category of mutual funds Money Magazine Hoss has selected for review.

The Hoss and Mrs. Hoss have included the PH&N High Yield Bond Fund, in their stable of mutual funds.

When the Government of Canada introduced the tax free savings account in 2009, The Hoss and Mrs. Hoss invested the maximum permissible amount in The PH&N High Yield Bond Fund. How has this fund performed? Since their initial investment on January 26, 2009, The Hoss and Mrs. Hoss have realized a return of over 14%.

The PH&N High Yield Bond Fund investment objectives are to provide a high level of income and the opportunity for capital appreciation by investing primarily in a well-diversified portfolio of fixed income securities issued by Canadian corporations.

To achieve the fund's investment objectives, the manager invests primarily in medium quality Canadian corporate bonds and preferred shares and government bonds issued or traded in Canadian and U.S. dollars. The average term to maturity of the portfolio is managed within strict guidelines, typically between three and ten years.

If you are an investor with low or moderate risk looking for a bond fund with high levels of current interest income, this fund may be of interest to you.

As with all Mutual Funds there is some risk with the purchase of this fund. The principal risks associated with an investment in this fund are market, interest rate, credit and liquidity risks.

For more information see PH&N High Yield Bond Fund.

Stay on track,

The Hoss
Next Hoss Cents Free Financial Money Magazine Post: Oct.11, 2009
Return to previous post from Hoss's Best Bet Mutual Funds: Bond Funds

Related Posts:

How Do Mutual Funds Work The Loads

Defintion of Mutual Funds

Alternative Energy Mutual Funds

Green Mutual Fund Investing

Index Mutual Funds

Tax Free Savings Account

Investment Strategy Dollar Cost Averaging

Market Timing

The Best Mutual Funds

Finding the Best Mutual Fund

We have stopped our economic freefall - President Obama

2009-09-21T06:33:00.000-07:00

Image by Getty Images via Daylife

In his weekly address to the nation, President Obama gave credit to all nations for taking measures which he believes have stopped the economic free-fall. However, there is still much work to be done and he believes the G20- Summit in Pittsburgh September 24-25 will provide an opportunity for "a five-month checkup to review the steps each nation has taken – separately and together – to break the back of this economic crisis."

President Obama pointed to the Recovery Act, which was enacted in February, as an example of action his administration has undertaken to spur economic growth. He also stated that they have worked hard to free up the credit market to put more money into the hands of the consumer.

At the G20 conference the United States is going to "discuss some of the steps that are required to safeguard our global financial system and close gaps in regulation around the world – gaps that permitted the kinds of reckless risk-taking and irresponsibility that led to the crisis".

To this end President Obama is pushing his Consumer Financial Protection Agency proposal (currently before Congress). This agency will have clearly defined rules aimed at preventing shady lending practices such as:

Loan contracts written to confuse

Hidden fees

Financial penalties issued without warning

President Obama gives his assurance that this agency will both establish clear rules and enforce those rules.

He recognizes that Wall Street banks would rather maintain the status quo and have hired lobbyist to work at stopping the bill currently before Congress, but this does not deter his determination to stop the business as usual mentality which this time could result in total financial collapse.

We have all seen how quickly many financial institutions have decided to pay back the government loans rather than abide by the strict rules applied to those loans.

Money Magazine Hoss agrees with the President's philosophy and sincerely hopes that he sticks to his guns and does not succumb to the pressure that will undoubtedly be put on him and his administration to withdraw their proposal for a new Consumer Financial Protection Agency.

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: September 27, 2009
Return to previous post from We have stopped our economic freefall - President Obama

Related Posts:
G20 Summit
AIG Bonus Scandal Continues

Half of Americans under 65 to lose their health care?

2009-09-13T07:53:00.000-07:00

Image by Getty Images via Daylife

A brand new report from the Treasury Department indicates that at some point over the next ten years approximately half of Americans under age 65 will lose their health care coverage.

In his weekly White House address, President Obama assured the American people that he would not let this happen. "In the United States of America, no one should have to worry that they’ll go without health insurance – not for one year, not for one month, not for one day. And once I sign my health reform plan into law – they won’t."

President Obama took this opportunity to tell those Americans already with health insurance that nothing in his plan would require them to change their doctor or the coverage they have. Rather, his plan would make sure their insurance would be improved. "We’ll make it illegal for insurance companies to deny you coverage because of a pre-existing condition, drop your coverage when you get sick, or water it down when you need it most. They’ll no longer be able to place some arbitrary cap on the amount of coverage you can receive in a given year or over a lifetime, and we will place a limit on how much you can be charged for out-of-pocket expenses – because no one should go broke just because they get sick."

In addition, those currently without coverage will be able (under his plan) to get quality plans at affordable prices.

He reaffirmed his commitment that any plan he signs will not to add one dime to the United States deficits. He actually predicted a deficit reduction of $4 trillion over the long term. How? By successfully slowing the growth of health care cost by a mere one-tenth of one percent.

President Obama stated the time for action is now.

Money Magazine Hoss agrees with the President. Enough debating. What is currently in place is not working. It's time to try something new. In a country as abundant as America, it is a travesty, an international embarrassment, that so many are without the means to get health care.

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: September 20, 2009
Return to previous post from Half of all Americans Under 65 to lose their health Care?

Related Posts:
Health Care Public Vs Private
Insurance, Insurance, Insurance
Obama McCain Health Care Plans

Unemployment Hits 26-Year High

2009-09-06T07:55:00.000-07:00

From The Hoss's Mouth

The US jobless rate reached a 26-year high according to government reports. August had a net job loss of 216,000 jobs, bringing the total job loss since the beginning of 2008 to 6.9 million. The current unemployment rate is 9.7%.

The silver lining in this dark cloud is that fewer jobs were pruned in August than in July (216,000 vs 230,000). In addition it was the lowest job loss since August 2008.
Christina Romer, Chairwoman of the White House Council of Economic Advisers, kept a positive outlook by saying it (job losses) is still a terrible number but it is certainly showing those job losses moderating and that really is what is important. In her opinion this demonstrates that the stimulus package is working and they (government officials) will continue to monitor the situation.

The only sectors to show an increase in employment were health care and education. Construction, manufacturing, financial services, government and professional services all incurred job losses.

It is usual for teenagers to have difficulty in finding summer jobs and this may have an effect on the record high unemployment percentage. For example, the teenager unemployment figure for August was 25.5 % versus 10.1% for adult males and 7.6% for adult females.

It will be interesting to see what next months figures bring, but let’s hope that with students returning to school and perhaps a continued decline in job losses that we will see a meaningful drop in the unemployment rate.

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: September 13, 2009
Return to previous post from Unemployment Hits 26 Year High

Related Posts:
Has The Economic Recovery Started?
General Motors Files For Chapter 11 Bankruptcy
AIG Bonus Scandal Continues

Health Care Public Vs Private

2009-08-29T18:25:00.000-07:00

Image by Getty Images via Daylife

From the Hoss's Mouth

Why does health care cost so much? Forget all you hear about the high cost of developing new equipment and drugs, over-utilization, increased salaries for health care professionals, and an aging population. Money Magazine Hoss can give you the answer for the high cost of health care in one word: GREED.

Greed by health insurance companies who are in the business for the sole purpose of generating a profit. They could care less about providing affordable health care insurance for companies and individuals.

How does Money Magazine Hoss come to this conclusion? He does so by reading private for profit insurance horror stories posted all over the Internet and by reading private insurance whistle blower testimony given before Congress.

Health insurance companies are notorious for denying valid claims, using excuses such as claimant had a pre-existing condition, claimant provided false information on their application form (even if it was an honest mistake). Testimony before Congress indicated for-profit insurance companies employ the following strategies:

Regular meetings to identify high cost areas and how to redesign benefits to control them.

Multiple exclusion clauses which are unknown to doctor or patient until used by the insurance company to deny a claim.

Pre-existing condition exclusions which enable the plan to take steps to link a patient’s current diagnosis with some prior diagnosis and thus deny the claim

Misleading advertising which only highlights the benefits of the plan with no mention of the plans restrictions.

Denials on the grounds the treatment is not medically necessary--this is the insurance companies' ultimate cost control tool.

The above examples are by no means a complete list of all the methods used by insurance companies to reduce their costs.

For more info, see the testimony of LINDA PEENO, M.D.

Perhaps the most disturbing tactic Money Magazine Hoss has come across is when a terminally ill patient’s health care claim is denied. The health insurance company knows full well that the claimant will die before s/he can process an appeal, and thus they avoid paying for any treatment prior to death. Of course they always claim they had legitimate reasons for denying the claim.

Money Magazine Hoss resides in Canada, and we have a public health care system which, although not perfect, does take the profit incentive out of health care. The premiums are minimal and provisions are made for those with no or very little income. We do experience some delays but emergency cases are given priority.

Money Magazine Hoss supports President Obama’s public health care option, in fact he would like to see health care totally removed from for-profit companies.

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: September 06, 2009
Return to previous post from Health Care Public Vs Private

Related Post
Obama McCain Health Care Plans
Insurance, Insurance, Insurance

Working Capital Per Dollar of Sales

2009-08-23T08:21:00.000-07:00

From The Hoss's Mouth

Working Capital Per Dollar of Sales is another financial calculation investors use when analyzing the performance of a company. This calculation tells the potential investor the approximate working capital a company should have.

Simply put, working capital is Current Assets minus Current Liabilities. Working capital per dollar of sales is the Working Capital divided by Total Sales and is expressed as a percentage.

Working Capital Per Dollar of Sales = (Current assets - Current liabilities)/Total Sales.

Current assets and liabilities can be found on a company's Balance Sheet, and total sales is found on a company's Income Statement.

The trick for investors is recognizing the fact that working capital per dollar of sales varies across industry types.

For example, retailing businesses with substantial low cost sales require a working capital per dollar of sales of about 10 to 15 %, while industrial manufactures who produce high cost merchandise require 25 to 30%. Companies such as fast food chains, due to the cash nature of their business, often operate with a negative working capital per dollar of sales.

Smart investors, when analyzing prospective companies, are always cognizant of the fact that the character of the business plays a huge part in determining the amount of working capital per dollar of sales a business requires.

Money Magazine Hoss hopes you will find this information useful.

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: August 30, 2009
Return to previous post from Working Capital Per Dollar Of Sales
Related Posts:
Calculating return on assets (roa)
Calculating Asset Turnover
Calculating Return On Equity
Financial Statements Explained
The Balance Sheet
The Income Statement
Calculating Gross profit Margin
Calculating Operating Margin
Investment Strategy Dollar Cost Averaging
Market Timing
Calculating Net Profit Margin

Calculating Return on Assets (ROA)

2009-08-16T07:31:00.000-07:00

From The Hoss's Mouth

Return on assets (ROA) is a tool investors use to determine how competent an organization is at using its assets to produce earnings. There are two primary formulas for calculating ROA.

Method One: Net Profit Margin x Asset Turnover

Method Two: Net Income / Average Assets for the Period

Both methods are acceptable but the investor must make sure that s/he uses the same method when performing these calculations, otherwise when comparing companies the results may be skewed. Just like when calculating the win percentage of two horses in a race, a handicapper would not use a formula which calculates win percentage by using total wins divided by total races for one horse and a formula that uses total wins at today's distance divided by total races at today's distance for another. This type of comparison would not produce meaningful results.

Generally speaking, the higher the ROA the better, however remember that widely different industries produce widely different ROA's. Industries such as railroads are asset heavy and will have lower ROA's than asset light companies. So always compare companies that are in the same industries; to use an old cliche: compare apples to apples.

There are many free online financial services which provide you with ROA numbers for all companies listed on the stock exchange, therefore Money Magazine Hoss is not going to bore you with sample calculations. Why perform all these mathematical calculations yourself when somebody is doing it for you and for free? For example, a quick look at Yahoo Financial shows that Amazon has a ROA of 6.93%.

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: August 23, 2009
Return to previous post from Calculating Return on Assets (ROA)

Related Posts:
Calculating Asset Turnover
Calculating Return On Equity
Financial Statements Explained
The Balance Sheet
The Income Statement
Calculating Gross profit Margin
Calculating Operating Margin
Investment Strategy Dollar Cost Averaging
Market Timing
Calculating Net Profit Margin

Calculating Net Profit Margin

Calculating Asset Turnover Ratio

2009-08-09T08:34:00.000-07:00

From The Hoss's Mouth

Asset turnover ratio is another financial tool investors use in their analysis of a company's efficiency. It calculates a business's effectiveness at using its assets in producing sales or revenue. The formula for this simple calculation is as follows:

Asset Turnover = Revenue/Assets (Assets in the example below are averaged for the period being calculated)

Let's take a look at Amazon for an example:

In 2005 Amazon had total assets of $3,696,000,000

In 2006 Amazon had total assets of $4,363,000,000

Average Assets = ($3,696,000,000 + $4,363,000,000) /2 = $4,029,500,000

Amazon's Total Revenue for 2006 was $19,166,000,000

Amazon's 2006 asset turnover ratio: $4,029,500,000 /$19,166,000,000 = .21

What this tells the investor is that for every dollar of assets Amazon had in 2006, they sold $.21 worth of product and services.

Money Magazine Hoss must point out that when comparing asset ratios it is important to compare companies that are in the same business industry. Generally, the company with the highest ratio is the most efficient.

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: Asset Turnover
Return to previous post from Calculating Asset Turnover Ratio

Related Posts:

Calculating Return On Equity

Financial Statements Explained

The Balance Sheet

The Income Statement

Calculating Gross profit Margin Calculating Operating Margin

Investment Strategy Dollar Cost Averaging

Market Timing

Calculating Net Profit Margin

Calculating Return On Equity (ROE)

2009-08-02T07:25:00.000-07:00

From The Hoss's Mouth

Financial analysts differ in their opinions of the value of using Return On Equity calculations to evaluate whether or not to buy shares in a company. Before Money Magazine Hoss gives you the pros on cons of this argument, lets examine the equation for calculating Return On Equity (ROE).

ROE= Net Income/Shareholder Equity

Financial analysts in favour of using ROE as an indication of when to buy stock suggest that you track ROE, and when you see a company with a double digit ROE and which is continually increasing it might be wise to consider buying the stock. You can use one of the many free or pay for service financial web sites available on the Internet for tracking ROE. Note: Not all continue to list ROE, but many do.

Other financial analysts consider ROE to be of little or no value to the potential investor. They point out that Net Income is not always a reliable corporate performance measurement. Why? Because companies use varying accounting procedures when calculating items such as capitalization, depreciation and growth rate, to name a few. Therefore, they conclude the formula for calculating ROE is not always reliable to determine a company’s success or corporate value.

The differing opinions are not unlike those of handicappers selecting a horse to bet on. Some use a horse’s total earnings divided by total races to determine the horse’s potential class. Many handicappers frown on this practice, as it does not take into account other factors such as but not limited to age, sex, distance, and surface.

In summary, the use of ROE by investors as a tool for investment purposes is a matter of personal choice.

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: Asset Turnover
Return to previous post from Calculating Return on Equity (ROE)

Related Posts:

Financial Statements Explained

The Balance Sheet

The Income Statement

Calculating Gross profit Margin Calculating Operating Margin

Investment Strategy Dollar Cost Averaging

Market Timing

Calculating Net Profit Margin

2009-07-25T07:58:00.000-07:00

From The Hoss's Mouth

Money Magazine Hoss continues his series on financial performance ratio calculations with today's post highlighting Net Profit Margin. This ratio tells the potential investor how much profit a company generates for every $1 of revenue. It is considered to be a measurement of a company's efficiency in converting revenue to profit. Investors normally prefer companies with a high net profit margin. Formula as follows:

Net Profit Margin = Net income/Revenue * 100 %

We will continue using the income statements of Amazon, GM and Google to provide examples.

Amazon's Net Profit Margin :

2006: $190,000/$10,711,000 * 100 = 1.8%

2007: $476,000/$14,835,000 * 100 = 3.2%

2008: $645,000/$19,166,000 * 100 = 3.4%

GM's Net Profit Margin:

2006: -$1,978,000/$207,349,000 * 100 = -9.5%

2007: -$43,297,000/$181,122,000 * 100 = -24%

2008: -$30,860000/$148,979,000 * 100 = -20.7%

Google's Net Profit Margin:

2006: $3,077,446/$10,604,917 * 100 = 29%

2007: $4,203,720/$16,593,986 * 100 = 25.3%

2008: $4,226,858/$13,174,044 * 100 = 32.1%

Once again, as in Money Magazine Hoss's previous financial indicator examples, when we compare the Net Profit Margin of the three companies, Google without question has the best performance.

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: Calculating Return On Equity
Return to previous post from Calculating Net Profit Margin

Related Posts:

Financial Statements Explained

The Balance Sheet

The Income Statement

Calculating Gross profit Margin Calculating Operating Margin

Investment Strategy Dollar Cost Averaging

Market Timing

Interest Coverage Ratio

2009-07-18T07:48:00.000-07:00

From The Hoss's Mouth

Interest coverage ratio is the topic of today's Hoss Cents Free Financial Money Magazine. This ratio indicates a company's capacity to make its interest payments (on all outstanding debts) with its earnings before interest and taxes. Think of it this way, how often could you make the interest payments all your outstanding debts with your annual pre-tax income? This is of great importance to bond and preferred stock investors. It gives these investors an indication of the company's financial stability and how far earnings can fall before possible bond or preferred stock payment defaults.

The higher the ratio the less a company is burdened by debt expense. A company's ability to meet interest expenses becomes suspect when the interest coverage ratio is 1.5 or lower. An interest coverage ratio below 1 is a strong red flag, as the company does not have sufficient revenues to pay its interest expenses. Exception: Some companies may have no debt and therefore no interest payments, in which case their Interest coverage ratio would be 0, which of course is excellent.

Interest coverage ratio is calculated as follows:

EBIT (earnings before income and taxes) divided by Interest Expense.

Money Magazine Hoss will again, as in Calculating Gross Profit Margin Percentage and Calculating Operating Margin, use the Income Statements of Amazon, Google and GM for demonstrating how to calculate interest coverage ratio.

Interest Coverage Ratio for Amazon:

2006: $455,000/$78,000 = 5.8

2007: $737,000/$77,000 = 9.4

2008: $972,000/$71,000 = 13.7

In all three years Amazon's Interest Coverage Ratio is well above the warning level of 1.5. In addition the ratio has increased each year which is a positive signal.

Interest Coverage Ratio for GM:

2006: $11,998,000/$16,945,000 = .71

2007: $-3,351,000/$2,902,000 = -1.15

2008: $-27,043,000/$2,345,000 = -11.53

If you considered buying GM stock in 2006, the interest coverage ratio of .71 would have been a warning sign that things were not at all well with this company. The continued deterioration in 2007 and 2008 confirmed this warning sign: Definitely a poor investment. In fact as we all now know, GM subsequently filed for Chapter 11 bankruptcy protection.

Interest Coverage Ratio for Google:

2006: $4,011,297/$257 = 15,608.16

2007: $5,675,183/$1,203 = 4,717.52

2008: $5,853,596/$0 = 0

Google once again is the star. Its ratios are off the chart, and in fact as can be seen in the year 2008, they had no interest expense.

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: Net Profit Margin
Return to previous post from Interest Coverage Ratio

Related Financial Statement Calculation Information Posts:

Financial Statements Explained

The Balance Sheet

Investing Related Posts:

Beginner Investing

Types of Investments

Cash Investments

Types of Fixed Income Securities

Equities

Shares What Are They?

Senator Sessions Attacks Sotomayor

2009-07-13T09:14:00.000-07:00

Image by Getty Images via Daylife

From The Hoss's Mouth

Like many of you, Money Magazine Hoss sat down this morning to watch the beginning of the historic Senate Supreme Court confirmation hearings for Judge Sonia Sotomayor. I watched the opening statements of Chairman Patrick Leahy (D-Vermont) and Jeff Sessions (R-Alabama) Senate Judiciary Committee ranking Republican member.

Senator Sessions' opening statement was an outright attack on Judge Sotomayor. He stated it is not appropriate for a Supreme Court Judge to have empathy. His implication was that empathy equals prejudice. Sunday on the CBS TV show Face The Nation Sessions said, "When you show empathy toward one party ... you show bias toward another." This man, whose own nomination to the federal bench was rejected because of his well know racial bias, has the gall to attack Judge Sotomayor because she has empathy. Give me a break.

During his nomination hearings, Sessions was questioned about his statements attacking the NAACP as an “un-American” and “Communist-inspired” organization that “forced civil rights down the throats of people.” Those charges are not unlike recent Senator Sessions' statements concerning Judge Sotomayor’s past service on the board of the Puerto Rican Legal Defense and Education Fund (PRLDEF), a group Sessions calls “extreme” because it “brought several race discrimination lawsuits for minorities." Well, it's obvious Senator Sessions has no empathy; sounds more like racism.

In closing his opening statement, Senator Sessions asked the American public who they would rather have on the Supreme Court: a judge who applies the letter of the law or one who uses empathy in making her decisions.

I can tell you this, I would rather have Judge Sotomayor than Senator Sessions.

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: Interest Coverage Ratio
Return to previous post from Senator Sessions Attacks Sotomayor .

Related Posts:

Obama and McCain Health Care Plans

Obama and McCain Economic Plans

Obama or McCain

Financial Crisis Deppens: Obama

G20 Summit

President Obama Trims Budget by $17 Billion

AIG Bonus Scandal Continues

2009-07-11T08:35:00.000-07:00

Image via Wikipedia

From The Hoss's Mouth

AIG has asked Kenneth Feinberg, the Obama administration's pay czar, to review a scheduled performance bonus payment of $2.4 million to 43 of its top-ranking executives. Money Magazine Hoss clearly recalls the public outrage that occurred in March when $165 million in retention bonuses was paid to top executives.

It is not clear that Feinberg, the person tasked by the Obama administration, with reviewing bonuses and retirement packages for the 100 highest paid executives at AIG, Citigroup, Bank of America, General Motors, GMAC Financial Services, Chrysler, and the defunct Chrysler Financial, has the authority to halt these bonuses. Some believe his mandate is only for current and future payments, not those delayed from 2008 (as these payments are) and therefore not only has no obligation to offer his opinion, but also no authority in the matter.

This would leave the decision up to AIG, and any resulting uproar would be laid squarely where it belongs: in the lap of AIG.

Money Magazine Hoss is of the opinion that if AIG executives would spend as much effort towards making AIG a viable company as they do in obtaining their retention bonuses, the tax payers may then have some hope in recouping the loans they made to AIG.

This smoke screen by AIG will not work. When honest hard working people are losing their jobs and life savings in increasing numbers there is no place for retention bonuses for already high paid executives. If these executives are that great, let them seek employment elsewhere. After all , it is these very same executives who caused the AIG financial catastrophe.

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: Interest Coverage Ratio
Return to previous post from AIG Bonus Scandal Continues.

AIG Retention Bonus Scandal

AIG Too Big To Fail

Has The Economic Recovery Started?

G20 Summit

President Obama Trims Budget by $17 Billion

General Motors Files For Chapter 11 Bankruptcy

Financial Year in Review

Financial Crisis Deppens: Obama

Calculating Operating Margin

2009-07-04T07:33:00.000-07:00

From The Hoss's Mouth

Operating Margin

Money Magazine Hoss occasional will wager a dollar or two on the ponies (regular readers of the blog are well aware of this). Before investing a wager on a horse, he likes to measure the efficiency of each horse in the race using several different handicapping tools. For example, he will divide a horse's total wins by total races to obtain the horses win percentage and compare that figure to the other horses in the race. Wise investors also use several mathematical calculations to measure a company's efficiency before buying stock.

In his last post, Money Magazine Hoss showed you how to calculate Gross Profit Margin Percentage. This week, Operating Margin or Operating Profit Margin is explained. Companies with a high operating margin usually have lower fixed costs and better gross margins than their competitors. This gives them some flexibility in determining prices, which can be an advantage during economic down turns.

Operating Profit Margin is calculated as follows:

Operating Profit Margin = operating income (divided by) total revenue.

Money Magazine Hoss will again use the 2006, 2007 and 2008 income statements of Amazon, General Motors and Google.

Amazon's Operating Margin:

2006: $389,000/$10,711,000 = 3.6%

2007: $655,000/$14,835,000 = 4.4%

2008: $842,000/$19,166,000 = 4.4%

General Motors Operating Margin:

2006: $9,277,000/$207,349,000 = 4%

2007: $-4,390,000/$181,122,000 = -2%

2008: $-21,284,000/$148,979,000 = -14%

Google Operating Margin:

2006: $3,549,996/$10,604,917 = 33%

2007: $5,084,400/$16,593,986 = 30%

2008: $6,631,969/$21,795,550 = 30%

Now, Money Magazine Hoss is not a genius, but if this was a horse race, it wouldn't take a genius to figure out Google is the best bet, Amazon is worth a look, but General Motors should be put out to pasture.

Stay on Track,

Money Magazine Hoss

Next Hoss Cents Free Financial Money Magazine Post: Interest Coverage Ratio
Return to previous post from Calculating Operating Margin

Calculating Gross Profit Margin Percentage

2009-06-26T07:55:00.000-07:00

From The Hoss's Mouth

In today's post, Money Magazine Hoss takes a look at calculating gross profit margin percentage. He will compare the income statements of three companies: General Motors, Amazon and Google. In particular, we will concentrate on the total revenue and gross profit for the years 2006, 2007 and 2008, from which we can calculate the gross profit margin (GPM) for each company for each year.

Why is this number important? Generally speaking, high gross profit margins are considered to be the signs of efficient companies which tend to make decent profits. Investors favor this type of company and are usually willing to pay a higher price per share. This will be clearly demonstrated in our three examples.

Calculating Gross Profit Percentage is not difficult; it is simply Gross Profit divided by Total Revenue.

Let's take a look at the first at the first company Money Magazine Hoss has illustrated for you, Amazon:

Amazon 2006 GPM = 245,600/10,711,000 * 100 = 22.9%
Amazon 2007 GPM = 3,353,000/14,835,000 * 100 = 22.6%
Amazon 2008 GPM = 4,270,000/19,166,000 * 100 = 22.3%

Amazon's GPM has remained constant for the three year period at about 22.5%. A good figure.

Next, Money Magazine Hoss has prepared the GPM for General Motors for the same time frame:

General Motors 2006 GPM = 4,267,000/207,349,000 * 100 = 20%
General Motors 2007 GPM = 12,121,000/181,122,000 * 100 = 6.7%
General Motors 2008 GPM = -1,624,000/148,979,000 * 100 = -11%%

General Motors GPM has been a disaster. Over a three year period it has declined from 20% to a negative figure. Not a company Money Magazine Hoss would invest in.

The third and final company that Money Magazine Hoss selected for the sample three-year period is Google. Take a look:

Google 2006 GPM = 6,379,890/10,604,917 * 100 = 60%
Google 2007 GPM = 9,944,901/16,593,986 * 100 = 60%
Google 2008 GPM = 13,174,044/21,795,550 * 100 = 60%

Google's GPM has remained constant at a very high 60%, which is an excellent Gross Profit Margin.

It is obvious to all that if Gross Profit Margin Percentage was the only criteria an investor was to use in selecting a company to invest in, Google would be the choice. However, as mentioned in Money Magazine Hoss's previous post The Income Statement there are several other criteria which must be taken into consideration. We will be reviewing several of these in future postings.

The June 24, 2009 closing stock prices of Google $409.29, Amazon $79.27 and General Motors $1.11 should not come as any surprise based on their respective Gross Profit Margins. These closing stock prices confirm our statement above: that investors pay higher prices for companies with high Gross Profit Margins.

Stay on track,

The Hoss

Next Hoss Cents Free Financial Money Magazine Post: Operating Margin
Return to previous post from Calculating Gross Profit Margin Percentage

The Income Statement

2009-06-20T10:50:00.000-07:00

From the Hoss's mouth

The Income Statement was formally known as the Profit and Loss Statement. Why? Because it shows all of a company's revenues and expenses for a certain period of time, and details any profit or loss.

The prudent investor will review this document in combination with the company's Balance Sheet and Cash Flow Statement when making a decision whether or not to invest in a company.

The following income statement is from Amazon and shows the years 2006, 2007 and 2008.

There are many formulas, ratios and calculations a prudent investor can apply from the information contained in a company's Income Statement. These formulas help the investor determine if a company would be a good investment.

Gross Margin, Net Profit Margin and Return on Equity are just a few. But before explaining these calculations (which The Hoss will do in a later post) one must first understand the details of the Income Statement itself.

The first line of any Income Statement shows the Total Revenue from all sales for the reporting period. (aka the Top Line).

Next we have the Cost of Revenue, which shows the total the company paid to obtain or manufacture the products it sold (aka Cost of Goods Sold or COGS).

The Gross Profit (income) follows and is calculated by subtracting the COGS from the Total Revenue. The greater the Gross Profit, the more likely a company is to have a positive bottom line. This is very clear in our Amazon example, as each year shows a significant increase in the Gross Profit and the Net Income.

Operating Expense is next and it shows...yes, you guessed it, the company's operating expenses. Investors calculate the percentage of expenses to sales to evaluate management efficiency in controlling expenses.

Now we have the Operating Income, which is a measurement of a company's earnings from its own operations. It does not include income from non-operating sources such as interest income.

Gross Profit minus Operating Expenses= Operating Income

The next line on the Income Statement is Income from Continuing Operations. This details the income (if any) that a company generates from non-operating sources such as interest from bank deposits. It is often expressed as a net (income-expenses) as is done in our Amazon example.

Now we find the line Earnings Before Income and Tax (EBIT), which simply is the total of Operating Income plus income from other sources. From this we deduct the next line entry which is Interest Expense (interest payments paid on company debt).

This gives us the next entry, which is Income Before Tax. In our Amazon Income Statement example the figure is $901,000,000. This is the profit Amazon made before paying any taxes.

Income Tax Expense is the line entry that shows the total income taxes the company paid to all government agencies. The income tax expense figure is deducted from the line income before tax to give the company's Net Income from Continuous Operations. Please Note: this is Net Income not Net Profit.

The Net Profit is the money left after any Specialty Items or Extraordinary Expenses are deducted from Net Income from Continuous Operations. What are specialty items or extraordinary expenses? They are called write offs and are supposed to be on- time occasions. Our Amazon example Income Statement provides lines for these expenses, but no actual charges were made in the three years reported.

The Net Income is (aka net profit or net earnings or bottom line) is the total funds available to preferred and/or common stock shareholders.

That pretty much sums up the information in the Income Statement.

The Hoss hopes you have found this explanation of a company's Income Statement beneficial for your investment activities.

In his next post, the Host will give a quick Income Statement summary and will provide information regarding formulas, calculations and ratios investors use for Income Statement analysis.

Stay on track,

The Hoss

Next Hoss Cents Free Financial Money Magazine Post: Gross Profit Margin
Return to previous post from The Income Statement

The Balance Sheet

2009-06-12T09:26:00.000-07:00

From The Hoss's Mouth

A company's balance sheet is a document which contains valuable information for any potential investor. It provides a financial snapshot of what a company owns (assets) and what it owes (liabilities) on a given date. Each and every transaction has an equal debit and credit entry, therefore the total value of the assets always equals the total value of the liabilities, hence the name "Balance Sheet".

This financial document is divided into two sections: one contains the assets, the other the liabilities.

The Asset side of the balance sheet shows the fixed and current assets. Fixed assets are both tangible and intangible.

Fixed Tangible Assets: include physical property, such as buildings, land, trucks, equipment, and computers, inventory, etc.

Fixed Intangible Assets: things that you can't touch but do have value such as goodwill, trademarks, patents, and long term investments

Current Assets are short term assets which can fluctuate in value very frequently, often every day. They include but are not limited to cash, short-term investments, stock, and consumer debt.

The Liabilities side of the balance sheet contains a company's current and long-term liabilities.
Current Liabilities are a company's short-term obligations such as current year's taxes, short term loans, money owed to suppliers, rent, payroll and bank overdrafts (if any).

Long-Term Liabilities are liabilities that are generally due after one year, such as long-term loans of financing.

The Hoss reminds you that the examples above do not include all the assets and liabilities a company may or may not have.

The balance sheet shows the potential investor how a company is financed, how much capital it is using, the company's liquidity and how solvent it is. The investor can compare several balance sheets to determine the company's ongoing performance.

The next addition of Hoss Cents Free Financial Money Magazine will provide information on the second financial document we are going to look at, The Income Statement.

Stay on track,

The Hoss

Next Hoss Cents Free Financial Money Magazine Post: The Income Statement
Return to previous post from Balance Sheet

Financial Statements Explained

2009-06-04T08:25:00.000-07:00

From The Hoss's Mouth

The technical definition of a financial statement goes something like this, depending on which dictionary you use: a written report that quantitatively summarizes the financial status of an individual or organization for a stated period of time.

Why is a financial statement important to the potential investor? It shows you where a company's money came from, where it went, where it is likely to go, and where it is now.

These are statistics any wise investor must know and understand before purchasing stock in a company or even buying a company outright. It is similar to a racing form, which gives the handicapper important information on all horses running in a race and enables him/her to make a selection based on the criteria s/he deems important.

In short, a financial statement enables you to analyze the financial health of any company you are considering for investment purposes and consists of four main parts.

Balance Sheet: Shows at a fixed point in time what a company owns and what a company owes.
Income Statements: These show how much money a company made and how much it spent over a certain period of time.
Cash flow Statement: A summary of cash inflows and cash outflows during an accounting period.
Statement of Shareholders' Equity: Shows what money would be left for the shareholders if a company sold off all its assets and paid off all its liabilities.

The Hoss, in the next several postings, will review in detail each of the main parts of a financial statement. He hopes that once you have read all the information you will have a good understanding of the components of a financial statement and be in a position to make wise investment choices.

Stay on track,

The Hoss

Next Hoss Cents Free Financial Money Magazine Post: The Balance Sheet
Previous Post: General Motors Files For Chapter 11 Bankruptcy

General Motors to File for Chapter 11 Bankruptcy Protection

2009-05-30T10:05:00.000-07:00

From The Hoss's Mouth

You probably know by now that General Motors is about to file for, or has already filed for, Chapter 11 bankruptcy protection, depending on when you read this. So just what does Chapter 11 bankruptcy protection mean? Does General Motors go on welfare? Many would say they already are on welfare given the large amount of bailout money they have received.

Hoss Cents free financial money magazine will try to explain in layman's terms what Chapter 11 bankruptcy protection is and how it works.

Chapter 11 bankruptcy is a form of corporate financial reorganization. It does not mean the company dissolves. It is the usual choice for large companies such as General Motors looking to reorganize their debt. Generally, companies are permitted to continue to operate while they pay off some or all of their debt.

The US Trustee appoints a creditors committee from amongst the major bondholders (creditors). This committee negotiates with the company (in this case General Motors) in hopes of producing a reorganization plan acceptable to the creditors and to the company. The plan may cancel some of the company's debt, and it may give part ownership of the reorganized company to creditors. Any proposed plan must be voted on and passed before a Chapter 11 plan is confirmed. Votes are rated according to each creditor's total claim against the debtor (General Motors).

In the case of General Motors it has been reported that the creditor's committee has reached a deal with General Motors that would give 10% of the company to the bondholders with an option to buy an additional 15% of the company's stock. In addition, the United Auto Workers union is to receive a reported 17.5% of the restructured General Motors, with an option to purchase another 2.5% stake.

When Congress enacted Chapter 11 of the bankruptcy code it was hoped that a newly restructured company would become profitable and thereby save jobs both in the bankrupt company and all associated business. In the case of General Motors there are many companies that would be adversely affected by a total collapse of General Motors. In addition, Chapter 11 provides the creditors with an opportunity to recover more of their investment than they would if the company were to dissolve and sell off all their assets.

The Hoss hopes his explanation helps you to understand the Chapter 11 bankruptcy process.

Stay on track,

The Hoss

Next Hoss Cents Free Financial Money Magazine Post: June 06, 2009
Previous Post: Does Balancing Your Portfolio Work?

Does Balancing Your Portfolio Work?

2009-05-24T08:36:00.000-07:00

From the Hoss's Mouth

For years now many money magazines and finance gurus have recommended portfolio diversification as a means to hedge against investment losses. For the most part this has been a successful strategy. However, last year's financial meltdown included nearly everything financial. Stocks, bonds, commodities and real estate all declined in value. Nearly everyone suffered big losses including those investors who diversified their financial holdings.

Does this mean that we should deep six the idea of portfolio diversification?

Hoss Cents Free Financial Money Magazine does not think so, and still prefers a balanced portfolio versus a portfolio that puts all your eggs in one or two baskets.

Hoss Cents Free Financial Money Magazine groups investors into several categories:

Very Conservative: 82% fixed income, 18% equities.

Moderately conservative: 78% fixed income, 22% equities.

Middle of the road: 60% fixed income, 40% equities.

Moderate growth: 43% fixed income, 57% equities.

High growth: 76% fixed income, 24% equities.

Aggressive: 0% fixed income, 100% equities.

What type of investor are you? Hoss Cents Free Financial Money Magazine's post asset allocation provided you with a simple calculation for determining the right mix between the two major asset categories of equities and fixed income.

You can use that method to determine how conservative (or not) of an investor you are, or you can use the services of a professional financial adviser who, if they are any good, will provide you with a client profile questionnaire.

Your work is not finished yet.

Now that you have determined what asset allocation is right for you, you must also decide what percentage of your fixed income will be cash, and what percentage will be bonds.

In addition, you should diversify your equities amongst several asset categories. You should not put 100% of your equity investment in one asset type (i.e. financials).

An easy way to diversify your equities is to purchase index or exchange traded mutual funds. If you prefer to build your own equities portfolio, be sure to include the major asset categories. A word of advice: Don't buy two things that are in the same asset category, otherwise you lose the diversity.

Once you have set up your portfolio with an asset allocation that suits your investor profile it will be necessary to rebalance it from time to time.

History has shown that a balanced portfolio will provide the best returns over the long haul. Hoss Cents Free Financial Money Magazine reminds you that there is no guarantee that your portfolio will grow, even if you have a perfectly balanced portfolio.

Stay on track,

The Hoss

Next Hoss Cents Free Financial Money Magazine Post: May 31, 2009
Previous Post: Asset Allocation

Asset Allocation

2009-05-16T08:19:00.000-07:00

From the Hoss's Mouth

Research has shown that asset allocation is the single most important investment decision an investor makes. What is asset allocation? Hoss Cents Free Financial Money Magazine's definition is as follows:

The structuring of your investment portfolio with different asset categories using stocks, bonds or cash.

There is no specific asset mix that is perfect for each investor. The wise investor knows what his/her investment objectives are, what the time horizon is for achieving those objectives, and what risk they are prepared to take (also known as risk tolerance) .

Time Horizon - Your time horizon is the length of time in months, years, or decades you have to achieve your financial objective.

Risk Tolerance – How much risk you are prepared to take to achieve your financial goal. Are you an aggressive investor prepared to purchase risky investment for greater potential returns or are you a conservative investor, one who wants to preserve your original investment?

A rule of thumb used by many financial advisers is that the total percentage of fixed income held in your portfolio should approximately equal your age. In other words, if you are 45 then 45% of your portfolio should be fixed income. If you are 20 then 20% is fixed income. This is a good tool to start you on an investment path which includes an asset allocation strategy.

Hoss Cents Free Financial Money Magazine provides a slight modification to this asset allocation rule. First, assess your risk tolerance on a scale of one to ten. One being the most conservative investor, and ten being an investor willing to take extreme risks. Now combine the two factors of age and risk tolerance in the following manner: If your risk tolerance is 5, make no adjustment to the rule of thumb. For every number higher than 5, reduce the fixed income component by 5%. For every number lower than 5, increase the fixed income percentage by 5%.

Look at some examples provided by Hoss Cents Free Financial Money Magazine :

Risk tolerance of 7 and age 45. Fixed income component would be 35%: 45 (age) minus 10% (5% for each number above 5)

Risk tolerance of 7 and age 20. Fixed income component would be 10%: 20 (age) minus 10%

Risk tolerance of 2 and age 45. Fixed income component would be 60%: 45 (age) plus 15% (5% for each number below 5)

Risk tolerance of 2 and age 20. Fixed income component would be 35%: 20 (age) plus 15%

For those of us who do not have the time or the inclination to go out and purchase individual stocks and bonds, a simpler and easier method is to buy mutual funds or exchange traded funds. They provide an excellent method of diversifying your portfolio.

The Hoss hopes he has helped you in determining an asset allocation that will enable you to reach your investment objectives. Remember, all investments have some risk and you could lose some or all of your money.

Stay on track,

The Hoss

Next Hoss Cents Free Financial Money Magazine Post: May 24, 2009
Previous Post: Moms are Priceless