Investing in Knowledge

Building a Website - Keyword Selection.

noreply@blogger.com (Martin Platt) — Fri, 05 Aug 2011 05:41:00 +0000

Did you know that some of your SEO ranking will occur naturally, if you plan, and set up you website correctly? Once you have everything planned out, executing your SEO strategy, is going to be very easy.
If you pick niche, specialised keywords, you will pick up free traffic very (more...)

keywords, search engine optimisation, search engine optimisation seo, search enging optimization, seo brisbane, the seo company, web design, website

noreply@blogger.com (Martin Platt) — Fri, 05 Aug 2011 01:31:00 +0000

Search Engine Optimisation and the Search Terms that you choose

It is a good idea to put together a business case for your site, to focus your effort on the goals of the site.You may change your mind, from what you originally intended the site to be after reading this article. Don't become too attached to those initial ideas just yet, you need to validate them, and change them if your research shows that you site will be better off if you refocus, due to your new found knowledge of your customers, competition and offering.

Search Term Selection

Hey! Are you listening?Concentrate, don't miss this information.To make it worth your time putting together a website, you need to make sure that it is making use of keywords that search users search for.When nobody is interested in the keywords you are using to drive traffic to your offer, you whole effort is a waste of time.

Advertising can drive traffic to your site, but at what effort and cost?Are there other opportunities, other keywords out there that are more easily attainable for you?

Research your websites' focus

First of all, you have a niche, right?You need a focus for your site; otherwise it will not make any sense.What you're trying to achieve is to send people to your site as THE place to go for information on your niche.Is there some aspect of your niche that customers are particularly interested in and how would you know?There are a number of ways that you can find what people really want - listen to people when they talk, look in the paper, look in internet forums and chat rooms that are associated with your niche.Is there something that people are looking for?Do people discuss your niche?Is there a subject that regularly crops up that would describe your niche?

Understanding your Competition - How do they rank, and why?

A good way to start to understand your competition is to open up your favourite search engine, let's use Google, most people do, and type in a search that you would expect would find your site when you build it.The number underneath the search box once you have performed the search shows the number of pages that were found.

Open up some of the search results - who are the competition, do they offer the same product or service that you are intending to offer? Is their location a factor in their domination? Could you offer a localised version of what they do? If your customers have been around for a long time, offer the same products and services, in the same location as you, you're going to have your work cut out for you, to beat them.

If you really wanted to get into the nitty gritty, you need to know for each of those sites, their age, the number of inbound and outbound links, page rank, body content - all these things are big factors in the ranking of that site.

Search Phrase Analysis Sites

Some utilities on the net will help you to discover the search volume per month, and levels on competitiveness for your search phrase.Varying levels of related search term suggestions can be generated that will help you find the term with the best combination of search volume and low competition.

Tools can be found from the following:

Google Adwords Keyword Tool - free

keyworddiscovery.com

Wordtracker

Siphon the free traffic - Pick the correct keywords

If nobody searches for the search term that you are focussing on, it makes it much more difficult to generate money.Without a clear set of keywords, your SEO results are very likely to be random. You may get traffic, but it will not be targeted, or the results will be less than could be expected from an alternative keyword.Don't worry, something can be done about it, but it entails refocussing the site toward the correct terms.

If your keywords are chosen correctly, your site is more likely to be structure in such a way that it makes sense in that context, through the choice of headings, categories, tags, page content, backlinks, anchor text, image names, and the search engine is more likely to be able to find your content and rank you well for it, as you deserve.As you can probably see from the list of items that feature in making the site rank well, changing from the wrong keywords to the right ones is likely to require a lot of rework.

Can you choose keywords yourself, or should you pay someone to do it?

Due to the importance of getting the right keywords for you site, it is a good idea to spend a great deal of time researching the best terms, researching your competitors, niches and so on, before jumping in to creating a web site.
There is nothing wrong with doing this yourself, although paying someone to do this is highly likely to yield sales way in excess of the initial outlay, and continue to do so for some time to come.

Article source: How to build a business web site - Keyword Selection - Keyword Research

How to start a website in the right way with the correct Search Terms - Keyword Research

noreply@blogger.com (Martin Platt) — Fri, 05 Aug 2011 01:30:00 +0000

SEO Keyword Research

It is a good idea to put together a business case for your site, to focus your effort on the goals of the site. As you read through this article you may have cause to realign your goals to make it easier to achieve success. This is good news actually, as it means that you have used completely understood your websites' purpose, and have eliminated that which is inefficient, given your new found understanding of your customers, your competition and what you are wanting to offer.

Search Term Selection

Hey! Are you listening? Concentrate, don't miss this information. To make it worth your time putting together a website, you need to make sure that it is making use of keywords that search users search for. You could be position number one in Google for keywords that nobody searches for, in which case the whole effort was totally pointless.

Advertising your products is going to cost money, are there easier ways to drive traffic that has a lower cost? Are there other opportunities, other keywords out there that are more easily attainable for you?

Research your websites' focus

Have you a niche? You need a focus for your site; otherwise it will not make any sense. When your visitors think about your niche, you want them to first think of your website.Is there some aspect of your niche that customers are particularly interested in and how would you know? Keep an eye on internet resources such as forums, chat rooms and blog comments associated with your niche subject, listen to people, ask your friends, look in niche publications. Is there something that people are looking for? Is you niche something that people talk about? Is there a core phrase that you could use that would describe your niche?

Understanding your Competition - How do they rank, and why?

A good way to start to understand your competition is to open up your favourite search engine, let's use Google, most people do, and type in a search that you would expect would find your site when you build it. When the results are displayed in the search engine, a number at the top of the results indicates the total number of matches found.

Open up some of the search results - who are the competition, do they offer the same product or service that you are intending to offer? Is their location a factor in their domination? Could you offer a localised version of what they do? If your customers have been around for a long time, offer the same products and services, in the same location as you, you're going to have your work cut out for you, to beat them.

If you really wanted to get into the nitty gritty, you need to know for each of those sites, their age, the number of inbound and outbound links, page rank, body content - all these things are big factors in the ranking of that site.

Search Phrase Discovery Programs

There are a few tools that allow you to understand the number of monthly searches that are performed for your core phrase, and how competitive it is. The good thing with these tools is that they are also able to suggest other keywords that may be applicable to your core phrase.

Tools can be found from the following:

Adwords External Tools: Keyword Tool from Google, which is free

Keyword Research - keyworddiscovery.com

Wordtracker

Correct Keyword choice drives Search Engine Optimisation (SEO)

If nobody searches for the search term that you are focussing on, it makes it much more difficult to generate money. Without planning the search phrases that you target carefully, using scientific methods that quantify what is required to achieve your goals, your SEO efforts are likely to be wasted. You will get traffic, but will not achieve the true potential of the site. It isn't too late - we can change that starting now, but redefining what the keyword focus should be, and concentrating our efforts there.

Your website structure should be clear given that you know your target keywords, the right page titles, webpage addresses, headings, link anchor text, body content, image tags, metadata will easily be found by the search engines, and will allow you to rank better naturally than you would without planning. As you can probably see from the list of items that feature in making the site rank well, changing from the wrong keywords to the right ones is likely to require a lot of rework.

Can I choose keywords myself, or should I pay someone to help me?

Build the site last - understand fully that you are trying to achieve before you start, including your competitors, niches, and alternatives.

This is something that you can do. The only downside is that it can be time consuming if you have never done it before. The effect of getting the whole process of SEO will generate traffic and sales way in excess of the initial outlay, so it is more a matter of priority.

Article source: How to start a website in the right way with the correct Search Terms - Keyword Research

Creating a new business website? Wondering where you traffic is? Want to know more about search engine optimisaton (seo)?

noreply@blogger.com (Martin Platt) — Tue, 02 Aug 2011 22:34:00 +0000

If you're interested in how to build a new website and need help with web design, and what needs to be done to get free traffic or wondered what SEO is, then go to this site. There are lots of very useful articles for people starting out with a new website, and these guys do a great job, and really want to help you succeed.

Visit The Brisbane SEO Company for more information.

A great news wealth creation and investment site

noreply@blogger.com (Martin Platt) — Mon, 06 Jun 2011 22:37:00 +0000

I stumbled across a very familiar seeming site whilst searching the other day. It has information about wealth creation,wealth strategy,wealth building,wealth partners, investment in both property or real estate,stock market trading,wealth mindset,business ownership. It seems that this site has much of the information that i was attempting to put together. Great site, take a look at Wealth Genetics, a really good source of information for wealth creation, wealth strategy, wealth management, to see how good it is!

Investing in Knowledge

noreply@blogger.com (Martin Platt) — Wed, 05 Mar 2008 02:46:00 +0000

It's been some time since I've been learning or reading about investing myself, I may have been gone, but I had not forgotten!

One lifestyle change to becoming wealthier, get more knowledge.
This has proven itself for me, having recently been studying for, and sitting exams for industry specific qualifications, for the job that currently brings me the money, I have just got a new job.

Whilst I can't be sure that that particular knowledge sealed the deal, it certainly helped. I thought that this fact was worthwhile pointing out, to enable you to make money in the stock market, or in real estate, you need to have the money in the first place. A good way to increase that potential cash flow, is to be always learning, increase the knowledge you have.

As an investment strategy it has certainly worked for me.

I hope to get back to blogging some more articles about techniques and my progress in the near future, to increate my knowledge in investing, and thus invest in knowledge.

Share trading school? Good or not?

noreply@blogger.com (Martin Platt) — Mon, 12 Nov 2007 01:37:00 +0000

Hi,

Well, today I'm not here to answer that question. I'm looking into having a go at a trading school. I figure that it would be better to learn how to do things properly whilst also self educating, to speed up progress, and hopefully limit losses from silly mistakes.

The difficulty that I'm having at the moment is picking such a school. A lot of the schools seem to be hyped up, which doesn't make me want to buy a course from them. I mean, if studying such a course would guarantee to make you millions, I think that they'd be oversubscribed, don't you?

So, I need to find something that gives a good understanding in lots of different trading methods, rather than be focussed on one particular trading strategy or theory - I'm ideally looking at a good grounding, as I realise that experience is the best form of knowledge in the market. I want something that has some form of track record, and I'm looking for something that doesn't cost much, or at least if it does, I'm looking at being able to recoup those losses quite quickly.

If there are any such providers out there, please drop me a comment!

Increase your odds of winning - Money Management

noreply@blogger.com (Martin Platt) — Mon, 12 Nov 2007 01:25:00 +0000

Hello again,

Here's me learning about stock market investing, and thinking I'd really like to find that failsafe strategy for making bucket-loads of cash, with no real risk. Sounds familiar? Well, whilst that's not likely to happen, there are facets of investing that are not really to do with the market itself, that allow you to stack the odds in your favour. What are they? I'm not going to tell you that, otherwise you'll make money. Only kidding.

When you lose money, if you set a limit on your losses, a point at which you get out, and take the loss, like a man (if you're a man) So, let's say that you set a stop loss limit at 5% of your investment.

finally, another way of looking at the market instead, is to set up rules so that when you make say 50% on a share, you sell. Yes, you're foregoing the possibility that you might gain another 50%, but you have 50%, and can get out, and back into another trade? You'd probably use this method if you're not too familiar with technical analysis, otherwise I'd imagine that you'd look for patterns.

Now, there's the upside. It's nice to be able to protect earnings from becoming losses, but if the market is a rampant bull, then better to let that bull run free, and make tons more cash, right? Well, you can do that, but what happens when that stock goes from $10 to $50, and then back to $11? Yes, you've made a dollar, but in effect have lost $49 for each share. So, in comes the profit protection stop loss, which again, you could set to being 5% of the highest price, upon which you cut your losses and take the profit.

So, you get 100 shares at $10 a share, and they go down significantly, when they reach your 5% stop loss point, you sell, which means losing only $0.50 for the share, whereas somebody who doesn't have such a strategy will lose a lot more.

So, if you assumed that the share market at any point in time will go either up, or down, you'd have a 50/50 chance of picking the right direction. In that instance you would make 50% of the increase in prices for the 50% that you get in the right direction, and lose 5% in the 50% that you pick the wrong direction. If you look at those figures you can see that in such a 50/50 market you can't lose more than you make.

Good, isn't it?

More on options - Why they might actually be a good thing.

noreply@blogger.com (Martin Platt) — Thu, 08 Nov 2007 23:48:00 +0000

Hi,

Yet again, I'm writing about options. I truly believe that there are worth looking at further, since there seems to be good reasons to believe you could make good returns in this area.

Writing covered calls seems particularly promising. There are different approaches to this investing strategy.

- Writing In-the-money calls; This is where the share price is already above the strike price, so increases the chances of an option being exercised. It seems like a strange thing to do, but if you think about it, you buy stock at a price slightly higher than the strike price, then the premium, or fee is paid, which reduces what you effectively paid. The fact that the option is already in the money means that it's likely to be bought, and thus give you a chance to receive the maximum return for that option. You must note that this strategy reduces the potential on returns from the stock price moving, but clearly reduces the risk.

-Writing Out-of-the-money calls; This is where the share price is below the strike price. This strategy clearly gives potential for the different in price between when the stock was bought, and the strike price where it could be sold, to be maximised. The downside to this is predicting that that situation will occur.

-Writing On-the-money calls; This is where the share price is at (or very close to) the strike price. This sort of combines the two above strategies. You haven't got as great a potential as out-of-the-money calls for earning from stock price increase, but it's better than in-the-money calls. The risk for this strategy is less than out-of-the-money calls, but but slightly more than in-the-money calls. This could certainly be a good place to start with covered calls, to learn, then perhaps look into the other alternatives.

All things software has moved!

noreply@blogger.com (Martin Platt) — Wed, 07 Nov 2007 00:08:00 +0000

All things software has now moved to a different blog location.

Find it here

I hope you continue to enjoy the information that it provides.

Martin.

Ordinary options - risky or not?

noreply@blogger.com (Martin Platt) — Tue, 06 Nov 2007 22:37:00 +0000

I have recently been reading about a little of the basics of options trading.

Okay, so an option is basically one of the following:

- A contract between a buyer and a seller where the seller promises to sell stock at a particular date, for a particular price, known as the strike price. This is a call option.

- A contract between a buyer and a seller where the seller promises to buy the stock at a particular date, for a particular price, known as the strike price. This is a put option.

Okay, now we have that bit out of the way. So why bother? The real reason could be leverage. You put down some money for the option, at the time you buy, and then when the stock goes up for a call option to a price above the level of the strike price, you can buy stock at a discount. That sounds great doesn't it? Damned right it does. Here's the deal though, can you reliably predict that the price will move in a certain direction? That's pretty tough isn't it? But there is more! Can you also predict the minimum price that a stock will reach, reliably, and repeatably? Then there's the premium that you would pay, as the buyer, can you further predict that the stock price is going to move in the right direction, to a price that is the premium above your stock price, reliably and repeatably? And here lies the problem. I know I wouldn't be comfortable with attempting that great feat. Obviously you can see that the leverage, and big rewards are possible, and with that comes the much higher risk.

The put option is the same, but the market moves in the opposite direction, and you would instead be betting on a bearish market.

You need a strong stomach to participate in that market, for sure. Interesting to see how it all stacks up though, isn't it?

Even more on EMT, and how it applies to different strategies

noreply@blogger.com (Martin Platt) — Tue, 06 Nov 2007 22:18:00 +0000

Hello,

I've getting a handle on how EMT effects investing strategies now. At first I thought of it as a largely irrelevant model that really didn't make any difference to anything at all.

I noticed over time, and talking to people that they corrected me when I said something along the lines of "Investor emotions undervaluing stock prices", and said that really it's that the market has already factored in the issue or event that has taken place. I thought that that was only a bit like the cup is half full, or the cup is half empty. An identical viewpoint with a different explanation. So why would you care, if the intent is the same? It seems that you should, depending upon how you invest.

So, let me try to explain. Let's imagine that you're going to sell or buy options, all shorter term fluctuations in price cannot be gleaned from a company's financial records. Yes, some of the information will be in there, it's a good company with a great future, but there simply is not enough information to be sure where the market would be when the option expires, for example. So here we have an investment strategy that relies more on investor emotion, or EMT to try to predict where a stock will be. It's good to know the fundamentals of the company, because you may see that it's a really bad company to invest in traditional stocks with, for example. However, even that doesn't mean that you won't make money from it, it just means that you might be able to predict the direction in which the price will trend.

So, in that case, what's the alternative? Instead, it's probably better to work thinking in terms on EMT, and looking for price patterns and trends in the prices. Given the cyclic nature of stocks, it seems that you're statistically more likely to pick the correct price than looking at the fundamentals, and hoping.

Then, on the other side of the fence, there's a value investor, someone who looks for undervalued stock. That statement by itself indicates that this breed of investor is at odds with the whole EMT idea. You can't have an undervalued stock, since the price reflects the true value of the stock. Yes, I could rephrase the first statement to make it compatible with EMT, but it indicates where the investor is coming from. He's probably going to be aware of the current stock price, to see if it represents good, value, but probably isn't really interested in recent patterns and trends, since that concept is at odds with his approach.

This information may well be obvious to some readers, but I thought that I'd point it out, since the penny finally dropped, and I can now see how the land lies. I hope this helps readers understand a little more as I now feel that I do.

More on Efficient Market Theory (EMT)

noreply@blogger.com (Martin Platt) — Sun, 04 Nov 2007 23:36:00 +0000

Hi,

Having studied a little more about EMT, I'm now seeing the relevance of it a little more.

If you are a believer in EMT, then you would only ever need to use Technical analysis to gather your information. If on the other hand you do not subscribe to the views of EMT, then you are likely to be drawn away from the Technical analysis, and more toward Fundamentals, and economic factors.

The point of this comes to the fore if you are looking at trends, which according to EMT would lead to the fact that something is going to happen in the company, rather than the other way about. The market has already factored in the event. On that basis, then, the share price indicates the true value of the company at that point.

One thing that EMT appears to do is simplify the view of analysing the stock. Instead of having to look at the company financial records, and research that side of things, it is only necessary instead to consider the price, and how it moves.

I think that it can be seen how that works from the point of view of the current share price, but as yet, I still find it difficult to believe in a view that can give insight into future stock prices through a process of trends and statistics?

Foreign Exchange, Forex, FX - Good or not?

noreply@blogger.com (Martin Platt) — Sun, 04 Nov 2007 22:40:00 +0000

Hi,

I have read a lot of people talking about Forex, so I thought that I'd try to figure out what the deal was. Is it like the lottery, or does it offer some promise to make money? Is it risky? Does it cost a lot?

First things first, Forex trading allow you into a leveraged position. This isn't the same sort of leveraged position as you would get with ordinary shares - margin lending. With Forex, your position is closed out by the amount of money you put in being wiped out. In other words, you can only loose what you put in, that seems to be the case anyway. The upside to that is that you can leverage the market something like 100:1, in other words if you put in $1000, you have access to $100,000. This means that the money you put in is amplified in effect, to give you a greater effect, but this works in both the positive and negative direction.

Forex works through pips, for example, if a currency is trading for 3.1456 and goes up to 3.6556, then it has gone up 200 pips. The other thing that happens is that you but one currency by selling another, and making money from then selling that.

Is Forex like the lottery? Well, in the same way that it would be if you participated in shares without using Fundamental or Technical analysis. If instead you use patterns, trends and so on to make your calls for Forex, you can potentially make a lot of money. So here is another avenue of making money that relies largely upon technical analysis, so on that basis, I will have to learn how that all works, and report back to you all.

Is Forex risky? Well, it can be. If you try to make millions, and are not sensible with protecting your principle, then you can get into risky situations, however if you correctly analyse, and are sensible with trades, it seems plausible that a Forex trader could make some good money.

Finally, does it cost a lot? As previously mentioned, you get a leveraged position, so you don't have to put up a lot of money to make a lot of money, it seems.

Having only just started to read about this area, I would love to hear some feedback from the traders out there who have real experience with how the Forex market works, so that I can talk to you, and you can perhaps write a post of two to help our readers?

Hedge Funds - Good or not?

noreply@blogger.com (Martin Platt) — Thu, 01 Nov 2007 23:41:00 +0000

Hello,

Well, I have just had my parents staying with me, so I've had a lot of my time taken up doing touristy things, and so have no been as active as I might be with my learnings.

I just started reading about hedge funds. They seem an interested product, in that they make money regardless of market direction. The idea of a hedge fund is to reduce risk. We all want to reduce risk don't we? I like the idea of that, but still being able to make money.

The one major downside to a hedge fund is that historically they've had high fees. It seems that if we could get into a situation where we could have a hedge fund with all it's benefits, but lower the fees involved, we might have a winning formula?

So that got me thinking, could I find out about a hedge fund, and how it works, then emulate it for myself, and thus achieve that above.

It seems that hedge funds work on the basic idea that you have short and long stocks, and further to that, you also have option call and put too, and in so doing, you hedge the risk.

It seems then that a hedge fund could be good. I will read on further and detail my findings in future posts.

Secrets of Investing!

noreply@blogger.com (Martin Platt) — Thu, 01 Nov 2007 23:39:00 +0000

Hi,

Well, I'm wondering how many of my readers are interested in what I write, so I thought that I'd take the direct approach, and ask what you all would like to see.

Am I on the right track, or is there something you'd prefer to see, or me using a different style, or whatever?

Whilst this is a personal journey, it would also be nice for other people to be able to benefit from my learnings.

I look forward to hearing your comments,

Martin.

Business Head Blog Launched!

noreply@blogger.com (Martin Platt) — Wed, 31 Oct 2007 00:13:00 +0000

Hi!

Please visit the freshly launched "business head" blog, when you can rad how to set up and run a business. See it at http://teamplatt-businesshead.blogspot.com

Martin.

Investing : Dividends - Good or not?

noreply@blogger.com (Martin Platt) — Mon, 29 Oct 2007 22:23:00 +0000

Hello again,

So, if you're investing in a company, are dividends a good thing to search out or not? Companies giving you money, are you kidding, that's got to be good, hasn't it?

The answer to that question really lies in the answer to another question: How good a return on equity (ROE) is that company producing?

That answer will tell us how much growth you can expect a company to produce for $1 of equity. So if you multiplied the ROE by the share price that answer would be what you would expect in total returns for your investment.

If the return on equity is good, then dividends are not necessarily the best
thing, because that company might well be capable of giving better returns
on you investment than you could.
Unless of course, you're a better investor than they are?

So, how do we know what a good return on investment is? Well, let's put it a different way, let's look at opportunity cost, the cost of not doing something else.
Let's just imagine (have you got your eyes closed?) that instead of investing in all that stock market stuff, we'll go the safe option and put the money into a saving account, that earns 6% per year. That's the benchmark. If our return on equity is less than that safe 6%, then it's clearly not worth bothering with, unless there's something that might indicate that it will grow significantly.

So, in short, dividends are great when a company isn't all that good at growing it's investment, and not so great when the company is good at making money.

That begs the question, why would you ever want to get dividends then? Well, unfortunately for us poor intelligent few, we have to put up with people looking for income from investments. Management of companies often divide the returns in half, half for dividends, half for re-investment.

So what's wrong with that? Well, you get some income, for sure, and put that money in your 6% saving account, or some other shares. Meantime the other 50% is used by the company to produce a 20% return. Bugger!

A way of looking at getting income out of an investment that doesn't pay dividends, could be to sell a few shares instead. If they're appreciating in value, and you really need that money, then that could be a way to go.

There's another downside though, tax. Bugger - again. When you take the income, you get taxed, then you re-invest that money. Now, your money has to make the amount of tax extra on top of the return you wanted before you can get the returns you desire.

So let's say you get a $1 dividend payout per share.  How lucky is that?  Don't get smug just yet!
Since you're a pretty smart cookie, you also earn a reasonable salary, and
get taxed at close to 50%.  Now your payout is 50 cents.  Not so smug now,
are you?
You now need to make a 100% return on that 50 cents when invested to get
back to the original $1 dividend payout.  Then, from there, you then need
to make money on top of that to get a return on that original $1.  That
return if left to be reinvested would only have to make the good return
to be successful.

That doesn't make dividends look quite so good now does it? Well, yes and no. If you want an income, it's possibly because you've retired, otherwise you'd be looking for growth, would you? I hope you would anyway! So if you're after income, you probably also want to reduce your risks too, don't you, so that you can afford to retire, buy a huge yacht, and sail away. Damned right! When risks are reduced, so are rewards, so it means by having the income that you're inherently looking for something that will have a lower risk, in which case, as mentioned earlier, you would probably find that you're looking at a company that doesn't have a huge ROE, and in that case, having a dividend payout is good. Nice! That worked out well, didn't it!

Technical Analysis - RSI - Relative Strength Index

noreply@blogger.com (Martin Platt) — Fri, 26 Oct 2007 05:20:00 +0000

Hi,

The relative strength index is a value that indicates if a stock has been overbought, or oversold. This is a good indicator to show if a particular stock has an opportunity to be bought or sold.

Oversold levels are below 30% and overbought levels are over 70%.

Fundamentals Analysis - PEG Ratio - Price Per Earnings Per Growth

noreply@blogger.com (Martin Platt) — Thu, 25 Oct 2007 22:31:00 +0000

Hi,

This is the second in a series of fundamentals analysis ratios. This post is about the PEG ratio, which is gives us an insight into how expensive a share in a company is, given their expected growth.

This ratio is useful because it takes into account an extra piece of information, growth, or future potential to give us an indicator of value. One thing that we may do with the information is also perform analysis on the company to find out if their projected growth is realistic. If it seems to be, then this could well be a good company.

The PEG ratio = (Share Price / Earnings Per Share) / Annual Earnings Per Share Growth.

See also PE Ratio

Due to the fact that the growth part of the ratio is projected, this is a speculative value, and therefore can be less accurate. If you use this ratio in conjuction with other ratios and they all tell the same story, this should give you a good idea as to where the company is heading.

The value of the PEG ratio, if a lower number is obtained, the stock could be seen as cheaper. The higher the ratio, the more expensive the stock is.

A value of 1 is generally accepted as a reasonable trade-off between stock cost and the expected growth of the company. A value of 2 or higher would generally be seen as expensive, relative to the amount of growth that is expected for the company.

This ratio is less appropriate for valuing the price of a share for a company that does not expect future growth, and instead expects dividend income. The use of the ratio in this case is down to what you are looking for in a stock purchase.

Fundamentals Analysis : PE Ratio, Price Per Earnings

noreply@blogger.com (Martin Platt) — Thu, 25 Oct 2007 22:14:00 +0000

Hi,

This first in a series of descriptions of fundamental analysis will look at the PE ratio. The PE ratio, or Price Per Earnings Ratio, is a measure of how expensive a particular stock is. It is a value ratio.

The PE ratio = Stock Price / Earnings Per Share

To get an idea of how good the PE ratio is, you would have to compare it to other similar companies to see if it is good or bad.

The value of PE is the amount the investor is willing to pay for $1 of earnings. If the value of the PE ratio is high, it may be that the stock is overpriced, or it may be that the company has a high expected future growth, and investors are getting in early. By itself and in isolation, the ratio has little meaning, but put in context it can be very powerful is deciding how profitable an investment might be.

Safe as houses - Are they?

noreply@blogger.com (Martin Platt) — Wed, 24 Oct 2007 22:17:00 +0000

Hello!

I occasionally receive communication from companies touting their property investment services. Pitches regarding the products being "safe as houses", so that got me thinking, as I do believe that property is a good investment if used correctly.

So, what does "safe" mean? Usually that something is "low risk". Okay, so we know that people always need places to live, and aside from properties dropping hugely in price which doesn't seem likely, or a natural disaster, or some road infrastructure springing up near your investment, nothing can go wrong, right? That certainly seems to be the case.

The big questions are around opportunity cost, liquidity, leverage and partially diversification.

The opportunity cost - well, that's the cost of not doing something else by investing in property. What I mean by that is, if you invest in a property worth $250,000, and it grows at a rate of 7%, and earns you $250 per week in rent, is that position better than $250,000 in stock that grows at a rate of 15% and earns a 10% dividend? It's quite difficult to compare one with another, other than averaging past performance. However, you'd have to compare the best house with the best performing stock to see the difference. My view is that property is indeed quite good at earning income, albeit slowly in general. If enough interest, in terms of comments are posted for this item, I will go about finding the averages and try an unbiased comparison of the two investment types.

There's liquidity. All that means is that it generally takes a large amount of time to convert the asset into cash. In comparison to going to your local bank and drawing your cash out, properties are not very liquid. That has it's benefits and drawbacks. Due to the liquidity, investors are forced into a buy and hold type strategy, which generally returns better than jumping about in the market. The downside is that if you want to realise your asset quickly, there may be no market, or a poor or slow one and the money may not be available when you need it.

Then there's leverage. With property it's a bit of a joke, banks will lend you far more than you can possibly hope to pay off, so you have a highly leveraged position. Does that help you at all? Too much negative gearing can quite quickly sink your investment ship, the interest payments grow more quickly than you can afford to pay, and your loan to value ratio (LVR) gets higher, and the investment becomes more highly geared, until the bank forecloses on the loan.
On the other hand, if you can afford such a payment, the availability of a such a highly leveraged position seems unthinkable in the stock market. Where else could you get a loan and not have to put any money down to do so? My view on such a position is that it is a stupid mistake. If you have no deposit, the interest is going to really hurt you, as is the mortgage insurance.   So we can see that we can gain access to a highly leveraged fairly low risk investment, so long as the interest rates don't go mad.

Finally diversification. The investment property is only one asset class, it's all your eggs in one basket, and with the leverage you may have, you're going to have to pay
a lot toward the investment to keep it in the black.  If on the other hand you are in the stock
market, you're able to get into different asset classes and spread your risk (and average your
returns probably too)  So one important thing - is location of property like diversification?  Can
we rely on the asset class to much that we don't have to diversify?  Perhaps, seems to have
worked for a large majority of people.

In the stock market there are similar situations, such as Options, or Installment Warrants that allow you to limit risk, whilst gearing your investment and leveraging your position to build wealth. These products would allow diversification, but are also more liquid than the property investment. So are these products likely to serve you better, and it is the property investment companies that are selling you something that is likely to be inferior? I will look further into Options and Installment Warrants, and let you know, if you leave me a comment!

Finally, it seems that if you can get a property with low gearing, in a good area, with good tennants most of the concerns expressed here can be mitigated. It's all a case of how easily that position comes to you. Stock market alternatives seem worthy of research, to see which is most likely to give you the best risk / reward profile, and the best returns in the long run.

Psychology - Knowing what you're comfortable with

noreply@blogger.com (Martin Platt) — Wed, 17 Oct 2007 04:16:00 +0000

Hello people!

The more that I look into the different methods of investing in the stock markets, the more it becomes apparent that there are some methods that I am comfortable with whilst others, not so much.

That fits in with advice offered from a large number of people, regarding picking strategies that fit in with your way of thinking, your psychology.

The psychology can also be extended a little further, investing in areas of the market that you know about will also give you a certain level of comfort when compared to investing in something that you know nothing about.

For those of you that have followed Graham Buffett, the above two comments won't come as a surprise. I didn't mention this earlier, because I was in the process of making my own mind up, and as time has gone by, I can easily see how those things would help you to sleep a little better at night, after a trade.

Elliott Wave Theory

noreply@blogger.com (Martin Platt) — Tue, 16 Oct 2007 23:03:00 +0000

Hello again,

Yesterday I read a little about Elliott Wave Theory. This theory is based around the fact that there are recognisable patterns to the stock market prices over time. The idea is that a set up of a particular pattern may lead to a conclusion or prediction of future prices based on these patterns.

The idea of waves, which are phases in price movements over time seem to often act predictably given a set of indicators, it may be possible to further find information of the future prices and trends.

Each wave, which is typically a movement in a particular direction forms to make up a 3 or 5 wave group, or pattern. The wave may also be broken down further into another 3 or 5 wave group of pattern, and so on. The theory is interesting due to the fact that it seems able to predict that if a particular sort of pattern occurs, then the following pattern can be predicted, as well as possible prices, and so on.

There is motive, and correction, subdivision and truncation, trends zigzags and waves to name but a few titles given to the various elements of EWT.

This theory can be associated with Fibonacci through the fact that these patterns often exhibit
movements that are a multiple of Phi, the golden ratio, 1.618, or its inverse, 0.618.

So far, I have only read about the basics of the theory, and so far, I can see how this theory fits into existing data, what I am now interested in, is how reliably it can work for future prices and patterns, in a given time-frame, and the returns that that might give. There seems to be a fairly large number of recognisable patterns to choose from, so what will be interesting, is how quickly these patterns can be eliminated to the point that a prediction can be made.

I will continue researching this area, so that one way or another I can see how repeatable and plausible this approach might be. My thinking is, the more of these theories and technique I know, the more likely I am to be able to understand how the stock market works, and I am then much more likely to be able to pick or come up with an approach that can work for me, and the way I like to invest.

Subscription Services - Good or not?

noreply@blogger.com (Martin Platt) — Tue, 16 Oct 2007 00:05:00 +0000

Hi there!

Something else I notice a lot of, are companies offering subscriptions to "stock picks".

I would imagine if these services offer true value, and a lot of people subscribe, that would allow these companies to invest further, and make more money out of the offerings regardless of performance. That said, some of the companies do seem to have reasonable returns, the sad fact is that me being a sceptic, I can't get past thinking there's a catch, a deal breaker?

One thing that definitely will happen, is when the subscription service become popular, a particular pick being recommended is going to have a speculative effect on the share in question. If that fits the strategy you use, then it's good, but if you're looking for something such as value stocks, that pick may initially appear to be good because of the sharp rise, but actually only be due to the number of people purchasing that stock.

The other downside is that such a stock pick, since it is broadcast to a number of people as being a "hot" pick, the share price will rise, which may very quickly change the stock to no longer being a good buy, since the price per earnings ratio will rise quickly.

This final point also goes a long way toward being able to agree with the efficient market theory previously mentioned, since you would see that effect in action, even if the signal is artificial.

So, in answer to my original posting title, is it good or not? I think largely it depends on what you use it for, and what your strategy is. It would be great to hear from such companies on this blog, for those people to point out further benefits, and to maybe even give some good evidence for readers of the blog, and potential subscribers some good offers too?