Posts Tagged ‘interests’
Monday, September 7th, 2009
Cautious investors often place stop-loss orders on their account. These orders sell out your shares should they decline by the amount of pain you anticipate you are willing to endure. Stop-loss orders are supposed to make an unmanageable situation manageable. Brokers encourage this as stock fluctuations inevitably trigger sales creating more commissions and spreads.
In a market break, the sell point may be much lower than the level you specify. For example, on a surprising corporate announcement, it is common for prices to gap down by $10 or more. Your stop loss may have only been down $2, but you will be sold out at the next trade, $10 lower. Of course, you always have the opportunity to buy back in again for more commissions and increasingly wide spreads. Stop-loss orders often lead to anger and frustration as an attempt to bring order to an unmanageable situation fails for you, yet enriches your broker.
Brokerage accounts also offer you a “parking place” for your cash. These are sweep accounts: money market funds that collect dividends and the change leftover from trades. In the old days, dividend checks and change were sent to your home and you had the onerous task of depositing them in your checking account. The sweep accounts are marketed as a great convenience to you. In fact, they are a great convenience to your broker as they gather your funds within short distance of the trading desk. Again, particularly optimistic types should have the dividends sent home. Maybe there is only $1,000 at stake, but would you rather have a new couch to lie on during the bear market or would you prefer to whittle it away in commissions, spreads, and poor stock picks?
Tags: fiscal problems, interests, manufacturers, methodology, mortgage, preserving cash
Posted in banking, budget analysis, business goals | Comments Off
Friday, August 28th, 2009
In every margin scenario, you may note, the broker collects larger commissions and more spreads than in a simple purchase-and-hold scenario. More shares are used in the transaction, plus the transaction inevitably involves a purchase, a sale, and margin interest.
Overconfidence in your investment ability is the main cause of margin investing. It is not a coincidence that the highest margin on record, $279 billion dollars, occurred at the peak of the NASDAQ in March 2000. Five years of 20 percent plus returns led investors to believe they could handle margin. Margin investing is best left to speculators or those with an admitted desire to lose their fortune. Optimists will be happier with a buy-andhold strategy. Even after the worst bear market, they will still own their stocks, assuming no bankruptcies, and have the opportunity to again hope for a great rise.
Tags: business plans, cash dynamics, credit score, executives, interests
Posted in accounting, attitude, banking | Comments Off
Saturday, August 1st, 2009
Here are some steps that should help you develop your business strategy:
Know your business. This seems basic, but it’s the most often forgotten step along the road to business success. Were railroads in the business of being railroads or part of the transportation industry? There’s a distinct difference between the two and a distinct difference in the psychology and strategy that awareness will bring to the business. It’s important, as we noted earlier, when you’re defining your philosophy, identifying your competition, and finding your niche. But it’s just as important when you’re determining how you’re going to achieve your goals.
Identify the philosophy behind your company’s way of doing business. If it’s a service business, articulate how important that service is to the overall goal. If the company makes products, define the purpose and goal each product line has for the company.
Is there a level of quality or production time important to success? If so, that must be part of the strategy.
Tags: business philosophy, business plan, interests, strategy
Posted in business goals, business patterns, business strategy, cash demand, financial principles | Comments Off
Saturday, August 1st, 2009
Developing a strategy and, subsequently, building a business plan based on that strategy are critical to developing the sound financial strategies.
Companies that take the time at the start to define a strategy and then build their business plan around it improve their chances for greater financial success. And department managers have an obligation to help build that success by understanding the strategy and their part in making it work—through the strategy each defines for his or her department.
Although you may not actually be involved (yet!) in forming your company’s strategy, the following discussion will put you there among the movers and shakers who determine that strategy. Then you’ll better understand the principles behind a business strategy.
Tags: business plan, cutting costs, interests, strategy
Posted in business patterns, business strategy, cash demand, financial principles | Comments Off
Friday, July 31st, 2009
Most enterprises have something called a strategy. Invading armies have one. Football teams have one. In most cases, just having a strategy may mean the difference between success and failure.
More than any other enterprise, a business needs a strategy. Why? Well, just consider what you’re trying to do and what you’re up against. You’re trying to get a share of the dollars out there. You’re competing with businesses that provide similar goods or services, yes, but also with any business at all, because the amount of dollars is limited. You’re risking economic changes as well—not only downturns that could threaten your financial stability and growth, but also upturns that could favor competitors ready and able to capitalize on them, especially if you’re not prepared. Then there are the other dangers, such as the potential loss of vital financial support, a key manager, or a valuable employee. Then, toss in the reaction of customers, which might mean a lawsuit that could sap your resources and damage your public image.
So, every company is facing tough challenges. That’s why every company needs a strategy. That’s often the key to a company’s financial success. Without an overall strategy, you’re less likely to meet your financial goals.
Even if you’re not responsible for running your company, you must first grasp the overall concept behind what the top managers are doing, just to be able to properly manage any part of that company. If you don’t understand the strategy behind the company, how much can you help it succeed?
Tags: business plan, cutting costs, interests, preserving cash
Posted in business patterns, business strategy, companies, funds, negotiationg | Comments Off
Friday, July 31st, 2009
Looking for ways to decrease operational costs runs hand-in-hand with looking for new and better ways to manage operations. Can the sales team cut down on the number of personal calls by making regular telephone contact instead? In addition to saving sales call time and money spent on automobile wear and tear, the new approach might give a definite market advantage by allowing staff to make more frequent contact. Done correctly, this can translate into better service at a lower cost. Then everyone benefits.
Inventory can be a cash eater if it isn’t financed. The company should pay the interest required to finance the inventory and keep its cash at hand. The company may need it. To make this clearer: In buying a car, you might have the funds to pay for it in cash, but by financing it, you keep your funds available in case you need them for some situation where it’s more difficult to borrow money than to use your cash. Of course, the company should also better control inventory quantities, to minimize its cash investment.
Tags: cutting costs, interests, payment plans, preserving cash
Posted in business patterns, cash demand, companies, funds | Comments Off