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Dividend stocks

Dividend stocks: a way to build a passive income

Dividend stocks

Dividend stocks

Dividend Stocks

What are dividend stocks?

Dividends stocks are stocks of companies that share the profits  with their shareholder. So let’s say company A had made a profit. Let say the profit is 100 USD. And let’s say that company A have only 100 stocks standing out on the market. They decide that want to share ( which is often called as distribute) the 100 usd profit to the 100 stocks. So this means if you had one stock of this company A, then you will get a dividend ( company A’s profit ) of 1 USD. If you own ten of these stocks then your dividend would be 10 USD.

Type of dividend stocks

There are many types of dividend stocks. I will just discuss the most popular types with you.

1. Normal Growth Stocks

Normal growth stocks are stocks of companies that are focusing in growing their business. Most of the time they give you very little dividends. The reason for that is that company need the profit to invest in growing their business. When they see that they have  too much cash reserve, they are starting to increase the dividend or buy back stocks. This way they increase the value of their stocks. A few examples for growth stocks are Apple, Google, Facebook stocks and so on. These company usually give out dividend once or twice a year.

2. Close end funds

Close end funds are funds that are managed by the managers of a investing fund. Close end funds borrow money or give out in stocks ( to get capital) to invest in companies, stock markets, forex markets and so on. By investing in the right things these managers make profits. And with these profits they share it with their shareholders right away or as soon as possible. Most close end fund give dividends quarterly or monthly. To avoid heavy taxation, these funds share 90% of their profit with their share holders.

3. REIT funds

Reit funds are a bit like close end funds. But the main difference is that these funds are primarily focussed on real estate or mortgages. These funds makes their profit by collecting rent , buy and sell real estate, giving out mortgages and building and leasing of properties.

How to build up a portfolio of dividend stocks?

Before you start working on building your dividend stocks portfolio, you need to make clear to yourself what the purpose is of this portfolio. For example do you want that this portfolio to cover all your life expenses or do you want to replace your income. Once you decide what you want. Then you can start on working building up this portfolio of dividend stocks.

How to manage the risk?

So what is the best way to manage your risk? Before you start buying, make a list of stocks which one has the highest yield, research their business and the market that they are operated in. Don’t put all your money in one dividend company but invest in a few. This way if company A one day reported that they want to reduce the dividend it won’t hurt you hard. ( it will hurt you because you get lesser dividned and stock will lose their value) Because still have company b, c,d that are doing well. Another tip is when you research take a look at the dividend pay out history. If a company miss the dividend pay out often, then I highly recommend you not to invest in this stock or fund.

Amazon Whole Food Market

Amazon Whole Food Merger

Amazon Whole Food Merger

Amazon Whole Food Merger

Hi guys, in this blog we are going to talk about the Amazon Whole Food Merger. In this blog you will find what we think what the effect of Amazon Whole Food merger will have on Amazon stock price. On Friday the 16th Amazon announced that it would take over Whole Food.

Amazon Whole Food Merger: What are the advantages?

On Friday the 16th of June Amazon announced that they would take over Whole Food company for 13.7 Billion USD. It basically means that Amazon is paying 42 USD per Whole Food share. What are the possible advantages from this acquisition?

#1 Whole Food Market customers

With this take over, Amazon will gain more access to high end customers. Like Amazon Whole Food Market served high end customers who demands top quality for every dollar they spend. With this merger Amazon can gain more prime members. For those who don’t know what high end customers means. High end customers are customers who are willing to pay top dollars for premium products that is worth their money.

#2 Physical Stores

Amazon also gets 432 physique stores of Whole Food Market. With the experiments of Amazon on what a customer pick, pay and how they get their grocery delivered in the recent years. Amazon has now the opportunity to change and shake up the grocery industry. It is the reason why nearly every supermarket stocks went down when the Amazon Whole Food merger was announced. Just take a look below what kind of store Amazon Go is. ( They launched the store this year.)

#3 Reducing delivery time

By acquiring Whole Food Market, Amazon got more physical places to distribute their products. For example customers can pick their Amazon products during their grocery time at any Whole Food Market store.

Amazon Whole Food Merger

AmazonWhole Food Merger source : bloomberg

# 4 Extra Profit

The final advantage is that Amazon get the revenue and profit from Whole Food Market. In 2016 the revenue of Whole Food Market was 15.7 billion USD.

Amazon Whole Food Merger: What are the disadvantages?

#1 Fierce Grocery industry

Whole Food Market has been struggling for the last few quarters. Their profits has been slinking. And their profit margin isn’t exactly super great either. If  Whole Food Market continue too struggle in the grocery industry then their profit will turn negative eventually. So there is a chance that Amazon will lose more money in this deal.

Amazon Whole Food Merger: How does this effect the stock price?

I think on the short term the trend of Amazon will be bullish. Because it feeds the market the idea that Amazon can do something really amazing in the grocery industry. Some analyst are believing that Amazon will change the whole grocery industry. The grocery market was worth around 606 billion USD in 2016. So there is a lot of money to be made in the grocery industry. If Amazon can disrupt the grocery market with the help of Whole Food Market like they did with the book industry then the stocks of Amazon will sky rock a whole lot more!

making money on stock market

3 Methods for making money on the stock market

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making money on stock market

Today i am going to share with you my knowledge on making money on stock market.

Making money on stock market: Method 1

The first method on making money on stock market is to invest in stocks for the long term.  like Warren Buffet. Look for a good company and invest for long term. Every time a company performs well and the results are better than expected then the value of the stock of that company will increase. So you will have to do a good research on that the company and the market that they are active in.

When you do a research you have to look at the potential of what a company can be. After all investors invest because they believe they will make a good profit in the future. So when you invest in a company make sure you know exactly what the potential of the company is and know if the current CEO and his/her management team can make this potential come true. As you all probably know, a company can only grow if they have a good CEO with his/her management team.

How to recognise a good management team?

One of the best way to know if the management team  is good, is to check the company’s quarterly results and see if the management team of that company  have achieved their goal or  did they do better than what wall street analyst had  expected. Most companies have we website with a section investor relations. You can find the quarterly results on the investor relations section. Or just google for it.

Now a example of a company that has a clear potential is Starbucks. Starbucks potential is that they can open thousands of store in the future where consumers can enjoy their Starbucks products. So it is easy to understand that the more stores they open, the more money they can make. And thus the value will go up in the future.

A example of a company that doesn’t have a clear potential is Twitter. For me I don’t see or understand what the potential of twitter is. Like all social media, their revenue is relied on ad revenue. To earn more ad revenue, twitter needs more unique users. At this moment I don’t see how twitter is going to create a large base of unique users compare to Facebook and snapchat.

 

Making money on stock market: Method 2

When you buy a stock, you can buy a dividend stock. A dividend stock gives investors a piece of the company’s profit. In the video How make to make a passive income with dividend, i explain more about this subject.  

Making money on stock market: Method 3

The third method on how to make money stocks is by going short. You probably have heard the term of going short on the market. This one of the few ways of making money when the stock market goes down. Meaning that you can earn a profit when the stock price value goes down.

So how does this work? When you are going short, you are making a deal on contract with a buyer. In this contract you have a deal that the buyer will buy the stocks of you for the current stock price where you have just gone short. So if the price dropped in the future then you are making money. However if the price goes up then you will be losing money. Because when you go short , your broker buys the current stock and hold it for you. So when the stock price goes up , you will have to pay the difference to your broker. This procedure is called margin call.  Each broker have their own margin call policies. In  margin call you have a deal with your broker , that if price goes over % of the stock price value of your short position. Then you have to pay for the difference.

So guys these are the three methods were professional traders, investors make money on the stock market. If you have any questions or remarks, please put it in the comments section. We will get back to you as soon as possible. Thanks for reading and good luck with making money on the stock market.

Read more about CFD Trading: How to make money with CFD Trading

Plus500 Tutorial - How to use the CFD broker Plus500

Plus500 Tutorial: How to open and close a trade in Plus500

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Plus500 Tutorial: How to open and close a trade in Plus500

Opening and closing a trade is simple in Plus500. A trader with a Plus500 account can trade CFDs on Forex, Stocks, Commodities , Options and Indices.

Below I will explain to you how to do this and what the options mean that you see during opening a position.

Contents

  1. Finding an instrument that you want to invest in
  2. Difference between short and buy
  3. Stock information screen explained
  4. Short and buy screen explained

 

Finding an instrument that you want to invest in

  1. Login to your Plus500 account via the webtrader. Create an new account if you haven’t done it yet.
  2. Click on ‘Real Money’.
  3. Login and in the menu at the left side of the page, click on ‘Trade’. Here a list of all tradeable instruments can be seen. Now Plus500 is one of the few online CFD brokers who has that many instruments, so you can trade stocks, commodities, indices and forex from all across the world.
  4. Now for the sake of learning, let’s say you want to trade in the USA stocks  of Apple (iPhone, iPads anyone?). You now go to: Trade -> Shares -> USA -> AN-AW and find Apple in the list. You could also just search for ‘Apple’ in the search field at the top left corner, next to the Plus 500 logo.
  5. Openandclose1When you click on the Apple row, information about that specific stock is displayed on the right. In the next section I will explain to you what this all means.
  6. For now, important to know is what the difference between short and buy is.

 

Difference between short and buy

In the screenshot above you must have noticed two options: short and buy. For the people who know a bit more about trading, simply put this is the same as going bear and bull. Whereas short is the same as going bear and buy is the same as going bull.

For the people who don’t know what I’m talking about:

Going short means you anticipate that the stock will go down. Let’s say you short a stock at £20 and tomorrow the stock value becomes £15. You will have made a profit of £5.

Buying a stock means you anticipate the exact opposite. You think the stock is going well, so the stock will increase. Let’s say you buy a stock at £20 and tomorrow the stock value becomes £25. Your profit is £5.

Of course these are just examples, if you are using Plus500 you’ll also get leverage and your profit (or loss) will most likely be a lot more.

 

Stock information screen explained

When you click on an instrument in Plus500 you will be displayed a screen with information about that instrument. Let’s take Apple for example again. Look at the screenshot below. I clicked on Apple and information about that stock is displayed on the right now. Plus500 gives a couple of important information here, which I will explain in detail below.

Openandclose2

The first thing you see is the title: Apple (AAPL) this is the stock you selected. Between the brackets the stock symbol is shown. This is the stock acronym that is used worldwide to identify that stock. Sometimes a stock name can be a lot a like, looking for that stock with the unique symbol makes it a lot easier to find that stock.

Next you’ll see pricing information of this stock. The current high and low values are shown here. This is taken right out of the Yahoo! Finance page. You can also see how much the price has changed in percentage in comparison with the opening value of that day. When the stock market is closed, you’ll see the line ‘Trading is closed’.

The line ‘Traded at the Nasdaq Yahoo! Finance’ just tells you where the stock belongs and where you can find it on Yahoo! Finance. Nasdaq the second-largest American stock exchange, usually consists of a lot of technical companies.

Next there are two buttons available. Short and buy and below this the value of the stock that you will short or buy. You see a little difference here. This is called the spread, the spread is what you pay to the broker as a commission. This usually is not a lot, depending on the stock’s popularity and value. Be careful with this, because to profit you need to make more money than you pay in the spread. When opening a stock I suggest you to try it in demo mode, to see how much the spread is exactly.

In the last section there is some more information available. If you don’t see it, click on ‘Info’ to uncollapse this information. I will explain to you the most important information:

Leverage: this is not the same everywhere. It usually is 1:10, but in Forex it usually is 1:100. Leverage is a way to make your money worth more than it is. Let’s say you want to use £100. A leverage of 1:10 means your £100 is worth £100 * 10 = £1000. This means with only £100, you can buy stocks that is worth a £1000. Yes, this means you can make 10 times more profit, but this also means you could lose 10 times faster. This last thing sounds scary, but Plus500 gives us a negative balance protection. This means you cannot lose more than your deposit. This means that if you deposited £100, you can profit from £1 to £99999 (infinite) and only lose a maximum of your deposit £100! In my opinion this is awesome.

A more detailed explanation about CFD stocks and leverage can be found here.

Premium: If you keep a position open overnight, a night premium is added or substracted from your position. This means you pay a small amount of money overnight (or you gain it). This is very low usually, so I don’t pay much attention to it. As you can see Apple’s overnight buy premium is -0.0093% of your position.

Premium time: This is the time that the premium is done. I almost always keep my position open for a night and I have never really noticed premium much.

Maintenance margin: This is important information, because if your position goes below this margin your position will be automatically closed. So to keep your positon open, your current account balance needs to exceed this margin. Thankfully, this isn’t much either. I usually deposit £100 and use that £100 completely in a position and this position can be kept overnight without it autoclosing on me. If you open a position, this margin will also be automatically calculated for you in the top header (look for M. Margin) – so you don’t even have to calculate this yourself.

Expires daily/expiry date: I have never noticed this much. I don’t think this applies to stock, but might apply to something else. Just make sure to check if this is ‘No’.

Trading hours: This is important to know. Plus500 automatically changes this time to your timezone. An American stock is usually open from 9.30 am to 4 pm American time, but the time shown here is in your own time. Which is great and makes it so much easier to time your trades well.

Now you understand the information screen. The next screen to explain is the screen when you want to open a position.

 

Short and buy screen explained

Now let’s say you want to buy Apple. Click on the Buy button. This is what you will see now:

Openandclose3

The short screen has the same information, so I will explain this only once.

The Plus500 short and buy screen is very nicely done with the user in mind. It gives great information and makes it easy to open a trade. The first thing you see is the stock name and symbol. The current value and the percentage of movement since the opening time.

Now to open a position you need to decide how many shares you want to buy. Let’s say here youw ant to buy 5 shares. The value of this 522 dollar, which is the same as 488,59 euro. Plus500 automatically takes the foreign exchange price of your currency and the one the stock is using, which usually are dollars. This is great, you don’t really have to pay much attention to this. Also, because Plus500 is giving you leverage of 1:10 of this stock, you only need 55 dollar to buy 5 shares that is valued 522 dollar. Amazing right?

So really you only need to pay attention to the ‘Required Margin’. This is the amount that will be substracted from your account to use in the position. So not the value, but the required margin. This is important.

Next you have ‘Close at profit’ and ‘Close at loss’. These options give you the ability to let Plus500 automatically close your position when the stock value reaches a certain value that you set. This is great if you don’t have the time to close it yourself and want to let it happen. Also, if you are losing this guarantees a certain loss. So instead of losing your whole position, you only lose what you want. Or the opposite: profit what you want.

Guaranteed stop sets an absolute limit on your potential loss. The position will be closed at the value you specified, even if the market gaps suddenly, your position will be closed at the value you specified.

The advanced section I will explain in a later article.

Below this section, the information I explained earlier is displayed again for your convenience.

When you are ready, just click on the big blue button ‘Buy’ and your position will be opened. This position will be shown in the left menu at ‘Open positions’. Or in the stock list, under the stock itself.

Don’t forget, to truly learn how to trade, you need to try it yourself for a couple of times to be able to get the hang of it. Try it out with small amounts of real money first to feel how you react to profits or losses. This is important to know of yourself prior to trading.

*How to buy and sell bitcoin on Plus500*

*How to buy and sell Ethereum on PLus500*

 

Go back to:

The topics below are coming soon:

  • Plus500 trading methods and tactics
  • What are the benefits and disadvantages of Plus500?
  • Important things to know when trading with Plus500

fundamental stocks analysis

Fundamental Analysis on stocks: How do you do it?

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Fundamental Stocks Analysis

Fundamental Stocks Analysis

When you do a fundamental stocks analysis, all you want to gain out of it is to understand how the company operates, their strategy, the success rate of their strategy, the financial health of the business and the company  future plans. By reading and analysing reports you will know how the company is performing and how healthy the company is in the current market condition. If you read the reports of the competitors as well then you will what position your company is on the market.

Why do people use fundamental stocks analysis?

There is an idea in the markets that the stock market may value a company wrong from time to time. Profits can be made by finding stocks that are underpriced. According to the methodology of fundamental stocks analysis the market will eventually value the stock at the right price.

One way of performing a fundamental analysis on stocks is to analysing the financial reports from companies. Each quarter the company gives out their financial result that they have achieved in the previous quarter. By analysing these financial reports, you will gain a better understanding and insight of the value of different company and you will understand how they got priced in the stock market. By doing this you will get to know if a stock is overpriced or underpriced.

5 key factors of a fundamental stocks analysis to look at

  1. Earnings

The first key element to look at when doing a fundamental analysis on stocks is earnings. You need to know what the earnings are. When you know what the earnings are, check it and compare it to the forecasted earning that was done by the CEO of that company. This way you will know if the company strategy is working good. And if the company is profitable or not. Future earnings are a key factor as the future prospects of the company’s business and potential growth opportunities often determines the stock price.

When you are performing a fundamental stocks analysis on you will find out that the factors that determines the earnings of a company are revenue, cost , assets and liabilities. In order to get a simple view on the earnings is too look at the earnings per share (EPS). The EPS is calculated as follow: The total earnings of a company divided by the numbers of the outstanding shares of a company.

  1. Profit Margins

The next key factor to look at in the fundamental stocks analysis is the Profit Margins. Now there is one thing that you need to know first and that is that the total revenue of a company doesn’t tell you the whole story of how well the financial situation is of a company. When you look at the profit margin of company it gives you a new information insight on the financial situation of a company. For instance a profit margin can tell you how much money a company keeps from it’s revenue. This profit measure is therefore extremely useful for comparing similar companies that operates in the same markets. It’s one of the best method to determine which company performs better in a certain market

A high profit margin indicates that a company has lower cost and therefore more profit. Some professional investors and hedgefund managers use the profit margins to see which company has a better control of cost in the same market.

  1. Return on Equity (ROE)

Return on equity is a financial ratio in the fundamental stocks analysis that measure how much profit is being made with the current available equity of the company. Basically it tells how much profit is being made with your investment.

Example:

Company A and company B are both making a profit of $10 million. However company A has a equity of $100 million while company B has an equity of $500 million. In this case the ROE of company A will be 10% and the ROE of company B will be 5%. What this tell us is that company A make the same profit as company B but with lesser equity. If company A had the same equity as company B, company A would have made much more profit. In this case based only on the ROE it would be a good idea for a investor to invest in company A as he gets more profit.

  1. Price-to-Earnings (P/E)

Price to earnings (P/E) is a other very popular financial ratio in the fundamental stocks analysis. What the P/E does is that it tells you quickly what the value is of a stock. The calculation of the value P/E value goes as follow: current market price divided by the earnings per share (EPS).

What does the value of a P/E of a stock tell?

A low P/E value means that a stock is under valued. When a stock is under valued it basically means that the current stock price is cheap and it hasn’t reach the price that it should be.  A high P/E means that the current stock price is more expensive. Now you might think that when a stock has a high P/E value that the stock price will go down. But often it doesn’t go down. As the stock price includes many factors such as earnings, profit margin and growth potential. Often a high a P/E of a stock indicates that many traders and investors believes the current stock value is under valued as they believe that the company will earn a lot more in the future. Therefore although the P/E is high they still see it as cheap compare to the future worth.

  1. Price-to-Book (P/B)

Price to book ratio is a financial ratio in the fundamental analysis stocks that compare the stock market value against its book value of the company. The calculation for this financial ratio is as follow: current share price divided by the book value per share (according to the latest financial statement) or use the market capitalisation of the company and divided it by all the shareholders equity.

So what does this financial ratio tells you about the company? What the ratio tells you is that if you are paying too much or too little for a stock as it denotes the residual value if the company went bankrupt today. A higher P/B ratio than 1 denotes that the share price is higher than what the company’s assed would be sold for. The difference indicates what investors think about the future growth potential of the company.

What is the right price to buy?

The thing with fundamental stocks analysis is that in the long run the stock price will be reflected through its fundamental true value. However in the short- term the stock price of a company might go in the wrong direction. This because that there are still factors that can have influence such as news releases and changes in the future outlook of the company. Trends, investors emotions also effects the short term price fluctuations which results that the current share price is different from its true value.

What is the best way to make money with fundamental stocks analysis?

Longterm

If you are using the fundamental analysis on the right way you can make a lot of profit in the long term. For example in the article I wrote about Starbucks of why I invested it for long term was based on based on the fundamental analysis on shares/stocks. However for entering the buying price I used the technical analyses. I have bought the shares in 2014 and currently my return on investment is over 70%.

Short term 

Not many knows this but you can make a lot of money on short term with using fundamental analysis stocks especially when you are going short or when a company seems to be hit by bad news that barely effects the company revenue. For example if you that something has changed in the fundamental analysis stocks that can have influence on the companies revenue, then the first thing you need to do is check the technical analysis to see what the current price trend is of that stock. Then check if the stock price is near support level or the resistance level. A change in the fundamental analysis stocks will break many support levels or  many resistance levels.

 

The best way to make money from stocks in my experience is too use a combination of fundamental stocks analysis with technical analysis for entry and exiting. The fundamental stocks analysis is best use to determine why the stock should get more or less value in the future. And the technical analysis is best to use for understanding the price movement( that is based on the past) to determine whether it is a good time to buy or sell the stock for a certain price.

Trading succes story: A young guy turned $9,700 Into $360,000 by trading

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Trading success from $9600 to $360.000

Trading success story

Hi guys,

Check out this awesome interview. His trading success story is amazing.  This guy turned turned $9,700 Into $360,000 by trading penny stocks. Of course it didn’t go in a straight way. He made some losses on his way to the $360,000. Once he made huge loss. That loss was so huge that he stopped trading for a few days. But he didn’t gave up on trading. Instead he was determined to improve his strategy and trading success was a must. Check this interview and learn how he improved his strategy and what his final strategy is.

What have we learned here from this guys trading success story?

  1. You need to have a proven strategy. ( read here more on how to trade like a pro: 5 steps to trade like a pro)
  2. Quit your losses quickly
  3. minimise  your downside risk
  4. Pick trades that is low on risk but have high rewards
  5. Let your winners ride
  6. Analyse your trades , understand what you are doing wrong.

How did this guy make his comeback after his first big loss ?

In this interview the young trader says that he took a break from trading for a week and a halve and he took also a break from his social life. He took the time of what went wrong. Researched and study it and then improves his strategy. It took him 3,5 months to get back his lost from trading the stock market.

The biggest lesson that he learned is to quit the bad trades fast. And he doesn’t put all his money on a single trade. What he does now he divides it in percentage of his total cash. Like for example if he trade stocks then he only put up a percentage of his total investment money.

One more thing is that this guy makes his trades mostly from his Iphone. Watch this interview because you learn more stuff for trading succes.

stock market

Stock market : What is it and how does it function?

Start trading now to receive a 20 pounds welcome bonus!

Stock market

Are you considering to start trading in the stock market or starting to invest in the stock market. Then  you have come to the right place. In this article you well get know what a stock market is , how the stock market functions and who the participants are. So let’s get starting.

What is a stock market?

A stock market is a market place where people and companies can buy or sell shares. The buying process works as follow. If you see a share that you find interesting then you can do two things. First you can buy the share for the current market price or you can try to buy it cheaper then the original market price by placing a bid. And if the bid gets accepted then deal has been concluded.

In the old days it was very difficult for you as a private consumer to access the stock market. If you wanted to place an order back then, you had to  have a broker that were sending his/her people to the market floor to execute your order.Now with the modern technology and internet it is very easy for a private trader like you and me to access the stock market. All we need  to have is a account at a on-line broker and we are able to execute our orders by ourselves. If you are interested in how to trade the stock market on-line then read this article: on-line share trading.

What is the function of a stock market?

The stock markets has two functions. The stock markets gives buyers and sellers the opportunity to trade shares with each other in a safe environment. And the second function is that it gives companies the possibility to get capital that they need for the their business. So the way of how the stock market works is as follow:

1. Company A is planning to expand their business. For expanding the business company A needs to do an investment for it. And since company A doesn’t have the capital for it, it decides that they want get the capital at the stock markets. In exchange for the capital company A gives a bit of ownership of the company away in the form of shares. There reason why many companies like company A wants to enlisted their stocks at the stock market is that they can get a huge amount of capital with out worrying of paying back. And of course they don’t have to pay interest rate.

2. Investors and traders can buy shares of the company that they like. And if they have stopped liking the company then they can sell the shares. The volume of those transaction depends on how popular the stock is. If the demand for the stock is big but the supply is small it most likely that the price for that share will increase and vice versa. The reason why there is many transaction in stock markets everyday is because of the huge amount of participants the stock market haves. And each participant has their strategy and vision of how that stock will develop in price. The market participant varies from small private investors , big investors such as banks , pension fund , hedge funds , institution and companies themselves (buying back their shares). So now you know what the stock markets is , how functions and who the participants are. With this basic understanding of the market, you can start trading.