How To Buy Property Insurance

Reuters reported that catastrophes will drive insurance rates higher,

“Big insurance losses from hurricanes, wildfires and other natural disasters over the past two years are set to push reinsurance renewal rates higher in January, ratings agencies said.

Insurers are increasingly concerned about the impact of bad weather linked to climate change, with an increase in wildfires in California among the most costly in recent years, something S&P said could see rates there jump 30-70%.

Fitch Senior Director Graham Coutts said he expected average rates to rise 1-2%, similar to the increases seen in January 2019, although further rises could be seen depending on the scale of losses from Dorian and other hurricanes.” Read more…

Did you understand that owning a home of any kind immediately puts you at danger? Think of it, if you rent (independently or commercially) and something takes place then it's the property owner who has to look after the residential or commercial property. We aren't just talking about the potential damage of your property, however likewise prospective liability. Property-casualty insurance is created to protect you and your residential or commercial property need to something bad happen.

The first type we'll talk about is commercial residential or commercial property-casualty insurance coverage. This is simply property insurance coverage that is held by an entrepreneur; whether a sole proprietor, partnership or corporation. You need to know which policy is best for you. There are a couple of main types of policies, which may or might not apply to your situation:

General liability insurance covers costs occurring from injury, negligence or mishaps. The bottom line here is that none of these even need to be your fault and you could be effectively taken legal action against. Having this type of insurances could end up being the most important company choice you make.

There is likewise commercial home insurance coverage which covers against losses due to damage. The damage could be the outcome of anything from natural disasters to fire, from vandalism to theft. You might never ever require this insurance, however you'll be delighted you have it if you must ever wind up requiring it.

If you work out of your house then you must get a home-based business policy. You might have homeowner's or renter's insurance coverage, but they probably do not cover anything associated with a company. So you require to secure yourself with a unique sort of home casualty insurance if you have a home-based company.

The 2nd type we'll talk about is personal property liability insurance. This is implied for average people to protect their personal property. House owner's, renter's and vehicle insurance coverage are all a form of home insurance.

Since home and vehicle insurance are a form of home defense, it is very important that you look over any policy thoroughly before paying any premiums. You require to make sure that the policy has enough coverage to change what you own and to pay for liability claims. While liability claims are most likely to be filed versus services, there are individuals who will take legal action against any person for anything (once again, even if it's not your fault), so it's finest to have a healthy amount of liability coverage.

Let's face it, insurance is among those things you require, but might never utilize. But at the very same time it appears as though not having it, in fact increases your danger of something happening. That's not a scientific fact, but think of the number of times you have become aware of people that never ever used their insurance coverage, let it lapse, and after that had something happen to them the really next day.

Residential or commercial property-casualty insurance coverage is technically optional, however the truth is that you really do need it. When you compare it to how much you might potentially lose, the expense of the premium is tiny.

Believe about it, if you rent (independently or commercially) and something occurs then it's the property owner who has to take care of the property. Property-casualty insurance coverage is designed to safeguard you and your property must something bad take place.

The first type we'll discuss is industrial home casualty insurance coverage. You require to protect yourself with a unique kind of property-casualty insurance coverage if you have a home-based business.

House owner's, renter's and automobile insurance coverage are all a form of home insurance.

 

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How to Protect Your Portfolio

CNBC recently reported a heavy loss by a hedge fund,

"One of the better-performing hedge funds reportedly took a heavy loss last month, as a big bet on Argentina’s economy went sour.

Autonomy Capital lost about $1 billion, or about 23%, in August after taking a large position in Argentina’s 100-year bonds, The Wall Street Journal reported on Wednesday. The hedge fund began betting on Argentina’s recovery last year, the report said.

Run by Robert Gibbins — who reportedly has a penchant for concentrated positions — Autonomy was managing about $6 billion at the beginning of August, the Journal said. Additionally, the report said that the fund had been doing well before the loss, gaining 17% in 2018. This year is marking a rebound for the hedge-fund industry so far, with widespread gains vaulting funds in the first half of 2019."  Read more

The key to successful long-term investing is protecting capital. This does not imply you need to sell your financial investment holdings the minute they enter the losing territory, however, you need to remain acutely familiar with your portfolio and the losses you're willing to endure in an effort to increase your wealth. While it's difficult to play it safe completely when investing in the markets, the following methods can help protect your portfolio.

1-Diversification

Financiers produce deeper and more broadly diversified portfolios by owning a large number of investments in more than one possession class, thus reducing the unsystematic threat. This is the danger that comes with investing in a particular business as opposed to systematic risk, which is the danger associated with investing in the markets generally.

2-Non-Correlating Assets

Stock portfolios that consist of 12, 18 or perhaps 30 stocks can get rid of most, if not all, unsystematic risk, according to some economists.

Unfortunately, the organized danger is constantly present. Nevertheless, by including non-correlating property classes such as bonds, commodities, currencies, and realty to a group of stocks, the end outcome is frequently lower volatility and lowered systematic risk due to the fact that non-correlating possessions respond in a different way to changes in the markets compared to stocks. When one property is down, another is up.

In current years, nevertheless, proof recommends that properties that were once non-correlating now simulate each other, thereby reducing the technique's effectiveness.

3-Put Protection Technique.

Between 1926 and 2009, the S&P 500 declined 24 out of 84 years or more than 25% of the time. Investors normally secure upside gains by taking revenues off the table. In some cases, this is a sensible choice. However, it's typically the case that winning stocks are simply taking a rest before continuing greater. In this instance, you do not wish to sell but you do wish to lock-in a few of your gains. How does one do this?

There are numerous methods available. The most typical is to buy put options, which is a bet that the underlying stock will decrease in cost. Various from shorting the stock, the put offers you the option to sell at a specific cost at a particular point in the future.

You're encouraged that its future is outstanding but that the stock has increased too quickly and is most likely will decline in worth in the near term. To secure your profits, you buy one put choice of Business A with an expiration date six months in the future at a strike cost of $105, or a little in the loan.

If the stock drops to $90, the expense to purchase the put alternative will have risen significantly. At this point, you offer the option for revenue to offset the decline in the stock rate.

It's important to keep in mind that you're not always attempting to make money off the alternatives however are instead trying to ensure your unrealized earnings don't become losses. Financiers interested in protecting their whole portfolios rather of a specific stock can purchase index that work in the very same way.

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Lessons Learned from Trading

Lessons learned from trading were shared by zacks.com

"After all these years, my experience has taught me to accept that the market is a living breathing organism. It is not against you; it is not out to get you; it just exists as a marketplace where prices go up and down based on a wide variety of factors. Given that, the most important aspect for survival in trading and investing is discipline and risk management. This can be a difficult skill for both rookies and experienced traders to grasp.

Sometimes, up and down price movement is irrational. One of the major causes is what I mentioned in my fourth lesson above: computers run the show. These High-Frequency Traders can short millions of shares in tiny fractions of a second, driving stock prices lower and profiting on the way down. Then they buy the stocks at the bottom and profit even more as price rebounds to its fair market value. " Read more...

Lessons learned from the 1987 stock market crash

"Along with those safeguards, the 1987 crash also left behind a legacy of lessons learned, and applying some of them to the market today isn't hard to do, given certain similarities. One of the biggest similarities between 1987 and now is how both markets are richly valued. When the stock market is strong, much like it is today, current events can be a breaking point, Sukits says, and considering how quickly news travels now and gets embedded in share prices, investors should keep that in mind as a potential trigger for plummeting stock prices.

Although portfolio insurance as a strategy was discarded, some critics of exchange-traded funds say that because these passive investing vehicles contributed to rising stock-market valuations, ETFs could exacerbate a market crash if everyone sells. Not necessarily, Longo says. A market correction could cause ETF holders to panic-sell, but unlike portfolio insurance, there is no automated rule that forces ETF selling, which is a big difference, he says." Read more

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How Option Trading Works

Forbes recently predicted that 2020 will be the most volatile year in history

"A far bigger one is the looming 2020 US campaign. None of the possible outcomes are particularly good. I think the best we can hope for is continued gridlock.

But between now and November 2020, none of us will know the outcome. Instead, a never-ending stream of poll results will show one side or the other has the upper hand.

That will generate high market volatility, inspiring politicians and central bankers to “do something” that will probably be the wrong thing.

As noted above, if Roubini is right then rate cuts aren’t going to help. Nor will QE. Both are simply ways of encouraging more debt which Lacy Hunt’s work shows is no longer effective at stimulating growth.

They are, however, effective at blowing up bubbles.

I expect 2020 to be one of the most volatile market years of my lifetime.

I predict an unprecedented crisis that will lead to the biggest wipeout of wealth in history. And most investors are completely unaware of the pressure building right now. Learn more here." Read more...

With options we can profit under any kind of market conditions. It is possible to profit whether stocks are up, down or sideways using option trading. If the ability to trade all kinds of market conditions is the doorway to becoming a stock market millionaire, then option trading would be the very key.

In this article, I will outline some common ways by which you can profit from all kinds of markets by option trading.  You could buy the same number of equivalent stocks for a fraction of the price using call options and profit when the stock goes up. If the stock should crash, you will lose only the small amount you put towards buying the option instead of the whole amount that you would have put towards buying the stock itself.

Sell Naked Put Option - Instead of buying call options, you could sell short put options thereby pocketing the entire amount you made on selling the put options if the stock should go up.

Bull Call Spread - A bull call spread consists of buying call options at the money and selling short out of the money call options of the same month. The benefit of this strategy is that you profit when the stock goes up and profit also when the stock stays sideways!

Simple Option Strategies for Down Markets:

Buy Put Option - Instead of shorting stocks and risking a margin call, you could simply buy a put option. Buying a put option is exactly the same as buying call options except that you profit when the stock goes down instead of up.

Sell Naked Call Option - Instead of buying put options, you could sell short call options thereby pocketing the entire amount you made on selling the put options if the stock should go down.

Bear Put Spread - A bear put spread consists of buying put options at the money and selling short out of the money put options of the same month. The benefit of this strategy is that you profit when the stock goes down and profit also when the stock stays sideways!

Simple Option Strategies for UP or DOWN Markets

-Straddle - A straddle consist of buying a call option and a put option at the same strike price on the same stock. This strategy allows you to profit whether the stock moves up or down and is excellent when you are certain that a stock will move greatly soon but isn't sure which direction that may be.

-Strangle - Similar concept to a straddle but buys out of the money call option and put option instead of at the money ones in order to reduce the cost of the position.

Simple Option Strategies for Sideways Markets

- Covered Call - If you are holding on to a stock that is moving sideways, you could collect rental out of it by selling the call option of that stock month after month and pocket the whole amount of the sale should the stock remain sideways.

-Short Straddle - Instead of buying call options and put options as described above in a Straddle, you would sell short them instead. In this way, you create an option position which profits when the stock remains sideways.

These are only very few of the many more option trading strategies that you can use to your specific portfolio needs.

 

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Investing in a Bear Market

Warren Bufffet is reportedly increasing his cash position:

"Warren Buffett's mountain of cash may be a warning to investors that stocks are overvalued and that a crash is around the corner.

Berkshire's cash pile is worth nearly 60% of its $208 billion portfolio of public companies. In the past 32 years, the group held more cash as a percentage of its portfolio only in the years leading up to the financial crisis of 2008, according to Bloomberg.

Berkshire Hathaway has been amassing cash for a while. The company boasted $111 billion at the end of June 2018, a record at the time. A crash didn't immediately follow, indicating the cash pile doesn't necessarily signal an imminent downturn.

Buffett would prefer to put Berkshire Hathaway's cash to work in acquiring companies rather than buying stock, he wrote in his latest letter to shareholders. But current valuations are prohibitively high." Read more...

But not everyone is Warren Buffet. For ordinary investors, the best course of action is to educate ourselves and be disciplined in our investments. The key to smart investing is knowledge and discipline.

Cultivating the discipline and focus to invest money regularly is a lot easier if you have defined your investment goals. Establish separate accounts for specific goals like college savings and retirement so you can tailor your choice of investment vehicles accordingly. Your state's 529 Plan might be a great option for educational investments. An aggressive stock portfolio could be advantageous for a young person with retirement decades away; but a middle-aged person would want to consider less volatile options like bonds or certificates of deposit for at least a portion of retirement savings.

Keep your day job as long as you can. If you reinvest your yields from dividend stocks instead of cashing them out when paid, you get more shares that produce more dividends the next time around. Even a low-paying dividend stock left alone can create an avalanche of wealth over the decades.

It is important that you diversify your investments as much as you can. Remember the old saying: do not put all your eggs in the same basket. Instead of buying a quantity of stocks from the same company, look for other investments. However, you should also learn when to strengthen your positions when you find a great investment.

Understand the risk involved in the stock market. If you are used to investing in mutual funds, understand that individual stock investing is a greater risk. If you aren't the type of person who is prepared to take a risk, stick with companies that have a good financial standing, and that have shown excellent stock performance in the past.

Do not start to sell all of your stock just because of an impending bear market. You may be trying to lighten potential losses, but this can be a huge mistake. Eventually, the market will rebound and most of the stocks will, too. Trying to cut your losses may actually cause them to be greater.

Never take anything personally in investing. Do not be jealous of another's success. Do not let your financial advisor's advice or criticism get to you. Do not panic when the market moves down and don't get overly exhilarated when it rises. Many top fund managers make their best decisions when deep in yoga or after a long meditation.

Think about how much time you are willing to put into keeping up with the stock market. If you know that you can not give this investment a lot of time, you may need to have a broker work with you so that you can get what you want to get out of your investment.

Approach investing in stocks as a serious thing. Even if you are investing small amounts of money, you should take the time to think about your decisions instead of taking chances. The people you are competing against are taking trading seriously, and so should you if you want to be successful.

Consider getting some good software that specializes in investment management. It really does not cost that much and it will help save you a ton of time trying to learn how to properly do things. Look into getting one that can help you with profits and losses and one for tracking prices.

When you are investing in the stock market, you need to trade defensively to protect yourself from losses. By using stop losses, you can put in an order to automatically sell a stock when its price drops below a certain point. This will protect you against big losses in a downturn.

Many people find investing to be a challenge that they wish to undertake. The potential upside to wise investing is almost limitless. The best way to make the most of your investments is to arm yourself with facts. Use the guidance in this piece, and you will have a great start toward achieving your financial goals.

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Best Way to Manage Personal Finances

Managing personal finances is not easy. Fortunately, you can turn to financial therapists for help, as explained by Marketwatch

"Demand for financial therapy is poised to grow, said Debra Kaplan, a Tucson, Ariz.–based licensed mental-health therapist, speaker and author of “For Love and Money: Exploring Sexual & Financial Betrayal in Relationships.” Kaplan has an MBA and first got interested in the psychology of money while working as a commodity options trader on Wall Street. This past decade of stock-market prosperity has coincided with the rise of a generation that is open to self-reflection, she’s observed.

And as traditional financial planning becomes increasingly automated, with investors relying on robo-advisers and index funds, and talk of artificial intelligence helping clients make asset allocations, Kahler sees a bright future for financial therapy.

After nearly 40 years in the financial-advisory business, Kahler, 64, has come to the conclusion that only about 20% of financial-planning clients respond to logic and education. That small minority will, for example, stop overspending if an adviser tells them to. But, for most people, “it goes way deeper,” he said, and they need more than monthly budgets to change their behavior. " Read more...

Managing personal finances is imperative for any adult, especially those with children or other dependents. Learning how to create budgets and strict shopping lists will let you make the most of your income. Remember the tips in this article, so that you don't find yourself overwhelmed with a pile of debt.

Use an automatic payment plan when you begin to repay your student loans. Most lenders offer significant discounts for those who opt to have payments deducted electronically every month. This also ensures that you do not incur additional charges or late fees, if you forget to make your payment!

Get the right kinds of insurance, if you want to remain secure, financially. If you own a home, but do not have the proper type of insurance, your home will be at risk if a lawsuit follows. The same is true for any of your vehicles or other property. Insure yourself as well as you can, in order to avoid financial ruin, in case of an accident.

When it comes to credit scores, what you don't know can really hurt you. Be sure to get a copy of your credit report every six months and study it carefully, looking for errors. It is up to you to find mistakes and request to have them deleted from your credit report. Look for such things as, old collections accounts that have been paid, as well as, incorrect information.

At the end of every day, empty out all of the change in your pockets, purse, and briefcase into a jar for saving. Once per month, you can deposit the money into your savings account, where it will earn interest. Avoid losing out on surcharges and fees from coin-counting machines.

Ask family and friends what they are doing. This is not so much so that you can do what they are doing, but to give you ideas about options that might be available that you haven't heard of. Finding out what other people are doing is a good way to find what will work best for you.

Save as much money as you can every month. Having a solid amount of savings on hand is very useful in case of any emergencies. It will enable you to avoid taking out loans or suffering great losses, like your car, simply because you could not afford what you needed at that time.

Make a budget and stick to it. Many people make a spending plan for themselves, but quickly fudge on it or throw it out all together, when times get hard. Taking control of your finances means taking control of yourself and doing what needs to be done to stay within your means.

Avoid getting calls from debt collectors or angry friends to whom you owe money by learning how to manage your personal finances wisely. It's important to track how you spend your money each month, so that you can realize where you are spending too much. Remember these tips to keep your account in the black.

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How to Invest into Index Funds

The Volatility index just hit a new low. Valuewalk reported:

"The technical picture is clearly bullish on Wall Street, thanks to this week’s rally, and all of the key trend indicators are pointing higher again following the August correction. The S&P 500, the Nasdaq, and the Dow are still well above their flat 200-day moving averages, and the benchmarks are finally back above their flat 50-day moving averages as well. Small-caps continue to show relative weakness compared to the large-cap indices, and although the Russell 2000 recovered above its 200-day moving average, it’s still stuck below its short-term indicator.

The Volatility Index (VIX) hit its lowest level in five weeks together with the major indices, dropping below both its 50- and 200-day moving averages, and it closed the week near 16, well below the key 20 level.

Market internals improved for the second week in a row, and even though the weakness in small-caps is still weighing on the most reliable indicators, the overall picture is consistent with a healthy bull market. The Advance/Decline line hit new bull market highs thanks to the broad rally in stocks, as advancing issues outnumbered decliners by a 5-to-1 ratio on the NYSE, and by a 6-to-1 ratio on the Nasdaq. The average number of new 52-week highs increased on both exchanges, climbing to 105 on the NYSE and 58 on the Nasdaq.

The number of new lows collapsed in the meantime, falling to 35 on the NYSE and 63 on the Nasdaq. The percentage of stocks above the 200-day moving average is finally back above 50% in the wake of this week’s risk-on shift, and the closing value of 52% is the indicator’s highest reading since the start of the correction." Read more...

Do you believe that the world economy will grow? Do you believe that US economy will grow? I do. The major stock indexes are indicators of economy grow. You can make money use this opportunity buying index funds. Investing into index mutual funds is easy, interesting, and profitable. It takes 5 minutes every month! If you are long-term investor, index funds is for you!

It doesn’t matter what index you choose. This index will grow due to economy sector grow rate. There are many indexes in the world. But how to get money from indexes grow?

There are many indexes mutual funds. Fund share price change accordance index performance. There are thousands of mutual funds have S&P 500 as a base of their portfolio. The differences from one fund to other are operating company and expenses. Choose fund with fell known operating company and smallest expenses.

Small expenses are very important. If fund have big expenses, the managers steal investors’ money. Index fund manager don’t buy expensive stock market researches, don’t arrive at a difficult decision witch stock to buy. Index fund manager buy stock included into index only. It isn’t expensive!

The best investment strategy for indexes mutual funds is to invest some dollar amount monthly. And be the long-term investor – invest for 10 years or more. Our computer modeling of this strategy shows that you will receive profit, if you invest on monthly base during 10 years. I can’t give you guaranties that you will get profit but the probability of this is close to 100%.

And the last, if you can, diversify you portfolio. Divide you portfolio into three parts. Buy large capitalization company index fund (S&P 500, DJA), small capitalization index fund (S&P 600) and developed market index fund or international index fund. It makes you portfolio more profitable and more stable.

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What Causes Stock Market Volatility

Stock market volatility has increased lately. CBOE reported:

"Every day since July 30, with the exception of August 20, the S&P 500 has seen a move greater than 1% during normal U.S. trading hours. In other words, 21 of the last 22 trading days have been fairly volatile. It remains to be seen whether this is another “new normal.” For some recent context, between October 10, 2018 and January 10, 2019, the S&P 500 experienced intraday moves of greater than 1% on 59 of 62 sessions.

While temperatures start to decline, the VIX Index has a history of heating up. Cboe Global Markets VIX Index data between 1990 - present (includes 13 years when the VIX Index was calculated using S&P 100 (OEX) options, and 16 years when the VIX Index calculation uses S&P 500 (SPX) options) shows the months of October, November and September registered the highest average VIX Index level.

The VIX futures term structure continues to toggle between slightly inverted and its more normal contango. The VIX Index is around 18 as August comes to a close, which indicates expected daily S&P 500 moves of roughly 1.125%. Realized volatility is currently running at a slight premium to the VIX Index (21 day Historical Volatility – VIX Index), which is fairly unusual. "Read more...

So what causes stock market volatility?

We know that greed and fear rule the markets. But did you know that when investors gets too greedy, markets usually fall, and when investors are overcome with fear, markets usually rise. So how can when we monitor investors emotions and take advantage of investors emotional extremes?

Investor psychology has been analyzed for at least 250 years. Charles MacKay wrote his book, ‘Extraordinary Popular Delusions And The Madness Of Crowds’, in 1841, describing, among other manias, the herd mentality that caused the South Sea Bubble. Since then, many academics have published financial theories based on the concept that individuals act rationally and consider all available information in the decision-making process. But real life frequently demonstrates that the behavior of equity markets is irrational and unpredictable. A field known as “behavioural finance” has evolved over the years attempting to explain how emotions influence investors and their decision-making process. Studying human psychology helps predict the general direction of financial markets as well as many stock market bubbles and crashes. At the height of a period of optimism, greed moves stocks higher, ignoring business fundamentals and therefore creating an overpriced market. At the other extreme, fear moves prices lower, ignoring obvious opportunities and creates an undervalued market.

One important study, (“Aspects of Investor Psychology,” The Journal of Portfolio Management, Summer 1998) found that investors are much more distressed by prospective losses than they are made happy by equivalent gains. Some researchers theorize that investors “follow the crowd” and conventional wisdom to avoid any regret in the event their decisions prove to be incorrect.

QUANTIFYING INVESTOR EMOTIONS OR INVESTOR SENTIMENT

When a stock or market index rises, we know that it means investors are more eager to buy than to sell. But how can we accurately gauge just how investors feel?

Most often, investors are somewhere between mildly positive and mildly negative, and only occasionally do they demonstrate the extremes of greed or fear. It is easier to detect emotion when it is close to either irrational exuberance or outright fear. When markets act this way, it becomes "news" and moves from the business section, to being featured at the start of the evening news, and on the front page of the daily newspaper.

The success of charting as a tool, depends on investors repeating their behaviour patterns. There is always a comfort factor in doing the same as others and generally an aversion to behaving differently. Investors display herding instincts in their behaviour and this has become particularly noticeable among institutional investors. In the early stages of a rising trend in a market, positive sentiment can act as a positive driving force as everyone rushes in to join the party. However, there comes a time after the trend has been in place, when this positive sentiment acts as a warning that the trend is nearing its climax. That’s when smart investors will start switching to alternative investments.

The most sophisticated and active players in the market use derivative products to effect their transactions. These players tend to display earlier changes in emotion than most investors and normally their emotions run to greater extremes. So, derivative markets are a good source of data on investor sentiment. There are various options available on stocks, ETF's and indexes. By using an option pricing formula, we can extract a measure of how much investors are prepared to pay for the possibility of making a profit, or hedging against a loss. This is known as implied volatility, and it provides a mathematical valuation of investor emotion. Implied volatility tends to be high (the scale is inverted) when the market has had a sharp fall and this is associated with investor fear. At the other extreme, low implied volatility often occurs after a rise in the market and when investors are becoming complacent.

WHAT IS THE VIX?

VIX is the symbol for the Chicago Board Options Exchange's volatility index for the S&P 500 (SPX). It is a measure of the level of implied volatility and not historical or statistical volatility. A numerical value for the VIX has been published by the CBOE since 1993. The method of calculating VIX was changed in early 2003. Instead of using the S&P 100 (OEX) Index options, it is now calculated using the options on the S&P 500 (SPX). Also note that the VXN is the symbol for the implied volatility index of the NASDAQ 100 index.

The implied volatilities are weighted to give the VIX a value that in effect acts as the implied volatility of an at-the-money SPX option at 22-trading days to expiration. The VIX represents the implied volatility of a hypothetical at-the-money SPX option. If implied volatility is high, the premium on options will be high and vice versa. Generally speaking, rising option premiums reflect rising expectation of future volatility of the underlying stock index, which represents higher implied volatility levels. The higher the VIX, the more panic in the markets and the greater the chance that investors have given up hope, taken their money, and gone home.

Comparing the movement of the VIX with that of the market can quite often provide clues as to the future direction the market might move. The more the VIX increases in value, the more "panic" is an issue in the market place. On the flip side, the more the VIX decreases in value, the more complacency there is amongst investors. The psychological impact measured by a relatively high VIX is a clear indicator that tells traders markets are oversold. A historic example was displayed on July 23rd 2002 when the VIX shot over 55. That big move coincided with a significant low in the Dow Jones Industrial Average that was followed by a 1,034-point, six-day rally. That rally didn't stick and the market again re-tested its July low in October of 2002. But throughout this double bottom in 2002 the VIX accurately identified a major directional shift in the market. At its core, the VIX is a statistical measure of emotions, and emotions are a major factor signalling capitulation in the market.

INVERSE RELATIONSHIP

Extremely high readings of VIX indicate market bottoms, while low readings indicate market tops.

The VIX actually has an inverse relationship to the stock market. This is one of the first things you'll notice when viewing the VIX on a bar chart. When the VIX goes down the stock market moves higher. When the VIX advances, the stock market is headed lower. Generally speaking, a rising stock market is considered less risky by investors. On the other hand, a declining stock market is considered more risky. Therefore, the higher the perceived risk by investors the higher the implied volatility. This will make options, especially put options, more expensive.

When the phrase "implied volatility" is mentioned, keep in mind that it is not about the size of price swings. Rather it's the implied risk that is associated with taking a position in the stock market. When the stock market declines, the demand for put options usually increases. Increased demand means higher put option prices.

USING VIX TO TIME THE MARKET

One early study identified a VIX value of 25 as normal, and a value above 35 as high. Between October 1997 and May 2001 the VIX indicator went above 35 eleven times. In this study, the S&P 500 index as represented by SPY ETF. was purchased each time and held until the VIX retreated below 25. There were 9 profitable trades for an average gain of 3.1% and an average holding period of about one month. By using this VIX timing scheme you could capture 80% of total gains in the market, but your money is only at risk one third of the time.

THE CONTRARIAN VIEW POINT OF THE VIX

An extended and/or extremely low VIX suggests a high degree of complacency and is commonly considered bearish. From the contrarian view point ,many traders are of the opinion that if the VIX becomes low, they'll begin looking for a reason to begin selling stock. On the flip-side of the coin, a very high VIX can indicate a high degree of anxiety which often leads to panic among options traders. This action is often considered bullish by the contrarian, and they'll look for reasons to begin buying stock. High VIX readings usually occur after an extended or sharp market decline with investor sentiment still very bearish. Some contrarians view readings above 35 as bullish. Hence, they'll begin looking for a major market turn to the upside.

The VIX should be used in conjunction with "regular" analysis of price action on price charts. The wise trader will never make a purchase or sale based solely on the price level of the VIX. The wise trader will use the VIX (and its support and resistance levels) in conjunction with the price action of charts of the S&P 500, the Dow, and the NASDAQ.

Using the VIX with charts of these indices will help you get a good grasp of the current market psychology. Since market movements are based entirely on human emotions, it is important for traders to understand psychological indicators. When the VIX is used correctly it helps you stay on the right side of the market and make profitable trades.

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How to Save Money in Today Economy

With the inversion of the yield curve, investors started worrying about a recession.

"You can be sure an economic downturn will affect your investments in one way or another. But, if you're not relying on that money for day-to-day living or an upcoming expense, you'll be just fine, says Lauren Anastasio, a certified financial planner at SoFi, a personal-finance company.

"If you're in a position where you're investing for the long term and you have the ability to ignore what's happening to your account balance because you don't need that money to live off of in the next few years, that's a big indicator [you can survive a recession]," Anastasio told Business Insider.

In other words, if your investment strategy is predicated on long-term growth — e.g. you're building a nest egg for a retirement that's a few decades away — chances are that money isn't essential to your current budget.

To be sure, most financial experts recommend investing only after you've paid off high-interest debt and set up an emergency fund, which can act as a safety net should you face an unexpected expense or lose your job. Your retirement accounts are usually the best place to start investing, since they're focused on long-term growth anyway." Read more...

Managing your personal finances responsibly can seem difficult in this economy, but there are a few simple steps that you can take to make the process easier.

In order to manage your personal finances properly, it is crucial to establish and maintain a monthly budget. This budget should contain line items for everyday expenses and revenue streams. By analyzing where you spend most of your money, you will be better able to control your expenses and pay your bills on time.

Before you make an investment, take the time to meet with a financial planner and develop an investment policy statement. A good statement will help you avoid the pitfalls of investing, and will help you make investment choices that are right for you. If you're educated about investing, you may be able to put together a statement on your own.

Use a card for small purchases each month such as groceries and gas and pay it off or pay off a majority of the balance each month. This will show creditors that you are capable of handling your card and being responsible with payments. Doing this on a regular basis will help to repair that bad credit score that you currently have.

A great way to avoid being overburdened by expenses that only come around once a year is to set aside a little money out of each paycheck. To do this, divide your yearly expenses by the number of paychecks you receive in a year. The next time the expense is due, you'll be ready for it.

Always look for ways to save. Audit yourself and your bills about once every six months. Take a look at competing businesses for services you use, to see if you can get something for less. Compare the cost of food at different stores, and make sure you are getting the best interest rates on your credit cards and savings accounts.

To find real space in your personal finance, stop thinking about income and expenses at the same time. It is essential to track every penny of both, but if you pay attention to them simultaneously, all you end up doing is balancing your budget and not saving anything. Cap your expenses at 70% of your income and see the difference.

Diversify your investments using mutual funds. It's difficult and expensive for a small investor to create a diversified portfolio using individual securities, but a no-load mutual fund can provide instant diversification at low cost. You can invest as little as $1000 in a fund that holds anywhere from 20 to several hundred securities, for an annual fee as low as 1%. Diversification helps to lower investment risk by reducing dependence on any one security to provide a favorable return.

As said in the beginning of the article, it's very important to pay off necessary items, like your bills, before purchasing anything for fun, including dates or new movies. You can make the most of your money, if you budget and track how you are spending your income each month.

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What is a High Yield Bond

High-yield bonds are doing well lately, according to Reuters.

"Investors had been feasting on U.S. corporate credit bonds for years, though recession fears and mounting defaults late last year put an abrupt end to that. This year, the appetite for U.S. corporate bonds picked up dramatically when investors’ views on the economy began to improve and central banks became more accommodative.

U.S. corporate bonds have posted a total return of 13.4% this year, measured by the Bank of America Merrill Lynch US Corporate Bond Index, while year-to-date Treasury returns are up 8.1%, according to an index compiled by Bloomberg and Barclays .

What’s more, a lack of alternatives against the backdrop of ultra-low, even negative-yielding, debt has made U.S. corporate bonds the natural destination for many investors. Some 95% of all investment-grade corporate debt in the world that has a positive yield is in the United States, according to Bank of America Merrill Lynch." Read more...

To understand high yield bonds, let's define what a bond is. A bond is an interest-bearing investment that obliges the borrower to pay a specific amount of interest for a specific period of time and then at maturity to repay the investor the original amount of the loan. High yield bonds are bonds issued by corporations. These companies pay interest rates higher than those of top quality government or corporate bonds to attract investors. Corporate assets back the bonds; incase of default, the bondholders have a legal claim on those assets.

High yield bonds can offer many advantages:

1. As the name implies, high yield bonds frequently have higher yields. They can be called (redeemed) earlier, which is one reason investors receive higher interest payments. In general these bonds have shorter maturities. Downturns in this investment category have not been as dramatic as in other investment categories.

2. High yield bonds have become a large global market and lack of liquidity is not a huge concern.

3. High yield bonds are not perfectly correlated with other investment categories.

4. High yield bonds have to earn higher returns in order to compensate investors for higher risk. High yield bonds tend to combine the higher returns associated with equities and the lower risk associated with bonds.

5. These bonds will fluctuate based on more than just the direction of interest rates; they will also increase or decrease in value as the issuing company improves its financial performance.

During the previous five years, high yield bonds have generated superior returns compared to more conservative bond funds. However, these returns are less than those of some aggressive equity funds. Investors should invest a portion of their portfolio in this investment category to reduce their risk and increase their income and return potential.

High yield bonds play an important role in a well-diversified mutual fund portfolio for both the conservative and aggressive investors. This sector will still incur risk; but the worst downside risk displayed by this investment category was a loss of 8 percent. Investors who want to capitalize on the opportunities of high yield bonds could consider several mutual funds.

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Stock Market Trading Tips From Professional Investors

During this market condition, a professional trader suggested buying the dip

"After getting crushed Friday, the markets are moving higher on renewed hopes of a trade deal.

Whether or not this recovery can be sustained remains to be seen. However, if you're feeling bullish in the short term, Optimize Advisors President Michael Khouw has a way for you to get in on the cheap.

"We are seeing considerable volatility, and relative to the volatility we are seeing, we are not actually seeing options premiums as high as they might otherwise be."

As Khouw pointed out, a big reason for this is that the Volatility Index , the VIX, is probably not as elevated as it should be.

"We've averaged just under 1.5% intraday moves since the beginning of the month. With the VIX sitting around 20, [it] should be probably 50% higher than that when you're seeing moves of that kind of magnitude," said Khouw.

"I was looking out to September," said Khouw. "You could buy the 295/300 call spread. You'd be spending about $1.20 to put that trade on, so the payoff is going to be better than 3 to 1 if we get a move up to 300 which, by the way, is approximately where we were at the beginning of this month." Read more...

Here are more trading tips from professional traders:

Avoid placing all your eggs in one basket. If you put all of your money into one or two stocks and those stocks fail, you have lost everything. If instead you choose to diversify, you will have stocks in many different areas to turn to, and therefore a more diverse portfolio that you can see gains from.

Diversify your holdings. By investing your money in various sectors and investment vehicles, you limit the risk of losing money. It is wise to invest in a combination of stocks, bonds and cash vehicles, with the allocations varying depending on your age and your comfort level with regard to risk.

If you are investing in the stock market be sure to shop around on the front and back load fees, in addition to any other fees. Depending on the type of trading you plan to participate in, fees can eat away quickly at your earnings. Compare the rates of many investment companies before making your decision.

Before you decide that how much you want to invest in the stock market, take some time to figure out what you want your investments to do for you. Are you looking forward to building a retirement fund? Alternatively, make some extra income? When you get this figured out, you will be able to decide how much you are willing to risk on the market.

Do not blindly follow the recommendations of your investment broker without doing some due diligence of your own. Ensure that the investment is registered with the SEC and find some background information on the way that the investment has performed in the past. There have been instances of fraud whereby the information presented by the broker was fabricated.

Keep your objective and time horizon in mind when choosing your stocks. If you have many years left and are saving for a retirement decade away, invest aggressively. Look at small-cap growth stocks or related mutual funds. The percentage of your portfolio in the stock market should be as high as 80%, if this is your personal situation.

Having a good education is important when it comes to the stock market. Investors who understand basic accounting principles are much more likely to have success with trading. This does not mean you have to get an accounting degree. You just need to know the basic scoring system of how the stock market works, such as annual reports and stock history.

Before you invest in the stock market, be sure to investigate the companies that have succeeded through the recent versatile economy. If a company has maintained a steady increase in earnings, despite a down economy, they are likely to continue to do so, regardless of how bad the economy gets.

Learn to invest on the long term, as well as, on the short term. When you invest in a stock, you should have a pretty good idea of how long it will take for the stock to gain value. A short-term investment should be made if you notice a trend. However, you should make a long-term investment, if you know a certain company has a good chance at beating its competitors in the next year or so.

You need to take the stock market seriously. You don't dabble in it. Your involvement with the stock market can generate you legitimate money, but it can also be the cause of serious losses as well. Treat your time investing with respect and learn all you can to make sure you are on the positive sign of that equation as often as possible.

Hopefully, you have found the information that was presented to you in this article, quite helpful and that it was just what you needed to get started with investing. If you keep this information in mind as you invest, you will be sure to see a big difference on your returns.

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