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Tuesday, February 02, 2010

Market Capitalization

One thing newbie investors are often confused about is a stock's market capitalization. A company's market capitalization is simply the value of the company as priced by the stock market. The market capitalization is taken by the price of the stock times the amount of shares outstanding.

For example, if there are 100 million shares of company XYZ and those shares are trading at $35 a share, then company XYZ has a market capitalization of $3.5 billion.

Stocks with a larger market capitalization are generally seen as 'safer' investments, since the company itself is larger. However, large-cap stocks also do not have as much growth potential as small cap stocks. For a $1 billion stock to triple, it just needs to become a $3 billion company. For a $200 billion company to triple, it needs to become a $600 billion company.

Stocks are generally classified as mega-cap, large-cap, mid-cap, small-cap, or micro-cap stock based on their market capitalization. There is no set definition for these terms. What some consider a small-cap others might consider a micro-cap. Nevertheless, here's a general guideline to give you an idea what market capitalizations fit these terms:

Mega Cap: $200 billion or more (very few companies fit this category)

Large Cap: $10 billion to $200 billion

Mid Cap: $2 billion to $10 billion

Small Cap: $250 million to $2 billion

Micro Cap: Less than $250 million
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Saturday, January 09, 2010

Choosing A Good Stock Investment Broker

If you want to invest in the stock market, you need to find a stock broker. Most people just use brokers that either their friends or family use or they see an advertisement on TV. Most of the time, these brokers are just fine. But with a little bit of research, you should be able to find the best stock broker for you. Here are the factors that you should consider when shopping around for a broker:

Place trades through the Internet

Some brokers allow you to place trades via phone, in-person, or through the Internet. Whatever the case is, the key is that you need to be able to place a trade online. Placing a trade online will generally cost you between $7-$15, whereas placing a trade over the phone or in-person can cost you anywhere between $25-$100. The difference in savings between making an $8 trade and a $10 trade is nowhere near the difference in making a $10 trade and a $50 trade. So whatever you do, make trades online.

Any advice or research they give is generally useless. Don't pay much for it

Some firms justify higher prices based on 'personalized research' or 'excellent investment advice.' Almost always, these perks are worth little. Again, if it's the difference between making $8 trades with no help and $10 trades with some help, go with the $10 trades if you want the advice or research. But don't be paying $50 a trade and up for research and advice. Chances are you are best served just investing in index funds or ETFs anyway.

Use a beginner-friendly broker

There are some brokers that are more geared for frequent traders and professionals, such as Interactive Brokers. There are others that are geared more for beginners, such as TD Ameritrade. For most novice investors, it is much much better to go with beginner-friendly brokers. The brokers geared for professionals offer lower trading fees and some advanced tools, but this will most likely just confuse beginning investors. Investment firms such as TD Ameritrade, Fidelity, etc. are very easy to use, and their trading costs are still relatively low as long as you use internet trades.
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Saturday, January 02, 2010

Know Your Role - How About Their Roles?

It seems pretty obvious that employees need to know what their own jobs require -- their roles, responsibilities and authority levels. We don't expect people to do their jobs effectively if they don't know what they are supposed to be doing. However, one area that people tend to ignore is how well employees understand what OTHER PEOPLE DO in their organizations. Why might that be important?

Recently, I was doing some training in customer service and defusing hostile customers for a fairly large organization. A constant theme kept emerging (and it's quite common). A customer would call in with some sort of difficulty or problem, and the person answering the phone would transfer the caller to someone else. Unfortunately, the next person taking the call was not the right person, or was unavailable, leaving the customer to leave voice mail, or once again, get shuffled to someone else. Often the frustrated customer would end up calling the first person back to holler at them.

How does this happen? Are employees stupid? Or perhaps can't be bothered? Probably not. They simply lack the information they need to provide good quality customer service to callers. And what's the outcome? First, angry customers. Second, stress and frustration on the part of staff caught in this shuffle. Third, some terrible inefficiencies for the organization itself, which impacts the bottom line.

The problem is that we don't educate staff in the "bigger picture". In this case, that bigger picture relates to what other people do, their various expertise, and the relationship of other employee's jobs to each other. Before we talk about specific "fixes", consider this.

It's very rare that employees work is independent of the work of other people in their workplaces. These days, getting jobs done has become more complicated, where the ability to get something accomplished often involves cooperation with others, or some degree of teamwork. Customer service aside, workplaces where people understand their own jobs and the jobs of others (like how the whole puzzle fits together) are going to be more effective and more productive.

Helping People Understand The Larger Puzzle

New employees should be oriented and educated not just about their own jobs, but about what other people do, and who to talk to when faces with different kinds of situations. They need to know who has decision-making power, and who has expertise they may need. That's far more important than knowing where the washrooms are (well, that's debatable!).

Workplaces are constantly changing. Responsibilities change, and so do job roles. Management should take an active role in keeping employees up to date about changes that affect not only their own jobs, but the jobs and roles of others. This is even more important in team based and project based environments. Regular staff meetings can be used to do this in an ongoing way, and need not be time intensive. Often, staff updates can take only a very few minutes.

Here's the most important part. And this applies to every employee. Employees tend to hesitate about asking too many questions, for fear of looking stupid or being perceived as a nuisance. They rely on the human resources department or their supervisor to tell them what they need to know. Unfortunately, supervisors don't always know what employees need to know, or haven't thought about it, and they can't read minds. So, it's important that employees take on responsibility for their own understanding of what other people do. Employees! Listen up! ASK! You can't do your job well if you don't know your own role and what other people do. You can't do your job if you don't know where to refer a customer with a particular problem.

Let's end this by listing some things that people should know:

  • Who has authority to make decisions about specific issues (which people, which issues)?
  • Where does the expertise lie to deal with particular issues?
  • What procedures should be used to involve people who need to be involved in a particular issue?
  • When a particular person who needs to be involved is unavailable, is there a backup procedure (someone else to contact)?

The nice part about all this is that it isn't rocket science, but it is neglected. Human resources, managers and employees can all take responsibility and make sure that employees know and understand their own job responsibilities and roles, and those of others who fit into the completed "puzzle" of getting things done effectively and efficiently.
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Thursday, December 10, 2009

Improve Your Debt Management Skills

If you are struggling with debts, and would like to feel in full control of your finances, you should consider improving your debt management skills.

Improving your debt management skills could allow you to:

• See exactly how many debts you have.

• See exactly how much you owe, and who you owe it to.

• See exactly how much you are required to pay towards your debts each month.

• See if you can actually afford to service your debts each month.

• Get a rough idea of when you should be debt free.

Improving your debt management skills can actually be pretty easy.

The first you thing you should do is create a budget. This should help you see exactly how much money you are earning / receiving each month, along with exactly how much money you need to spend each month. Knowing these two figures should give you a rough idea of whether or not you will be able to afford to service your debts each month (providing you know how much they will cost you).

To find out the exact amount of money you have available to pay towards your debts each month, you should do the following:

Total monthly income minus total monthly essential expenditure (mortgage/rent payments, secured debt payments, utility bills, food, etc.).

The amount you are left with is called your 'disposable income' - and as mentioned, this is the money you will have available each month to pay towards your unsecured debts, as well as spending on non-essentials and saving for the future, if you can afford it.

Creating a budget is just one of the ways you could improve your debt management skills.

In general, the sooner you take action to improve your debt management skills, the better. The earlier you address your problems, the easier they should be to tackle. If you simply leave your debts to grow and don't take action against them, they will probably get worse.
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Thursday, December 03, 2009

Bankruptcies Hit Retirement Communities

The recession is hitting elderly people where they live, literally. Financial problems have been mounting at a number of assisted-living and continuing-care communities, forcing some facilities into bankruptcies and inflicting new worries on residents and their families who thought their life plans were comfortably set. In recent weeks, Erickson Retirement Communities, which manages 19 continuing-care retirement communities in 11 states, declared bankruptcy. Sunrise Senior Living Inc. posted a quarterly loss of $82 million and announced plans to sell off 21 of its assisted-living communities. Nationally, smaller retirement communities are raising their prices, changing the way they operate, selling themselves off to bigger chains, or getting out of the business altogether. Many companies say they can't make a profit—or even succeed on a nonprofit basis—in an environment that combines the high cost of caring for elderly residents, restrictive Medicaid budgets, tight credit markets and fewer residents willing and able to pay top dollar for their care.

When a facility fails, it can have myriad effects on the residents. The good news is that no one gets kicked to the curb–at least not right away. "Nobody has ended up on the street, which is a primal fear when you're dealing with these places," says Jason Frank, an elder-law attorney in Baltimore. "But their fees can skyrocket, and they can become unaffordable. Then they can kick you out for nonpayment." In some cases, residents may find that the sizeable deposits they made to get their apartments in the first place have disappeared. (Continuing-care communities like Erickson's typically charge deposits of $150,000 or more, and assure residents that they can stay on the campus for the rest of their lives regardless of how their needs change, and that the deposits will be refundable to themselves or their heirs when they leave or die. But residents typically also have to pay monthly fees for care, and those fees can continue to increase. Assisted-living facilities like Sunrise generally require no deposits but charge a monthly pay-as-you-go-plan.) That's what happened to the 170 people who lived in Covenant at South Hills in Lebanon, Pa. Their deposits went up in smoke when their facility was sold in bankruptcy to Concordia Lutheran Ministries, which did not take on that liability. Several are now suing B'nai Brith Housing, the original operator of Covenant.

Erickson executives say that their bankruptcy filing will have no impact on residents. "We've refunded every single deposit in our 26-year history," says Tom Neubauer, the firm's executive vice president of sales. "People moving in are completely unaffected by all this." Erickson's corporate organization is complex, with each community (and that community's deposits) owned by a separate nonprofit entity that is not part of the bankruptcy filing.

But residents could face disruptions. Newer communities that haven't been completely built out yet may not have their assisted-living and nursing-home wings, so residents who need higher levels of care may end up being transferred to other facilities. Should various nonprofits not be able to resell units at the same price as the original buyers paid, those original buyers might not get their deposits back. And residents who run through their personal savings and their deposits paying for ever-higher levels of care will have to depend on an optional "benevolent fund" to cover their expenses.

Erickson has a solid reputation and good track record for keeping residents for the rest of their lives, but anyone shopping for retirement housing now should think thrice about the financial risks of their arrangements. "You've got to keep your eyes open," says Eric Carlson, director of the long-term-care project for the National Senior Citizens Law Center. "If you look at the agreements, sometimes what you're being promised is not that much. The provider may be reserving the right to force you to leave for various reasons." Often there's a generic "can't meet your needs" clause in the contract.

He recommends that refundable deposits be set aside in escrow accounts, and that anyone signing a long-term-care contract run it by an elderlaw attorney first. (They can be found at the National Academy of Elderlaw Attorneys.) His organization also has an online checklist of questions that should be asked before moving into a retirement or assisted-living community.

Carlson also says he generally prefers the financial advantages of the pay-as-you-go models, but even consumers who choose facilities that only charge rent on a monthly basis may not be saving their nest eggs for long. Sunrise has raised prices as it has gone through several quarters of financial trouble. It can cost $6,000 or more a month for quality assisted living, and $9,000 for nursing-home care. At those rates, it's not hard to run through life savings in a hurry, and then not every assisted-living facility will keep you. Many don't take Medicaid or other subsidies, and some facilities that had taken Medicaid have switched to no-Medicaid policies. That leaves those residents who have no assets with no place to live. Nationally, discharge-related complaints about nursing homes and assisted-living facilities have doubled in a decade—to 12,237 in 2008, according to the U.S. Administration on Aging. It's now the second-most-common complaint at nursing homes, behind "failure to respond to requests for assistance." And it's the third-most-common complaint at assisted-living facilities, behind problems with medication administration and disappointment with the food.

Complicated state rules can then force newly impoverished residents to go into nursing homes for at least a month so they can qualify for Medicaid, and then back out into another assisted-living facility, says Beverley Laubert, the long-term-care ombudsman for Ohio and president of the National Association of State Long-Term Care Ombudsman Programs. She and her colleagues are called in when facilities declare bankruptcy or force residents to relocate because of policy changes, but usually they can't force facilities to keep residents. Instead, they spend much of their time helping residents who thought they'd found their final homes look for new places to live in a market where, now, nothing is certain.
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