4 Reasons Why You Should Not Worry About Market Declines And 2 Reasons Why You Should

The stock and bond markets always change in value. If you are invested in the markets, you are going to experience the financial effects of fluctuation. Should you worry or not? Here are four reasons why you should not worry and two reasons why you should.

You should not worry about downward moves in the market for these reasons:

1. If you primarily invest for dividends, the dividend income is your focus not the value of the shares. Dividend investing has some similarity to the real estate owner who rents his or her property. The monthly rent helps determine the return on investment. The market value of the property is not of great concern since the owner does not intend to sell. The current purpose of ownership is the receipt of income. If you are content with the dividend income from your mutual fund or stocks, the market value is a secondary concern.

2. If you are purchasing shares on a regular basis, a downward move in the market is not a problem--it is an opportunity to accumulate more shares at a lower price. The downturn can be a welcome event. The renowned investor, Warren Buffet, seems to find good values during periods of market declines. A lowering of prices does not necessarily mean a scarcity of good value. Sometimes prices are lower because the demand for ownership has fallen--and not because a business or a property suddenly has less value. If you believe that a decline will not be permanent and that demand for ownership will increase in the future, the current market price is not that important.

3. If you are a long-term investor, current prices should not cause worry. A long term may be five years or more. The question is what will prices be in five years? The answer should be based on the investment's future prospects. As an example, the price of real estate may be calculated by using rental income return as a determining factor for investment value. This return on investment reasoning can apply to dividend-paying stocks as well. If rents will go up in the future, or if business profits will increase in the future, so will the price that someone has to pay to assume ownership of the asset. As a bonus, you have had the benefit of the dividends, or return on your investment, throughout the entire term of your ownership.

4. If you understand that there is a relationship between risk and reward, you should not be upset as the investment process unfolds. Informed risk-taking uses information and reason in an effort to offset risk. Risk is never eliminated. For you to claim the fruits of excellent investment results, you must also be willing to bear the negative possibilities that accompany risk-taking.

Here are two reasons why you should worry about downward market moves:

1. You are an equity investor. You do not invest for income. The market price of your assets must move higher from the price you paid in order for you to make a profit. When you are not looking for income to provide a return on investment, you have no other choice than to rely on the increase in market price. Why does market price go higher? Because there is a demand to own the asset or because there is a belief that the asset's value will increase. An income investor has a real indication of an asset's productive value, the anticipated dividend, while an equity investor relies on less concrete indicators. Therefore, a downward price move is of greater consequence.

2. You plan to sell your investment soon. Obviously you want the highest price you can get. Will the price go higher or lower from where it now sits? The need for cash and a pessimistic view of near-term market direction are both strongly tied to the current price.

Whether your interest is in participating in dividend-paying stocks or in buying low and selling higher, your temperament and tolerance for various levels of risk are factors to consider when choosing your investment strategies.

Howard Feigenbaum is Registered Principal and Owner of Sharemaster, a Broker-Dealer firm that specializes in monthly dividend income funds.

"Do you know the only thing that gives me pleasure? It's to see my dividends coming in." - John D. Rockefeller

This article is a general discussion of the subject and is not intended as a solicitation or specific investment advice.

Copyright 2011 Sharemaster

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What You Should Know About Mid Cap Mutual Funds?

We spend most of our lifetime working in order to have the sufficient financial sources to pay for our daily expenses. We work in order to get paid and buy what we need; food, shelter, etc. Some are lucky enough to have more than they need while others, work to their bones, with blood sweat and tears but still earn less. Sad to say but reality shows that we were educated not to learn but to be employed. Given this, we have to keep in mind that we work not just for today but also for the incoming future. This is where mid cap mutual funds become very beneficial. These funds will help us with our expenses when the right time comes.

Before deciding to invest in mid cap mutual funds, one must first review the requirements for the investment. If one has the capacity to fulfill the requirements, one then has the opportunity to diversify bonds and stocks. Increasing the value of investment from time to time is the best approach that can be done. There are several mid cap funds that will be offered by several companies. One must be able to carefully compare what the varying funds have to offer. It is not advisable to easily give in to offers. For parents applying for their students, it is best to seek for professional advice for there is a lot of thinking to be made for it is not just money that is at stake here but also the future of the children. With careful comparison, one will eventually see the right mutual fund to be chosen.

If the investment for the mid cap mutual fund is done at an early age, it is very likely that bigger funds will be generated. It is also important to check the expense ratio and see to it that this is lesser than the asset allocation. At first, the value of the investment is still not realized but when the right time comes, the value of everything that was paid for will surface. Asset allocations and expense rations will determine the value of the mutual funds. These will dictate how much one will get to enjoy when the right time comes. This is why performance must be kept at high every month until the time of claiming the invested money. In all aspect, investing for mid cap funds, is advantageous and very helpful for everyone; working or non-working.

If you have spare cash lying around for investment purposes, you will not regret visiting this site at http://www.mutualfundsgenie.com/ where you will find useful information on how to get the best mutual funds that suits your need.

A Little Secret about Islamic Finance

Islamic banking is based on the principles of Islamic (Sharia) law that depends on Quran and Hadith rules. In view of CIMB Group Holdings, "Islamic finance is considered as the rapidly growing part of overall global financial system - sale of Islamic bonds increases about 24 percent worth of $25 billion in 2010."

Islamic finance is not a new concept; it is a centuries-old practice that is by no means making its significance in Eastern but also in Western states. It is the process by which the financial institutes in the Muslim world inclusive of banks and other loaning bodies raise their capital in accordance with Islamic rules and regulations that are termed as the "Shari'ah".

Islamic scholars has presented out following 3 basic principles of Islamic financing.

1. Mudaraba 2. Musharka 3. Murabaha

1. What is Mudaraba? This mode of financing is based on trust of both parties. It is form of partnership under which one party called rub-ul-amal provides finance for the business while other party utilizes his core expertise to run the business. Unless profit is determined separately, there is no need to create a company. Profit is determined according to an agreed ratio. Loss under Mudaraba is beard by finance provider, unless it is caused by other partner due to his misconduct.

2. What is Musharka? It is based on partnership agreement about financing. It is considered as old fashioned because it is fruitful only for small scale business.The only difference between Mudaraba and Musharka is that in Musharka both parties are involved in contributing finance. Profits are shared in accordance with agreed ratio among partners but losses are beard in strict proportion to their investment ratio.

3. What is Murabaha? It is the most populated form of Islamic Finance. Under this category bank make purchases of any asset for its client from a third party then it sells to its customer with a little bit amount of profit at once or against deferred payments. Some people considered it mark up finance technique but in reality it is quite different from that.

It is understood fact that prohibition of markup is becoming essential day by day, regulators of finance from all over the world especially in the United States of America; people have been doing their best to get rid of markup and other bad practices like fraud, coercion etc. It can be said that many elements of Shari'ah are common now and highly adopted.

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Interesting Facts About Finance

Finance is the general term applied to the commercial service of providing funds and capital. This is part of the area of economics that focuses on the strategies and methods of looking after money and other financial assets. A more general and accepted definition is the control of business plus public sector assets and money. People that look after or manage the arranging of finance are called finance managers.

Managing this involves dealing with the optimization and allocation of funds to various areas either by borrowing or by using those available from internal resources. The term optimization is used to explain the procedure whereby finance is maximized by reducing costs and increasing the return. Poor finance management is caused when managers neglect the rules and a deterioration occurs affecting markets around the world. It is for this very reason that finance managers are very careful with finance they agree too and where it is funded from.

Finance managers can be very short sighted, only looking at the initial cost involved and not the future return capability of the project. Finance managers are people who always like to see where they have been and do not look towards the future in the same way that a sales manager does. Many small business owners forget that the business loan they have arranged is not for personal use; a distinction which gets blurred regularly. Managers are rarely impressed with this situation as they believe they have aright to know what their money is being used for.

This may cause some concern amongst small business owners but they should train themselves to be more focused on their business which should in turn create a better frame of mind for the future. An important area for businesses to receive finance is their own bank or failing that good friends or even relatives. The simple trick is for finance managers to arrange loans using outside lenders thereby protecting their own assets whilst maximizing their own profit simultaneously. Bob Hope once said that you can only get a loan from a bank if you can prove to them you have absolutely no need for it; advice which could not be more true.

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