Category Investment Ideas

Four Key Principles to Trading Forex

Forex

The Forex market is attracting waves of new investors who are looking for a more level playing field than the traditional securities market. Forex is also open 24 hours a day, which is much more convenient for the modern day trader.

Although the Forex market contains many opportunities for the savvy and lucky trader, there are some things that everyone should know before beginning to trade on the highly volatile market. Below are four of the major tips to keep in mind when trading the Forex market.

 

1 – Limit your trading to the currencies and the countries that you know.

The way to succeed in the Forex market is to cut down on the amount and the types of trades that you do, not increase them. The best traders focus their efforts on the types of trades in which they have a knowledge, either from previous trades, holding employment that tipped them to cues within that industry or a great deal of independent study. That knowledge gives them the competitive advantage that they need in order to execute with slightly more precision and profit where others might miss the opportunity.

 

keep-calm-and-trade-forex-362 – Only trade in the markets in which you have a legitimate interest.

The amount of research that is necessary to accurately begin to predict the Forex market is immense. There is little chance that you will be able to complete the research for topics in which you have no interest. Do yourself a favor and limit your research to topics that interest you!

 

3 – Going for the next “hot tip” is usually suicide.

Once you start trading on the Forex market, you will notice that there will be no shortage of people who will attempt to sell you information about the next hot thing to hit the market. Most of these people have a hidden agenda or a complete conflict of interest. You must be incredibly tight about the sources you accept information from.

 

4 – Get a good execution strategy.

Even if you have the right instincts and the right research, Forex trading requires a very precise execution in order to work. Make sure that you trade through a reputable firm that gets your orders out when you want them. You are competing against computers that trade in the milliseconds with no loss in accuracy. You need similar accuracy in order to have a chance at success.

Some of the best Forex methodology by Online Guru Trader is available by newsletter or message board. Be sure to keep an eye out for true professionals that provide you with legitimate information!

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Options for Raising Capital for Small Businesses

Small companies are often in the need of capital to run their business and to expand. Equity financing is often considered to be a superior source of capital for small businesses as it allows them to grow without the overhang of repaying a significant amount of debt.

There are many ways to raise capital for a small business. One option is to invest money themselves. Another option is to offer ownership interest for friends and family members. The problem with this is that there is often a limited amount of capital available from your family and friends. In addition, more often than not, they do not have much experience in running a business. This is where private equity firms can significantly help your small business.

Private equity firms have investors who trust the private equity fund managers due to experience with them, their reputation, and their experience. As a result, these private equity firms are often able to raise a significant amount of money that can significantly allow an small business to expand more quickly.

Professional equity firms also have more sophisticated investors who may be able to understand that your small business may need time to build a reputation to expand. They often have more patience than individuals who need a quick return and as a result your business can potentially grow in a more measured and sustainable way. This can provide a large boon to your business.

In addition to this, private equity firms provide small businesses with business experience and expertise. Many small business owners do not have an extensive history in business. As such, they are not experienced and knowledgeable regarding the best practices currently present in the industry. This can help your business grow quicker and also to install some internal controls that help to effectively run your organization in a more efficient and safer way.

Private equity firms often invest in different ways into a small business than other investors may. Some offer a loan that is convertible into equity shares upon certain triggers. Others invest through convertible shares that provide them with the ability to convert into common shares. The point is that many private equity firms are looking for investments that offer the protection and income that bonds offer yet the potential that equity investments provide. Therefore private equity firms can provide much needed capital for small businesses, but has a cost associated with it.

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Private Equity Investing

Private equity is money that is invested by individuals and funds that are used to make an investment in a private company or to take a publicly traded company private. The funds in use by private equity may be raised by using institutional and retail investors. Capital from private equity is used to make an acquisition or to provide funding for new technologies. A private equity firm will try to improve financial results of an acquisition to sell at a later time or take it public. Familiarity with terms used with private equity is a benefit when discussing investments.

Limited Partners
These are institutional investors or investors with high net worth that will receive capital gains and any income when making an investment in a private equity fund. A limited partner is not involved with any aspect of the management of a fund. Investors are protected from litigation taken against the fund or from losses that exceed their original investment.

General Partners
These are people that are actively managing capital that has been invested in a private equity fund. The general partners receive a percentage of the profits made by the fund known as carried interest and will earn management fees. A general partner is also legally liable for any actions taken by the fund.

Compensation Structure
Compensation for general partners will come from any management fees or carried interest. The share of profits of an investment in a private equity fund is carried interest. The amount of carried interest on a fund is often between 5 and 30 percent of the total profit. Management fees are about 2 percent on all investments made each year.

Included Clauses
Two clauses are typically found in the compensation agreements for private equity funds. There will be a return provision and a clawback provision. The return provision is a minimum annual return a limited partner is entitled before any general partners receive any carried interest. The preferred return is called the hurdle rate and is typically about 8 percent. The clawback provision for a private equity fund allows a limited partner to get back some of the carried interest from a general partner. This occurs when a general partner has withheld a higher percentage of carried interest from future investments.

Residual Value and Cumulative Distribution
The residual value for a private equity fund is defined as the market value of the equity that remains for all limited partners in a fund. The cumulative distribution is the amount of stock or cash that is paid out to a limited partner. There are important factors for the track record of a fund.

Additional Information
Investors that are interested in private equity need to have an understanding of basic terms that are used to make smart investment decisions.

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Hedge Funds, Venture Capital, and Private Equity

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