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by Ashraf Laidi
Posted: Feb 22, 2010 5:00
Comments: 8936
Posted: Feb 22, 2010 5:00
Comments: 8936
Forum Topic:
Gold, Oil & Indices (Equity & Bond Indices)
Discuss Gold, Oil & Indices (Equity & Bond Indices)
Understanding Terminal Value (TV)
The forecast becomes darker as the time horizon increases. This also applies to finances, especially when it comes to estimating the company's cash flows in the future. At the same time, business needs to be valued. To "solve" this, analysts use financial models, such as discounted cash flow (DCF), along with certain assumptions to obtain the total value of the business or project.
Discounted cash flow (discounted cash flow) is a popular method used in feasibility studies, corporate acquisitions and stock market valuations. This method is based on the theory that the value of an asset is equal to all future cash flows received from that asset. These cash flows must be discounted to their present value at a discount rate that represents the cost of capital, such as an interest rate.
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DCF consists of two main components: the forecast period and the final value. The estimated period is usually about five years. Anything longer than that and the accuracy of the forecasts suffer. Here, calculating the value of the terminal becomes important.
There are two commonly used methods for calculating the final cost: perpetual growth (Gordon's growth model) and multiple output. The first assumes that the business will continue to generate cash flow at a constant rate forever, while the second assumes that the business will be sold in multiples of some market indicators. Investment professionals prefer a multiple approach, while scientists prefer a model of perpetual growth.
Terminal value types (TV)
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The discount is necessary because the temporary value of money creates a mismatch between the current and future value of a given amount of money. When valuing a business, free cash flow or dividends can be forecast for a period of time, but estimating the results of current problems becomes more difficult as forecasts spread further into the future. Moreover, it is difficult to determine the exact time when the company may cease operations.
To overcome these limitations, investors can assume that cash flows will grow at a steady rate forever, starting at some point in the future. This is the ultimate value.
The cost of the terminal is calculated by dividing the last projected cash flow by the difference between the discount rate and the growth rate of the terminal. The terminal cost estimate estimates the value of the company after the forecast period. Formula for calculating the final value:
(FCF * (1 + g)) / (d - g)
Where:
FCF = Free cash flow for the last forecast period
g = terminal growth rate
d = discount rate (which is usually the weighted average cost of capital)
The final growth rate is the constant rate at which the company is expected to grow forever. This growth rate begins at the end of the last forecast period of cash flow according to the discounted cash flow model and passes into eternity. The final growth rate usually corresponds to a long-term inflation rate, but not higher than the historical growth rate of gross domestic product (GDP).
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Exit from several methods
If investors assume a limited transaction window, there is no need to use a model of indefinite growth. Instead, the final cost should reflect the net realizable value of the company's assets at that time. This often means that equity will be acquired by a larger firm, and the cost of acquisitions is often calculated with multiple yields. https://www.freeforex-signals.com/
Yield ratios measure the fair price by multiplying financial statistics, such as sales, earnings or interest income, taxes, depreciation and amortization (EBITDA), by a ratio that is common to similar firms that have recently been acquired. The formula for the value of a terminal using the multiple output method is the last metric (ie sales, EBITDA, etc.) multiplied by the accepted multiple (usually the average of the last multiple outputs for other transactions). Investment banks often use this valuation method, but some detractors are reluctant to use their own and relative valuation methods at the same time.
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zahrani17@gmail.com
Personal capital financing
Platform: iOS, Android, AmazonCost: Free
Over 2.4 million people track their finances using personal capital, which includes more than 22,000 investment clients in all US states (as of December 2019). 1 Sync almost any investment account, including retirement and taxable accounts, then track Performance and customization, and graphics with easy-to-read graphs and charts. Track investments by account, asset class, or individual security. The You Index tracks your holdings and measures their performance against major market indices, so you can see your progress in stocks, cash, ETFs and mutual funds positions.
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The portfolio check feature determines whether you can save money on mutual fund fees, and the asset allocation review reveals diversification opportunities. Work with a personal wealth management advisor to discuss your investment needs via FaceTime, email or phone. Bank-wide app security uses a two-step remote authentication process. https://www.freeforex-signals.com/
The main concerns
Mobile portfolio management apps can provide information on your investments from 401K (s) to IRAs.
Some wallet management apps can sync with your existing accounts, and most are free.
Some of the more popular apps include SigFig Wealth Management, Personal Capital, and Stocks Portfolio Manager.
SigFig Wealth Management
Platform: iOS, Android Cost: Free
Use the wealth management app of investment company SigFig to track all of your investment accounts for free. SigFig automatically pulls your investment accounts from more than 50 leading brokers into a single dashboard to provide you with a real-time view of every stock, mutual fund, ETF, and option you own. 2 In addition, it provides snapshots of the 401 (k)) plan. And IRAs. You'll get weekly email summaries of account performance, news affecting your portfolio, and alerts focused on the top gainers and losers.
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The app automatically analyzes your portfolio to find hidden charts and overexposures for a single stock / industry. For a fee, users can improve their returns through automated investing. SigFig will optimize your portfolio and provide daily monitoring to keep it on track through rebalancing, profit reinvestment and tax-efficient strategies. https://www.freeforex-signals.com/
Tape: a stock portfolio manager
Platform: iOS, cost: free
Ticker lets you manage multiple equity portfolios - think growth, technology, and retirement portfolios - from one dashboard. Color charts, graphs, and detailed analyzes display real-time account values, daily profit / loss, daily profit / loss, customization, money weighted return rate (MWRR), time-weighted rate of return (TWRR), plus news related to symbols. Manually enter trading information for stocks and currency pairs such as EUR / USD, mutual funds and ETFs, including dividends, splits, buy / sell orders, indicator symbol, trading volume, price, date, and brokerage fees. Track stocks with multiple watchlists, and create alerts to notify you if a stock is trading above or below the stimulus level you selected, based on price, volume, and percentage of changes.
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Hey ho! Financial
Platform: iOS, Android Cost: Free
Hey ho! Finance has an easy-to-use design, so you can easily track your stocks, commodities, bonds, and currencies.4 Get personalized news and alerts and follow market movements in real time. Set watchlists and get live quotes while monitoring your portfolio performance.
Hey ho! Finance is one of the largest business news sites in the United States with data, comments, and press releases within its daily content. Of course, Yahoo! Finance app users also have quick access to this urgent information at a glance.
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Portfolio management apps easily track your investments from anywhere, anytime. Some apps sync with your existing accounts, while others require you to manually enter information about your assets. Either way, these apps provide the most up-to-date information - so you know where you stand now - as well as provide tools to help you get where you want to be in the future.
Margin trading
Margin trading makes it easier for traders to enter into trading opportunities as you don't have to worry about spending a lot of cash to acquire an asset.
Margin is the interest owed on loans between you and your broker in relation to the assets of your portfolio. For example, if you short sell shares, you must first borrow it on margin and then sell it to the buyer. Or, if you buy on margin, you will be offered the ability to leverage your money to buy more shares than the cash you spend.
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For example, with a margin of 10%, you can buy up to $ 1,000 worth of shares with only $ 100 subtracting. You are given an additional $ 900 in the form of a marginal loan, on which you will have to pay interest. If you have a margin account, it is important that you understand how this margin interest is calculated and be able to calculate it yourself manually when needed. It is just as important as the interest on your savings account. https://www.freeforex-signals.com/
Before making a calculation, you must first know the margin interest rate your broker charges for borrowing money. The mediator should be able to answer this question. Alternatively, the company's website may be a valuable source for this information, as well as account confirmation and / or monthly and quarterly account statements.
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Usually the broker will list their margin rates alongside other disclosures of fees and costs. Often times, the margin interest rate depends on the number of assets you have with your broker, the more money you have with them, the lower the margin interest you are responsible for paying. https://www.freeforex-signals.com/
Margin interest calculation
Once you know the margin interest rate being charged, grab a pencil, piece of paper, and calculator and you'll be ready to find out the total cost of the margin interest payable. Here's a hypothetical example:
Let's say you want to borrow $ 30,000 to buy a stock that you intend to hold for 10 days where the interest margin is 6% per annum.
In order to calculate the cost of borrowing, first, take the amount of money borrowed and multiply it by the rate charged:
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$ 30,000 x .06 (6%) = $ 1,800
Then take the resulting number and divide it by the number of days of the year. Typically, the brokerage industry uses 360 days, not the anticipated 365 days.
$ 1,800 / $ 360 = 5
Next, multiply that number by the total number of days you've borrowed, or expect to borrow money on margin:
5 x 10 = $ 50
Using this example, it would cost you $ 50 in margin interest to borrow $ 30,000 for 10 days.
While margin can be used to amplify profits in the event that the stock rises and a leveraged purchase is made, losses can also be amplified if the price of your investment falls, resulting in a margin call, or the need to add more cash to your account to cover those paper losses.
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Remember that whether you win or lose on a trade, you still owe the same margin interest that was charged in the original transaction.
The bottom line
Margin trading is a risky business, but it can be profitable if managed properly and, most importantly, if the trader does not get over himself. It also makes accessing specific asset values easier as the trader does not need to pay the total cost of the asset when he sees an interesting trading opportunity. When entering into a margin trade, it is important to calculate the cost of borrowing in order to determine the true cost of the deal, which will accurately indicate profit or loss.
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Regards
PAul
Thks for your concern. The DOW30 trade tested 28300/28400 twice or 3x before heading back to 27800 and 27500 giving subscribers recurring opportunities in shorting and locking and reentering, or opening various pstns.
You may recall EURUSD rose to 1.1880s after the trade was issued and later dropped back to 1.1750s ie the same notion as DOW30, giving subscribers plenty of opportunities to get in and out and in again.
Finally, i suggest you may want to consider joining the WhatsApp Broadcast group, which consists of frequent trades and ideas on the markets, pre-trade alerts and 2-way interaction between Group members and Ashraf Laidi, all on the WhatsApp App.
WBG members receive frequent updates on existing Premium trades than for general Premium subscribers, as well as trades and suggestions on hedging and stops not available to the general Premium subscribers.
Updates and trades to WBG are communicated via text, voice notes and charts on WhatsApp on currencies, commodities, indices, bonds and occasionally individual indices.
WBG members can interact with Ashraf Laidi team via WhatsApp to seek clarifications and views on specific trades, or on the markets in general.
All the details are here: http://ashraflaidi.com/premium/subscribe
Psl let me know if you require are clarifications.
Regs
Ashraf
I have recently signed up for the premium signals service, and was wondering whether it would be safe to take a trade in the Dow30, following the 4th September signal.
Price is pulling back close to the entry zone around 28260 - 28290, but I am warey, as price came within 120 pips of the first target, before retacing.
In short, should the current trade be considered as a failed trade, or would people think that it will eventually hit its targets?
Also, the 1st September EURUSD short signal is in a similar situation.
Thanks
Paul
What is constant proportion portfolio insurance (CPPI)? https://www.freeforex-signals.com/
Understanding Constant Proportion Portfolio Insurance (CPPI)
Constant Proportion Portfolio Insurance (CPPI) allows an investor to maintain exposure to the upside potential of a risky asset while offering a capital guarantee against downside risk. The result of the CPPI strategy is somewhat similar to buying a call option, but it does not use option contracts. Therefore, CPPI is sometimes referred to as a convex strategy, as opposed to a "concave strategy" as a constant mix. Financial institutions sell CPPI products on a variety of risk assets, including stocks and credit default swaps.
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KEY TIPS
CPPI is a strategy to combine the advantage of exposure to the equity market with investments in a conservative financial instrument. This is done by assigning a specifically calculated investment percentage to a risk account.
A multiplier is used to determine the amount of risk an investor is willing to take.
Investors can rebalance their positions on a monthly or quarterly basis.
How Constant Proportion Portfolio Insurance (CPPI) Works https://www.freeforex-signals.com/forex-signals/
The investor will make an initial investment in the risk asset equal to the value of: (Multiplier) x (value of the cushion in dollars) and will invest the rest in the conservative asset. The value of the multiplier is based on the investor's risk profile and is obtained by first asking what the maximum loss in a day of the risk investment could be. The multiplier will be the inverse of that percentage. As the value of the portfolio changes over time, the investor will rebalance according to the same strategy. https://www.freeforex-signals.com/
CPPI consists of two accounts: a risk account and a security account. As their names indicate, both accounts serve specific purposes in an individual's overall investment strategy. The risk account is leveraged with futures holdings to hedge against the downside of significant exposure to equities. The funds are dynamically transferred between the two accounts based on the economic environment.
The schedule for rebalancing is up to the investor, with monthly or quarterly examples being frequently cited. Typically, CPPI is implemented over five-year periods. Ideally, the value of the cushion will grow over time, allowing more money to flow into the risk asset. However, if the buffer falls, the investor may need to sell a portion of the risk asset to keep the asset allocation targets intact.
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One of the problems with implementing a CPPI strategy is that you do not immediately "de-risk" your holdings when markets move in the opposite direction. A hypothetical CPPI strategy on a five-year investment time horizon would have underperformed the S&P 500 for several years after the 2008 financial crisis.
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CPPI example
Consider a hypothetical portfolio of $ 100,000, of which the investor decides that $ 90,000 is the absolute floor. If the portfolio falls to $ 90,000 in value, the investor would move all assets to cash to preserve capital.
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If one decides that 20 percent is the maximum chance of "falling", the value of the multiplier will be (1 / 0.20), or 5. Multiplier values between 3 and 6 are very common. Based on the information provided, the investor would allocate 5 x ($ 100,000 - $ 90,000) or $ 50,000 to the risk asset, with the remainder going to the cash or conservative asset.