The downturn in the economy is worrying many investors. Cuts to the workforce are widening. The stock market is suffering as several reliable companies that have been around for centuries are now crumbling. This on-going phenomenon has levelled the playing field for investments. Commodities that were not considered viable stock in the past are slowly gaining attention. People are now starting to look at investing in art during a recession.

Tips on Investing in Art

Colleene Skinner is an appraiser on PBS’s Antiques Roadshow, a popular TV program. She looks at more than 10,000 paintings a year, and provides a few tips to those who are considering investing in art during a recession:

• Educate yourself – discover not only what you like but also art as a whole. Take a course in art history – get to know the famous painters and the various art styles. The more knowledge you have, the better your decisions will be regarding what is popular and what will hold its resale value.
• Watch for local talent – many skillful artists are studying with fine teachers and producing good work but have not yet made a name for themselves. Regional markets are doing well with paintings.
• Buy the best you can afford – look for the highest quality and stay away from art work that looks worn and tired. No matter how good the deal is on a piece, pass it up if its in bad condition.

Like other investments, keep in mind when investing in a piece of art, that time is a critical factor. You have to safe-keep it for a certain amount of time in order for its market value to escalate.

Recession is Affecting the Art World

The international financial crisis has undoubtedly affected the field of art. For instance, the annual art fair in Cologne had fewer booths of artists exhibiting their work in 2009. Nevertheless, gallery owner Franz von Salis had a still-life by Max Ernst on sale for 1.3 million euros (US $1.7 million) and said he hopes to find a buyer, in spite of the crisis in the economy. He optimistically states, “I think the art market has a good chance because it’s the first time in the history of artwork that it’s being thought of as a real investment, like real estate.”

Yet, there is a sense of uncertainty when it comes to the sale of paintings this year. Everybody is holding their breath.

Opportunities under Dire Circumstances

Popular pieces of art that have been off the market for years have become available again during this economic downturn. It’s like a redistribution of fine art. The shortage of cash in many businesses has caused owners to have to liquidate possessions in order to keep their doors open.

For those willing to do a little detective work, they may find that hard times have squeezed out some valuable art pieces at affordable prices. For example, Arthur Andersen, the accounting firm involved in the Enron scandal, transformed part of their Chicago offices into an art gallery in 2002, and sold more than 2,000 art pieces in five days. In 2006, New York broker Refco Inc., which had filed for bankruptcy protection the previous year, sold 321 photographs for $9.7 million at Christie’s auction house in three days.

Stocks or Art?

Art as an investment has withstood the tumultuous economic situation so far. It has been competing with, and sometimes beating, the stock market returns. Stock holdings are being liquidated and used to fight inflation, but somehow art investment has been holding steady. Beautiful Asset Advisors, a firm which specializes in art investments during times of recession, says the level of art buying is on par with the art frenzy of the mid 80′s.

Investing in art during a recession should be approached cautiously, without taking anything for granted. You could buy an extremely beautiful art piece to add to your collection, but if it does not appeal to future buyers, it will be a fruitless investment. That is the reason collectors stress the importance of purchasing art for aesthetic purposes first and value second.

Art Historian, Donovan Gauvreau lectures about art therapy with a focus on creativity development. He believes we can learn from the great masters in art to communicate ideas and feelings through painting. He provides content for AaronArtPrints.org to educate and inspire people to take a glimpse into an artist’s life to better understand the meaning behind their work.

Article Source: http://EzineArticles.com/?expert=Donovan_Gauvreau

Profitability ratios are used by investors and analysts to evaluate a company’s ability to generate earnings as compared to its competitors and other industry players. They also highlight the strength and efficiency of a company’s business model. There are two types of profitability ratios; profit margin ratios and rate of return ratios. While profit margin ratios are used to judge the efficiency with which the company earns profits, rate of return ratios provide information of the efficiency with which the company employees its assets and other available resources. Comparison of profitability ratios with other competitors in the same industry reveals the relative strengths or weaknesses of the business. Some of the most commonly used profit margin ratios are Gross Margin ratio, Operating Margin ratio, EBITDA ratio and Net Profit Margin ratio.

Gross Margin ratio:
Gross margin ratio indicates the efficiency of production and pricing strategies applied by a company. In simple terms, it measures the margin left after meeting all the manufacturing expenses including labor, material and other manufacturing costs i.e. the costs which are directly related to the business. Going by this definition it can be assumed that service industry players will normally have higher gross margins as compared to players in manufacturing industries. This is primarily because they have lower manufacturing costs. Moreover, range of gross margin varies across industries. The ratio is calculated as follows:

Gross Margin Ratio = Net Sales – Cost of Goods Sold / Net Sales

Trend of the gross margins over a period of time provides a better meaningful insight into the business strength rather than a single year’s gross margin figure. A company earning a consistently high gross margin over couple of years is in a better position to face the downturn in business cycles. However, a company earning lower but a consistent gross margin over time is considered to be more stable compared to a company boasting higher but a volatile gross margin. Significant fluctuations in the gross margin figure can be a potential sign of fraud or accounting irregularities.

Operating Margin

Operating profit margin measures the profitability of a company’s normal and recurring business activities. It enables the analyst to judge the efficiency of a company’s core business. Since operating profits do not include interest and taxes, this ratio does not indicate the effect of management’s financing decisions and is calculated as follows:

Operating Profit Margin = Gross Profit – Operating expenses / Net Sales

Operating margin is a measure of management’s efficiency. By applying low levels of fixed costs in its cost structure a company can maintain a high level of operating margin. This is important primarily because lower fixed costs grant management more flexibility in determining prices and acts as a measure of safety during tough times. However, it is important to note that nonrecurring and one-time expenses, such as cash paid out in a lawsuit settlement and goodwill write-offs should be excluded while calculating operating margin ratio. They do not represent a company’s true operating performance and can result in misleading conclusions.

EBIDTA margin

EBITDA is Earnings before Interest, Tax, Depreciation and Amortization. Management can manipulate their bottom line by changing the depreciation rates. Moreover, manufacturing companies generally have higher depreciation figure as against service companies. Financing decisions can affect the effective tax rate paid by a company. These factors are a constraint to a meaningful comparative analysis of a company with its competitors and other industry players. Hence, EBITDA margin is a good measure for comparing companies across different industries. It is calculated as follows:

EBITDA Margin= EBITDA / Net Sales

This ratio is useful while comparing companies which carry large amount of fixed assets subject to heavy depreciation charges such as a mining company or an infrastructure company, etc. It is also useful in comparing companies in a mature industry which is in a consolidation phase. Companies in consolidating industry tend to acquire significant tangible and intangible assets, such as a brands and copyrights, which are subject to large amortization charges.

As EBITDA measures the income which is available to pay interest charges, EBITDA margin is of great importance to creditors and financial institutions. Companies with higher EBITDA margins are considered to be less financially risky than companies with low levels of EBITDA margins. In practice, EBITDA margin is used only while analyzing large companies with significant depreciable assets, and for companies with a significant amount of debt financing.

Net Profit Margin

Net profit margin measures the profit available for distribution amongst shareholders (both equity and preference) after meeting all the expenses during the given period of time. It indicates the efficiency of all business activities conducted during the given period, such as production, administration, selling, financing, pricing, and tax management. It is calculated as follows:

Net Profit Margin = Net Profit / Net Sales

Analysis of profit margins along with the study of a company’s cost structure enables the analyst to identify the sources of business efficiency. The analyst should be aware of manipulation techniques used for distorting the income statement before drawing any conclusions based upon the profitability ratios.

Micro cap stocks are shares of stock in companies capitalized as low or micro in terms of total stock value. These companies usually have limited assets and tend to be lower priced than other similar types of stock. Micro cap stocks are different from other stocks because they have no minimum listing standards. These types of stocks can also be more difficult to find, due to lack of public information.

Like any other type of investment, investing in micro cap stocks carries a certain amount of risk. This is due mostly to the fact that micro cap companies are usually newer and lack a proven track record or are older companies that are experiencing financial difficulty. It is important to remember that all big companies were once small companies, and a successful fund manager can help you to pick out the best up and coming micro stock investments.

In order to safeguard against fraud, federal law requires that all companies except for the smallest file reports with the SEC. Companies become public by either issuing securities in a transaction or an offering registered wit the SEC, or by registering a company and its outstanding securities with the SEC. Obtaining this information before you invest in a company’s stock is essential because it will tell you whether or not a company is making money or losing money. While companies with less than $10 million dollars in assets are not legally required to file with the SEC, many companies do, in order to establish their reputation.

While many companies that are classified as micro cap and who do not file reports with the SEC are legitimate, others are fraudulent. The most common micro cap stock scams are sent via junk or spam email and by Internet fraud techniques such as posting phony messages on Internet bulletin boards. For this reason, it pays to be wary of any email solicitation to invest as well as relying solely on message boards for investment tips. Other fraudulent organizations utilize methods like cold calling, paid promotion, and others.

Before investing in any type of stock or company, be sure to research your options and speak with your financial advisor. Never agree to invest in a company without taking the time to learn as much as possible about it, and never agree to invest over the phone or via unsolicited email. If invested in correctly, micro cap stocks can be extremely profitable investment options.

Visit our website for more financial information about micro cap investing and other related investment, news, tips and articles.

Bonds can be a good investment if you have some spare cash to invest. Bonds are generally safer than stocks and pay a better return than depositing your cash in a bank account. But do you understand the basics of bonds? Continue reading and you will learn what the basic terms mean.

The bond issuer is the entity who needs to borrow money and therefore has issued the bond. It can be any of various different organizations, but is most likely either a government agency or a company. Government bonds are usually safer than company bonds as there is very little risk of the issuer defaulting on the bond.

The par value, or nominal value, of a bond is the amount of money the issuer of the bond is borrowing from the purchaser of the bond. Each bond is often issued for $1,000 in the United States.

The coupon rate is the interest the bond is issued with. If, for example, the nominal interest rate is 5% on a bond with a nominal value of $1,000, you will receive $50 in interest every year. The nominal interest rate of a bond will stay the same until the bond is due.

The maturity date of a bond is the date the bond is completely repaid. Most bonds are issued for a number of years so the due date could be many years into the future. The length of time until the maturity date can be referred to as the term of the bond.

The issue price is the price you pay for the bond at the time it issued. It could be different from the par value of the bond and would most often be below the par value.

The market value is related to the par value, but is very likely different from it. Many bonds are traded on an exchange at a different price than when the bond was issued. This is the price at which the bond market trades the bond currently. If the bond value is less than the par value, the current yield will be higher than the coupon rate. The market value of the $1,000 bond might be trading at only $950.

The current yield is the interest you receive from owning the bond, calculated as a percentage. If the current interest rate level is different from when the bond was issued, the effective interest rate will be different too. The only time the coupon interest rate is equal to the current yield is when the market value is exactly equal to the par value. Then the bond is said to be traded at par value. In the example, the effective interest rate might be 5.5%.

Understanding these terms is essential if you want to understand your bond investments and what influence they have on your results.

Brian Ullitz, personal finance expert, author of the e-book Enjoy Healthy Personal Finances and founder of http://Finance4Everyone.org. If you find finances complicated, boring or intimidating get our free e-book now by enlisting to our newsletter. With this e-book you can learn to manage your debt, save money and enjoy a happier life.

The GCC economies had been impervious to the global credit crisis for the better part of 12 months. While many people believed that the Middle East’s oil wealth would protect their economies from the crisis, these expectations have proved baseless. The falling equity values impaired sovereign wealth funds and lack of access to credit derailed numerous grandiose property development plans leaving some skylines littered with idle cranes. Economists predict the current conditions will stable and persist for the most of the remainder of the year. The end of this year (2009) through 2010, capital market conditions are expected to stabilize and improve. In this crisis no country is an island, as even Australia recognized its economy was in recession.

Virtually every market of the world has experienced sharp declines save for the one uncorrelated market that posted positive returns, the Tehran Stock Exchange. Enough said. The current situation finds the world economy trying to establish a base from which to grow supported by the most massive, concerted global government economic intervention in the history of the world. The bailouts and stimulus packages to date have targeted banks and countries and the auto industry. Yet as the unemployment percentage surges into double digit numbers, the consumer who was footing the tax bill will move from being a tax payer to recipient of tax benefits; credit card payments will laps, mortgages lost. The cascade downward will continue as more business will contract, more foreclosed houses in the market and higher credit hurdles and terms for new homeowners. The impact of a global shutdown due to swine flu could well trigger a cataclysmic economic freefall that even threatens the stability of longstanding democracies.

Given this backdrop, the question is, ‘what’s the best strategy to employ to capitalize on this economic imbroglio?’ The answer, my friend, is that ‘cash is king or queen if you prefer.’ Even with that, knowing which currencies to hold is also a critical analytical exercise. Several countries have individual private banks with outstanding notional debt that exceeds their country’s GDP! We recommend a basket of currencies that overweight natural resource backed economies such as Canada and Australia. Sometime next year, those patient investors holding cash will be plundering egregiously underpriced assets boasting global brands and predictable cash flows.

5 Sure Fire Ways to Avoid Investment Fraud

Beginners in investing should begin with some basic objectives and to fully understand them before putting in your first investing portfolio. The followings are some key pointers to guide beginners.

A] Income generation objectives

This is more concern about current income then capital appreciation overtime. Trading is an aspect to income generation where the time horizon is much shorter.

B] Growth objectives

Investors are concern about capital appreciation and ready to take on a longer term objective. An example will be today market situation is a good time to take on equities or funds position as extreme price bargain is available now.

C] Capital Preservation objectives

It is a concern on the risk involved especially when one reached near to retirement age. There is a need to diversify their portfolio into allocation of stocks, bonds and cash to minimize the risk. If one is near retirement age, he should not allocate more then 25% of his total funds on equities.

D] There are various types of investment instruments.

They are savings accounts, fixed deposit, Bonds, Stocks, Commodities, Mutual Funds, Derivatives like Options, Contract for Differences and Real Estate.

The common factors that investors need to consider in choosing the various instruments are as follows:

1] Time horizon of the investment.
2] Risk tolerance and management.
3] Rate of return or yield.
4] Diversification to spread the risk.
5] Taxation concern.
6] The size of investment units. Some stocks can only be purchase with a minimum of 1000 shares per lot in certain countries.
7] The liquidity and marketability of the stocks concern.
8] The security of the principle sum invested and the needed income that one would expect.

Investor mistakes happen and the big ones can kill you financially. If you lose half of your money, you need to double what you have left to get back to break even. Here we discuss the major investor mistakes, not the obvious.

Call the following rules investing basics, or simply investor mistakes to avoid. The sorry thing about these investor mistakes is that some financial planners I have known not only embrace them, but they use them as sales tools, so beware.

Never play “catch up”. For example, your financial planner reviews your progress and finds that you are not on track to reach your retirement goals. Even though you are a relatively conservative investor he recommends investing heavily in aggressive stock funds to earn a higher return. The stock market tanks, and your dreams of early retirement go down the drain. This course of action goes against sound investing basics. Unfortunately, in 2008 and early 2009 too many investors made this major investor mistake.

Averaging down on a stock is an investor mistake, and an old sales tool used by some stock brokers to work a client for commissions. Your broker calls and suggests buying stock in XYZ Financial at $10 per share. XYZ sold for over $40 less than a year ago. You buy 1000 shares and the broker makes a commission. Two months later he calls back when XYZ is selling for $5. The broker exclaims that if XYZ was a good buy at $10 it’s a great buy at $5. You buy 2000 more shares, and he makes a commission.

When XYZ hits $2 your man pimps you again, because at $2 XYZ is the opportunity of a lifetime. You buy 5000 more shares, he makes yet another commission and soon after XYZ goes broke. You lose every penny you had invested. You made a major investor mistake and violated one of the rules of investing basics. If XYZ was a good buy at $10 and $5, why did it then go to $2, and end up broke?

Do not believe that higher interest rates are good for investors. Savers may benefit, but investor mistakes in times of rising interest rates can be costly. Bonds and bond funds will fall in value, and often times stocks and stock funds as well.

Do not believe that you have nothing to worry about if your investment portfolio is diversified. You are diversified if you own several stock funds, but in a bad stock market they will likely all be losers. For much of 2008-2009 there was virtually no good place for average investors to invest and make good returns. Investors lost lots of money, diversified or not, even if they understood investing basics.

Paying ongoing fees for service, or for timing services, is often an investor mistake. For example, you roll your $200,000 retirement plan into an IRA through a financial professional. He puts you into various mutual funds from various fund families. In addition to sales charges of almost 5% and yearly fund expense of over 1%, you are also charged a yearly service fee of 1 1/2%. That amounts to $3000 the first year and grows with the value of your account. Be careful what you sign, these extra fees are not necessary.

In regard to paying for timing services, this is almost always an investor mistake. Very few market timing services have a good long-term record for timing the stock market.

The last of our investor mistakes to avoid: don’t complicate your life by getting disorganized. You may have had numerous employers and retirement plans. Now you have your money scattered about and have lost control. Consolidate by rolling these retirement funds into an IRA with one or two major mutual fund families. You will be able to access your accounts and get service no matter where you live.

Conquer the Art of the Back Test and Stop Trading in the Dark

Your persistent savings will add up with time.  One hundred dollars saved each year will cause your total savings to rise from $100 to $1,000 in ten years.  However, your net worth (or financial wealth) should grow, over time, by much more than the sum of your savings.  This is because of the power of compound interest.  This means that you should expect to receive on your savings some rate of interest (or return or appreciation) each year.  If you leave the interest in your account, your interest will “compound” because you will then receive in subsequent years interest on your savings, plus interest on the interest that you received in previous years.

Again, if you save $100 for ten years and receive an interest rate of 10 percent, your total savings with interest will grow from $100 the beginning of the first year to $210 the second year ($100 of savings the first year plus $10 of interest on the first year’s savings plus $100 of new savings), to $331 the beginning of the third year, on to $1,594 the beginning of the tenth year.  In short, with compound interest you will have close to 60 percent more in net worth at the beginning of the tenth year than you would have had from the savings alone.

You can imagine with “interest on interest”—or compounded interest—your net worth will build progressively more rapidly with each passing year.  With sufficient savings, enough patience, and a reasonable rate of interest on your savings (or return on your investments),  you can imagine that your net worth (and resulting income level) in the future will be the envy of those who have chosen to spend all their income year after year on many things they could do without, or do with less of.

To dramatically illustrate just how powerful compound interest can be in building wealth, suppose that you are a newly minted twenty-two-year- old college graduate, with a starting salary of, say, $30,000 a year, and you salt away a mere $2,000 the first year, and only the first year, on your job (which means that you will then save only 6.6 percent of your annual pre- tax income that one year).

Assume that you are able to secure an annual rate of return on the investment (above the inflation rate) of 15 percent until retirement.  Amazingly, your onetime investment will be worth, in the purchasing power of today’s dollars, $814,774 at age sixty-five and over $1.64 million at age seventy.