Thursday, April 26, 2012

Diversity Top 50: "Making the List"

Publishers publish lists because they think readers swarm to them. There are lists (and rankings) for almost everything. There is a cottage industry of lists. Some are frivolous, many are arbitrary, and others are humorous. Most are meant to sell magazines and newspapers or attract attention. Some are a serious attempt to report a trend or celebrate the efforts and programs of participating institutions.  Lists occasionally confuse, because students, readers, consumers, and business people who peek at them don't know what is subjective, credible or useful.

Finance professionals rush to see deal lists, underwriting rankings, league tables for transactions, M&A rankings or rankings of the best capitalized financial institutions. The list of business-school rankings can be useful, except what list is most reliable or captures the correct attributes of an MBA education? What list is updated and, beware, what list uses irrelevant criteria? There are many b-school lists--from the Economist and BusinessWeek to U.S. News, Financial Times, and (occasionally) the Wall Street Journal.

One current list always seems to be useful or eye-opening.  Useful for business professionals to detect and evaluate opportunities.  Useful in making decisions about where to pursue a career or where there might be, say, a legitimate chance for a woman to become CFO. Useful in determining what companies value input of all employees from all backgrounds. The rankings probably change with minimal variation from year to year. What better way, however, to determine more fairly whether companies are practicing what they preach or what they espouse in mission statements on the front of annual reports.

That would be a list of the top U.S. companies for diversity. Many magazines or organizations produce diversity lists from time to time--including Black Enterprise magazine.  The latest list comes from the publication Diversity, Inc.--which this week produced its list of the top 50 companies in diversity (its 13th year). It also presented various subsets of the same--top companies in diversity for executive development, recruiting, culture, Asian-Americans, blacks, Hispanics and LGBT communities.

All lists purport to be (or pretend to be) the results of objective measurement and inputs. All lists present what they claim are objective criteria.  The mere selecting (and omitting) certain criteria that they say will be used objectively is a subjective process. Thus, all lists are subjective. But where possible, readers can glean invaluable information or trends and find out what they want to know:  Who's walking the walk, talking the talk?

In Diversity's list, financial institutions, particularly large banks, brokerage firms, asset managers and dealers, aren't prominent. That's not new.  Most large, notable financial institutions have legitimate diversity programs and have made laudable efforts the past decades. Financial institutions, however, aren't necessarily pace-setters in diversity.  They have been embroiled in turmoil the past years, and banks, insurance companies and broker/dealers continue to fight to survive, remain relevant and must navigate the burden of reams of regulation.

Let's get the criteria out of the way first. Diversity, Inc. used four primary criteria--CEO commitment, human capital, corporate communications, and suppliers.  It sent surveys to over 1,000 participants and asked them to respond to a booklet (perhaps overwhelming to some) of over 300 questions. 

In the latest list from Diversity, Inc., the accounting/consulting firms fare the best for diversity among financial services companies.  Pricewaterhouse led the entire list, Ernst & Young and Deloitte squeezed into the top 10, and Accenture and KPMG are in the top 25.

Card companies American Express and Mastercard are also in the top 25.  Insurance companies do well, too. Aetna, Prudential, MetLife, and AllState make the top 50.

One common thread among these names is that most have large, diverse bases of customers.  Because those who purchase their products are diverse, they will be sensitive to, aware and respectful of the importance of diversity--diversity among employees and diversity in senior management.

Bank of America, Capital One, and Wells Fargo have the same--customers in the millions, branches in the thousands, a presence in just about every state in the Union, and an appreciation that all who use their services (mortgages, credit cards, wealth management, etc.) come from myriad backgrounds. All three make the top 50 in 2012. 

Some prominent well-known financial institutions are missing:  Goldman Sachs, Morgan Stanley, JPMorgan Chase, and Citi don't make the top 50. Indeed they are institutions that would happily participate in providing survey responses and aspire to be on the list. They likely took the time to fill out surveys and answer questions thoroughly and use the platform to boast about progress and special efforts (e.g., MBA fellowship funding for under-represented groups at JPMorgan and Goldman). Diversity, Inc. concluded they hadn't done enough, or other companies do more.

Many other finance firms won't be found, because they hesitated to participate, are embarrassed with their efforts, disagree with the idle exercise of surveys and lists, or deemed this is not a priority:  hedge funds (Citadel), securities exchanges (NYSE, CME, Nasdaq), institutional trading firms (BCG Cantor, Jefferies, Knight), asset managers (BlackRock), retail brokerages (E*Trade, Scottrade), and private-equity firms (Blackstone).

Some of the same above don't have the required 1,000 employees to be included. Some are "all right" with diversity or will proclaim they are '"for it," but haven't devoted resources, energy or passion. Some might argue they have legitimate programs, but don't think it's necessary to flaunt their efforts by devoting resources to complete pages of survey questions. Most firms, however, will bother, because they don't like the market penalty they risk taking (among customers, especially), if they are not on the lists. 

(Note, too, the prominent absence of technology companies Facebook, Apple, Google, and Microsoft.)

Pricewaterhouse and Ernst & Young were highlighted for recruiting and retention and promoting women into executive positions.  Deloitte was noted as a top firm for Hispanics, while Wells Fargo was cited as the best in community development. American Express is in a top 10 for developing women for senior roles.

Consortium sponsors do well in these surveys and lists. That's no accident.  They include past and current sponsors (including financial-services companies American Express, Deloitte, Wells Fargo, Bank of America and KPMG). The same resolve they have in sponsoring and recruiting from pipeline/inclusion programs such as the Consortium (and Toigo, SEO, MLT, and others) is the same resolve they have in promoting employees, developing senior managers and celebrating the differences and input from people of all backgrounds.

Tracy Williams

Understanding Mortgage Life & Mortgage Disability Insurance

When purchasing a new home, buyers must decide if they want mortgage life insurance and mortgage disability insurance. Both forms of coverage provide some degree of protection if the purchasers become disabled, become terminally ill or die. It is important to know what options are available before deciding. The following points define the various options for both insurances.

1. Reducing Term Mortgage Life Insurance

In the past, this was the most popular type of coverage chosen. The amount owed on the mortgage is the insurance amount, and the death benefit decreases each year as the mortgage is paid down. If the policyholder died suddenly, the remaining amount would be enough to pay off the home. This reduces the chance that the insurance company would pay out more than necessary. For example, they would not want to pay $250,000 to survivors if the current amount owed was only $50,000.

Me and Amy at our new house!!!

2. Term Life Insurance Mortgage Protection

As a rule, this economical form of coverage is the most popular choice today. With this form of coverage, two basic elements are combined: Term life insurance and mortgage payments. This policy offers the same protection as a regular life insurance policy. There is no decreasing benefit over time. However, the term expires when the mortgage is paid in full, which means the policy serves its purpose for the time needed.

3. Return Of Premium Mortgage Life Insurance

This form of coverage comes with higher premiums than regular term life. However, the main advantage is very clear. If the policy is effective throughout the entire term, all premiums paid are returned to the policyholder. In a way, it is similar to simply making a large refundable deposit in multiple installments.

4. Mortgage Disability Insurance

The disability coverage on a mortgage-based policy is somewhat different than regular disability coverage. There are more limitations, and the benefits can only be used to make mortgage payments. For example, with regular disability coverage, the policyholder has the freedom to use the benefit funds to pay for any necessary expenses. Food, medical care and utility bills can be paid. However, mortgage disability benefits are paid directly to the lender. This ensures that the funds are used only for their intended purpose. Keep in mind that most regular disability policies offer between 40 percent and 80 percent of total income replacement. Having a mortgage disability policy to close the gap and ensure a place to live is definitely beneficial. Research shows that a large percentage of foreclosures are due to people becoming disabled and not being able to make mortgage payments. If an individual does not have separate disability coverage, this mortgage policy can be very helpful.

Every home buyer must decide whether these insurance policies are right for their individual needs. It is also important to read the terms of each policy carefully. Not all underwriters have the same requirements or provisions, so be sure to compare quotes and terms before making a final decision.

Andrew Greene is a freelance insurance writer who blogs for, a site he recommends to anyone who wants to learn more about ppi claims.

Wednesday, April 18, 2012

Pay Attention to the Trendllines

What is a trendline?

Trendline is a straight line drawn on a chart through or across the significant limits of any price range to define the trend of market movement.

Trendlines are one of the first technical aspects of the market to be discovered. Technical analysis is based on the fact that the stock prices move in fairly definite trends. Technical analysts use trendlines in two ways: first, to identify the direction of the movement of the stock prices; second, to determine if and when the movement will change.

Uptrends and Downtrends

An “up trendline” is whereby a line is drawn on the chart by connecting the low points of the security as its price continues to rise. Each low point is successively higher than the previous low. This progression gives the trendline its upward slope.

A “down trendline” is drawn with a line on the chart connecting the high points of the security as it continues to fall. Each high point is successively lower than the previous hig
h. This progression gives the trendline its downward slope.

How to use trendlines?

Prices move in trends. Once a trend has been clearly identified, it's likely to continue for a time. Technical analysts look at trendlines for their ability to support price declines or resist price advances.

In addition, the slope of the trendline tells us the strength of the security price. In general, a healthy trendline should be around 45 degrees sloped. The steeper the slope, the more aggressive is the underlying security, however, it may not be sustainable. On the other hand, the flatter the slope, the weaker is the trend and there may be a possible correction in near term.

An Excercise:

Below is our KLCI chart, you may practice your chart reading skill by studying the chart carefully, let's see if you can make a forcast based on the information given. There's no right or wrong answer, it all depends on your forecasting skills. Enjoy!

(Click to enlarge)

Tuesday, April 17, 2012

Role Models and a New Network

NYU-Stern graduate Daria Burke
Who are the women of color, the women from under-represented groups who occupy "C-suite" positions at companies involved in global business? A roster of such names usually includes Ursula Burns at Xerox, Andreae Jung (until earlier this month) at Avon, and Indra Nooyi at PepsiCo, CEOs of companies with billions in revenues and even greater numbers in market value.

Burns, Jung, Nooyi and others preside over companies, business sectors, geographic units, corporate brands, major subsidiaries and functions in finance and treasury. They would also be women from who hustled, regrouped, paused to raise families, scratched, climbed and willed their way into top spots, board rooms and significant leadership positions.  Their  few numbers, while growing, suggest there is still a ways to go. Those in CEO roles, such as Burns, Nooyi and Jung, are known and are seen commanding the podium at shareholder meetings or outlining strategic plans in a broadcast on CNBC.

Those below the CEO rung may not be as widely known outside of their industries and are not prominently profiled  in the business media. As such, they aren't presented as role models as widely as they could be--especially as role models for younger women contemplating a similar corporate-ladder climb or a long-term career in business after the MBA.

That's where Daria Burke, a Consortium alum and MBA graduate from NYU-Stern, stepped in.  She is doing her part by establishing a network of black women with MBA degrees, with corporate promise and with the resolve to succeed in business. Earlier this year, she and others established a new group, called Black MBA Women. The group has its own website and Linkedin group.
Burke wanted the group to go beyond sharing experiences and expertise about business opportunities in a network forum. She also wanted network members to learn about, study and follow the career steps of other successful black women in business. For many black women at or near the top rungs, there are lessons that can be shared or advice that can be exploited, based on their experiences.

Hence, the group will present and highlight success stories to share with members. It will spread the news and show what has been accomplished by black women in senior business positions, whether they were CEOs, CFOs, or heads of international marketing and sales, legal and compliance, client relationships, Europe subsidiaries, Asia expansion, risk management, technology and systems, or human resources.

The new group's mission is "to reinforce and create a strong network of African-American women with top MBAs."  The group will try to influence and encourage younger professionals and students and "empower the next generation of young black women by increasing their access to education and business networks."  Hence, identifying role models, presenting the profiles of women in senior roles, and heralding their achievements are primary objectives.

Burke says in the website she was concerned about the "staggering number of African-American girls and post-collegiate women" who don't know about the business successes of black professional women with MBAs from top schools.

She said this week, "I was truly inspired to create this organization by my personal network and by all the young ladies I meet and speak to about going to business school."  She added, "I've gotten a wonderful reception so far and am grateful for the support."

Since graduating from Stern four years ago, Burke has worked in various marketing roles--her specialty.  She is currently Director of Makeup Marketing (North America) at Estee Lauder, steadily rising into roles of greater responsibility and impact.  At Stern she was a student leader in the school's Association for Hispanic and Black Business Students (AHBBS). Today, she is the head of that group's alumni group and decided, along with others, they can do their part to support black women MBA students and alumnae.

The group's website features "Power Profiles" that highlight the business accomplishments and career paths of black women in senior business roles. They include Tracey Travis, the CFO at Polo Ralph Lauren, who has an MBA from Columbia.  Ursula Burns, Xerox's CEO, is featured with a profile that highlights her engineering background. Burns used her undergraduate and graduate degrees in mechanical engineering to launch a 32-year (thus far) career at Xerox.  She was named CEO in 2009.

Edith Cooper, global head of human capital management at Goldman Sachs, also profiled, started out in the firm's energy group and now manages all facets of the firm's recruiting efforts and diversity hiring.  Cooper received her graduate business degree from Northwestern-Kellogg. Rosalind Brewer, CEO at
Sam's Club, is featured, as well.

As Burke hopes to show, dozens, hundreds, if not thousands, of young students may not have been aware of the women in these roles, the bottom-line responsibilities they have at large, major companies, the quiet, effective influence they have in diversity initiatives, and the impact on younger women just from being in the position.

Burke encourages women to join the group as members on the website or via Linkedin.

Tracy Williams

Tuesday, April 10, 2012

Composing the MBA Class of '14

Tuck: Over 2,700 applications for just 250 spots
At top business schools, including the Consortium 17, this is the time of the year  admissions offices fine-tune and compose a new class that will start in the fall.  Many schools have rolling admissions, while most schools notify applicants during the spring. The Consortium, too, notifies those who will be invited for membership and those who will have earned full fellowships.

How will the Class of '14 be different? How will it be like others? What do members of the class hope to achieve from two years on campus?

The application numbers and statistics are likely similar to those in recent years.  At selective schools from Harvard to Haas at Berkeley and from Chicago to Carnegie Mellon, gaining an acceptance letter for a spot in the first-year class is still a hard task and the result of perhaps a half-year process of securing recommendations, writing essays, taking tests, visiting campuses, expressing interest and trying hard to be patient and hopeful. In recent years, NYU-Stern and UC-Berkeley have accepted just 15% of all applicants for full-time programs. Over 4,000 apply to Stern; over 2,700 each to Michigan and Dartmouth-Tuck,  which accept fewer than 18%. 

Total applications across the country fluctuate somewhat from year to year. A dismal economy or financial crisis, such as what we've endured, with irony sometimes sustains the aggregate applications number.  Young professionals may choose to wait for a recovery while in the classroom or to transition from areas with little opportunity to areas of growth.

Market conditions, the economic environment, past personal experiences, the general outlook and total costs: All are factors that influence who return for the MBA, where they choose to attend, and what they hope to get from a rigorous, grinding experience.

Is this year's class more interested in unconventional segments, start-up situations or small boutiques, or do they prefer the formal tracks from an experience at Goldman Sachs or McKinsey?

This year's class, just as those who matriculated in the past three years, is familiar with volatility.  They know volatile markets, but they are also acquainted with volatile opportunities and even a volatile, teasing, uncertain recovery.  Thus, they will approach the business-school experience, knowing they must be flexible, realistic and willing to explore something new and different.

They may write in admissions essays they hope to pursue consulting, investment research or brand management, but they know the environment may force them or even encourage them to change their minds and pursue start-ups, community activities, or even industrial management. They may tell admissions officers they hope to work in New York, Chicago, or San Francisco, but two years later may accept job offers in Indonesia, Ghana, or Boston (as even some recent Consortium graduates have done).

A current student may have her eyes on an associate position at Morgan Stanley in M&A, but she won't be close-minded and will consider opportunities at General Motors, Google, Pfizer or even the World Bank or Zynga. 

Those who went to business school until the late 2000s to study finance, especially those who attended known, reputable institutions, could almost chart and measure their ambitions. They could make a conscious decision to go into consulting, investment- or private-banking, trading, research, venture capital or private equity; they could proceed through a check-list of to-do's to get from school to a cubicle at Carlyle, Blackstone, Wells Fargo, New York Life, Goldman Sachs, Bank of America or a hedge fund in Chicago or Greenwich.  They could expect to stay put for about 5-10 years, or at least until a vice-president promotion.

In 2012, the current classes approach the finance landscape differently. Someone just admitted to the business school at UNC, UVA or USC may visualize and dream of being in private banking at UBS or in investment management at Aetna , but won't slam the door if a San Francisco-based start-up turns him on to a role in corporate strategy or if a pharmaceutical firm invites him to work in its venture-investments unit.

Business school in 2002 might have been a springboard to a lucrative spot at Morgan Stanley or McKinsey, if the student studied hard, learned a lot, kept up with markets and played the recruiting and networking games astutely and unrelentingly.  In 2012, business school still provides an entry into the most coveted spots in banking, finance and investing, but this crop of students will be happy to explore something they never considered, if the opportunity makes sense, allows for rapid personal growth, and offers something on the long-term horizon.

Thus, within the ranks of the Class of '14, there will still be large numbers interested in corporate finance, interested in spots at Goldman, UBS, Barclays, Paribas or JPMorgan, and willing to pursue investment banking, equity research or bond trading in the new, highly regulated environment. There will still be more than a few interested in consulting at McKinsey, BCG and Deloitte.

Yet there will be quite a few who will change their minds in school, will discover a pursuit more pleasing, will choose not to  to go through marathon-like motions to chase a Wall Street dream job, or will learn they prefer strategy, operations, marketing, product innovation, and distribution  more than investment analysis, corporate finance and capital markets. The top banks, firms and funds won't have trouble finding attractive candidates, but a coveted offer from Citi, Booz, or Merrill  won't be the be-all or end-all.

Tracy Williams

Monday, April 9, 2012

10 Most common insurance myths

Insurance policies have become an important part of life with the increase in risks related to life and accidents. These policies can be very complicated and surrounded with a lot of false information. You must not believe everything you hear, because there are many myths associated with your insurance policies. 

The 10 most common myths are as follows: 

1. Benefits should equal premiums:

 Your policy is your buffer against severe financial problems and not to be used for daily ups and downs in life. You must not feel cheated if you have been paying premium for years and never made a claim. 

 2. Everyone needs life insurance:

For some even this policy is unnecessary. The policy is designed to give financial care to your dependents. This includes your children or any elderly person who depends on you. If you do not have any dependents, then you may not need the policy. 

 3. Only the breadwinner needs to be insured: 

It is generally believed that only the person who earns in the family needs to be insured. We tend to forget that duties such as house care, food preparation etc also must be taken into account. Thus a non-working spouse also contributes greatly to the budget; therefore even he or she should be insured for life.
Car insurance images

 4. Your car not your responsibility if someone else drives it: 

Even if someone else is driving your car and causes an accident, you will be financially held responsible for it. 

 5. No need to insure old cars: 

According to statistical information old cars are the ones that get stolen the most, because it’s easier to steal them. 

6. Company will pay for a rental car if your car gets stolen:

This is not automatically included in your policy. Even if you have comprehensive and collision coverage the policy will not include a rental car. 

7. You need flood coverage only in a high risk area: 

All areas under a National Insurance Program are eligible to buy flood insurance. You must be insured if you live in a flood prone zone. 8. Umbrella insurance is for rich people: As lawsuits occur so commonly now, this policy is for all home, auto and watercraft owners and not just for the wealthy. 

 9. You don’t affect others when you don’t get insured:

 If you decide to be uninsured, you are indirectly affecting the lives of others. This will include the lives of those who are dependent on you. 

10. Red cars increase your policy premium: 

Many drivers think that car color is an important factor when it comes to paying premiums. This is not true at all.

Friday, April 6, 2012

The Moon And The Stock Market

Have you heard before that human tends to be emotional during the full moon? The reason why I want to talk about this is because statistically shown that mankind behaves irrationally during these periods and this will affect our decision making process in the financial markets.

A study suggests that a full moon really can bring out the beast in us, turning us into irritable animals.

While we may not actually transform into the bloodthirsty creatures of fables and movies such as An American Werewolf In London, research suggests we do display worrying symptoms.

A study conducted in Australia found that in 2009, 91 emergency patients with violent, acute disturbances were happening in one hospital north of Sydney.

According to the research, "some of these patients attacked the staff like animals, biting, spitting and scratching, and the patients had to be sedated and physically restrained to protect themselves."

Of course we can do another research on the crime rate and the full moon to confirm the above claims. But today I have done a small research on this topic and compare to our Malaysia KLCI and to see whether the moon does affect our stock market.

This research is about the distance of the moon to the earth and how this relationship affect our stock market. It is generally believed that people are more rational when the moon is furthest away from the earth, and the name for this type of moon is called "Apogee Moon". Another extreme case is when the moon is closest to the earth and we can see the moon big and round right infront of us, this type of moon is known as "Perigee Moon". It is this perigee moon that often cause people become emotional, anxious, and pessimistic.

So I did a research on the dates of the perigee moon and marked them on the KLCI chart. (The chart may be unclear but if you click the picture, it will be enlarged.)

Amazingly I discovered that the claim is about 86% accurate that the KLCI did experience local low during the investigating period.

On the other hand, there's a research done by, they studied not only the perigee moon, but also the apogee moon (when the moon is furthest away from the earth). They discovered a high correlation between the "highs" and "lows" with the agogee and perigee moon. Most of the time, "highs" happen during apogee and "lows" happen during perigee! In other words, it means that "highs" happen when people are more rational while "lows" happen when people are emotional.

I hope this article is not trying to convince you that astrology is perfect, but just to highlight to you that these little researches help us to look at the stock market in different perspectives.

Happy investing,

Pauline Yong

Thursday, April 5, 2012

Consortium MBA: Going the Entrepreneur Route

Consortium Alumnus Boomer
Sometimes experienced professionals among minority groups choose the route of being an entrepreneur--taking a risk and having the courage to go out on their own. They do so, once they figure out the timing and are confident about resources, opportunity, and often family support and understanding. There is a long history of blacks, Latinos and women, who gained experience at established institutions and decided to start their own firms in banking, brokerage, or investment management. Muriel Siebert, widely known as a pioneer in the industry, started her own retail brokerage decades ago after a long stint as New York state's supervisor of banking.  Her firm evolved partly into Siebert Branford Shank, now an established women- and minority-owned firm and prominent in municipal finance.  MR Beal, Loop Capital, Guzman, W.R. Lazard, Blaylock, Advent, Williams Capital and Utendahl are other examples of minority firms that launched after their principals learned the ropes at places like Merrill Lynch and Lehman Brothers. In many cases, the same firms received welcome capital injections and processing support from the owners' old firms.

Despite the hurdles (raising new capital, navigating regulatory requirements, winning new business and mandates, and gaining trust among trading counterparties), women and minorities continue to test opportunities to do it on their own.

In recent weeks, Consortium alumnus Allan Boomer decided to step away from an apparent secure environment of a large financial institution and start his own asset-management company.  Boomer has gained approval from regulatory bodies and has opened the doors to his new firm, Momentum Advisers. The firm will focus on investment advisory and financial planning. 

Boomer is an MBA from NYU-Stern and was affiliated with both the Consortium and Toigo. Before he made his move, he studied his chances and the market landscape, assured himself that certain contacts and clients will follow, brought in other partners and expertise and courageously made the move. Boomer had clients, contacts, experience, pedigree, and investment knowledge, but the hardest part of the effort may have been to make the decision. After the decision, he then had to comb through a maze of registrations, compliance and regulation, and choose securities-clearing partners. At the same time, he had to convince clients to follow him and announce that Momentum was open for business.

Years ago, before the move was more a long-term dream and after NYU, Boomer worked on Wall Street into various roles, starting at Merrill Lynch.  He soon departed for Goldman Sachs, where he worked for seven years and eventually became a Vice President in Private Wealth Management with clients, products, a global network, and hundreds of millions to manage.

At his new firm, Boomer will start with 15 clients (institutions and individuals who meet his current minimum requirements) and over $30 million under management. He says he hopes to reach $100 million under management in three years.  Michael Glickstein, also an NYU-Stern MBA, will be a strategic partner in the new firm. Jontue Long will join him as an investment advisor.  Rudy Cline-Thomas will also be a strategic partner.

At Momentum, Boomer and his partners hope to increase assets under management not only by importing old clients or contacts, but growing in other niches. For example, the partners plan to tap into money management for corporate executives, athletes, and entertainers.  Boomer spoke about managing money and affairs among sports stars at a conference at Wharton last December, hosted by its African-American MBA Association. He formally announced Momentum was open for business a few weeks ago in New York City. The group still must hustle and compete in a grinding, tough business, but  Boomer and partners are anxious, excited and hopeful.
To learn more about Boomer's firm, go to, or contact him directly in LinkedIn. 

Tracy Williams

Wednesday, April 4, 2012

What Is Volatility Index (VIX)

In 1993, a new measurement for the index of volatility for the S&P 500 stock index came out with the purpose of measuring fear and greed. It is called the “VIX”. If the VIX index goes up, the traders and investors may be heading for the exits. Conversely, if the VIX goes down, confidence and optimism are restored, money is coming off the sidelines and moving into equities.

We can't trade the VIX directly but the VIX is traded on the futures exchange and can be traded just like any other investments. In general, VIX values greater than 30 are generally associated with a large amount of volatility as investors are fearful of uncertainty; VIX values less than 20 associate with less volatility and less stressful in the market.

On the other hand, when the VIX is consistently below 20, it means that the underlying S&P is in overbought position and it is due for a correction and vice versa.

There are 4 variations of the volatility index: the VIX tracks the S&P 500, the VXN tracks the Nasdaq, the VXD tracks the Dow Jones Industrial Average and the RVX tracks the Russell 2000. Investors can trade VIX futures for hedging purpose. For example, if VIX starts to rise, it means the level of fear and uncertainty is increasing and you may purchase VIX futures contracts on the Chicago Board Options Exchange (CBOE). If the market does indeed start to sell off and the VIX rises, the profits gained by the VIX futures can help to offset some of the losses that you might experience in other investments.

Monday, April 2, 2012

How bad credit can affect your family

Financial indiscretions or poor money decisions affect your future and your family. Making late payments, missing payments, owing high balances or opening multiple credit cards lowers your credit score. Even if you made these mistakes during your college years, negative information remains on your credit report for up to seven years. When future creditors evaluate your credit history, your past mistakes indicate that you are a high credit risk. Creditors may refuse to extend credit to you or may assess high interest rates on new loans. Your family’s finances and future are adversely affected by bad credit.

Bad credit limits your ability to meet your family’s current needs. When you owe money to numerous creditors, you spend your income repaying the debts. You have no excess money to repair the leaking house roof or buy new clothing for your growing children. Your spare money goes toward repaying debt accumulated in the past. You also have access to limited financial resources. Already overextended, new creditors may be reluctant to open new credit cards or offer store credit for essential household expenses.

                                        Family Credit union Images

With poor credit, your family may be unable to obtain affordable housing. If your family expands, your home sustains weather-related damages or elderly parents must move in with you, you could be left without financial resources to purchase a new home or make improvements. Mortgage lenders and property managers perform credit checks on potential buyers. In most cases, they choose to extend credit and favorable interests rates only to the consumers with clean credit records. Poor credit reveals your history of missing payments or paying less than the minimum payment. You may lose valuable housing assistance because of bad credit.

After a vehicular accident, a new baby is born or never ending auto repair bills, you may wish to purchase a different vehicle. Bad credit limits your ability to purchase a reliable vehicle upgrade. While auto dealers advertise loans for consumers with bad credit, the money is not free. You will pay high interest or receive other unfavorable loan arrangements that limit your ability to maintain the payments and stay current on other household expenses.

Repeated phone calls or letters from creditors can lead to emotional stress or depression. Additionally, the weight of unpaid debt strains family relationships. One spouse blames the other for irresponsible spending. The strained relationship inhibits honest communication about a solution, and the debt cycle continues. In many cases, bad credit leads to emotional separation, health problems or divorce. Instead of suffering, work with your spouse to create a solution to your bad credit.

Bad credit indicates the possibility of poor spending habits. Unaddressed, increased spending on credit prevents your family from finding financial freedom. It keeps you stuck repaying creditors for items you probably do not really need.

Learn to live within your means. Record an accurate list of your family’s monthly income and expenses. Look for ways to increase your income, and cut unnecessary expenses. Use the excess money to repay outstanding debts and save an emergency fund. At least once a month, hold a business meeting with your spouse. Address the next month’s bills, and work out a manageable budget. By agreeing together on your financial goals, you improve your credit and protect your family’s financial future.