Category Archives: Business

Tips to Calculate an Exchange Rate

An exchange rate is how much it costs to exchange one currency for another. Exchange rates fluctuate constantly throughout the week as currencies are actively traded. This pushes the price up and down, similar to other assets such as gold or stocks. The market price of a currency – how many U.S. dollars it takes to buy a Canadian dollar for example – is different than the rate you will receive from your bank when you exchange currency. Here’s how exchange rates work, and how to figure out if you are getting a good deal. (For the more advanced investor, you might want to check out Currency Exchange: Floating Rate vs. Fixed Rate or What economic indicators are most used when forecasting an exchange rate?)

Finding Market Exchange Rates

Traders and institutions buy and sell currencies 24 hours a day during the week. For a trade to occur, one currency must be exchanged for another. To buy British Pounds (GBP), another currency must be used to buy it. Whatever currency is used will create a currency pair. If U.S. dollars (USD) are used to buy GBP, the exchange rate is for the GBP/USD pair. Live rates for several major currency are available on the Investopedia Forex page.

Reading an Exchange Rate

If the USD/CAD exchange rate is 1.0950, that means it costs 1.0950 Canadian dollars for 1 U.S. dollar. The first currency listed (USD) always stands for one unit of that currency; the exchange rate shows how much of the second currency (CAD) is needed to purchase that one unit of the first (USD).

In this case, 1 / 1.0950 = 0.9132. It costs 0.9132 U.S. dollars to buy one Canadian dollar. This price would be reflected by the CAD/USD pair; notice the position of the currencies has switched.

Yahoo! Finance provides live market rates for all currency pairs. If looking for a very obscure currency, click the “Add Currency” button and type in the two currencies being used to get an exchange rate. Find charts, with live market rates, for most currency pairs on FreeStockCharts.com.

Conversion Spreads

When you go to the bank to covert currencies, you most likely won’t get the market price that traders get. The bank or currency exchange house will markup the price so they make a profit, as will credit cards and payment services providers such as PayPal when a currency conversion occurs.

If the USD/CAD price is 1.0950, the market is saying it costs 1.0950 Canadian dollars to buy 1 U.S. dollar. At the bank though, it may cost 1.12 Canadian dollars. The difference between the market exchange rate and the exchange rate they charge is their profit. To calculate the percentage discrepancy, take the difference between the two exchange rates, and divide it by the market exchange rate: 1.12 – 1.0950 = 0.025/1.0950 = 0.023. Multiply by 100 to get the percentage markup: 0.023 x 100 = 2.23%.

A markup will also be present if converting U.S. dollars to Canadian dollars. If the CAD/USD exchange rate is 0.9132 (see section above), then the bank may charge 0.9382. They are charging you more U.S. dollars than the market rate. 0.9382 – 0.9132 = 0.025/0.9132 = 0.027 x 100 = 2.7% markup.

Banks and currency exchanges compensate themselves for this service. The bank gives you cash, whereas traders in the market do not deal in cash. In order to get cash, wire fees and processing or withdrawal fees would be applied to a forex account in case the investor needs the money physically. For most people looking for currency conversion, getting cash instantly and without fees, but paying a markup, is a worthwhile compromise.

Shop around for an exchange rate that is closer to the market exchange rate; it can save you money. Some banks have have ATM network alliances worldwide, offering customers a more favorable exchange rate when they withdraw funds from allied banks.

Need a foreign currency? Use exchange rates to determine how much foreign currency you want, and how much of your local currency you’ll need to buy it.

If heading to Europe you’ll need euros (EUR), and will need to check the EUR/USD exchange rate at your bank. The market rate may be 1.3330, but an exchange might charge you 1.35 or more.

Assume you have $1000 USD to buy Euros with. Divide $1000 by 1.3330 to get 740.74 euros. That is how many Euros you get for your $1000. Since Euros are more expensive, we know we have to divide, so that we end up with fewer units of EUR than units of USD.

Now assume you want 1500 euros, and want to know what it costs in USD. Multiply 1500 by 1.35 to get 2025 USD. Since we know Euros are more expensive, one euro will more than one US dollar, that is why we multiply in this case.

 

Let’s Learn About A Beginner’s Guide to Precious Metals

Since the dawn of time, gold and silver have been recognized as valuable. And even today, precious metals have their place in a savvy investor’s portfolio. But which precious metal is best for investment purposes? And why are they so volatile? If you’re just getting started in precious metals, read on to learn more about how they work and how you can invest in them. There are many ways to buy into precious metals like gold, silver and platinum and a host of good reasons why you should give in to the treasure hunt.

All That Glitters Is Gold

We’ll start with the grand-daddy of them all: gold. Gold is unique for its durability (it doesn’t rust or otherwise corrode), malleability and its ability to conduct both heat and electricity. It has some industrial applications in dentistry and electronics, but we know it principally as a base for jewelry and as a form of currency.

The value of gold is determined by the market 24 hours a day, nearly seven days a week. Gold trades predominantly as a function of sentiment; its price is less affected by the laws of supply and demand. This is because new mine supply is vastly outweighed by the sheer size of above-ground, hoarded gold. To put it simply, when the hoarders feel like selling, the price drops. When they want to buy, new supply is quickly absorbed and the gold prices are driven higher.

Several factors account for an increased desire to hoard the yellow metal:

  1. Systemic Financial Concerns: When banks and money are perceived as unstable and/or political stability is questionable, gold has often been sought as a safe store of value.
  2. Inflation: When real rates of return in the equity, bond or real estate markets are negative, people regularly flock to gold as an asset that will maintain its value.
  3. War or Political Crises: War and political upheaval have always sent people into gold-hoarding mode. An entire lifetime’s worth of savings can be made portable and stored until it needs to be traded for foodstuffs, shelter or safe passage to a less dangerous destination.

The Silver Bullet

Unlike gold, the price of silver swings between its perceived role as a store of value and its very tangible role as an industrial metal. For this reason, price fluctuations in the silver market are more volatile than gold.

So, while silver will trade roughly in line with gold as an item to be hoarded (investment demand), the industrial supply/demand equation for the metal exerts an equally strong influence on price. That equation has always fluctuated with new innovations, including:

  1. Silver’s once predominant role in the photography industry (silver-based photographic film), which was been eclipsed by the advent of the digital camera.
  2. The rise of a vast middle class in the emerging market economies of the East, which created an explosive demand for electrical appliances, medical products and other industrial items that require silver inputs. From bearings to electrical connections, silver’s properties made it a desired commodity.
  3. Silver’s use in batteries, superconductor applications and microcircuit markets.

It’s unclear whether (or to what extent) these developments will affect overall noninvestment demand for silver. One fact remains; silver’s price is affected by its applications and is not just used in fashion or as a store of value. (Find out how everyday items you use can affect your investments in Commodities That Move The Markets.)

Platinum Bombshell

Like gold and silver, platinum is traded around the clock on global commodities markets. It tends to fetch a higher price than gold during routine periods of market and political stability, simply because it’s much rarer; far less of the metal is actually pulled from the ground annually. Other factors that determine platinum’s price include:

  1. Like silver, platinum is considered an industrial metal. The greatest demand for platinum comes from automotive catalysts, which are used to reduce the harmfulness of emissions. After this, jewelry accounts for the majority of demand. Petroleum and chemical refining catalysts and the computer industry use up the rest.
  2. Because of the auto industry’s heavy reliance on the metal, platinum prices are determined in large part by auto sales and production numbers. “Clean air” legislation could require automakers to install more catalytic converters, increasing demand. In 2009, however, American and Japanese car makers started turning to recycled auto catalysts or using more of platinum’s reliable (and usually less expensive) sister group metal, palladium.
  3. Platinum mines are heavily concentrated in only two countries: South Africa and Russia. This creates greater potential for cartel-like action that would support, or even artificially raise, platinum prices.

Investors should consider that all of the above factors serve to make platinum the most volatile of the precious metals. (For more on this entire industry, check out The Industry Handbook: Precious Metals.)

Filling Up Your Treasure Chest

Let’s take a look at the options available to those who want to invest in precious metals.

  1. Commodity ETFs: Exchange traded funds exist for all three precious metals. ETFs are a convenient and liquid means of purchasing and selling gold, silver or platinum.
  2. Common Stocks and Mutual Funds: Shares of precious metals miners are leveraged to price movements in the precious metals. Unless you’re aware of how mining stocks are valued, it may be wiser to stick to funds with managers with solid performance records. (For related reading, see Strike Gold With Junior Mining.)
  3. Futures and Options: The futures and options markets offers liquidity and leverage to investors who want to make big bets on metals. The greatest potential profits – and losses – can be had with derivative products.
  4. Bullion: Coins and bars are strictly for those who have a place to put them. Certainly, for those who are expecting the worst, bullion is the only option, but for investors with a time horizon, bullion is illiquid and downright bothersome to hold.
  5. Certificates: Certificates offer investors all the benefits of physical gold ownership minus the hassle of transportation and storage. That said, if you’re looking for insurance in a real disaster, certificates are just paper. Don’t expect anyone to take them in exchange for anything of value.

Will Precious Metals Shine for You?

Precious metals offer unique inflationary protection – they have intrinsic value, they carry no credit risk and they themselves cannot be inflated (you can’t print more of them). They also offer genuine “upheaval insurance”, against financial or political/military upheavals.

From an investment theory standpoint, precious metals also provide low or negative correlation to other asset classes like stocks and bonds. This means that even a small percentage of precious metals in a portfolio will reduce both volatility and risk.

 

More Information About Top 4 Companies Owned by Google

Google has expanded far beyond its original claim to fame as a search engine. Through its holding company Alphabet Inc. Google owns multiple companies. The reach of this technology giant is so vast it is hard to imagine an area of modern life it has not touched.

Google owns more than 200 companies, including those involved in robotics, mapping, video broadcasting, telecommunications, scholarship and smoke alarms. Google is growing through acquisitions, but it is also increasing revenues in each of the companies it owns. In cases where an acquisition cannot grow revenues, Google tends to sell that company.

We have selected four companies to highlight based on their ability to produce consistent revenues. Each of these companies has a history of attracting customers and monetizing their services. All figures are current as of August 8, 2017.

You can look up any location in the world using Google Maps. The views are aerial for the most part, but Google also provides street-level views of many cities. Google Maps is embedded in real estate sites, as well as sites for businesses that want to make sure you can find them. And that’s how Google Maps makes money.

Companies pay to be included in Google Maps searches. Companies may also be featured as the user zooms in or out on any given map. Google does not list how much money it makes from Google Maps, but analysts predict the company will earn an additional $1.5 billion in 2017 from advertising.

As of July 2017, the Google Maps Local Guides introduced gamification to persuade local users to update data and add photos of local venues. This may increase the number of users, and thus the value of Google Maps.

2. Android

Android is sometimes thought of as a phone, because people say they have an “Android phone.” Android is actually a software. It is used in phones, tablets, wearable devices and automobile entertainment systems.

Technically, Google does not own Android, because it is an open-source initiative that Google leads. Google makes its money by using a version of Android it created and then marketing that to manufacturing companies. Those companies include Samsung, Sony, Lenovo, and LG, among others. Google’s revenues from its Android marketing top $31 billion. Android is by far the most popular operating system in use around the world.

3. DoubleClick

DoubleClick is an advertising service. It can target customers and focus on an advertiser’s specific pages to bring in revenues. It also allows website owners to place ads on their websites. DoubleClick can tell a publisher how long visitors are on a site and which pages they stay on the longest.

Online publishers use DoubleClick to build their web traffic, product sales, and service sales. Google also uses DoubleClick to promote its own services. If you have less than 90 million ad impressions per month, the service is free.

DoubleClick earns more than $30.6 billion in annual revenues. Google acquired DoubleClick in 2008.

4. YouTube

YouTube is highly popular, and users have become accustomed to seeing short ads at the beginning of most videos on the site. It makes $9 billion per year from advertising. However, there is another value to YouTube that is harder to measure in dollars. By owning this company, Google dominates the online video business.

The difficulty for Google is that many people watch embedded YouTube videos without going to the site, where the ads are.

YouTube has become the go-to source for videos, and looks like it will continue to dominate. YouTube has been considered a “break-even” company by many industry watchers, but its presence as a means of popularizing goods, services and entertainment is priceless.

 

How to Growing a Successful Business

To succeed in business today, you need to be flexible and have good planning and organizational skills. Many people start a business thinking that they’ll turn on their computers or open their doors and start making money, only to find that making money in a business is much more difficult than they thought. You can avoid this in your business ventures by taking your time and planning out all the necessary steps you need to achieve success.

1. Get Organized

To be successful in business you need to be organized. Organization will help you complete tasks and stay on top of things to be done. A good way to do this is to create a to-do list each day. As you complete each item, check it off your list. This will ensure that you’re not forgetting anything and you’re completing all the tasks that are essential to the survival of your business.

2. Keep Detailed Records

All successful businesses keep detailed records. By keeping detailed records, you’ll know where the business stands financially and what potential challenges you could be facing. Just knowing this gives you time to create strategies to overcome those challenges.

3. Analyze Your Competition

Competition breeds the best results. To be successful, you can’t be afraid to study and learn from your competitors. After all, they may be doing something right that you can implement in your business to make more money.

4. Understand the Risks and Rewards

The key to being successful is taking calculated risks to help your business grow. A good question to ask is “What’s the downside?” If you can answer this question, then you know what the worst-case scenario is. This knowledge will allow you to take the kinds of calculated risks that can generate tremendous rewards.

5. Be Creative

Always be looking for ways to improve your business and to make it stand out from the competition. Recognize that you don’t know everything and be open to new ideas and new approaches to your business.

6. Stay Focused

The old saying that “Rome was not built in a day” applies here. Just because you open a business doesn’t mean that you’re going to immediately start making money. It takes time to let people know who you are, so stay focused on achieving your short-term goals.

7. Prepare to Make Sacrifices

The lead-up to starting a business is hard work, but after you open your doors, your work has just begun. In many cases, you have to put in more time than you would if you were working for someone else. In turn, you have to make sacrifices, such as spending less time with family and friends in order to be successful.

8. Provide Great Service

There are many successful businesses that forget that providing great customer service is important. If you provide better service for your customers, they’ll be more inclined to come to you the next time they need something instead of going to your competition.

9. Be Consistent

Consistency is a key component to making money in business. You have to consistently keep doing the things necessary to be successful day in and day out. This will create long-term positive habits that will help you make money over the long term.

More Information About Top 4 Alternative Energy Companies in 2017

Alternative energy is not the fledgling industry it used to be. The sector has produced some global leaders that are helping to make alternative energy a viable energy choice. Investors have a number of stocks to choose from that are showing promise and offer genuine growth opportunities.

The technology associated with alternative energy is rapidly changing, with new developments appearing on a regular basis. This helps drive the sector in a positive direction, but it also creates much volatility as companies have to adjust to new ways of creating energy. It is easy for a company to get left behind in an environment of constant innovation. We have chosen four companies that are world leaders in alternative energy. Despite the volatility in this sector, these firms offer investors a degree of stability and are positioned to take advantage of the growing worldwide demand for sustainable energy.

1. Atlantica Yield PLC (ABY

 Atlantica does own conventional power assets, but it also owns and manages renewable energy. It has 1,442 megawatts of renewable energy properties that include solar power and wind plants. The company is based in the United Kingdom but has plants throughout North America, Spain, Algeria, South Africa and South America.

The stock has been moving sideways since the beginning of 2017, and this was a base. The stock broke upward out of that base, fell back, then moved on to new highs.

  • Avg. Volume: 793,987
  • Market Cap: $2.204 billion
  • PE Ratio (TTM): 233.94
  • EPS (TTM): 0.09
  • Dividend & Yield: 1.04 (4.71%)

2. Vestas Wind Systems A/S (VWDRY

Vestas makes its living from wind power. It sells wind turbines across the globe, and has captured the biggest market share of turbines in the world. It also sells complete power plants as well as individual wind turbines. In addition, the company services its products.

This is no newcomer to the field. Vestas dates back to 1898 and is headquartered in Denmark. It also operates in Germany, Romania, the U.K., India, China, the United States, Sweden, Australia, and Norway. The number of employees exceeds 21,000.

  • Avg. Volume: 33,361
  • Market Cap: $18.62 billion
  • PE Ratio (TTM): 16.75
  • EPS (TTM): 1.9
  • Dividend & Yield: 0.46 (1.46%)

3. First Solar Inc. (FSLR

First Solar is an international alternative energy firm specializing in solar energy. It manufactures solar modules for the solar industry, and it develops complete solar projects for utilities, power companies, and commercial entities. The company also provides engineering, construction, and service for its solar systems.

First Solar is known for creating low-cost solar converters that make electricity more efficient to produce. Management has set an aggressive goal of building the company’s energy output threefold.

The stock has broken out and is hitting new highs. This stock is for investors who trust the larger trend and think solar can reasonably challenge traditional energy companies.

  • Avg. Volume: 2,736,126
  • Market Cap: 5.07 billion
  • PE Ratio (TTM): -9.23
  • EPS (TTM): -5.26
  • Dividend & Yield: N/A (N/A)

4. ABB Ltd (ABB

Along with its motors, generators, and Robotics, ABB provides solar conversion, wind conversion, and electric vehicle quick-charge systems. ABB works with railroads, utilities, and transportation companies, as well as industrial plants.

Investors who want some exposure to alternative energy with a foundation in traditional electrical services may find ABB attractive. It operates in 100 countries and is known as a top electrical engineering firm. The company specializes in connecting alternative energy to the electrical grid.

  • Avg. Volume: 1,917,552
  • Market Cap: 48.76 billion
  • PE Ratio (TTM): 23.67
  • EPS (TTM): 0.99
  • Dividend & Yield: 0.76 (3.26%)

The Bottom Line

The alternative energy firms on this list are in the process of taking alternative mainstream. These are substantial companies with solid track records. Investors should be aware of the increased volatility that comes with investing in this sector, but they should also know that alternative energy has the potential to produce strong returns over time.