On December 31st, 2012 tax increases and large spending cuts will be taken into effect due to President Obama's Budget control act of 2011. Economists are predicting that if these measures due take place, the economy will most likely hit a recession. Both Republicans and Democrat's agree that this plan, also known as the "fiscal cliff", needs alteration. However, congress cannot seem to come up with a better solution due to the ever so common political gridlock.
The Financial field is left paralyzed. Without a clue as to what the tax rate will be in 2013, financing decisions cannot be made. Companies are forced to set their investment projects aside until congress makes up their mind. Hugh Regan, the CFO at Intest states,"In our business, we usually have three months clear visibility and another three months of foggy visibility. Now, I joke that I can’t see to the end of the parking lot."According to CFO.com, "If the automatic cuts and increases kick in, 67% of CFOs say they will reduce capital spending for 2013, and 70% say they will reduce hiring." These undesirable decision plan's CFO's are having to draw up if the "Fiscal Cliff" takes place is going to impact the stock market.
See link below to watch this video
Currently, stock market analyst's along with CFO's are praying for a "Fiscal cliff" resolution. According to Jim Cramer, the stock market needs Washington to come up with a new deal for 2013. However, in his Mad Money show on Monday, Cramer mentioned he is skeptical Washington is going to make a deal by the new year. So what does this mean for the Market. Basically, analyst's realize tax's are going to rise whether a deal is made or not. When tax's rise businesses and consumer's will spend less. Therefore, this is going to hurt companies capital gains, which may or may not affect it's stock price. My prediction is that since the stock market is based on current and expected news, if Washington can work out a new deal before 2013 that is perceived to have lower tax hikes than expected, the market will rise. With that being said, if Washington cannot resolve a new deal or the deal resembles similar tax hikes, the market will fall.
My financial professors at San Francisco State are always preaching to buy stocks low and sell them high. The million dollar question is when exactly is the stock at it's lowest point. We simply do not want to buy a stock at a low price if its going to drop even lower in the future. Timing is truly everything when it comes to investing. Ideally, finding out when a stock hits it's lowest point and investing at that time is what's going to make you fast easy money. However, as long as your invested stock's price increases, you've made a profit.
So is today the time to buy? The first place to find this answer would be to check out the U.S markets. The two largest U.S stock markets are the NASDAQ and New York Stock Exchange. These markets have indexes such as the S&P 500 and the Dow Jones Industrial Average that represent a group of stocks to indicate the current status of the overall markets. Keep in mind that the DJIA is composed of 30 large capital companies and the S&P 500 is composed of 500. Therefore, If you're deciding to invest you're money in large capital companies then the S&P 500 is a better indicator because of it's larger distribution of companies. There are also index's made up of small and medium capital companies. The S&P 400 is made up of mid cap companies and the S&P 600 is made up of small cap companies. Observing the historic ups and downs of each index can help you understand the current status of the market and perhaps help you decide what type of company you should invest in. As a general rule large cap companies tend to be less volatile, so if you are looking for less risky investments these would be the right selection. Keep in mind however, the less risky the stock the smaller the return. Mid cap companies will offer higher risk premiums than large cap companies. Therefore, small cap companies will offer higher risk premiums than mid cap companies..
Understanding the index fluctuations of the past will help you predict the fluctuations of the future. Drawing conclusions as to why the market decreased or increased at certain times(see graph above) will help you understand what might influence the index in the future. Therefore, when listening to current news you may be able to correlate what will effect the market, which will help you decide when it is a good time to buy or sell. Financial analysts preach all day long about their views on the current market, which can help you make smart investment decisions. Check out the video on financial analyst Jim Cramer who explains his animated perspective on what to invest in today.
As a college student attending school full time and working part
time I expect to one day have a rewarding financial career. However, something
tells me I’m not the only college student with this perception of having a career
in their study. Surely were not all going to be content with the jobs we
receive after college. The sooner we understand the competitiveness of getting
the jobs worth going through college, the sooner we can help better position
ourselves now. The NY
York Times stated, “According to an Associated Press analysis
of data from 2011, 53.6 percent of college graduates under the age of 25 were
unemployed or, if they were lucky, merely underemployed, which means they were
in jobs for which their degrees weren’t necessary.” The question I’m left
repeating over and over in my head is how can I be part of the other 46.3% with
a satisfying job? After doing some research on the web I found some tips that
can help college students studying finance stand out to employers.
Discovering
What They’re Expecting
Before we earn our bachelor degree in Finance, it’s
important to make sure we are ready for what is expected of us in our career
field. Check out Careers-in-Finance,
this site asks you personal questions that can help discover if a finance
career is right for you. This site mentions qualities that are important in
this career. “The number one attribute most corporate
employers are looking for is initiative. If you can give examples in interviews
of situations where you did something plain useful even though no one asked you
to, you will be a hot commodity.” Therefore, getting your desired job after college
involves demonstrating your ambition to the interviewer. So take some time and
organize your accomplishments that are worth mentioning in an interview, to show the
employer your initiative. If you find yourself without many achievements that
correlate to impressing an employer start planning tasks that will! For
example, finance careers are highly connected with the current state of the
economy, so being currently aware of what is happening could be something to
become more knowledgeable about. Even
just reading daily financial articles, like CNN
Money can help gain current knowledge and show an employer your desire to
learn.
Networking
According to Classes
and Careers there are 1.75 million college graduates per year. Networking just
might be the key to standing a part from that number. I hear people always say “Sometimes
is all about who you know,” so spreading the word about yourself is important.
With the internet people can network like never before. Sites like LinkedIn allow
you to present yourself professionally in front of millions of people and companies.
Establishing relationships through networking can help open job opportunities for yourself.
Joining a networking site like LinkedIn helps you establish these relationships
within you’re interested field. It also allows you to learn about different companies
as there are more than 2.6 million company pages subscribed to LinkedIn. This
is the time to start networking! For most of us that are still in college,
staying in touch with classmates after we graduate is a great way to create job
opportunities for us in the future. For example, in one year from now when I will
be looking for a finance job I might know a fellow classmate working for a
financial company that can help me get an interview.
Experience
You don’t become a great basketball player by reading a
bunch of books on basketball. You become a great basketball player by actually
playing the sport (athletic ability helps too). A college degree is
a great tool for companies to evaluate a possible employee. However, having
actual experience in the field is a better tool to measure how good someone
actually is in the field. Studying finance in college is helping me understand what
the field is all about, yet there’s a definite line between studying and
actually working in finance. Knowing that I needed to obtain some hands on experience,
three months ago I started investing in the stock market. Ever since then I am
constantly checking my stocks everyday and have become a lot more enthusiastic
about finance. I encourage everyone who’s studying finance to start investing
in the market. Even if all you can afford is one share of stock, it will
encourage you to be more involved. This hand’s on experience can also impress
an employer on your initiative during an interview.
I graduated high school in the spring of 2009, wanting to
attend college for the sole purpose of playing collegiate baseball. I didn't
receive any scholarship opportunities, so I spent the summer of 2009 trying out
for several different schools. It was one stressful summer, as all my friends
had already committed to universities and spent their time partying. Yet I was
in a race against time, deciding what school I should pick. It wasn't till
early August that I decided to choose San Francisco State because I figured I
had the best possible chance to be on the baseball team. I decided to declare
business finance as my major because I enjoyed working with numbers and thought
I'd find it interesting. I particularly didn't care much about what major I
choose, I was just focused on baseball. I ended up making the team and played
two years for the gators. However, throughout my first 2 years attending school
it appeared choosing a major made no difference. All students, no matter your
major, were required to take these general ed courses. I took classes that had
nothing to do with my major. These general ed classes were required courses to
obtain my finance degree, yet they had nothing to do with finance. So there I
sat in my classrooms, trying to justify how these lectures on biology and the
Renaissance era was going to help me excel in a finance career. I could not
come up with any motivating explanation for me to pay attention in class. I
choose a bachelor’s degree in Finance hoping to explore this field of business
throughout my time at SF State. Instead, I was forced to waste half my time
taking courses that were meaningless towards my pursued career.
It turns out I made the right decision choosing Finance as
my major. Now in my senior year at SFSU the majority of my classes are in fact
finance courses, which I have become very interested in. It was not until last
year that I started taking finance related courses. Yet, I've been a full time
student averaging about 15 units each semester since the spring of 2009.
Therefore, I'm left baffled by the fact that it took me 6 semesters to find out
if the major I choose was the right fit for me. This issue makes me skeptical
about the values of higher education. Is requiring irrelevant courses just a
way for schools to make more money, extending the duration a student has to
spend going to college? Or perhaps the reason is to develop well rounded
learning. You can call me a pessimist, but I'm leaning towards my first idea.
Since my early adolescence, I have realized general science
classes are not my cup of tea. However, since as early as i can remember I've
been forced to take these science courses. In fact, even here at San Francisco
State I have been required to take 4 general science courses. Are these general
science courses really going to help me pursue a financial career? Absolutely
not, the study of biology is great if i wanted to become a doctor, but its not
going to help me choose the most profitable investments in the stock market. I
understand why in middle school and high school these classes are taught.
General science is information that we as a society should have a basic
understanding of. However, college is not a required education. According to
Merriam-Webster college is, “a part of a university offering a specialized
group of courses." Therefore, I shouldn't have to spend 6 semesters of
college before I get to "study the specialized group of courses" I
chose.
Universities need to restructure their
undergraduate programs. Perhaps there are general courses all majors should be
required to take. General sciences do not fit in that category. However, I did
take a few general courses at SF State that were helpful. There was a critical
thinking course I took that studied the structuring of arguments. Almost all
majors require communication skills. Therefore, this class showed me how to
become a more persuasive individual. My point is universities should create
courses that educate students to become more of a desirable employee. Students
go to college to obtain a better job once they graduate. Therefore,
universities need to start recognizing this. Perhaps create more degree
designed courses and less general courses. I want to be a financial expertise
when I graduate not an expert on high school material.
All types of finance jobs relate to current events. Whether
you are a mortgage broker issuing loans at the current interest rate or a stock
dealer working on Wall Street buying and selling shares, your job revolves
around the current market. However, perhaps you are just like me trying to decide
what companies to invest in. Knowing that all financial jobs respond to current
events, you should understand the importance of what state the current economy
is in. How the overall economy is doing will cause all financial jobs to
strategize their planning accordingly. Since financing refers to managing money
for the future, current events and how they will forecast the future will play
a large role. For example if the economy is prospering, society as a whole is
making more money. When society is making more money, people tend to have extra
cash to spend. Therefore, when people have more money to spend they will buy
more goods, giving companies more business. In this particular state of an economy,
companies are given more opportunities to invest their extra cash flow into new
projects. If these projects are viewed by the public positively, the value of
the company rises reflecting in its stock price. This is an important idea to
realize when choosing companies the right companies to invest in.
Another idea to realize about investing your money in the
stock market is how expected market news differs from actual market news. The
stock market has hundreds of analysts predicting the economic state of participating
companies in the market. Because the majority of investors believe or have the
same predictions as professional analysts the stock prices are adjusted to
these predictions. Therefore, when these expectations are wrong the market can fluctuate
rapidly, increasing or decreasing stock prices based on the difference between
what actually happened and what was predicted.
Let’s look at one of the companies I am currently a
shareholder of, Facebook. On Tuesday night Facebook announced its 2012 Quarter
3 earnings which were higher than analysts expected. Sure enough Wednesday morning when the stock
market opened, Facebook's stock increased to nearly 20%. According to Before It
News, "The social networking company said that it now has 1.01 billion users
on its network and had earned $1.26 billion in revenue this past quarter, about
a 32% increase over Q2 and almost 100% increase over the same time last
year." This announcement was great for shareholders of the company. I have
owned the stock for about 3 months and this was the greatest increase the stock
has had. Check out the graph above, showing Facebook's stock price for the last
three months. Notice its closing price on Tuesday before Facebook's
announcement. Then Wednesday morning after the news its stock price sky
rocketed. Therefore, as you can see the stock market is affected by current
events that differ from the markets predictions. You see according to the
Outline of the U.S. Economy by Conte and Carr, "In general, economists
say, they (stock prices) reflect the long-term earnings potential of
companies." After this announcement the stock price went up because
analysts had undervalued the success of the company. Facebook has done better
than analysts expected, showing their future is brighter having more cash flow.
I've mentioned that all financial professions are impacted
by current events. However, since I've been currently researching stock brokers
I want to emphasize their relation. Because one of the main skills a stock
broker must have is a strong clientele relationship, he must be able to
understand the effects of current events. For example, a good stock broker
having done the research should have been able to realize that Facebook was
going to announce their 2012 Quarter 3 earnings Tuesday night. Therefore, this
broker should have predicted the outcome prior to the announcement to help his
clients decide whether to invest in Facebook or not. If the broker had realized
Facebook was going to inform everyone like they did, he should have informed
investors to buy shares on Tuesday. This would have gained investors 20% on
their investment in one day! However, it’s easy to speculate after the fact
about what your broker advised. All they can do is give an educated guess as to
what is going to happen. Check out this video below from the movie the 25th
Hour. This entertaining clip demonstrates how brokers predict the market.
However, keep in mind this broker is looking after mutual funds where he is in
charge of picking the investments for his clients. This is not a job all
brokers have.
Throughout school I've
realized English has never been one of my favorite classes. Reading books and
writing essays was a task I wish I'd never had to do. However, I've come to
realize that most jobs require sufficient reading and writing skills. So maybe that’s
why English teachers make students annotate articles and write lengthy papers
on our readings? The concept of learning how to write and read will help
students become better professionals in their careers. Therefore, since I find
myself embarking on the career of a financial broker, I've decided to take a
look at what type of reading and writing activities they do. Since a broker's
job is to provide investment advice to investors they must be knowledgeable.
Brokers must stay currently informed to offer the best possible advice.
Therefore, researching companies is a huge part of what brokers do. However,
before we go any further lets make sure we know what a broker actually does.
According to Fundamentals of
investments, by Bradford D.Jordan states, "A broker is an intermediary who
arranges security transactions among investors."Brokers are essentially
middle men, matching investors with opposite investment decisions. For example,
say that you own shares of Apple stock and you decide that you want to sell
your shares. You simply pick up your phone (or go to you online brokerage
account) and tell your broker about your decision. After the phone call your
investment broker will find someone else who is looking to buy your shares of
Apple stock. Then once your broker has found someone to purchase your shares,
the transaction will take place and you will receive your money.
Building trust with clients
is an extremely important aspect of becoming a successful broker. In order to
accomplish this task a broker must be knowledgeable to give good advice.
Knowing current issues, like the position the current economy is in, relates to
directing a client towards smart investment decisions. Therefore, investment
brokers must read a lot of material involving company and industry reports. Understanding how current events affect
market decisions is a crucial part in picking the right companies to invest in.
Therefore, brokers make their money by investing in profitable companies, so
deciphering this relationship between current news and affected companies is
crucial. Therefore, learning how to annotate information could be a way to decipher underlying
messages that would help predict the future market as a broker.
Another important task to build trust with
clientele is regular communication. People feel more comfortable investing
their money when they have someone to answer their questions at anytime. When
talking with one of the brokers at Scottrade he mentioned that "his door
is always open." Communication with his clients is mainly done through
email mainly because Scottrade is an online
brokerage company. Therefore, sufficient writing skills are crucial. Brokers not having proper writing skills could impact the required "trusting" relationship with clients. Imagine if you were receiving poorly written emails from their broker how would that make you feel? You would probably may begin to
doubt who you are sending your money to. Since being a successful broker requires having a good relationship with clientele, they must have
professional analytical skills.
Oh the grind of college! Why is it that we put ourselves through sleepless nights working part time jobs and taking full time college courses? I don't think many of us can answer that question. I realize the discipline I'm studying is a good fit for me. However, what I want to do with my finance degree is still way up in the air, and trying to figure out my career path right now is all too overwhelming. There is a wide variety of financial careers in today's job market with many that I'm unfamiliar with. Therefore, I decided to research the financial position of a stock broker.
I recently opened up an online brokerage account with Scottrade, so I decided to start my journey of discovery there. A few months ago after setting up my account I started investing, with the little money I have, in the stock market. The outcome of my investments have not been that great, but I have realized how interested I've become with the market. I check my stocks several times each day. My eagerness to learn more about the market has increased since I started trading and has helped me stay focus in all of my finance classes (particularly my investment class). Therefore, at this point in time I'm considering working for a brokerage company after I graduate. So I decided to call Scottrade's branch office in Walnut Creek to learn more about a possible career at the firm. I was able to speak with Kevin, one of the brokers at the branch. When I told him about my career uncertainty, he informed me that Scottrade offers a lot of different positions. He explained, "Scottrade offers positions with little experience needed, such as paid internships to divisonal branch mangers." The range of jobs offered consist of customer service related positions in branch offices, like Kevin, to positions in their corporate office analyzing stocks. Kevin also made it sound like the company offers employees opportunities to move up in the company.
I was really impressed talking to Kevin about Scottrade. He seemed to enjoy working as a broker for the company. When I asked him what a broker does? He informed me that a majority of his time is spent processing clients stock and bond transactions. You see a broker is the person who allows an investor to buy and sell securities. If I decide I want to sell my Facebook shares tomorrow all I have to do is click the "sell" button on my online Scottrade account. As the broker, Kevin then has to process the transaction (find an investor to sell the shares to). Kevin also spends time talking to clients both in person and through email and phone. "Customer service is a big part of my job," Kevin mentioned he makes several calls a day checking in with clients to offer assistance with their accounts. Building relationships with clients, Kevin explained allows him to offer better advice. He talked about finding their "risk tolerance", meaning how much risk someone is willing to take to earn more profit. Once a broker has an understanding of a client's "risk tolerance" he is able to advise certain investment funds. To find out your own "risk tolerance" check out this link. and the video below.
After speaking with Kevin the idea of a broker seemed like a possible career for myself. The daily interaction a broker has with the financial market appeals to me. I thought to myself, since I'm very interested in learning more about the financial market, a job such as Kevin's would allow me to engage with it everyday. I feel that this job could offer me a great amount of experience and knowledge that I desire regarding the stock market. Therefore, after speaking with Kevin I visited Scottrade's website to learn more about career opportunities and how to get started. I found out that Scottrades headquarters are located in St.Louis, Missouri and Denver, Colorado as well as 500 branch offices nationwide offering a job almost anywhere in the country. However, what was most appealing was that 19% of Scottrades current employee's started as interns with the company. I realize after I graduate, I'm not going to be able to receive a position such as a broker with no financial work experience. Therefore, getting an internship will greater my chances. Knowing that Scottrade offers career opportunities after interning with them has definitely caught my attention.
On December 31st, 2012 tax increases and large spending cuts will be taken into effect due to President Obama's Budget control act of 2011. Economists are predicting that if these measures due take place, the economy will most likely hit a recession. Both Republicans and Democrat's agree that this plan, also known as the "fiscal cliff", needs alteration. However, congress cannot seem to come up with a better solution due to the ever so common political gridlock. 
