These helpful tips will help you get on your way to acquiring penny stocks the right way. 

Understanding Penny Stocks

 Image via Flickr by AndreasPoike  

You may have heard of penny stocks previously, and not thought much about them because of the negative connotation that they can have due to some risks involved.

Penny stocks are traded on the Over the Counter market or OTC that has a low cost. They often have a low price because the companies may be new, relatively small in size, or have financial difficulties.

These reasons can cause them to have stocks that are inexpensive and not traded on the more well-known New York Stock Exchange. Penny stocks do have benefits that can make them worthwhile when you follow these tips to make money trading them.  

Stop-Loss Orders

Stop-loss orders are a way to set up your account to trade your shares if the price ever drops down to a predetermined price point.

This type of order lets you work on reducing your risk because you will sell your shares before they can drop any lower.  You can do this by setting stocks alerts or running simulations with a backtesting software.

Invest What You Can Afford to Lose

Penny stocks can be volatile, and it makes sense to take this risk seriously. It can be helpful only to invest an amount of money that you can afford to lose if something goes wrong with the stock.

Putting up more money may have a bigger payoff, but if the amount hampers your finances, it may not be worth it to risk it all. 

Limit Orders

A limit order stops you from investing too much in a particular penny stock.

Your purchase of the stock can increase the price and may make it seem as though the share is already growing in value, even if it’s not actually. 

Avoid Free Stock Picks

Penny stocks aren’t as widely covered as stocks that are on the more well-known stock exchanges, and this means that the information available on them isn’t as reliable as more expensive stock options.

You may see information advertising free stock picks when it comes to penny stocks, but this could be a seller with ill-intentions trying to steer you towards a share that will make them money but cause you to lose your investment.

There are often illegal practices where they inflate the financial information regarding the company to make it look more attractive only to have the company financially crash at a later date. 

Beware of Confirmation Bias

Another potential pitfall with penny stocks is that you may suffer from confirmation bias when deciding which stock you want to invest your money in. What happens here is that you look at the data and twist it to fit your thoughts about the company. You have to look at the data available with an open mind without being partial to it going a particular way. 

While you can never wholly lower your risk when investing in any stocks, you can help to decrease your risk. Following these tips will help you to skip over more questionable penny stocks and find reliable stock picks that work to boost your portfolio.   

The one obstacle getting in the way is money. There are ways you can fund your business and get it off the ground, including business loans.

As you start looking into business loans, you’ll quickly learn that they’re not created equal. Read on to discover 5 types of loans and which are the best small business loans you should consider.

1. Traditional Banks

For years, if someone wanted to start a business, they’d either have to self-fund or go to a bank. Banks require a lot to get a loan.

They need a full business plan and a high credit score. There’s also a ton of paperwork involved that requires a lot of time that can keep you from starting your business right away.

Not only that, the approval rate for small business loans is low when you go to a bank. Only about 26% of these loans are approved.

2. Friends and Family

You could turn to friends and family to help you start your business. They’re likely to want to help you, but you may quickly learn that money and close relationships don’t always go well.

They may want to have input or unreasonable expectations about your business. That can leave you frustrated as you’re launching your small business.

3. Personal Loans

A personal loan is a great option to fund your business. A personal loan is a loan that you pay back in monthly installment payments. You can use these loans for any purpose, including starting your business.

They’re easier to get than a traditional bank loan. With personal loans, you have complete control over how to spend the funds and control over your business.

4. Peer-to-Peer Lending

You may go online and search for loans for small businesses. These sites match individuals who want to fund loans with people searching for money.

Typically, these loans are funded by investors who plan to make money off of interest.

5. Crowdfunding

Crowdfunding has been another popular way to fund a business or product launch. Some have been very successful and raised millions for their business.

Crowdfunding is a little complicated, especially for startups. In some instances, you’re exchanging equity in your business for cash. You are giving up control of your company in this situation.

The Best Small Business Loans to Turn Your Idea into Reality            

You have an idea and a dream to start a small business. It could be anything from a new blog to a fitness studio. Whatever it may be, you don’t want a lack of funding to get in your way.

You can turn to small business loans to make it happen. The best small business loans will give you the money that you need, reasonable repayment terms and excellent service. The best loans also allow you to run your new venture the way you had dreamt about it.

The best option for some other business may not be right for your business so make smart decisions when it comes to money matters. Start your new business after deciding the most appropriate funding option based on your needs.

You can talk to the customer representatives of various banks and non-banking financial institutions to know about their services in detail. This will help you make better decisions and know if they can really understand your requirements or not. 

Foreign exchange (FX) risk is one of those factors that one has to manage with utmost efficiency. Hedging remains the best way for small and medium-sized enterprises (SME) to achieve this, reports CNBC. 

Understanding FX Risk: What and Why It Is 

FX risk is a risk to your investment’s value which exists for deals that involve different currencies. It’s the risk of a currency changing its exchange rate value. However, one can hardly call it a ‘risk’ because the change in those rates is a certainty. 

Therefore, it’s essential to have a strategy for managing FX risk in place before you start dealing with any foreign currency transactions. The majority of tools that help reduce your losses due to the volatile exchange rates are preventative, so you must consider those safeguards while choosing a method for cross-border money transfers. 

Types of FX risk you’ll be facing are: 

• Transaction risk.
  The risk that occurs when your business has actual contractual cash flow, which can be directly affected by currency exchange rates changes. 
• Economic risk.
  This is a major risk that occurs when your company’s actual value is dependent on the changes in currency exchange rates. It mostly has to do with macroeconomic factors in the foreign country you do business with. 
• Translation risk.
  Translation risk refers to issues which can occur with your financial reporting when you process and consolidate statements in different currencies. It has little to no effect on your actual cash flow. However, this kind of issues can affect your reported revenue and therefore the stock price of the business. 

• Contingent risk.
  This type of FX risk occurs when your economic or transactional risks are contingent on some business project negotiation you are currently having. 

Managing FX Risk with the Help of Hedging Tools 

To manage FX risk most effectively, your business will need to use a suitable foreign exchange hedge (FOREX hedge). These financial operations are regulated by International Financial Reporting Standards and a variety of national accounting standards.

Therefore, you need to check the regulations in your country as well as the country you do business with in order to determine how exactly you can use hedging tools to manage your FX risk. 

Types of Hedging Tools 

Limit orders

Limit orders in currency exchanges are one of the most efficient ways to reduce FX risk as they enable you to buy/sell at a predetermined price level. When using a limit order, you set a specific buy or sell rate that you want to secure and the transaction goes through once that level is reached. Top online money transfer platforms today offer a limit order feature which you can use to automate the process and avoid monitoring FX rate changes personally. 

Forward contracts

Forward contracts are a tool that allows you to secure a specific rate to buy or sell currency on a set date in the future. This is a hedging tool that allows for maximum certainty in the cash flow because it eliminates currency exchange rate fluctuations as a factor for this specific transaction. However, you won’t be able to profit from a favorable change in FX rates when using this method. 

FX derivatives

From all available FX derivatives, SMEs should consider using options and swaps. Currency options are a type of insurance for currency exchange. You pay a premium and you secure the right to buy or sell currency at a secured rate (strike price) on a specific date in the future. Note that it’s a right, not an obligation. This method allows you to benefit from positive changes in the FX market. This is one of the best hedging tools to reduce long-term risks, so it works well for extremely volatile markets.
Currency swaps are a tool used by companies that enter a long-term borrowing commitment. In essence, a swap is an exchange of loan principal in one currency and interest in another. It’s a good option for foreign financing. The rates on the loan can be either variable or fixed. 

For the majority of SMEs, forward contracts and limit orders are sufficient methods to manage FX risk rather effectively. However, don’t forget that you are the one making the decisions on the best rates to secure. You’ll need to do a lot of market research to make the choices that will benefit your business the most. 

Money transfer companies, such as MoneyCorp or Currencies Direct offer a variety of hedging tools to their clients. SMEs that work with foreign currencies should always consider this factor when choosing a money transfer provider as the ability to manage the FX risk can be more important than a marginally lower currency exchange rate. 

There is no simple solution, and not everyone will benefit in the same way. This is why conducting due diligence is so important for all borrowers. This simply means the process of obtaining information about the credibility of the lender before agreeing to the terms of the loan.

There are some similarities between traditional bank loans and hard money loans, but there are also significant differences as well. Understanding the terms of any loan is absolutely critical for investors who seek to get a favorable return on their investment.

Real Estate Financing Options

When real estate investors seek a loan from a traditional lending institution, they face a series of obstacles that might not apply when the same proposal is made to a hard money lender. For example, the banks typically require the borrower to provide documentation that is exhausting. This may include a business plan in some cases, but it can also mean providing extensive financial data, history of similar projects and related experience.

Some of these requirements are designed to discourage certain types of borrowing, which can inhibit investors from taking on these transactions. This is a real problem for a real estate investor who has already spent a lot of time and energy locating a great investment property. The building might not currently be in top condition, but a good investor will know that this can change.

According to Delancey Street, hard money lenders look at the same situation differently. These are lenders who will evaluate the proposal based on something called an after-repair value, or ARV. This means that these lenders understand how the real estate market works, and they will evaluate the prospects of the real estate based on the projected future returns. This can include a series of variables that banks would never even consider.

For example, if the neighborhood is planning to build a series of schools in the area, the housing value can be expected to rise in the future. This type of property would be evaluated by hard money lenders differently than the same property in the same condition would be appraised if it was in an economically depressed area.

Hard Money Loan Benefits

Conventional loans for mortgages have many potential drawbacks that are not shared with the loan terms offered by hard money lenders. For example, hard money loans often come with flexible repayment options, and the interest rate can be negotiated in many cases. The application process is also a lot more convenient, and the terms tend to be more favorable to the borrower. In addition, the approval process tends to be significantly faster than the process at a traditional lending institution.

Hard money loans are a good option for real estate investors who need to get approved quickly in order to get the property in shape for reselling. It is important for the borrower to conduct the proper amount of research before accepting the terms of any loan.

The interest rates will determine the total cost of borrowing the money, for example. If the borrower accepts terms that undermine the profit margin of the investment, this will be reflected on the investment portfolio, and this can affect future transactions.