Chartered Financial Analysts

It is not a child's play to become a Chartered Financial Analyst or CFA. Only one in five people clear all the three levels of the CFA program as well as fulfill the professional experience requirements to become a CFA charter holder. However, successful candidates enjoy benefits of the strong global networking of CFAs which provides them with unrivalled opportunities in the investment industry.

The boom in Asian financial markets, led by China and India present some of the best opportunities for aspiring Financial Analysts while more mature markets such as Australia, Hong King and Singapore and investment banks, investment firms, insurance companies, mutual funds, pension funds, and general banks also offer leading roles to deserving candidates.

Eligibility for a CFA program

The CFA program is considered a benchmark for finance professionals in professional excellence, competency, analytical skills, and integrity. In June 2010, about 1,40,000 candidates from 160 countries enrolled for the program, out of which about 9% candidates were Indians. Anyone with a bachelor's degree in any discipline or appearing for the final year exams of their bachelor's degree can enroll for the CFA program.

Many of the candidates who apply for CFA program have full-time jobs as Research Analysts, Accountants, Auditors, Corporate Financial Analysts, Consultants, Portfolio Managers, Investment Banking Analysts, Relationship Managers, Financial Advisors, Risk Managers, Traders, Brokers, Strategists, and Private Bankers.

Where to study for the CFA programme?

The CFA Institute is a global association of investment professionals that works on a not-for-profit basis and awards the CFA charters to successful candidates. It also offers a range of educational programs and services through its member societies. Currently, it has 122 CFA Programme Partners worldwide, with 29 in the Asia Pacific Region.

Currently, CFA does not have an official partner to offer programs in India. ICFAI does offer CFA programs but its programs are not affiliated with the CFA Institute and are not the same as the globally recognized CFA charter offered by the CFA Institute. The CFA exams were conducted in India for the first time in India on 4th and 5th December, 2010 in Bangalore, Mumbai, and New Delhi, with the permission of the Delhi High Court.

The CFA program is basically a self-study graduate-level program and is not approved by AICTE (All India Council for Technical Education) and any investment professional who meets all the requirements of the exams are eligible to receive a CFA charter. The CFA organizes the CFA Institute Global Investment Research Challenge every year and in 2010, as many as 28 Indian universities participated in it, including IIMs, JBIMS, SP Jain, and ISB.

The CFA has also signed a Memorandum of Understanding (MoU) with the Securities and Exchange Board of India (SEBI) last year to jointly organize financial and investment training programmes in India through its National Institute of Securities Markets. Soon, CFA will be offering education programs to prepare candidates for a wide range of investment specialties that are hot in demand across the world.

Where Can a Chartered Financial Analyst Apply for a Job?

With liberalization and globalization in the financial services sector - money markets, merchant banks, international banks, lease finance institutions, portfolio management services, mergers and acquisitions, factoring services and other related services - the need of skilled finance professionals with a global perspectives is constantly on rise. Chartered financial analysts (CFA) have managerial skills with specialization in the following core areas:

• Corporate Finance and Control: Corporate finance is about optimum mobilization and utilization of financial resources in short-term and long-term in domestic and overseas markets and includes treasury management.

• Information Technology: Finance professionals with IT skills are much in demand and CFA professionals trained in high-end ERP packages like SAP, Oracle applications, or Baan draw high salaries.

• International Finance and Risk Management: Rupee can now be converted on current account and the future of convertibility on the capital account looks bright too. Besides, growth in exports and imports require personnel who understand the nuances of international finance, risk management, and international capital markets.

• Investment Banking and Financial Services: The growing field of investment banking needs personnel who can offer advisory services to corporate clients, financial consultancy services, help with mergers and acquisitions, and formulate nursing and rehabilitation programmes for sick units. Asset-based financial services want CFAs for leasing and hire purchase. Allied services such as stock brokering, marketing of public issues, National Stock Exchange (NSE) dealership, share registry, venture capital assistance, and loan syndication also require financial experts.

• Investment Management: CFAs cab work well as portfolio managers whose job involves the balancing of risks and rewards for the mutual fund investors by successful portfolio management.

Thus, the scope for a certified CFA professional is virtually limitless. The Reserve Bank of India, the Industrial Finance Corporation of India (IFCI), the International Development Bank of India (IDBI), and the Indian Railways recognize the CFA programme and employ trained CFAs. A trained CFA can also become an independent business consultant or join an existing consultancy or Chartered Accountancy firm. The excellent career growth of successful CFA candidates in the path is quite encouraging too and provides an edge to the recent pass-outs in terms of global networking and recognition.

Career Path and Salary of a Chartered Financial Analyst

Freshers with American CFA earn around Rs 6 to 9 lakh per annum while those with work experience may get a package up to 25 lakhs per annum. The final step on the career ladder of a Chartered Financial Analyst is usually the CFO (Chief Financial Officer) designation.

Source: Shiksha Team

Tips and Tricks for Day Traders

Day traders Buy or Sell Stocks several times every day and close out all positions before the market closes. The expectation of Traders is making small profits with as little risk as possible and they simply look for potential price movement Based on Technical Analysis.

1. Plan your trade. Trade as per your plan.

Select your Stock, Decide the Quantity, Decide the entry and exit price and Decide the amount of money you can loose if the trade goes against you. Trading in Opening and Closing hours of the market is Risky but Rewarding.

2. Use a Stop Loss

Always trade with Stop Loss. Set Stop Loss Sell Order just below the low of the day or Support level and Stop Loss Buy Order just above the high of the day or Resistance level.

3. Never Trade too many stocks at once
Always trade in High Volume Index based Shares. Select Three or five stocks for Trading.

4. Get the price movement between the bottom and top
It is not possible to Buy at the Bottom and Sell at the Top. Try to trade between the Bottom and Top.

5. Buy a stock
Always buy a stock that is going Up. Buying level is just above the previous closing price.

6. Short the stock
Always sell the stock that is going down. Selling level is just below the previous closing price.

7. Don't average Your Position
One common mistake by Traders is averaging Loss making position. You must exit if the trade goes against you.

8. Take control of your greed
Book Profit and leave the trading hall and enjoy the day.

9. Take control of your fear
Cut your loss - Relax – Forget your loss quickly. Wait for next Opportunity. You can Win.

10. Keep records of your trading results.
Always record details of your trades and mistakes. Accept failure as a step towards victory.



Source : Economic Times

Financial Ratios

1. Ploughback or Reserves

Every year, the company divides its net profit (profits in hand after subtracting various expenses including taxes) in two portions:
ploughback and dividends

While dividends are handed out to the shareholders, ploughback is kept by the company for its future use and is included in its reserves. Ploughback is essential because, besides boosting the company's reserves, it is a source of funds for the company's expansion plans. Hence, if you are looking for a company with good growth prospects, check its ploughback figures. Reserves are also known as shareholders' funds, since they belong to the shareholders. If a company's reserves are twice its equity capital, the company can reward its shareholders with a generous bonus. Also any increase in reserves will push the share price of your share.

2. Book value per share

This ratio shows the worth of each share of a company as per the company's accounting books. It is calculated as:

Shareholders' funds
------------------------------------------------ = Book Value per share
Total quantity of equity shares issued

Shareholders' funds can be computed as such:
Total assets (equity capital to the company's reserves) less total liabilities (money owed to creditors).

Book value is an old record that uses the original purchase prices of the assets.

However, it doesn't show the present market price of the company's assets. As a result, this ratio has a restricted use when it comes to estimating the market price of the shares, but can give you an estimate of the minimum price of the company's shares. It will also help you judge if the share price is overpriced or under-priced.


3. Earnings per share (EPS)

One of the most popular investment ratios, it can be computed as:

Profit Post Tax
------------------------------------------------ = EPS
Total quantity of equity shares issued

This ratio computes the company's earnings on a per share basis. Say, you own 100 shares of ABC Co., each having a face value of Rs 10. Assume the earnings per share is Rs 10 and the dividend declared is 30 per cent, or Rs 3 per share. This implies that on every share of ABC Co., you earn Rs 6 each year, but you actually get Rs 3 via dividend. The balance of Rs 4 per share goes into the ploughback (retained earnings). Had you purchased these shares at par, it implies a return of 60 per cent.

This example shows that instead of looking at the dividends received from to company as the base of investment returns, always look at earnings per share, as it is the actual indicator of the returns earned by your shares.

4. Price Earnings Ratio (P/E)

This ratio highlights the connection between the market price of a share and its EPS.

Price of the share
------------------------ = P/E
Earnings per share

It shows the degree to which earnings of a share are protected by its price. Say, the P/E is 40, it means the share price is 40 times its earnings. So if the company's EPS is constant, it will need about 40 years to make up for the purchase price of the share, after taking into account the dividends and the capital appreciation. Hence, low P/E means you will recover your money quickly.

P/E ratio shows what the market thinks about the earnings potential and future business forecast of a company. Companies with high P/E ratios are the darlings of the investors and thus enjoy a higher market rating. In order to use the P/E ratio properly, take into account the future earnings and growth projections of the company. If the current P/E ratio is low, as against the future prospects of a company, then the shares make an attractive investment option. But if the company is saddled with losses and falling sales, stay away from it, despite the low P/E ratio.

5. Dividend and yield

Dividend is the portion of the profit that is distributed amongst shareholders. Companies offering high dividends, normally don't have much of growth to talk about. This is because the ploughback required to finance future development is insufficient. Similarly, those companies in high growth sector don't give any dividend. Instead here they give sharp capital appreciation, which ultimately will lead to higher dividends.

So it makes much more sense to invest for capital appreciation instead of dividends. Rather it makes more sense to invest for yield, which is nothing but the association between the dividends and the market price of the shares. Yield (dividend yield) can be calculated as:

Dividend per share
----------------------------- x 100 = Yield
Market price of a share

Yield shows the returns in percentage that you can expect via dividends earned by your investment at the current market price. It is more useful than simply focusing on the dividends.

6. Return of capital employed (ROCE)

ROCE is the ratio that is calculated as:

Operating profit
----------------------------------------
Capital employed (net value + debt)

To get operating profit, add old taxes paid, depreciation, special one-off expenses, and special one-off income and miscellaneous income to get the net profit. The operating profit is a far better indicator of the profits earned by the company instead of the net profit. Hence this ratio is the better indicator of the general performance of the company and the company's operational efficiency. It is one of the most useful ratio that lets you compare amongst the companies.

7. Return on net worth (RONW)

RONW is calculated as

Net Profit
-----------------
Net Worth

This ratio gives you an idea of the returns generated by investing in the company. While ROCE is an effective measure to get a general overview of the profitability of the company's business operations, RONW lets you gauge the returns you can earn on your investment. When used along with ROCE, you get an overview of the company's competence, financial standing and its capacity to generate returns on shareholders' finances and capital employed.

8. PEG ratio

PEG is an essential and extensively used ratio for calculating the inbuilt worth of a share. It helps you decide whether the share is under-priced, totally priced or overpriced. To derive the ratio, you have to associate the P/E ratio with the expected growth rate of the company. It assumes that higher the growth rate of the company, higher the P/E ratio of the company's shares. Vice versa also holds true.

P/E
----------------------------------
Expected growth rate of the EPS of the company

In general, a PEG lesser than 0.5 is a lucrative investment opportunity. However if the PEG exceeds 1.5, it is time to sell.

These are some of the most critical ratios that must be considered when purchasing a share. Extensive reading of the financial performance of the company in newspapers and magazines will help you get all the relevant information to arrive at the correct decision.

Source : Economic Times

Why CFA . . . ???

A CFA is a useful qualification to have. Before telling you why, some advice - be sure you have a genuinepassion for finance & a career in this field before you jump into it, NOT because you want to use it to measure your passion. This is NOT an easy exam.

A CFA/MBA combination is not far-fetched, in fact growing more common i.e many MBAs have CFA's or are getting CFA's even after graduating b-schools. You have to however complete all 3 levels and bring a few years of hard core financial experience to the table (like a few years post MBA in an investment bank).

CFA's are found typically on the buy-side of financial careers, i.e this is a qualification for investment managers - those who manage investor's equity & funds. The CFA syllabus is skewed heavily towards investment analysis and portfolio management, which is the ideal educational preparation for these careers. Typical buy-side functions and careers are - Asset Management, Equity Research, Private Banking, Private Equity, Funds of Funds and Hedge funds etc..buy-side because you're "buying" equity & the opportunity to invest. A typical company to work for would be a mutual fund that invests it's client's money into company stock or other alternative investment vehicles. Because of its more human working ours, reasonable to high compensation and the sheer power seen in managing money rather than seeking it - the buy-side is also considered the more attractive side of a financial career. In reality it is more challenging to get into than a sell-side career. Secondly, it is also more competitive because you're competing not just with other CFAs and MBAs, but also with Ph.D's & Masters in Quant Finance, Advanced Econometrics and statistics.

An investment / commercial / retail / brokerage bank is a sell-side financial institution because you're "selling" the services of raising capital, loans, advisory services and other financial / equity investment products to clients (both private & corporate), while earning a fee for your work. Since it typically requires a lot of sales/business development skills and some hard financial skills, it is typically seen as less demanding to get into. Investment banks also recruit more MBAs immediately out of school than do the buy-side.

Most people find one of 3 ways to get into the buy-side:

1) MBA - Investment bank (5-6 years), network furiously - buy-side position

2) MBA - Equity research with a (example) Fidelity investment or Franklin or MF, portfolio management - move to a high end alternative investment firm (private equity or hedge fund).

3) BE - Business Analyst in IT company - do CFA - go for 1 year MBA - Finance - Then Choices are open between 1 and 2.

Any suggestion / correction welcome :)

Dream, Work and Life !!

I thought to finish my school
Before I start dream

I thought to finish my college
Before I start dream

I thought to get my job
Before I start dream

I thought to switch my job
Before I start dream

Finally when I thought about my happiness
I started missing my dream

I don’t know how many of you had dream and how many of you have had courage to achieve and work towards the dream which you have had seen being with you in the midst of those nights where you want to love yourself more than anyone else, where you want to laugh with your soul.

Our life is not an accident. We are here for a purpose, some central mission, some dream which we had seen every time before sleeping from our childhood and that dream has the potential to make you feel extraordinary.

Let be practical about dreams. I am talking about ‘the dream’ for which you have to work in your life to achieve it. Dream something which you can aim that, focused on, breaks all chains that might have previously bound you. It’s statement to all of them whom you want to give answer but without any words. It’s your challenge to discover you with in yourself.

I am in for roller coaster ride for next 3 months. Same feelings I had last year same time before I launched myself for Level 1 exam. And now things are getting more difficult. I think my next three months will be more challenging. I need to work hard to inch towards my dream. And these days, I have to motivate myself almost everyday to keep that thirst at the highest level. In fact I need to have another affair with whom I will stay through out day and night. And good part is that I had a taste of success after putting hard work so, I know how much effort required tasting that again.

I am just scared this time because I need to pull out this all alone but that is what mean to me Dream, work and Life!!!

Some where I understood that many times for long term benefits, short term losses have to suffered. But once you have courage to take those risks and handle that short term anxiety for your long term dream, you will see yourself clearly on a path which is moving towards your dream.

I wish this time again I will synergize my efforts towards a particular direction. I will overcome all the obstacles and hurdles. For me it’s not struggle for existence but it will be surely struggle for perseverance.

I need all your good wishes to balance my dream, work and life!!!

Wish me ‘all the best’ for my next 3 months journey.