Long-term investing and day trading have similar goals but take different approaches. Both want to make money in the stock market – they’re just on opposite ends of the risk/reward spectrum.
Imagine two people at the beach. One person is surfing the massive breakers – a thrilling, dangerous, intense experience. Another person is just chilling on the beach, drink in hand, watching the tide roll in. Same sand, same sun, same ocean. Both people are having a great day at the beach – but their experiences are very different.
So, if you plan to risk real money in the stock market, you first need to decide which strategy you will use. Are you an investor lying back with a drink in your hand? Or, are you a day trader catching waves and riding the adrenaline?
Answering that question requires you to understand some things about the market and yourself. This article will break down the concepts of investing and day trading, analyze the differences, and offer some recommendations.
What Is Investing and Day Trading
Before choosing a strategy, we need to understand some basic concepts. Let’s take a look at investing and day trading in more detail.
Investing is a long-term wealth protection and growth strategy, usually part of a retirement plan. In practice, this means using capital to purchase stock or mutual fund shares, then waiting years or decades for those shares to grow in value.
For example, consider a person with a full-time job and a family. He doesn’t have much time to spend on his investments and doesn’t want to take a big risk with his hard-earned money.
His solution is to invest in an exchange-traded fund (ETF) that tracks the S&P 500, which historically returns 10% per year, on average. He sells the shares upon retirement.
Day trading is a short-term strategy with high risk and high reward. You try to profit by buying and selling stocks based on small market fluctuations. In practice, you are betting that stock prices will shift in your favor on any given day.
For example, consider a single person with a high salary. She has disposable income to open an online brokerage account.
After some research and analysis, she identifies a stock she expects will rise following an earnings report. She buys shares before the report and sells them later that day after the announcement.
Main Differences Between Investing and Trading
Let’s look at some of the key differences between investing and day trading. And remember, we are looking at opposite ends of a spectrum. In reality, traders can exist anywhere between these two extremes – and usually do.
|Asset hold time||Years or decades||Days or weeks at most – the longer the hold, the greater the risk|
|Capital requirements||Any amount||High – $25,000 minimum for making more than 4 trades per week|
|Diversification||High – reduces risk||Low – must bet big on individual stocks|
|Buy & sell activity||Monthly or yearly – an investor might buy at regular intervals, and sell only upon retirement||Daily – sometimes multiple trades per day|
|Commission and fees||Low – buys monthly at most and rarely sells||High – pays a commission on every daily buy and sell|
|Volatility exposure||Low – unaffected by short-term market fluctuations||High – sudden fluctuations could be disastrous|
|Analysis type||Fundamental – investors look for opportunities based on company fundamentals||Technical – traders look for opportunities based on technical factors|
|Asset type||Growth – investors seek stocks that will grow steadily over time||Volatile – traders seek out stocks with wild price swings|
|Withdraw funds||Rarely – the funds are only needed upon retirement||Regularly – funds might be needed for living expenses|
Looking at Their Benefits and Drawbacks
Every strategy has strengths and weaknesses. The important thing is to choose the strategy that best aligns with your goals. Let’s take a closer look at the benefits and drawbacks of investing and day trading.
- Market volatility protection: Long timelines and diverse portfolios protect against short-term fluctuations in stock prices.
- Minimal time commitment: Once you invest, you don’t have to do anything else. Just sit back and watch your money compound and grow over time. Check your tracked portfolios less frequently.
- Limited emotional decisions: If you know you’re in for the long haul, you are less likely to make short-sighted, emotional trades.
- Extended timelines: While also a benefit, the long timeframes required for investment can dissuade some who want quicker returns.
- Trader envy: It can be challenging to watch day traders make 1000% returns with quick trades while you wait seven years to double your money.
- Big win potential: The main benefit of being a day trader is the potential for quick, huge returns. While an investor makes 10% per year, the trader could make 10% daily.
- Work from home: Thanks to information technology, a day trader can work from anywhere on earth with nothing but a computer and an internet connection.
- Significant risk: Day trading avoids all sound investment advice. Large amounts of capital are invested in single stocks while trying to predict an unpredictable market. Most day traders lose money.
- Full-time job: When done correctly, day trading requires as much time commitment (or more) as any other job. It’s not a quick and easy way to get rich – or a way to avoid hard work.
When is Investing or Trading a Good Option?
Neither trading nor investing is inherently better or worse. The value of each strategy depends on the situation, personality, and goals of the person involved.
Questions to Ask Yourself
- What is my tolerance for risk?
- Can I afford to lose all the money I use to trade – financially and emotionally?
- How much time can I commit to researching and analyzing stocks?
- Do I have the discipline to stick to a trading plan?
- How close am I to retirement?
- What kind of profits do I want to gain?
Answering these questions will help you decide which strategy is most suitable for you.
You should invest if…
- You have a low tolerance for risk
- You can’t afford to lose your investment
- You have a career that you love
- You don’t have significant time to analyze stocks
- You want to protect and grow your savings
- You are content with modest profits
You should day trade if…
- You have a high tolerance for risk
- You have extra capital to gamble or lose
- You want to be your own boss
- You have strong market knowledge
- You are not nearing retirement
- You want big profits
Our Opinion: Investing Is the Better Option for 90% of People
For most people, investing is the strategy they should choose – at least in the beginning. First, set up a safe, diversified, long-term investment plan. As you learn more about how the stock market works, you can consider riskier trades with capital you can afford to lose.
No rule says you must choose one strategy or the other. The reality is that most people involved in the market use a combination strategy. Parts of their portfolio are composed of long-term positions, and other parts are reserved for short-term trades. The key is to understand the difference between both and trade wisely.
We hope you now have a better understanding of how investing and day trading are different and which approach might be best for you. If you are interested in more great content about personal finance, stay tuned to the Stock Market Eye blog.
Knowing the difference between trailing and forward dividends and their corresponding yield metrics will help you evaluate, compare and choose the investments that are best for your situation. Our first step is to look at what dividends are, where they come from, and how frequently they are payed. We’ll then discuss the details of what trailing and forward dividends are and how you can use them to help understand the income your investments will generate now and in the future.
What is a Dividend?
Companies have many options for what to do with the profits their business generates. To help their business grow, a company can put some of those profits back into the company to fund research and development (R&D) or pay for acquisitions. Publicly traded companies will often give back some of their profits to their shareholders as a thank-you for the trust they have in their business. Two common ways of giving back to shareholders are through open-market share repurchases (which boost share price) and the more traditional dividend payments to shareholders.
With dividends, a company decides to give some portion of their profits directly back to their shareholders in the form of a cash payment. Individual shareholders usually have the option of reinvesting those dividend payments by purchasing more of the company’s shares (typically done automatically via a dividend reinvestment plan [DRIP]), or by receiving the dividend payments in cash.
When a company declares a dividend, it specifies the amount of the dividend on a per share basis. For example, the fictitious company XYZ declared a dividend of $0.25 per share. This means that for each share of the company’s stock that you own, you will be paid $0.25. Thus the total amount you receive from this dividend payment is $0.25 times the number of shares owned.
As an example, if you were a shareholder of XYZ and owned 100 shares, their dividend payment of $0.25 per share would net you $25:
Dividend Payment Frequency
The frequency of dividend payments varies. In the US and Canada, companies typically pay dividends on a quarterly basis – that is, 4 times a year. However some REITs will pay monthly (i.e. 12 times per year). In the UK and developed Asian markets, bi-annual (2 times per year) dividend payments are most common. In Europe companies typically pay dividends annually. Sometimes companies will even pay special, one-off dividends, such as when Microsoft (MSFT) payed a special dividend of $3 per share in 2004.
Because of the difference in payment frequency, when analyzing and comparing dividends from different companies, investors look at the annual dividend amount, rather than the individual period amounts (i.e. bi-annual, quarterly or monthly). So for the fictitious company XYZ that pays a dividend of $0.25 per share each quarter, an investor that owned 100 shares would receive $100 per year in dividends:
What Dividends Mean to Investors
By looking at a company’s annual dividend amount, investors can judge how much money they will earn by owning the company’s stock.
However, since dividends are paid out of company profits, and profits are rarely stable, a company’s dividend payments are not always the same.
A company’s profits depend on 3 main factors: the company’s own execution of their business; the general economic environment for the sector/industry in which they operate; and the broader, global economic environment. A company might make a profit one year, but swing to a loss the next.
If a company’s profits have been lower for long enough, or the company foresees their profits dropping for a significant length of the time, they may choose to lower or even eliminate dividend payments. As an example, many formerly profitable companies, such as Carnival (CCL) and American Airlines (AAL), eliminated their dividends in early 2020 because of the drastic, negative impact that COVID-19 had on their businesses.
Ideally, investors are looking for companies that have a long history of stable, increasing dividend payments. Any uncertainty in the amount of the company’s dividend can lead to fluctuations in the stock price as investors re-evaluate a stock’s value.
There are also many investors who rely on dividend payments as a source of income. For example, many retirees live off of the dividends generated by their investments. If those dividend amounts change, it can have significant consequences on the retiree’s daily lives.
Due to the potential uncertainty around dividend payments, there are 2 main ways of calculating a company’s annual dividend: trailing 12 month dividends and forward dividends.
Trailing 12 Month Dividends
Trailing 12 Month (TTM) Dividends are the simplest way of looking at and calculating a company’s annual dividend amount. They are calculated from actual dividend payments made by the company over the last 12 months. To calculate a company’s TTM dividends, all dividend amounts from the last 12 months are added together to arrive at the total dividends paid over the last year.
For example, if our fictitious company, XYZ, paid a dividend of $0.20 per share in February, May and August, and a dividend of $0.25 per share in November, their annual trailing 12 month dividend would be $0.85 per share. That is:
($0.20 * 3) + $0.25 = $0.85. For an investor that owned 100 shares of XYZ during those 12 months, the TTM dividend resulted in a total of $85 in dividend payments.
Forward Dividends, on the other hand, are extrapolated from the company’s last dividend payment or announcement. Instead of looking back at the past payments, the forward dividend assumes that the most recent dividend payment will be continued for the next 12 months.
For example, if our fictitious company, XYZ, paid their most recent quarterly dividend of $0.25 per share, their annual forward dividend would be $1.00. That is:
$0.25 * 4 = $1.00. For an investor that owns 100 shares of XYZ, the forward dividend would be worth a total of $100 in dividend payments over the next 12 months.
The forward dividend calculation also applies when a company suspends or eliminates its dividend. In this case, because the suspension announcement means the company will not pay a dividend, the forward dividend is considered to be 0. Investors that own shares in that company will not receive any dividend payments as long as the company’s dividend has been suspended. As mentioned above, this can have significant affects on the company’s stock price as well as on some individual investor’s daily lives.
As seen in our fictitious example company, XYZ, the trailing 12 month dividend may not always be the same as the forward dividend. This is especially true when there have been recent changes (positive or negative) in the company’s paid or announced dividend amounts.
What Is Dividend Yield?
Annual dividend amounts between companies can not be directly compared. An annual dividend of $1 per share from company XYZ is not the same as an annual dividend of $1 per share from company ABCD. This is because each company’s stock may trade at a different price, and the amount of shares that you own of each stock may be different. Both of which may lead to different total amounts of dividend payments that you would receive.
So in order to help investors evaluate the dividends paid by a company, a fundamental metric called dividend yield was invented. Dividend yield (or simply a stock’s yield) is calculated as the annual dividend amount per share divided by the current share price, expressed as a percentage:
The dividend yield metric allows an investor to make comparisons between the annual dividends of companies, even when the dividend amounts paid by the company differ and the company’s stocks trade at different prices. A stock’s yield gives investors a direct and useful way of analyzing and comparing potential or current investments. It is also particularly useful for investors who need to find the best dividend stocks when building an income generating portfolio of investments.
Different Ways of Calculating Dividend Yield
Because there are multiple ways of calculating a stock’s annual dividend amount, there are also different ways of calculating a stock’s dividend yield.
The trailing 12 month (TTM) dividend amount is used to calculate a stock’s trailing 12 month dividend yield:
While the forward dividend amount is used to calculate a stock’s forward dividend yield:
If our fictitious example stock, XYZ, trades at $10 per share, the TTM yield would be
($0.85 / $10) * 100 = 8.5%.
However, the forward dividend yield for XYZ is
($1 / $10) * 100 = 10%.
When to Use Trailing 12 Month vs Forward Dividend Yield?
The TTM dividend yield is a backward looking metric that uses known values to measure the worth of a company’s dividend. But as is so often the case in the investment world, past performance does not imply future returns. Just because a company has paid a certain amount in dividends over the last year, does not mean that the company will continue to pay the same dividend amount for the next 12 months. Investors during the financial crisis of 2008 or the pandemic crisis of 2020 will be acutely aware of how dividend payments can change very quickly when companies are fighting to stay afloat.
Forward dividend yield is a forward looking metric that uses assumed dividend payments to measure the worth of a company’s dividend. But like the TTM dividend yield, forward dividend yield values are not a guarantee of payment – they are only an assumption based on current conditions. Forward yields can change (up or down) depending on many factors. However, forward dividend yield is a more useful metric to fixed income investors than the TTM dividend yield as forward yield allows for a more accurate estimate of future income.
Dividend investors of all types must be aware that unknown changes in a company’s results or in the broader economy can have effects on the dividends paid by the stocks in their portfolios. Regular evaluation of the stocks in your portfolio and their TTM and forward dividends will help you maintain your investment goals.
Tracking Your Investment’s Dividends
If you’re looking for a way to easily evaluate and analyze your portfolio’s dividends, StockMarketEye can help. Using data freely available on the web, view TTM and forward dividend values for your holdings, or analyze and compare watchlists of stocks that you’re shopping for. You’ll find more information on the various metrics available for tracking dividends, as well as for tracking the performance of your portfolio on our site.
China and its stock markets often make the financial news headlines. From blistering performance at the start of 2015, to vertiginous corrections in the latter months, the Chinese markets have given more than one investor cause to down a few antacid pills. Actively tracking the Chinese stock markets, from the mainland China Indexes to their ETF counterparts, can help you get a better grip on their workings and lead to a positive investment experience.
From the start of 2015 till mid June 2015, the mainland China CSI 300 Index, composed of the 300 largest stocks on the Shanghai and Shenzhen exchanges, increased 50%. Going back 12 months to June 2014 through mid June 2015, the performance of the CSI 300 was even better, topping out at an over 125% increase. A broader mainland index, the SSE Composite Index, composed of all stocks that trade on the Shanghai exchange, increased over 150% in the same 12 months through mid June 2015.
The main Hong Kong index, the Hang Seng Index, was more subdued. This index of the 48 largest companies on the Hong Kong exchange, only increased 20% over the first 5 months of 2015. The Taiwan Capitalization Weighted Stock Index (TAIEX) increased a miserly 5% over those same first 5 months of 2015.
The powerful advance of the mainland indexes has been fuelled mainly by individual investors. By some counts, over 80% of the transactions in Chinese stocks are produced by these retail investors. And over the last 2 years, the percentage of young investors has skyrocketed. In the last 12 months, more than half of the new investment accounts that were opened in China were opened by someone under 30 years old. It’s no wonder then that the market volatility has also subsequently increased.
Chinese regulators have recently stepped in to try to manage the volatility. Limiting margin investing (i.e. borrowing cash to invest in the markets) has been one of their main tools. Until recently however, young investors were able to get around some of these limitations by using social media and peer-to-peer lending to borrow more investment funds instead.
July 2015 has seen a number of gut-wrenching drops in the mainland indexes. On July 27, 2015 alone, the CSI 300 Index dropped over 8%, its largest one-day drop in years. Other sell-offs happened throughout the month of July, with follow up bounces and subsequent further drops.
On June 24th, 2015, the CSI 300 entered bear market territory (a drop of 20% or more) from the peak earlier that month.
Whether the Chinese mainland markets can recover their high-flying ways, or crash and burn al-la 1929 New York style, or even whether the Chinese regulators manage to bring serenity to the markets, is anyone’s guess.
Tracking the Chinese Stock Market Indexes
Whether you’re a Chinese market bull or bear, to make intelligent, informed decisions on what to invest in, you’ll first need to start tracking the ups and downs of the Chinese stock markets.
- CSI 300 Index – As a starting point, you’ll want to track the mainland China CSI 300 Index. This index is composed of the 300 largest “A”-stocks that trade on the Shanghai and Shenzen exchanges. It is the most commonly referred to Chinese index. At Yahoo Finance, the ticker symbol is 000300.SS. At Google Finance, the ticker symbol is SHA:000300.
- SSE Composite Index – It’s also useful to track the broader mainland China index, the SSE Composite Index. This index is composed of all stocks (both “A”-stocks and “B”-stocks) that trade on the Shanghai exchange (about 870 stocks, currently). You can see it at Yahoo Finance as 000001.SS or at Google Finance as SHA:000001.
- SZSE Component Index – Additionally, there’s the SZSE Component Index, composed of 40 stocks that trade on the Shenzhen stock exchange. At Yahoo Finance its ticker symbol is 399001.SZ and at Google Finance its ticker symbol is SHE:399001.
- Hang Seng Index – Another useful index is the Hang Seng Index, Hong Kong’s main index of the 48 largest stocks that trade on their exchange (Yahoo: ^HSI; Google: INDEXHANGSENG:HSI).
- TAIEX – The Taiwan Capitalization Weighted Stock Index (abbreviated TAIEX) covers all listed stocks on the Taiwan Stock Exchange (TWSE) (Yahoo: TAIEX; Google: TPI:TAIEX).
Chinese Market ETFs
Once you’ve done a bit of homework and have a better feel for how and where this sort of investment could fit into your portfolio, you’ll need to take a look at some of the actual investment instruments that you can put your money into.
As a non-Chinese person, you won’t be able to invest directly in individual stocks. However, there are a number of ETFs that can expose you to various elements of the Chinese market.
- iShares China Large-Cap ETF (Yahoo: FXI; Google:NYSEARCA:FXI) – As the most heavily traded Chinese share ETF (20 million shares traded daily), it invests in the 25 largest Chinese stocks that trade on the Hong Kong exchange as it tries to replicate the FTSE China 25 Index.
- Deutsche X-Trackers Harvest CSI 300 China A-Shares ETF (Yahoo: ASHR; Google:NYSEARCA:ASHR) – This highly liquid ETF (over 3 million shares traded daily) aims to replicate the CSI 300 Index. This index tracks the 300 largest, most liquid stocks that trade on the Shanghai and Shenzhen exchanges. Comparing its chart to that of the CSI 300 Index shows that they trade very closely to one another.
- Market Vectors ChinaAMC SME-ChiNext ETF (Yahoo: CNXT; Google:NYSEARCA:CNXT) – Less widely traded (200K shares traded daily) this ETF looks to replicate SME-ChiNext 100 Index. This index is composed of 100 small and medium sized stocks that trade on the SME (Small and Medium Enterprise) Board and the ChiNext (fast-growing and technology heavy stocks) Board of the Shenzhen Stock Exchange.
- iShares MSCI China ETF (Yahoo: MCHI; Google:NYSEARCA:MCHI) – Another liquid ETF (over 1 million shares traded daily) with over $2 billion in assets, it aims to replicate the MSCI China Index, which tracks the performance of large cap Chinese equities.
- SPDR S&P China ETF (Yahoo: GXC; Google:NYSEARCA:GXC) – Less widely traded (200K shares traded daily), but with a low expense ratio and over $1 billion in assets, this ETF tracks the S&P China BMI Index. The S&P China BMI Index encompasses the stocks of all publicly traded companies, domiciled in China, but whose shares are available to trade by foreign investors.
Short Term Investing with Chinese Market ETFs
If you’re more of a short term trader (swing-trader or day trader), there are a number of ways to play the Chinese market volatility using leveraged and inverse ETFs.
- ProShares Ultra FTSE China 50 (Yahoo: XPP; Google:NYSEARCA:XPP) – A leveraged ETF that aims to provide returns that are twice (2x) the daily performance of the FTSE China 50 Index. This index tracks the performance of the largest companies in the Chinese equity market that are available to international investors.
- ProShares Short FTSE China 50 (Yahoo: YXI; Google:NYSEARCA:YXI) – An inverse ETF that aims to provide returns that are the inverse (-1x) of the daily performance of the FTSE China 50 Index.
- ProShares Ultrashort FTSE China 50 (Yahoo: FXP; Google:NYSEARCA:FXP) – A leveraged inverse ETF that aims to provide returns that are the twice the inverse (-2x) of the daily performance of the FTSE China 50 Index.
- Direxion Daily FTSE China Bull 3X ETF (Yahoo: YINN; Google:NYSEARCA:YINN) – Aims to provide returns that are three times (3x) the daily performance of the FTSE China 50 Index.
- Direxion Daily FTSE China Bear 3X ETF (Yahoo: YANG; Google:NYSEARCA:YANG) – A leveraged, inverse ETF that aims to provide returns that are three times the inverse (-3x) of the daily performance of the FTSE China 50 Index.
- Direxion Daily CSI 300 China A Share Bull 2X Shares (Yahoo: CHAU; Google:NYSEARCA:CHAU) – A leveraged ETF that aims to provide returns that are twice (2x) the daily performance of the CSI 300 Index.
- Direxion Daily CSI 300 China A Shares Bear 1X Shares (Yahoo: CHAD; Google:NYSEARCA:CHAD) – An inverse ETF that aims to provide returns that are the inverse (-1x) of the daily performance of the CSI 300 Index.
Other Notable Chinese Stock ETFs
The ETFs mentioned above are certainly not the only ways to invest in the Chinese market. There are a number of smaller ETFs that provide a more targeted investment, or track various other Chinese Indexes.
- Guggenheim/Claymore/AlphaShares China Small Cap ETF (Yahoo: HAO; Google: NYSEARCA:HAO ) – An ETF that aims to provide returns equivalent to the performance of the equity index called the AlphaShares China Small Cap Index. This index tracks the performance of publicly-traded mainland China-based small capitalization companies who have a maximum $1.5 billion market capitalization.
- PowerShares Golden Dragon China ETF (Yahoo: PGJ; Google: NYSEARCA:PGJ ) – An ETF that aims to provide returns equivalent to the performance of the NASDAQ Golden Dragon China Index/Halter USX China Index. This index is comprised of the United States-listed securities of companies that derive a majority of their revenue from the People’s Republic of China.
- iShares MSCI China Small-Cap (Yahoo: ECNS; Google: NYSEARCA:ECNS ) – An ETF that aims to track the performance of the MSCI China Small Cap Index. This index is designed to measure the performance of equity securities in the bottom 14% by market capitalization of the Chinese equity securities markets.
The list of Indexes and ETFs above is certainly not an exhaustive list of the ways of investing in the Chinese market. The ETFdb.com website has an even longer list of ETFs that can help you find the right vehicle for your investment in the Chinese market.
Tracking Chinese Indexes and ETFs
To get yourself started tracking and doing follow up research on these indexes and ETFs, create a new Watchlist for them in StockMarketEye. Then download and import this CSV file that contains all of the ticker symbols for the Chinese Indexes and ETFs mentioned in this post. Or watch this video on how to import a CSV watchlist into StockMarketEye.
If you have other suggestions for indexes or ETFs that other investors would find useful, don’t hesitate to mention them in the comments.
There are many variables involved when choosing the best investment. From fundamental data to technical analysis to on-line recommendations, each piece of information plays a part in your investment thesis.
Why Compare Stock Charts?
Once you have a set of stocks, ETFs, mutual funds or other securities that match your general investment thesis, using a stock comparison chart can give you valuable perspective. Charting all of your potential investments against each other improves your understanding of the individual investments and how they fit into the larger picture.
Comparison charts give you a strong, visual data point that you can use when ranking and choosing the investment that best fits your investment thesis.
A Technology Stocks Example
Let’s walk through just one way you might compare stock charts when choosing an investment.
Let’s say you’re interested in investing in the tech sector. There are lots of companies in this area to choose from. While doing your research (browsing investment websites, talking with colleagues, reading analyst recommendations, etc.), you’ve built up a special “Technology” Watchlist in StockMarketEye. This stock watchlist holds all of the tech stocks that have crossed your radar during your research and that seemed “investable”.
You may have come across other tech stocks, but for one reason or another, they didn’t make it into this curated list. (Although keeping a separate watchlist for the technology stocks that didn’t make your curated list is also possible as StockMarketEye does not restrict how many watchlists you can have, nor the number of stocks you can have in each watchlists.)
In StockMarketEye, this watchlist may look something like this:
You have also identified who the “big name” players in the industry are and placed them at the top of your watchlist. For our discussion, those “big name” technology players are:
- Apple Inc. (AAPL)
- Google Inc. (GOOGL)
- Yahoo! Inc. (YHOO)
- Microsoft Corporation (MSFT)
- Amazon.com Inc. (AMZN)
Adding Comparison Symbols to the Chart
To compare the stock charts of these potential investments, you add them as comparison symbols to the chart. There are multiple ways of adding comparison symbols.
The first way allows you to add each symbol individually using the chart menu, Chart Options -> Compare to… In the “Add Comparison Symbol” enter the ticker symbol to use for comparison in the field (you can type the symbol you want to add directly into the field, or use the drop-down selector to choose one of the indexes listed), then click OK to add it to the chart.
Alternatively, if you have more than one symbol you want to compare against, you can select all of them in the watchlist, then use the menu: Watchlist -> Add to Chart as Comparison Symbol. Note that this menu is also available by right-clicking (Ctrl-Click on Mac) on the watchlist.
Afterwards, your chart will look something like the following:
The chart of each stock starts at 0 on the left side of the chart. The y-axis shows the relative performance (in percent) of each stock since the first day of the chart. As you can see, over the last 6 months, AAPL has out-performed the others with YHOO a close second.
Comparing Other Stocks
But how do some of the other stocks compare to these big 5?
Clicking on one of the other stocks, such as FB, shows it as the main symbol in the chart. As you can see, over the last 6 months, Facebook’s stock (the dark blue line) has outperformed the stocks of the other “big 5”.
However, selecting P shows that Pandora (the dark blue line) has under performed even AMZN, being down close to 20% over the last 6 months.
Selecting IBM (the dark blue line) shows a similar chart for “big blue”, down more than 15% over the last 6 months.
What do comparison stock charts tell me?
IBM is down more than 15% over the last 6 months, but does that mean it is a buying opportunity or should it be avoided? Facebook is up almost 30% in the last 6 months, but does that mean it is too expensive or does it still have room to run?
Unfortunately, chart comparison alone can’t answer those questions. To make sense of the charts, you need to understand the background (earnings, economic factors, etc.) behind the recent performance.
Comparing the charts can help you to quickly identify the stocks that meet some aspect of your investment thesis. But you’ll most likely want to supplement that information with a deeper understanding of the specifics of the particular stocks you’re interested in.
Picking the right stocks to invest in is part art and part science. The science part focuses on the research into the fundamentals and technicals of the stocks, ETFs, mutual funds or other securities involved. The art part is your investing thesis and culminates in the final selection using information from your research. An integral part of that selection process is to compare stock charts, helping you to rank and differentiate based on your investment thesis.
If you’d like to add this technology watchlist to your StockMarketEye, you can download it as a CSV file here. Then watch this video for how you can import the watchlist into StockMarketEye. If you’re not already a StockMarketEye user, you can try it for free for 30-days, no strings attached.
(Full disclosure: I own shares of the following stocks mentioned in this post: AAPL, GOOGL, YHOO, MSFT, AMZN, P and FB.)
Managing your investments is no easy task, but StockMarketEye can give you high and low level views of all your investments together, helping you make informed investment decisions faster.
A couple of question we often get from users are:
- How can I get my investments into StockMarketEye?
- How can I copy my investment data to another computer so I don’t have to enter it twice?
To better answer those questions, let’s look at the following graphic.
Brokerage Import, File Import or Manual Entry
Before you can get started syncing your investment data to another computer or device, you’ll need to get that investment data into StockMarketEye. For many users, the easiest way to initially get your investments into StockMarketEye is via the Brokerage Import feature. Importing from one of the supported brokerages makes it quick to get started and easy to maintain as your investments evolve. Unfortunately, this “direct connect” standard for downloading data from brokerages that StockMarketEye, Quicken and other financial programs use, is only supported by some U.S. brokerages.
If your brokerage does not support the “direct connect” standard or your accounts are with non-U.S. brokerages, you can instead import your investments into StockMarketEye via certain types of investment files. Most brokerages give you the option of downloading your data for use in another program. Often they refer to this as something like “Download for Quicken” or “Download for Microsoft Money”. Downloading your data in this way will give you a QIF or OFX/QFX file which you can import into StockMarketEye.
It is also possible to manually enter your holdings and transactions. StockMarketEye has easy to use manual transaction entry windows that support virtually all transaction types (buy/sell, dividends, capital gains, return of capital, splits, company actions, transfers, cash transactions, etc).
Syncing Your Data To Other Computers/Devices
Once you’ve gotten your investments into StockMarketEye, you can easily sync them to other computers and devices. For example, you could sync to your wife or husband’s computer so they can follow along too. Or sync it to your computer at the office so you can track your investments while at work. You can even sync it to your iOS (iPhone/iPad) device so you can take it with you on the go.
Syncing to the other devices is supported by the StockMarketEye On-Line Sync service. This is a “cloud” based service that we provide to make it easy to follow your investments anywhere you want to.
The basic principal of the on-line sync service is that the service stores a copy of your data, which can then be downloaded by any version of StockMarketEye that you use. Your data in the on-line sync service is only accessible to you. The data is sent and stored securely using strong, industry standard encryption.
Use of the on-line sync service is completely optional. StockMarketEye’s other features do not depend on the on-line sync in any way. If you only use StockMarketEye on one computer, there’s no need to setup or use the on-line sync. But if you run StockMarketEye on more than one computer or device, it is an easy way to keep your data updated on all of them.
NOTE: Our on-line sync service is not the only way of transferring your data to another computer. It is also possible to use the backup/restore method. This involves making a backup of your StockMarketEye data on one computer, copying the backup file to the other computer and restoring it with StockMarketEye on that computer. Typically, this method is best for one-off transfers, such as if you upgrade your computer and want to move your data to the new computer.
My Typical StockMarketEye Workflow
Here’s how I typically manage my investments in StockMarketEye, using both the brokerage import and the on-line sync.
- I have a main computer where make updates to my investments, create regular backup files, etc. I call this my “master” computer.
- Periodically, I will “update from brokerage” (menu: Portfolio -> Update from Brokerage…) for each of my portfolios that are mirroring an account at a brokerage. This pulls in the latest transactions for that account and applies them to the StockMarketEye portfolio.
- I like to verify that the transactions were reported correctly by the brokerage. Typically there is no need to correct anything (if you have already updated the “placeholder” transactions that were created during the initial import), but in some cases, especially concerning splits, it may be necessary to make changes. See our blog post on the recent Apple split for an example.
- Once everything looks good, I use the on-line sync (either the standard “Start synchronization now”, or the “Push to Account” in the “Other Synchronization Actions”). This sends my data to the on-line sync service and stores it there.
- Later, when I’m at my other computer or on my iPhone, I’ll typically use the “Pull from Account” synchronization to replace the data in StockMarketEye with the data in my on-line sync account. I could also use the standard “Start synchronization now”, but since I maintain a “master” copy on one computer, the “Pull” sync on the other computers makes more sense, preventing any inadvertent changes I may have made on the other computers from being mixed up with the “master” data.
You don’t need to keep a “master” copy of your data on one computer like I do. The standard sync of StockMarketEye’s on-line sync service is built to handle updates from any computer or device, merging them together so you always get the most recent version.
StockMarketEye is a powerful, but easy to use tool for managing and monitoring all your investments in one place. Using the brokerage import it’s quick to get started, while the on-line sync lets you easily keep your data on multiple computers so you’re never far away from what’s happing with your investments.
Stock charts are a useful way of viewing the historical price movement of a security. The visual ups and downs of the line in the chart convey meaning in a way that a table full of numbers can not. One quick glance at a chart can give you meaningful perspective on the stock’s past performance and serve as a useful data point in your analysis.
A typical line stock chart in StockMarketEye looks like this:
The upper portion of the chart is called the Price chart. In the example above, the blue line shows the closing values of the stock. Moving the mouse over the chart will display the chart cursor. The details of the day under the cursor are shown in the top line of the chart area.
The lower portion of the chart is the trading Volume chart. The taller the bar, the more volume there was on that day.
The colors in the Volume chart also have meaning. A green volume bar means that the stock closed higher on that day verses the previous day’s close. A red volume bar means that the stock closed lower on that day compared to the previous day’s close. A black volume bar means either that the stock closed at the same price that day as it did the day before, or that the chart does not have the previous day’s closing price to compare with (such as in the first volume bar in the chart).
Red and Green in the Price Chart
In the Price chart, both the Candlestick and Open-High-Low-Close (OHLC) chart styles convey extra meaning when compared to a simple line chart. Instead of a single point (i.e. the closing price), the day’s activity is shown as a symbol, in which the day’s 4 data points (i.e. the open, high, low and closing prices) are drawn.
The red and green versions of the Candlestick and OHLC chart styles convey extra meaning through the colors. This same meaning is also visible in the monochrome version of these chart styles, but some investors find the green and red versions help them to interpret the meaning faster.
The next chart shows the “Candlestick Green/Red” stock chart type in action. A green candlestick means that the opening price on that day was lower than the closing price that day (i.e. the price moved up during the day); a red candlestick means that the opening price was higher than the closing price that day (i.e. the price moved down during the day).
Compare that with the monochrome version of the same chart. A green candlestick is equivalent to an open candle of the monochrome “Candlestick” chart type; a red candlestick is equivalent to a filled candle.
When the Colors differ between the Price Chart and the Volume Chart
Although both the Price chart and Volume chart can use green and red to convey meaning, the meaning of the colors is slightly different in each of these chart types. Sometimes the candlestick or OHLC’s color will be different from the volume bar’s color.
For example, if the stock finished higher than the previous day, the volume bar will be green. But on the same day, if the stock moved lower from the opening price, the candlestick would be colored red.
This situation is not that uncommon. For example, if there was a gap up at the open (because of positive company news, analyst recommendation, etc), but the stock moved lower from that point throughout the day, yet staying above the previous day’s closing price, the candlestick would be colored red, but the volume bar would be green.
Colors can be useful to help convey extra meaning in stock charts. Knowing how each color is used in the different parts of the stock chart will help you interpret their meaning faster and get more out of the chart.
StockMarketEye has a wide range of chart styles and technical indicators to choose from. Download your free copy of StockMarketEye today and start keeping your eye on the markets!
If there’s a household name in the investment world, it would be Warren Buffett. Buffett is the 84-year old chairman and CEO of Berkshire Hathaway, a conglomerate holding company. He is also the world’s 3rd richest person (due to his stake in Berkshire Hathaway; behind only Bill Gates and Carlos Slim) and is widely considered the most successful investor of modern times.
When Buffett speaks, the talking-heads on MSNBC stop talking and listen. When Berkshire Hathaway acquires or takes a stake in a company, the transaction itself and the reasons behind it are scrutinized by the investment houses of Wall St. down to the individual investors on Main St.
Berkshire, like all institutional investment managers with over $100 million in securities, is required to file an SEC Form 13F every quarter. The 13F filing details Berkshire’s holdings at the end of that quarter including the number of shares owned and their market value. Although specific trade dates, sizes and prices are not included in the 13F filing, by comparing with previous quarter’s filings, you can get a good picture of Berkshire’s investment activity over the quarter.
For example, notable in the trades gleaned from Berkshire’s 13F filing from Q2 2014 was the sale of 66% of their stake in Phillips 66 (PSX) and the purchase of a $500 million stake in Verizon Communications (VZ).
Although the information in the 13F filings can be very useful for an individual investor, the 13F filing itself is rather technical. Comparing the reported holdings to the previous quarter’s filing is also not entirely straightforward and takes some serious pen/paper or Excel work to figure out what has changed.
Tracking Buffett and Berkshire’s Portfolio with StockMarketEye
Because I’m a Buffett fan as well as a StockMarketEye user, I wanted to track the Berkshire portfolio in StockMarketEye. To do this, I took the Berkshire 13F filings dating back to Q2 2013 and created a StockMarketEye portfolio from them, including creating the buy and sell transactions each quarter.
Here’s part of what this portfolio looks like in StockMarketEye:
You can see that currently (September 8, 2014), Berkshire Hathaway’s portfolio is worth around $108 Billion.
If you’d like to track the Berkshire portfolio in your StockMarketEye, I’ve setup a page with everything you need. It has a transactions CSV file that you can download and import to build the portfolio.
There is also a video of how you can import the file into StockMarketEye:
If you’re a fan of Buffett, this is an easy way to track his holdings and see their performance. And if you’re not yet a fan, well, Buffett’s portfolio has about 108 billion reasons why maybe you should be.