One of the most basic concepts in our Investment Theory is the understanding of the word Securities and its deviations. It is essential to know when you are investing WHAT you are investing in. Having said this, many people have no idea what they are investing in and even if they have a vague idea, they will definately not take into account its many pro's and con's. Here is where you can outwit them.
There are THREE different types of SECURITIES: debt securities, equity securities and derivative securities.


Debt securities are equivalent to lending money with an expected eventual return (plus interest of course), in other words bonds. Debt means owing something, this implies someone has lent you something and the inevitable destiny of the object being returned to the owner. This is basically how bonds work. You buy a piece of paper, this piece of paper is exactly like a cheque, the difference is you can only cash it out after a certain amount of time. This of course is a simplification of what a bond really is as you have many types of bonds (zero-coupon bonds, return notes,  ...) as well as many different organisations that issue them (treasuries, governments, regios, supranational entities, firms). These all work in different ways, with variations in issuer, priority, coupon rate (interest rate of a coupon) and redemption features the bond will be classified in a different category. Answering your question, YES, there is a bond quality ranking which works sort of like your A to F grading criteria. For more information on bonds click here.


Equity securities are more commonly known as equities. An equity is part of a company, being either capital stock, trust or partnership. The most commonly known are capital stock, or simply stock. Stock is, literally, a piece of paper that states you are a part-owner of a firm. By owning a certain amountof stock you are usually eligible to dividend, which is your share of the profit made by the firm. By owning a firm´s stock you become a stakeholder, meaning you have a certain interest in the firm doing well. Stock is usually traded in the stock markets (NASDAQ, NYSE, Dow Jones, CAC40, DAX30) also know as indicies. This stock is bought and sold (long/short) by shareholders everyday. The exchange of this causes the fluctuation in their price, at the same time increasing or decreasing the value of the firm itself. This is why percentages of companies go public (IPO's) since they wish not be 100% conditioned by the expectations of the shareholders. To learn more about equities click here. 


Derivative securities are options, futures, swaps, forwards, CFD's and so on. All of these mostly come originally from the trading of equities and bonds. They usually derive from the performance of an entity, asset, index or interest rate. Forwards, for instance, are the trading (more like the promise of a trade) at a given value of a stock. It divides in two parties, one the risk taker who will buy the stock at the end of the period, and two the owner, who will sell the stock to the risk taker. for both options and futures the risk taker is paid a certain amount of money for taking the risk. Farmers use this a lot in order to ensure a fixed amount of money as the value of their crop will fluctuate with the market. This is pretty easy to understand with a given example. 


(e.g.)
Take person A has a Coke stock currently selling at $100. Person A wants to sell the stock but is in no hurry because he thinks the stock will keep on rising. So he calls his dad and say, ''Hey Dad, I want to sell this stock in a year at a price of $106''. His dad accepts with the condition that he will be paid $5 right now. ---> 1 year afterwards ---> So now person A sells the bond to his Dad for the price they agreed on one year ago. There are two possibilities. Forward Z, where the stock's value increased to $110. Person A could have made more money but is still satisfied since he made $1 more what he would have made a year ago. And his Dad is even happier since he made $9. Forward Y, where the stock's value dropped to $98. On the one hand, person A could have lost $2 but instead he made 1$. His Dad, on the other hand, lost $3. 

This clearly explains how the risk taker, obviously takes the risk as he is the only one who is really making or losing money. If you want to learn more about derivative securities click here.
Well that is all for today. Remember always to compare amongst these and chose depending on how much money you are willing and able to lose, how much you know and understand the market, and the amount of time you have available. Money is time my friends. The more you know the better you are off competing against everyone else. Remember their loss is YOUR gain.

The Inside Stakeholders are people who are closest to the organisation and have the strongest and most direct claim on organisational resources

--> Shareholders (or stockholders): the owners of the organisation
--> Managers: the employees who are responsible for coordinating organisational resources and ensuring that an organisation’s goals are successfully met
--> The workforce: all non-managerial employees

The Outside Stakeholders are people who do not own the organisation, are not employed by it, but do have some interest in it
--> Customers: an organisation’s largest outside stakeholder group, basically anyone who buys their products.
--> Suppliers: provide reliable raw materials and component parts to organisations
--> The government: wants companies to obey the rules of fair competition. Wants companies to obey laws that directly or indirectly may affect employee and customer relationships, social and economic issues.
--> Trade unions: relationships with companies can be one of conflict or cooperation
--> Local communities: their general economic well-being is strongly affected by the success or failure of local businesses. The general public wants local businesses to do well against overseas competition. They want corporations to act in socially responsible ways.

The first concept you must understand in order to analyse a graph properly are the JAPANESE CANDLESTICKS. These easily understandable icons contain vital information that will help you understand what happened during a certain period of time (minute, hour, day, week) in the market.

If the candlestick is red the market opened on the top and decreased until the bottom. If the candlestick is green then the market opened at the bottom and closed up top. The black line, or shadow, in the middle of the rectangle indicates the fluctuation (ups and downs) during the day.

There are 3 main types of candlesticks: the stable, the unstable, and the pretty much useless ones.

The STABLE candlestick looks something like this. We can clearly observe how this states the value of the stock went down, as explained previously, from the top of the rectangle to the bottom. It most likely fluctuated during the day with a downwards trend. There is no shadow indicating that the downward movement was consistent. This means that the next day the stock will most likely decrease even lower since it has not reached any resistance points.


 Next up, the UNSTABLE candlestick looks like the figure on the right. There was a slight increase in the value of the stock as the figure is green. The stock's went from the bottom to the top of the green rectangle. There is a huge shadow indicating fluctuation. This means a lot of stock was probably bought and sold. The candlestick was supposed to follow a trend but it reached a resistance point where most stockholders will want to sell. As stockholders sold the price decreased drastically making other less attentive stockholders sell too. Since everybody sold the stock's value decreases and it will probably adopt a downwards trend as this is most likely the pivot (moneymaking) point.


Finally, the USELESS candlestick looks like the figure on the left. The value of the stock has increased that day, as it is obviously green, therefore going from bottom to top. However this candlestick does not help us at all, as it will give us no clue of what will happen next. We know not whether it will increase of decrease since we can only note stockholders or the news has made investors indecisive. This indecisiveness is represented by a long shadow that goes both up and down. An example could be a stock that started off going downwards drastically. At the lowest point people bought stock. However so many people bought that it started rising quickly until it reached a point (top part of the shadow) where people started to sell once again, decreasing the value of the stock.

Now that we know the types of candlesticks we can use our knowledge on a graph. Take a quick look at the following graph.

We can clearly see both upward and downward trends. Take a look at the las  downwards trend. We can see how there is a drastic decrease in the value of the stock as all candlesticks are red. Now that we can identify the different kind of candlesticks we can classify the last one as UNSTABLE. We know that a unstable one usually means people are satisfied with the stock's price and they deceived to buy or sell depending on whether the candlestick has a low or a high price. Therefore the last candlestick probably represents a turning point.

The next figure illustrates my point as the stock's price rose once again with the change in stock position going from short to long.

''Do you want people to pity you, or would you rather be the person they envy?'' - my father.

There is a thin line between success and failure especially when it comes to economics and the world of investment. Statistically today you will be a failure, you must accept it, the odds are against you. There will always be someone smarter, faster, taller, stronger and so on. One must be aware of this limitation in order to fully embrace the art of investing. However, on the brighter side, there will always be people dumber, slower, shorter and weaker than you. 

The good news is you can outwit both by simply remaining more attentive and receptive to IMPORTANT information. I emphasise the word important because there is actually A LOT of useless data. Knowledge, experience and mind agility should be your key goals. With knowledge of the market and investment techniques you will be able to succeed. 

I will not show you how to win money quickly, but how to earn money. You are on a road with two different paths, and you can only choose one. Which one will it be? Are you a winner, or are you a loser?

Now I ask you, do you want people to pity you or would you rather be the person they envy?''