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What Is Alternative Data in Finance?

Using alternative data in finance can help investors get ahead of the competition. What is alternative data in finance? A simple example is the relationship between Google searches and prices of individual stocks. In a broader sense, alternative data in finance include news feeds, social media, payments information, any non-financial information that indicates interest in, fear of, or the intention to buy equities. This sort of information gives investors insights into what drives decision making of those who buy and sell stocks. Hedge funds and private equity firms use this information to gain early knowledge of trends both positive and negative.

Types of Alternative Data

There are many useful types of alternative data. This list contains sources commonly used by investors and traders. The list is arranged alphabetically and does not reflect the relative importance of any of these kinds of alternative data.

Credit card transactions
Email receipts
Geolocation (foot traffic)
Internet activity and quality data
Mobile App or App Store analytics
Obscure city hall records
Online browsing activity
Point-of-sale transactions
Price trackers
Product reviews
Satellite images
Shipping container receipts
Shipping trackers
Social media posts
Tracking corporate jets
Web site usage

What Is Alternative Data in Finance?

Those who successfully use this sort of data do not forsake standard analytic tools like important moving averages but rather use them to indicate trends and investor thinking outside of “box” of standard analytic tools.

Top Alternative Data Providers

Using this sort of information can help investors, but where can you get it? What you can do is to use one of top alternative data providers who do all of the “legwork” for you. Datarade offers a list of their choices for the top 10 alternative data providers.

Accern
Suburbia
Brain Company
RavenPack
Exante Data
Caretta
InfoTrie
Yewno
QueXopa
Thinknum

By using one of these services, you can get clues that will give you an advantage in the markets but not take up all of your time trying to track down many bits of information that may or may not be of value.

List of Alternative Data Providers

If none of the top list of alternative data providers offers the services that you want, there are many more such companies. In addition to the list we just provided, Arm Insight, Omni Sci, QuantCube Technology, Alternative Data Group, Crux, Preqin, Quandl, SEntieo, and Thasos, Group are excellent choices for providing extra information to give you an advantage in investing and trading. You may end up using one or two data providers before you settle on one that fits your unique investing and trading requirements.

Driving Investment Performance With Alternative Data

Although the use of alternative data in finance is becoming popular, you need to understand the benefits and potential drawbacks of your attempts at driving investment performance with alternative data. This data is unlike the sort of “hard” data that comes directly from analyzing market pricing, reading financial reports, and following the economy. This kind of information is partial, suggestive, and often incomplete. Too often the data is poor and difficult to verify. Most investors start with standard analytic tools and then use alternative data to fine tune or direct further research.

Machine Learning and Alternative Data Approach to Investing

Artificial intelligence can be extremely useful in helping sort through large amounts of data in order to optimize your investment choices. In this regard, machine learning and the alternative data approach to investing fit well together. The value of alternative data is that you can pick up very useful information to guide your investing. The problem is that there is an awful lot of data available and sorting through it to see what is useful and is not can be time consuming and often useless. By having an artificial intelligence program do the sorting, you can get it done faster and more effectively.

Alternative Data Is Valued on Wall Street

What Is Alternative Data in Finance - google search and consumer behavior

When investors have to wait for official data such as unemployment numbers, they often look to alternative sources to get a head start on those who simply wait for the official figures. Thus alternative data is valued on Wall Street where any tiny advantage can be parlayed into big gains. Alternative data has been especially helpful in the Covid-19 era when companies have put off offering guidance and Congress dilly-dallies with stimulus money while millions are out of work and in danger of eviction. Likewise, the stock market has recovered while the epidemic persists and the economy is not well. Alternative data offers useful insights to guide investment decisions in these times.

Alternative Data Investment Management

Because alternative data can be helpful in making smart investment decisions, it is applicable to managing investments on a broad scale as much as for guiding single investment choices. Alternative data investment management should always be coupled with an artificial intelligence tool to make it more efficient. And, all such data should be (at times) taken with a grain of salt to make sure that you do not follow a lie propagated on social media and lose all of your investment capital.

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Investment Options 2020

The stock market is back to record highs while the economy is in trouble. What are your investment options in 2020? Folks are investing in stocks because they don’t anything else to invest in. Is that really the case and, especially, are stocks really a safe bet right now? Nobody has a crystal ball to predict exactly where the future will take us but we would nevertheless like to offer our thoughts about profitable and safe investment options for 2020 and beyond.

Best Place to Invest Money Right Now

This is what investors would always like to know but to know the perfect answer you need your crystal ball to predict the future. The issues today affecting investments include a stock market where investors are putting their money because interest rates are low and the market has been going up. However, the economy is not yet back on track and further growth in stocks will be tied to the shape of the economic recovery. Many investors are betting on a quick recovery with a “V” shape instead of a prolonged “U-shaped” recovery or an “L” shape that lasts for years.

Short Term, Safe Investments

If you are unsure about how this will turn out, short term investments might be your best bet. Bankrate has some useful advice about the best short term investments in August of 2020. They suggest the following:

Savings accounts
Short-term corporate bond funds
Short-term US government bond funds
Money market accounts
Certificates of deposit
Cash management accounts
Treasuries

Investment Options 2020 - US Treasury

As you will note, stocks are not on this list.

Investing for the Future (and Accepting Short Term Risk)

Bloomberg offers several options in their article about Where to Invest $10000 Right Now. It is a useful read and looks at where growth will be down the line. Here is where you need to apply the concept of intrinsic stock value and look out a few years. That will take away much of the concern about a second market crash in 2020. Artificial intelligence is mentioned in their article along with investment in the Eurozone and UK. If you are willing to take the risk of a short term correction, an ETF that follows the FAANG stocks and using a dollar cost averaging approach would be a sound approach.

Good ideas about where to invest money to get good returns in the short term can be found on the Bankrate list. And ideas about where to invest to benefit for the long term will be found in the Bloomberg article.
Finding safe investments with high returns is always a problem because there are always tradeoffs.

Investment Options 2020 - investment in AI

Investing Money for Beginners

The best advice for beginners who want to invest is to start early, invest regularly, do your homework and avoid “tips.” Pay down your credit cards before you start any serious investing because the odds of your finding a safe investment that outpaces the interest rates on credit cards is pretty remote. Unless you have the expertise and time to study the stock market and individual stocks, it is a good idea to start with an ETF (exchange traded fund) that tracks the S&P 500. These funds have outpaced most investment managers for the last decade. When you do start to pick your own investments whether in stocks, bonds, or real estate, follow the thinking of pros like Warren Buffett who only invests when he fully understands what a company or other investment does to make money and how its business plan will continue to reliably make money into the distant future.

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Buying Cryptocurrency 101

Cryptocurrencies have been with us since 2009 when Bitcoin was introduced. A cryptocurrency can be bought a sold via the internet using a decentralized network. It is an efficient way to transfer money and to hold wealth outside of the system of fiat currencies, precious metals, and property. Although Bitcoin was the only cryptocurrency to begin with, by 2020 there are more than 6,000 cryptocurrencies.  The value of various cryptocurrencies has gone up substantially over the years and at times has fluctuated widely. It can be hard to get a handle on all of this, how to buy, what to buy, and when to avoid cryptocurrencies completely. Here we present a brief explanation of what you need to know, Buying Cryptocurrencies 101.

Buy Cryptocurrency Without Bitcoin

Although Bitcoin is the oldest and best known cryptocurrency, there are many (more than 6,000) different cryptocurrencies. Unfortunately, there have been cryptocurrencies that have appeared and disappeared as their exchanges were hacked or simply mismanaged. Thus most who buy cryptocurrencies stick with the larger and better run exchanges and types. Here are the ten most popular if you would like to buy cryptocurrency without Bitcoin.

Ethereum
Ripple
Litecoin
Tether
Bitcoin Cash
Libra
Monero
EOS
Bitcoin SV
Binance Coin

Buying Cryptocurrency 101

Each of these alternatives to Bitcoin has its pros and cons but all appear to be safe bets if you want to purchase cryptocurrencies and not have your wealth stolen overnight.

Challenges Facing Cryptocurrency

As cryptocurrencies have become increasingly popular, they have attracted the attention of regulators and law enforcement. Because monetary value is transferred via cryptocurrencies outside of the banking system and normal money transfer channels it has been used to move illegally gotten, intended, or hidden wealth (drug money, funding of terrorists, not paying taxes, etc.). Cryptocurrency exchanges in the USA now need to report to the IRS (IRS Form 8949, Schedule D). The main issue for those holding wealth in cryptocurrencies is security. Too many exchanges have folded, taking millions with them due to hacking or outright theft. And, unlike a US bank account, your money is not insured by anyone! Smart investors tend to stick with the best known and best run exchanges and cryptocurrencies to avoid losses.

Chart of Cryptocurrency Prices

Buying Cryptocurrency 101-Bitcoin Price Chart

Aside from the ease of transferring money with cryptocurrencies, an attractive feature is the prospect of the value of your Bitcoin or other cryptocurrency going up substantially. Here is a chart of cryptocurrency prices.

Bitcoin price at the far left in 2009 is $1 and the price in August 2020 is more than $12,000. As the chart shows, the cryptocurrency experienced a huge boom and bust from September 2017 to January 2018. It is going up again in response to the uncertainty generated by the current Covid-19 pandemic and its effects on global economies.

Breakout Cryptocurrency

Folks who want to speculate in cryptocurrencies can time their purchases to take advantage of changes in the global economy and specific events that drive fiat currencies down. Or they can look for a specific breakout cryptocurrency, which is typically a new one that gets a lot of attention. Forbes wrote about one particular breakout cryptocurrency earlier this year.

While bitcoin, the world’s original and most valuable cryptocurrency, has risen almost three-fold over the last 12 months, tezos has rallied some 400%, climbing from under $0.40 per tezos token in February 2019 to just over $2 today.

Thus, newness can lead to at least temporary popularity and a surge in price of a new breakout cryptocurrency.

Bullion Cryptocurrency

When the economy suffers and fiat currency values drop, both gold and cryptocurrencies go up. For those who would like to take advantage of this, it is possible to buy a bullion cryptocurrency. In fact, Bullion is the name of a cryptocurrency that is based on gold bullion and not the US dollar. This exchange has been in existence since 2013 and is promoted as an “ideal storage of wealth.” Thus, it is unlike Bitcoin and others which can grow wealth, or lose it, and are promoted as ideal ways to hold and exchange wealth. This bullion cryptocurrency is meant as a long term investment

Buy Cryptocurrency Penny Stocks

The investment community has ongoing concerns about the boom and bust quality of cryptocurrencies and the fact that there is nothing backing the currency. However, they are excited about the blockchain technology that underlies and many buy cryptocurrency penny stocks hoping to get in on the ground floor of big price surge or capitalize on a company’s important position in the technology that drives cryptocurrencies. Examples include Marathon Patent Group (MARA), Riot Blockchain, Inc. (RIOT), MGT Capital Investments, Inc. (MGTI), and DPW Holdings, Inc. (DPW) which are newer companies.

Buying Cryptocurrency for Someone Else

Many investors purchase stocks and other investments for their children or others. Buying cryptocurrency for someone else is typically done by making the purchase yourself and then sending to the other person’s account. Coinbase facilitates these sorts of purchase and transfer operations as do some other exchanges. This can be done as a gift or to start one of your kids out on the road to investing. Because cryptocurrency profits are now taxed in the USA, it may be to your advantage to gift to your children to be used for college or simply to make a wealth transfer far in advance of your death. To make sure that you do this correctly, check with a tax advisor who understands cryptocurrencies.

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Will the Market Crash Again in 2020?

The stock market started the year strong and then come the coronavirus pandemic and the market crashed. The stock market as a whole has largely recovered from the covid-19 crash. But, with a weak economy and no substantial stimulus, will the market crash again in 2020? If you look at how things played out in the wake of the 1929 market crash you see that the market crashed, partially recovered, fell again, and partially recovered and continued in a downward course until 1932. A major difference between then and now is that economists and especially the Federal Reserve realize that the crash turned into the Great Depression because credit was cut off and the USA picked a poorly-advised trade war by passing the Smoot-Hawley Act. Given that the Fed is “all in” doing whatever it takes to keep credit flowing, will the market crash again in 2020?

Why Is the Stock Market Doing So Much Better Than the Economy?

Will the Market Crash Again in 2020 - 1929 - 1932 crash chart
Three Year Course of the 1929 Stock Market Crash

A few months ago we asked why the stock market is ignoring the economy.  As we noted at that time, the stock market anticipates the next moves of the economy. .As such it has discounted airline stocks, hotels, and all tourism-related businesses among others. And, after a brief fall in prices it has not discounted the big tech stocks which are still leading the market. Much of this makes sense in that profits continue for many tech operations as businesses move online. What concerns us is that eventually there needs to be money being spent by ordinary people to buy things and that is what eventually supports everything else. As stimulus payments go away and Republicans in the US Senate wait, the economy may well be set for a fall and that could drive the market down.

Will the Market Crash Again in 2020?

If we go back to 1929 we see that there was lots of optimism along with pessimism as people bought back into the market and repeated drove prices back up. Unfortunately, the things that needed to be done in terms of credit and trade did not happen and the downward course of stocks went on for three years. New Balance says that another crash or at least large correction, or two, is possible. They look at other market crashes, their causes, and how in each case there were partial recoveries and losses on the way down. These crashes played out over a couple of years and were typically exacerbated by a lack of appropriate response or no response.

What is unsettling now is the optimism of some investors or perhaps pigheadedness of some investors in plowing money into stocks when the economy is just as likely to weaken as to improve. The 1929 crash was largely played out by 1932 but that is also when Roosevelt came into office and initiated stimulus programs. With elections coming up it is possible that a Democratic majority might take over the US Senate as well and hold the House of Representatives. And, if this happens along with a Democrat in the Oval Office we can expect to see impressive investments in US infrastructure and US R&D that could forestall any follow up dips in the market.

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Pros and Cons of Dollar Cost Averaging

Many investment advisors suggest that the average investor should use a technique called dollar cost averaging when investing. This approach lets you buy fewer stocks when the price is high and accumulate more when the price is low. It is a disciplined approach that avoids trying to time the market. By setting an amount that you want to invest every payday, month, or quarter, you set up an investing plan that is reliable and likely to succeed in accumulating wealth over the years. This having been said, what are the pros and cons of dollar cost averaging?

What Does Dollar Cost Averaging Mean?

Investopedia provides us with a formal definition of dollar cost averaging.

Dollar-cost averaging (DCA) is an investment strategy in which an investor divides up the total amount to be invested across periodic purchases of a target asset in an effort to reduce the impact of volatility on the overall purchase. The purchases occur regardless of the asset’s price and at regular intervals; in effect, this strategy removes much of the detailed work of attempting to time the market in order to make purchases of equities at the best prices. Dollar-cost averaging is also known as the constant dollar plan.

For those with no skill or interest in timing the market, this is generally a good choice.

What is Dollar Cost Averaging in Stocks?

While dollar cost averaging is generally used for investing in stocks it can also be used for investments like buying CDs or treasuries. However, the approach works best for stocks. In fact, if you are enrolled in a direct purchase plan for a stock, you can often buy fractions of shares which action then relieves you of the problem of buying more or less that you wanted. Many dividend reinvestment plans also include a direct purchase option.

Pros and Cons of Dollar Cost Averaging

Is Dollar Cost Averaging a Good Idea?

The value of dollar cost averaging is that it relieves you of the task of trying to time the market. But, it also leaves you open to blindly purchasing shares of a stock that you really ought to get out of. So, is dollar cost averaging a good idea for all stocks and all investors? The answer is no. Whenever you are invested in a stock you need to keep track of its intrinsic stock value and get out if the stock is not likely to grow and return profits over time. Dollar cost averaging helps keep you from buying excessively in a rising market and allows you to purchase more in a falling market. But, you need to make certain that the fundamentals of your stock warrant staying with that investment.

Why Do Investors Use Dollar Cost Averaging?

Smart investors use dollar cost averaging to ensure that they are investing at a steady pace over the years. They use this approach because it keeps them from buying excessively when shares are overpriced and allows them to accumulate more shares when prices are down. Not only does this approach help you avoid trying to time the market, but it also reduces the effects of fear and greed on your investing. Discipline is a necessity for successful long term investing and dollar cost averaging is a disciplined way to invest your money.

Pros and Cons of Dollar Cost Averaging - Why It Works

Power of Dollar Cost Averaging

The power of dollar cost averaging in your investments comes from two things. First, when you invest on a regular and steady basis you will generally realize the benefits of exponential growth with the regular appreciation of your stock. Second, when you have been purchasing your using dollar value of stocks in a down market and the market recovers and surges, you will see a nice increase in the value of your portfolio. This approach can be especially powerful in volatile markets such as this year with the covid-19 crash and recovery. Anyone who did not panic but simply continued to invest as always has commonly been very pleased.

Reverse Dollar Cost Averaging

While you can build your portfolio using dollar cost averaging, what do you do when retirement comes and you want to reap the rewards of your disciplined investing? The answer is reverse dollar cost averaging. Sell the same dollar amount of shares every month or quarter and do not try to time the market. By leaving your money in the market you will still realize gains and in retirement you will not have to be bothered with trying to time the market to cover your expenses while you live the retirement life that you worked for and deserve.

How to Do Dollar Cost Averaging

For dollar cost averaging to work, you need to be invested in stocks or ETFs that reliably grow your wealth. So, you need to pick investments wisely and pay attention as you go. Alternatively, you can choose an ETF that tracks the S&P 500 or one of its sectors and very often do better than someone who tries to time the market, including many investment advisors. Pick a dollar amount that you can comfortably invest on a regular basis and stick with that amount for a year or so. If and when you have more to invest, do so. The key is to stay invested in good investments and invest on a regular basis for years and years!

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Weaker Dollar and Your Investments

The US economy is going to need more stimulus money to recover and that will drive the dollar down. How about a weaker dollar and your investments? A weaker dollar is often good news for US exports but how does that work out in a world where every economy is weak and nobody has the money to buy anything? Let’s look at how a weaker dollar might affect the various sectors of the stock market.

Weaker Dollar and Your Investments in the Stock Market

Whenever the dollar goes up or down it affects different sectors of the stock market differently. Market Watch looks at what Wells Fargo says about a falling dollar and market sectors.

A falling U.S. dollar is getting a lot of attention from stock-market investors, and according to the chart below from Wells Fargo Investment Institute, the focus isn’t misplaced.

The chart sums up how the stock market and a variety of sectors have performed during past episodes of dollar weakness stretching back to 1988. As noted previously, the dollar’s long-term correlation with the S&P 500 SPX is somewhat negative, meaning that equities tend to rise as the dollar falls – though there are exceptions.

Weaker Dollar and Your Investments - Stock Market Sectors to Watch
This Chart Shows Who Prospers and Who Falls With the Dollar

In general, a weaker dollar means more sales by multinationals offshore and thus higher profits. This is especially true with high tech companies that do not need to ship anything but simply download software via the internet. Companies that need to ship materials can still profit but have a higher overhead. On the other hand, companies that sell products and services within the USA tend not to do so well when the dollar falls. Much is this because discretionary spending goes down in recessions and whenever the dollar is weak. Utilities also suffer a bit during these times.

Where Is the Dollar Going Next?

Gold is going up as the US prints more money to deal with the pandemic. Is this a short term phenomenon or something long term? NBC writes about the dollar headed for a fall.

There are certainly plenty of economists out there who will tell you that the dollar is headed for a fall. If the rest of the world stops buying our IOUs, the Treasury Department would have to keep raising interest rates until it could find buyers. That could, in theory, throw the U.S. economy into tailspin.

But for all its vulnerability, the U.S. dollar is still the most powerful currency in the world. And one big reason is that the U.S. economy is still the largest and most resilient in the world.

Because of this, the US has an outsized effect on the rest of the world. With a fifth of the world’s GDP and the dominant currency, the dollar often drives the rest of the world’s currencies and not the other way around. In regard to a weaker dollar and your investments, you can expect the USD to weaken from its three year high and then to slowly inflate over the years. But, because other currencies will follow the same course that part will have little effect on specific stock sectors. The greater effect over the next couple of years will be how the pandemic plays out and the abilities of nations to display the discipline needed to cope with this health crisis and its effect on their economies.

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Stock Market Response to Election Uncertainty

The presidential election promises to be close again this year. What will be the stock market response to election uncertainty? Traditional thinking is that Republicans are pro-business and that Democrats are not. Thus, you might think that the stock market would fear a Biden presidency, welcome four more years of Trump, and move accordingly as polls indicate. But, our sister site, Profitable Trading Tips noted, in an article about how the market will respond to a Biden presidency, that the market is more likely to go after a Democratic victory than a Republican one. But, what happens when the election is going to be close?

Stock Market Response to Election Uncertainty

Market Watch wrote recently about what happens in close versus predictable presidential elections.

In our call of the day, Deutsche Bank global chief strategist Binky Chadha said in a close election U.S. stocks typically rally after the result, regardless of the winner.

In the 10 postwar “close elections,” which include all of the last five – defined as elections where the polls were consistently tight or fluctuating widely, making the result unpredictable – the result has been followed by an average 5% rally to year-end, the bank’s strategists said.

“While predictable elections were nonevents, close elections historically have seen equities begin to go sideways starting in July; then rally strongly after on a clear win, independent of who won,” Bandha said in a note.

The rationale that explains is this. The market loves certainty and hates uncertainty. Investors can make money with either a Republican or Democratic administration but the strategies may be different. Knowing what approach to take removes the uncertainty which is why there is typically a rally from Election Day until the end of the year after uncertain elections.

In the meantime, history tells us that during the approach to a close election, the market is relatively flat. This reflects the uncertainty that investors hate which is followed by the certainty that they like.

Stock Market Response to Election Uncertainty: Biden vs Trump
How Will This Close Election Affect Your Investing?

What Will the Election Mean to Your Investing Strategy?

Depending on who wins the presidential election and if they take Congress as well, things may not change very much or there could be a wholesale overhaul of how the country operates. As the big tech FAANG companies become more and more dominant, the odds of the next “trust buster” taking them apart goes up. Tax laws that favor the preservation of multigenerational wealth may be weakened as well. On the other hand, long-overdue investments in American infrastructure could result in a big increase in middle class jobs and a long-overdue equalization of wealth across America. Investors who pay attention will be able to develop new strategies accordingly. As noted in the San Diego Union-Tribune, Biden wants to strengthen US manufacturing, beef up infrastructure, and invest in both education and research.

Democratic presidential candidate Joe Biden released his $700 billion economic plan last week that is largely aimed at boosting U.S. manufacturing.

Under his plan, the federal government would spend $400 billion in government purchasing of U.S.-based goods and services over four years and $300 billion in research and development for new technologies and clean-energy initiatives.

Paying for it is a little up in the air with Biden’s campaign directing The Wall Street Journal to Biden’s previous tax plan that would raise taxes on corporations and the wealthiest Americans.

Higher corporate taxes may not sound like such a great idea for many investors but a wholesale revitalization of American industry and its R&D should help many focus where their investments will go over the next years.

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Companies Under Nasdaq

If you want to find stocks in the tech sector and especially growing companies, look for companies under Nasdaq. Nasdaq ranks just behind the New York Stock Exchange in daily value of shares traded. It was founded in 1971 was the first electronic stock market in the world. Nevertheless, it functioned as a quote system initially. Because it lowered the bid to ask price difference for trades, it was popular with traders but not with brokers. Today Nasdaq is where you can trade the world’s largest tech companies

Difference Between NYSE and Nasdaq Exchange

Nasdaq is one of the two major US stock exchanges. Unlike the older New York Stock Exchange which is an auction market, the Nasdaq is a dealer market. While the NYSE matches the highest bid with the lowest asking price, the Nasdaq buying and selling happens electronically and virtually instantaneously.  While the NYSE and one designated market maker for each stock, the Nasdaq has fourteen on the average. While investors see the NYSE as the home for long term, stable stocks, investors go to the Nasdaq to find growth stocks, mostly in the tech sector.

Dow and Nasdaq Charts

In trading stocks for companies under Nasdaq traders use charts the same way as they do for NYSE companies, the Dow Jones Industrial Average, and others.

Companies under nasdaq: dow vs nasdaq charts

Example from Kitco

Dow and Nasdaq charts are both useful by themselves but can also be used side by side for comparisons and to help decide where to trade. Otherwise, Dow and Nasdaq charts work pretty much the same in terms of timing trades, using important moving averages, and for other purposes.

Dow Jones SP 500 Nasdaq

Although many choose to only invest in or trade companies under Nasdaq, most investors pick and choose among Dow Jones, SP500, Nasdaq and even foreign stocks based on their assessment of intrinsic stock value and tools like a stochastic trend. Investors who want to invest in ETFs that track these sectors will choose the Dow if they want blue chip companies, the S&P 500 if they want a broad cross section of the market, and Nasdaq if they want to track tech stocks, especially the FAANG stocks that have been leading the market.

Compare Dow Jones Nasdaq S&P

New traders and investors often want to know how to compare Dow Jones, Nasdaq and S&P. The three indexes track closely as the underlying companies are all affected by the business cycle and factors that drive the economy. Also, stocks like Apple are included in all three indices. When you compare Dow Jones, Nasdaq, and S&P it is useful to know how each is calculated. In each case total market capitalization is divided by a number that takes into account things like stock splits over the years.

Current Dow Jones Nasdaq

Companies under Nasdaq

Although the stocks in the Dow Jones and companies under Nasdaq are both subject to market forces, they may react differently. For example, the Dow contains ExxonMobil, General Electric, and Boeing. Each of these has been hit hard by the covid-19 pandemic and other factors. However, tech stocks like Microsoft have benefitted from the movement to business online and other factors related to social distancing.

Cheapest Nasdaq Index Fund

Many investors gave up trying to pick their own stocks years ago. They also gave up on having someone else manage their investments. Rather, they use a dollar cost averaging approach to put money into the cheapest Nasdaq index fund they could find. Three low cost index funds suggest by Nasdaq include the Schwab US Broad Market (NYSEMKT: SCHB), iShares Core S&P Total U.S. Stock Market (NYSEMKT: ITOT), and Vanguard Total Stock Market (NYSEMKT: VTI).

Define Nasdaq Index

How do you define a Nasdaq index? According to Investopedia, the Nasdaq composite index is

the market capitalization-weighted index of over 2,500 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities.

This is the best measure of the overall performance of companies under Nasdaq.

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MSFT Stock Nasdaq

Those who invested early in the MSFT stock Nasdaq listed more than thirty years ago are rich. But, even today Microsoft is one of the best tech investments. Anyone who purchased a few share of this stock when it went public in the late 1980s has seen their investment grow about more than 1,000-fold with stock splits and an increasing share price. The current quarterly dividend of Microsoft is $0.51. This is more than twenty times the original share price and will be paid out four times a year! Tech stocks have driven the stock market since the Financial Crisis and have proved to be somewhat immune to the effects of the covid-19 crisis. In fact, they may be propelled by the move online as social distancing becomes the norm. Here are some useful bits of information if you want to invest in MSFT.

Nasdaq MSFT Price Target

If you are considering an investment in Microsoft stock today, you want to know what it will be worth going forward. This is the Nasdaq MSFT price target. According to CNN Money, the MSFT price targets of twenty-eight analysts range from a low of $205 to a high of $260 with a median price target of $230. Now, at the end of July 2020 the stock sells for $201 a share. The stock started the year at $160, dipped to $135 at the start of the pandemic and has added 50% to its lowest price of the year. In general, analysts expect Microsoft to continue to grow at it has moved into lots of online services in addition to its dominant software business.

Nasdaq MSFT Dividend

The first Nasdaq MSFT dividend was in 2003. The stock price took a big hit during the dot com crash and the dividend was to reward investors for staying with a mature company that did not appear to have as strong a prospect of growth as previously. Now, the company has been growing nicely and still pays a dividend which has steadily increased over the years. Today’s dividend comes to $2.04 per share per year which currently is 1%. Although this dividend percentage is not as much as one sees with a utility stock, coupled with steady growth and dominance of its part of the tech sector makes Microsoft very attractive.

MSFT Stock Nasdaq Logo

Next MSFT Dividend Pay Date

Microsoft pays quarterly dividends. The next MSFT dividend pay date is September 10, 2020. The record date is August 20, 2020. And, the ex-dividend date is August 19, 2020. The ex-dividend date is the last date that the stock trades without the coming dividend being considered. The record date, which is the next day, is the date for which holders of the stock will receive the dividend. Thus, the price of the stock will jump up on the record date to account for the coming dividend payment. Because the amount of the coming dividend is known, there is generally no surprise regarding how much the price will jump up.

Nasdaq MSFT After Hours

Microsoft trades after hours as well as during the trading day. You can see Nasdaq MSFT after hours quotes on the Nasdaq site. A typical number of shares being trading after hours is about 600,000 as compared to about 3,000,000 during the trading day. The trading range is usually not that great during off hours unless some sort of news that affects the stock price becomes apparent at the end of the trading day. After hours trading is done on electronic communications networks that match buyers and sellers and do not use a stock exchange.

Sell MSFT Stock

Microsoft as well as many of the tech stocks that have led the market over the last decade have gone up considerably. Is it time to sell MSFT stock? You would only do so if you need the money or if you believe that the current situation with the covid-19 pandemic will get terribly worse and drive down prices for MSFT and other tech stocks. The covid-19 pandemic has driven down many stocks as social distancing has closed or reduced many businesses. However, the same conditions have driven businesses and entertainment online which has greatly benefitted Microsoft and other tech stocks.

MSFT Stock Split Prediction

Many companies split their stock when it rises to a certain price range. This is typically because they want shares to remain affordable to average investors. Microsoft stock has split 9 times over the years.

  • 9/21/1987: two for one
  • 4/16/1990: two for one
  • 6/27/1991: three for two
  • 6/15/1992: three for two
  • 5/23/1994: two for one
  • 12/09/1996: two for one
  • 2/23/1998: two for one
  • 3/29/1999: two for one
  • 2/18/2003: two for one

Although MSFT has not split for well more than a decade, the board of directors always has that as an option.

MSFT Stock Nasdaq - cloud computing

MSFT Stock Recommendation

The vast majority of stock analysts today recommend buying Microsoft stock. With an average price target 15% above its current price, a company with a huge cash reserve, huge presence in cloud computing, and a high cost of entry business, this stock is a buy in almost anyone’s book. However, the best way to approach this stock, as always, is to use intrinsic stock value analysis. Understand what the company does to make money and how that approach will continue to work into the distant future. In the case of MSFT, this reasoning will make the stock a good long term investment prospect.

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