Planning for Retirement

Planning for Retirement

It doesn't matter what age you are, planning for retirement is always a good idea. Now is always a good time to think about the future. Whether you are in your early 20's or late 50's, retirement planning should be taken seriously. There are many temptations to avoid retirement planning. For example, other expenses and luxuries may take precedent over it. It is important to do away with these temptations or control them at the very least in order to live a stress-free life once you hit retirement age. Below are some tips that can help you:

Save as Much as You Possibly Can
Although it is never too late to start, saving early has distinct advantages. You can watch your money grow because gains are building up from the previous years. Compounding interest is a powerful thing. It is a great way to accumulate wealth for retirement.

Set Measurable and Realistic Goals
Be honest about your retirement goal. If you want to live in luxury, calculate how it will cost so you know how much you should save to achieve that dream. Though there are "rules of thumb" that helps in retirement planning, nothing beats having security with what you have saved.

Consider 401(k) Plan
Making contributions to a 401(k) Plan is an easy way to save money. In addition, the cash you put in here will be immediately tax deductable. The growth on your savings is tax-deferred so you can boost your retirement savings.

Consider IRAs
Similar to the 401(k) Plan, the IRA also features tax breaks. There are two distinct types of IRAs including traditional IRA and the Roth IRA. The traditional plan features tax-deferred growth that allows you to pay taxes only after withdrawals. Meanwhile, the Roth IRA features tax-free growth meaning you don't pay tax upon making withdrawals because it has been paid for previously.

Look Into Diversifying Your Portfolio
If you're still at the early stages of your career, consider diversifying your asset portfolio. Invest in stocks, bonds, mutual funds while keeping a certain amount of liquidity. Diversification allows you to leverage on long-term growth rather than short-term gains.

Work Part-Time After Retirement
Depending on your personal preference and capability, working part-time during retirement can have some benefits. It engages you both mentally and socially so you remain active. At the same time, it is also financially healthier for you because the amount you need for your nest egg is lessened.

Author and entrepreneur Bernz Jayma P. is the owner of a financial blog dedicated to helping people expand their knowledge on personal finance. You may visit his blog at http://www.Invesmint.com.

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Scare for Scottish conveyancing solicitors

Scare for Scottish conveyancing solicitors

Seeking out the cheapest conveyancing solicitor can be incredibly tiring, particularly in Scotland where the legal costs are on average higher than when you go further South of the border.
Some of the remortgaging deals available now include free conveyancing, which has hit some Scottish borrowers slightly at a loss, as many of those deals available in England and Wales are not stretched as far as Scotland, though sometimes cash is offered towards fees instead.
Such cash back will generally be to the value of  £200 to £400. HSBC's  much in demand term tracker, charges 1.95% over base rates, and comes with free legal services and search fees in England and Wales, but Scottish borrowers are offered £400 towards fees which may well turn out to be much more.

John Postlethwaite, a mortgage adviser from Punter Southall, feels this difference in arrangements North and South of the border is the result of the different choices the housing markets have chosen to work.

He said: "In Scotland, solicitors dominated the property market through their role as estate agents. When lenders started to offer free conveyancing in England, they were afraid of upsetting solicitors in Scotland. They were frightened that solicitors would recommend against them if they took conveyancing fees away, so were reluctant to offer borrowers free legal services."
Scotland has been trying to catch up, in more than one way.  Registers of Scotland has been slower to automate than the Land Registry, which operates in England and Wales meaning the solicitors have been finding it difficult in terms of the higher costs. The original property register in Scotland was the Register of Sasines created by the Registration Act 1617.

As half of the houses in Scotland have no changed their registration with Sansines, a new register has been established under the 1979 Land Registration Act, meaning counties joined up one after the other, most recent in 2003.

This means the Registers of Scotland has two registers to monitor, with 1.3 million properties on the new register, which incorporates many titles other than domestic homes of the two to 2.5 million residential properties in Scotland.

A spokesman for the Registers said: "We think around half of all homes in Scotland are now on the new register, although this would be higher for the central belt."

The conveyancing system is very similar regardless of which system is used, the lawyer involved plans a mortgage deed and a discharge document for the previous one. He will then seek out the old lender for a redemption figure, and coordinate the remortgage. This means he needs to raise the money from the new lender and paying off the old mortgage, receiving a signed discharge document for his work. He then goes to register the new mortgage and discharge document with the land registers, and one cancels out the other.

Elelctronically conducted  business deals for such a process cost £20, compared to £30 if done with paper.

Ray Boulger of Charcol advises:
"The bigger the loan, the less important free conveyancing is, and similarly the longer the new loan, the less penal the cost of paying for the conveyancing yourself. But borrowers need to compare costs carefully."

Find out the best conveyancing deal for you when remortgaging by contacting your conveyancing solicitor and mortgage lender today.

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Best FMCG Companies - Stocks to Invest in 2009

Best FMCG Companies - Stocks to Invest in 2009
MCG Stocks are now catching eye of investors for investing as best option in stock market
. Analysts and market experts are now putting a 'buy stock' recommendation on select FMCG stocks.

FMCG stocks seem to be the dark horse on the bourses. These stocks are now catching the eye of investors. Analysts and market experts are now putting a 'buy' stocks from select FMCG stocks, a move which is not just being considered as a safe ploy but also as a defensive strategy to counter a volatile and uncertain market.

The trend is visible on the bourses where leading FMCG counters have outperformed the overall market during the last few sessions. Take the case of MNC giant Hindustan Unilever (HUL). The company's stock has made its 52-week high at Rs 267 on December 19, at a time when BSE's benchmark index, Sensex, was trading under the 10,000-mark (down by over 50 % from its life-time high of 21,000 made in January, 2008).

Similarly, the scrip of another FMCG giant, Godrej Consumer, is currently hovering near its 52-week high of Rs 145. On Wednesday, the stock price closed at Rs 138. Other companies like P&G , Dabur(I) and Colgate Palmolive have also recorded better performance on the bourses. Market analysts who earlier stayed away from FMCG stocks are now taking a fresh look at these rising scrips. Though some reservations about the FMCG sector still persists, the analysts have accepted the "safe" nature of these stocks.

"Fall in commodity prices (from crude, vegetable fat and food articles) is the main reason behind the outperforming FMCG sector. Earlier trends indicate that fall in commodity prices will lead to an improvement in profitability of the FMCG companies in the next fiscal. Such a phenomenon will not remain limited to just soaps and detergent companies; even paints, confectionery, food processing and others will get benefit of the fall in commodity prices," said Ajay Parmar, head, equity, Emkay Global Financial Services. "Those who want to play defensive can invest in such stocks," he added.

Anand Shah, a research analyst at Angel Broking, is also optimistic about the FMCG sector. Though the markets (at current level) have already discounted the positive impact of the fall in the raw material costs, Shah believes that those who wish to play safe should invest when the prices of the FMCG scrips fall.

"FMCG companies will be able gain cost advantage on raw materials, freight, transport and packaging. The balance sheet of the FMCG companies will definitely gain strength in the coming quarters," Shah said while cautioning the investors to adopt a stock-specific approach instead of a sector-specific one.

However, not all are convinced. "Now-a-days , smaller players are eating into the business of big MNC players in the FMCG sector. Biggies are therefore losing their market share," says VVLN Sastry, country head at Firstcall India Equity Advisors. "There is some momentary activity in FMCG stocks, which is a part of the defensive strategy adopted by the traders to restrict the downslide. But this trend will not prevail for a long time," he added.

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Stock Market 2009 Predictions - Where would it be in Feb-March 2009?

Let's try analyzing market trend and understand when can one buy stocks in year 2009.

Dow Jones is at 6 years low. What do you think a level for BSE SENSEX or NIFTY it could be?

The global disconnect between the global macro in the US and the rest of the world is actually narrowing. That's bad news. China and India are slowing big time. There are big stimulus packages that have been announced by every country, especially the West. But how will you find enough buyers to subscribe to those bonds? Therefore, if they don't find enough buyers then rates will go up." Says Shankar Sharma of First Global.

People were looking at the DOW Jones for further direction in stock markets to buy stocks. Now that DOW closed firmly below 7500 yesterday, breaching November lows, there is a high probability that global markets would follow. What does it means for Indian markets? There is possibliy of markets retasting their October lows. Most of the stock market reports are indicating the same.

After breaking 7500 levels, DOW finds its support at 6000 - 6500 levels in near future. For Dow this fall comes to 20 % and so world markets could follow the same fall in terms of percentage.

Looking at weakening world economy, the downtrend is expected to continue in first half of 2009. Then onwards economies are expected to start reviving. So if you try to project the Financial results of last quarter i.e. Q-4 2008-2009, and for Q1 of FY 2009-2010, they are going to reflect the weak economical financial conditions. And so the stock markets would reflect the same. Probability is on higher side that SENSEX could taste it's OCTOBER 2008 lows.

Enough of analysis for SENSEX targets!! What should be investor doing?
SEAT ON CASH!!
BEST PLACE FOR YOUR CASH FOR NEXT 3 - 6 MONTHS COULD BE YOUR BANK ACCOUNT!
This is not investors market. These are traders markets.
One can think of buying stocks once the economic cues are in clear trends and it could be only after near end of first half of 2009. Meanwhile new investors can learn How to buy stocks and try finding out value stocks to accummulate. Start accumulating stocks to buy in small quantities.

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How to secure my stocks and shares investment

How to secure my stocks and shares investment

International financial crises otherwise known as the great Economic Meltdown is a global virus that is steadily spreading across economies around the world.

Nigerian is not an exception. The Nigerian economy is adversely affected, too. Though some financial experts has dismissed it as not having any significant effect on our economy. But, this can be seen from the recent slide in the currency exchange rate of the Dollar to the Naira. Also visible is the international crude oil price. Oil prices fell from over $100 in the last quarter of 2008 to below $50 in the first quarter of 2009.

This global phenomenon, which has set into the Nigerian economy, and its effect, is visible even to the ordinary Nigerian, though financial experts have variously downplayed the effect on the economy.

The Nigerian capital market, which has been reputed as to be one of the most profitable stock market in the whole of Africa, has since late 2008 been steadily dropping, defying any known solution.

As at March, 2009 investors have lost over 60% of the value of their investments. Investor's confidence has plunged and panic is already setting in. The reasons for this downturn are mostly self-inflicted. A major factor was the flooding of the media with public offers by Nigerian banks in their bid to meet-up the N25 Billion capital base during their bank consolidation policy of the Central Bank of Nigeria. Regulators were also not very strict in watching the market.

The capital market witnessed a heated and unprecedented level of public offers, initial public offerings and hybrid offers to the mostly uninformed investors. The media became washed with advertisements of juicy offers, jumbo profits and multiple bonus offers. The first time investors were led to believe that investments in stocks and shares were the magic wand in money making and financial leverage.

This also gave rise to the emergence of emergency stock-brokers, brief-case investment analyst, stock advise magazines and other 'financial experts' and, of course, a plethora of stock broking firms.

The consolidated Nigerian banks with so much funds at their disposal, created share loan purchase products aimed at providing credits and funds to investors to purchase stocks and shares. Many investors even had to sell off their real estate and personal properties to invest in stocks. Some also borrowed from friends, relatives and financial institutions just to purchase stocks.

There were also some others who based on wrong advise, borrowed funds from friends, relations and other financial institutions to purchase stocks. This situation is not excludes financial and non-financial professional who, having access to their client's funds; acted with or without their consent to trade in the stock market.

A few months later, the bubble burst. The market became bearish, stock prices tumbled, indices dropped daily and steadily, too. Then the speculators, financial experts and professionals who probably saw it coming, started off-loading their stocks. Foreign investors buoyed in by the international financial meltdown culled most of their stakes in some Nigerian firms. This further led to the prices plummeting further. Insider trades, sharp practices, over-priced stocks and price manipulations also led to further irreversible price falls.

 The innocent investor, the poor, the retired pensioners, the students, the novice, the uninformed and even the professional were caught in thee mesh. Heartaches, hypertension and even suicides have been reported in the, media as a result of this mis-adventure.

 Although the meltdown has caught up with the Nigerian stock market, how do we survive this era?

    * Those who had already invested in stocks should not panic, but rather keep their stock and if they still have the heart, to purchase more stock at their present low prices.
    * Panic sellers should stay put their stocks now, as off-loading them now would lead to more downward prices, otherwise, they should carefully study companies individually, get information on their operations and management and if they believe they cannot scale through, only them can they sell off and probably re-invest in stronger companies.
    * On the other hand, they can cull up what they can salvage and re-invest into real estate. Real estate in Nigeria is the most secure investment for now.
    * Group of investors can pool up their assets and diversify into the government bond markets, mortgages and real estate investments.
    * The Securities and Exchange Commission and other regulatory bodies should enforce the laws and regulations. Scrutinise unusual price movements, bogus media advertisement of prices, unwholesome activities and generally create confidence in the investing public.

 As the global economic situation pervades, real estate investment is the surest investment in Nigeria as of today.

The Author is a Real Estate Appraiser, current affiars commentator and writer with interests in the human enviroment, living and life.

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Can the Markets Rise, When Economies Dive?

Monday, March 30, 2009

During the course of an economic cycle, interest rate increases are used to restrain rapid inflation or growth during a bullish market, while rate cuts are used during market mayhem (a bearish market), in hope that the declining rates will encourage consumer consumption, returning the economy to a normal and healthy state.

Throughout this cycle 2003-2009, the Fed has used numerous methods apart from its standard rate cuts to propel the economy. The recent one has been quantitative easing, where central banks have participated in the bond market, while injecting money into the financial system.

Over a year and a half ago, analysts thought the claim that a market recession reaching the scales of the 1930's depression is 'farfetched'. To date those investor's thoughts are quite different as exploitation of the housing sector has caused a snow-ball affect throughout the world economy, forcing government officials to make coordinate efforts to redeem the world's economy.

Over the last couple of months government interference in the markets has intensified as numerous banks and large caps have been nationalized, to help prevent further loses across the globe. In addition, economic data continues to pour out showing a deteriorating economy, forcing officials to come out with new creative methods.

Despite the negative data and gloomy outlook the markets have recently increased, making investors question as to whether the recent rally is a change in trend or just a simply a bullish rally in a bearish market.

While it is too early to determine any change of trend, one must take into consideration the following:

1) Interest rates reductions or increases can take up to 9 months to leak through the system, affecting the economy.
2) The markets work on expectations; therefore if government officials are aiming for a market turnaround towards the end of this year, the indices will price it in beforehand.
3) Once the indices retrace a fair part of their losses, demand will increase on positive sentiment, driving the markets even higher.
4) Low interest rates will eventually spark demand across the board as consumers will take advantage of the low rates, especially as rates like these might not last.

Last week's trading session presented mixed signals as the U.S housing sector suddenly showed signs of slight improvement. According to the National Association of Homebuilders, single family homes increased for the first time in seven months, adding an increase of 4.7% to new-home sales. In addition, over the last two weeks of trading the U.S government has addressed the market, stating that it intends to buy back government bonds and the far end of the curve, in an effort to reduce the costs of home purchasing. By taking a look at the homebuilder's index one can see the recent increase, caused by the improving data and overall market momentum.

Will the Market Rally Continue?

While there is quite a lot of market moving data coming out this week, including the G20 meeting and unemployment results from the U.S on Friday, one must not steer away from the housing sector (the cause of the current economic situation).

Following this week's U.S manufacturing data, housing figures are expected to be released and could show a further improvement in the sector. In addition unemployment data is expected to show another 656,000 job losses in the month of March. While one might think that the figures are devastating, the markets could react in a completely different way.

During the U.S 's last recession (2003-2003) the U.S unemployment rate continued to rise and Non-farm Payrolls decreased, while the markets were forming a bottom. The unemployment rate peaked during the middle of 2003, when the U.S indices were far off their lows.

With the G20 meeting coming up, an interest rate decision from Europe and employment data coming out, the markets could see some profit taking around current levels, accompanied by an increase in market volatility. Just keep in mind that the markets could surprise, especially when investors are already expecting further bad news. A 'higher-low' will give confirmation like in 2003.

Dodjit was developed to unite traders worldwide. Dodjit.com also offers a Trading Courses ,Forex reports,Stocks Markets Analysis,Forum,Currency trends and much more.

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A Beginner's Guide For Safe Investing In Your Retirement

A Beginner's Guide For Safe Investing In Your Retirement
Investing for retirement is a crucial step to insuring financial stability when you retire. In addition, it can provide some financial relief to any family you may leave behind. People are interested in different forms of retirement planning. This can range from stock market investing, which can be risky, to safe investing, such as a savings account or 401k planning. Many people fail to properly plan for their retirement, which can lead to difficulties after retirement, especially when it comes to leaving loved ones behind. If you need a beginner's guide for safe investing, look no further.

First, it is important to decide what method of investing is best for you. For those who are not experienced with the stock market, there are other options to consider. One obvious option is a simple savings account. Similar in concept is something called an annuity. By paying a lump sum into an account, a person secures tax free payments for the rest of their life. However, this can often be offset by a large number of fees and deductions. This can make an annuity attractive for those who need lifetime assistance and who own their own real estate, but it may not be an option for everyone.

A safe investing option that may have wider appeal is investing in a traditional or Roth IRA. The Roth IRA is the same as the traditional version, but with a twist. Rather than making the taxes at withdrawal, they are taken out up front. In addition, after a certain age, the withdrawals are made tax free. This can be helpful since most people will be nearing retirement by the time their payments are made tax free, allowing them to free up even more money. Regardless of the option you choose, it is important to understand whether or not these forms of retirement investing
are for you.

A beginner's guide to investing for retirement would not be complete without addressing 401k options. Depending on the specifics of the 401k, this can be the most appealing option for investing toward retirement. First, it is transferable if you should leave the company. Secondly, you can typically choose the investing that is done with the money you put in. Finally, a 401k often comes with a matching plan where the employer will match all or a portion of the money you put into your 401k. While this acts as a great incentive, it can lead to major payoffs at retirement.

There are many options to be taken into consideration when you are planning for your retirement. The best advice would be to consult with a professional before making any decisions outside of 401k investing. Banks often have their best interests in mind so it can be helpful to have a professional look over the plan. While it may seem a bit drastic, you are planning for your retirement and the future of those you will leave behind. Never take something so important lightly. With the right help, investment for retirement can be easy and reassuring.

If you are looking for more personal finance articles to help you with your retirement financial planning visit our page at http://www.squidoo.com/beginners-guide-to-investing. You can also get a valuable free beginners guide to safe investing here: Financial Adviser 4 U

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How to Spot the Next Ponzi Scheme

How to Spot the Next Ponzi Scheme
With the staggeringly high number of Ponzi schemes that had already been revealed this past decade, one cannot help but wonder why a lot of people continue to fall for this fraud. It is important to recognize that no two Ponzi schemes are exactly similar. It comes in all shapes, colors, and forms. Their differing characteristics make Ponzi schemes difficult to pinpoint. The only thing they have in common is investment returns that seem too good to be real. However, there are also times when the profits are not even that impressive. In most cases though, you can detect a Ponzi scheme if you are offered a consistent and above-average return every year.

How Does a Ponzi Scheme Work?
A classic Ponzi scheme involves the perpetuation asking for "investment" money but then turns around and uses the money for himself. He then comes up with fictitious profits when paying the investors. The said "profits" are actually other people's money. This scheme can continue until people realize that there is not enough money to pay off the investors. The Ponzi scheme soon collapses.

Though the financial damage brought about by this system can be great, the SEC is almost powerless to stop it at its roots. This is because there is no exact definition that describes what a Ponzi scheme is. Some perpetuations actually invest some of the money as promised. But he uses the remaining investments to pay off previous investors or lavish cash on himself.

Understanding Pyramid Schemes
Pyramid schemes are a variation of the Ponzi scheme. It essentially uses the same concept but it uses a large number of agents. For example, the main perpetuator will ask two people to "invest" in an once-in-a-lifetime opportunity. Assuming that the two individuals fall for it, they are given a chance to give the same "offer" to their friends and families. Meanwhile, they will derive a certain amount as commission. Theoretically, the investors are given a chance to recover some part of their investment by asking others to sign up. At first, it would seem that everyone is making money but eventually, the fraudulent system will be revealed once they can no longer recruit others into the pyramid.

In essence, both the Ponzi and pyramid system can be characterized by their reliance on money coming in from new investors, their requirement of new investors to pay off the returns, and the absence of effort to make honest and profitable work.

Author and entrepreneur Bernz Jayma P. is the owner of a financial blog dedicated to helping people expand their knowledge on personal finance. You may visit his blog at http://www.Invesmint.com.

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Top 4 New Rules for Retirement

Top 4 New Rules for Retirement
Previous rules about retirement planning are no longer effective in today's environment. The increasing cost of healthcare, longer life expectancy and the economic downturn are factors that force retirees to seen better growth in their portfolio. Meanwhile, there is also the pressure that drastic market drops won't completely destroy their nest egg. There are an increasing number of financial planners who are rethinking their old strategies. Below are the four new practices to look into:

• Separate the investment into different baskets – a lot of investors lump their assets together for retirement and use this to pursue a single strategy. This practice is very risky especially with today's market condition. An alternative would be to separate your asset into three classifications including short-term low-risk investments, intermediate-term investments which should be combination of stocks and bonds, and long-term investments.

• Don't focus too much on yield – it is said that cash is king. But getting good yield is difficult. Although Treasury securities are incredibly safe, the payout you can expect is minimal as well. If you want to enjoy higher yields, risks are necessary. There is a tradeoff between safety and benefits. To minimize your risks, focus on investing on quality funds. You should know exactly what you're buying into.

• Look into municipal funds – with this type of investment, you can enjoy tax-free yields and less volatility. Munis contain more value than before but you should choose wisely. For example, it would be a good idea to select general-obligation and essential-purpose bonds. Keep in mind that not all munis are created equal. Try to stay away from nursing home bonds.

• Give importance to dividends – it is obvious that quality is important but how can you determine whether a certain stock is can be classified as high quality? Well, its dividends are a good measure of its overall financial health. Dividends can also offset the volatility in its value on the stock market. Solid companies that are in good financial standing are worth considering.

As you can see, it is possible to save money for retirement even during an economic crisis. The key is to adapt your strategy to the needs of the market. It is important to be flexible and open-minded about investment options. With this in mind, the four new rules for retirement investing will hopefully help you build up a nice nest egg for your retirement years.

Author and entrepreneur Bernz Jayma P. is the owner of a financial blog dedicated to helping people expand their knowledge on personal finance. You may visit his blog at http://www.Invesmint.com.

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The Use of Currency Trading Pairs

The Use of Currency Trading Pairs
If you plan to go into forex, one of the most important points you need to understand is how currency trading pairs work. Although you are free to experiment and sift through other currencies where you can possibly make a profit, pairs in currency trading are the basics where you will base your trading plans from. If you are new in the field of currency trading, you should definitely consider being an expert with the currency pairs before you explore other fields.

In forex, currency pairs work by relating their values against each other. Each pair is composed of a base currency and a quote currency. The base currency is the first among the pair which is the target currency that you wanted to buy. Meanwhile, the quote currency is the second among the pair which tells you how much of it do you need to buy the base currency or the first one. Using the USD to Euro conversion, a quote presented as USD/Euro=.067 simply means that you will need 0.067 Euros to be able to purchase one US dollar.

Working with Currency Trading Pairs
To be able to plot out your plan in the forex business, you will constantly need to consult your own currency pairs. Among the most popular trading pairs are the combinations of US dollars and Euros, US dollars and Japanese Yen, US Dollars and Swiss Franc. Most of the forex traders use US dollars as their quote currency since it is the most widely used currency in the world. The Euro, Swiss Franc, and the Japanese Yen are among the highest yielding and also most volatile base currencies in the trading game.

As a forex trader, it is your responsibility to keep track of currencies individually. In reality there really are no hard and fast rules about currency pairs. You are the one who gets to ultimately decide which of these pairs you plan to keep an eye on and develop. But it helps to have a separate track of these currencies individually so that if a raise occurs in each of them, you can easily form your pairs and make a sell or buy them at the soonest possible time. The thing about currency pairs is that they may not last as long as you would like them to. Sometimes, you need to make quick pair ups to keep ahead of the game.

Choosing the Best Currency Trading Pairs
As mentioned, there are actually no limits to which currencies must be paired against each other. What it takes is a watchful eye and keen observation to make sure that you have the right combination to trade in the currency market. But if you are a newbie and you are still trying to gain your momentum in the currency market, it will be good to stick with major currencies, such as dollars and euros, as your quote currency.

Although these currencies fluctuate as much as the others, they are also the more frequently used. These currencies will help you develop your own style when it comes to scouting the currency trading game since they are widely used. It is also a good idea to keep only two pairs at a time and gradually increase as you gain more confidence in buying and selling your existing currencies.

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1930s Volatility is Here

If you are a long premium options trader, volatility is a necessary element to be successful.  If volatility is lacking, time decay (Theta) will make this financial instrument a challenging (or even more challenging) one.  These days, volatility is not lacking.  In fact, volatility is thriving.  For a long premium options trader, there is nothing like having market tailwinds to benefit your options strategy.

With a market that has gained 20% since March 9th bottoms and is down over 3% intra-day today (as of time of publish), 2009 has obviously been an extremely volatile year thus far.  This year seems to be even more volatile than 2008, which by our calculations, was the highest level of consistent daily volatility in decades.  In 2009, there have been a multitude of sessions that have seen stocks rally or fall by a significant percentage.  It seems almost commonplace that the Dow Jones Industrial Average is up or down at least one percent.

Volatility can be defined in many ways (i.e. implied volatility, statistical volatility, etc.) -- in this analysis we look at volatility by the number of occurrences the Dow Jones Industrial Average rallied or declined by one percent or more on a closing basis in a trading day.  More specifically, we looked at the absolute return for the Dow Jones Industrial Average for each day going back to 1928. We then calculated the number of occurrences (and the percentage) that the Dow Jones Industrial Average finished up or down more than one percent in a given year.   

Below is a graph of the percentage of days out of each year that saw a market move of one percent or more.  Two items that stand out are (1) the increase in volatility has soared since 2006 (from 10% to 64%) and (2) the current level of volatility only rivals the early 1930's when volatility peaked at 74%.

DJIA Daily 1% Move Graph (data as of 3/9/2009)

In 2008, there were 134 occurrences out of 253 trading dates (52.96% of days) that saw the Dow Jones Industrial Average finish up or down by one percent.  This compares to the 2004 to 2007 period, which had a four-year average of 15.61%.  This translates to only about 40 days per year in that four-year stretch that saw the Dow Jones Industrial Average fall or rise by one percent or more.

2009 has picked up where 2008 has left off.  Our analysis was through March 9th 2009 -- as of that date we were on pace for an astonishing rate of 64% of the time the DJIA moves 1% of more on a daily closing basis.  If the volatility continues through the last nine months of the year, this would be the most consistently volatile market since 1932, when the Dow Jones Industrial Average was up or down by one percent 74% of the time.  Since March 9th, there has been no letup in this trend as roughly 10 of the 14 days (or 71%) are moving at this rate (as of the March 27th close).  So the % pace for 2009 is actually a bit higher than the 64% utilized in the above chart.

For long premium options players, this kind volatility can be a blessing.  Buying calls, puts, straddles, and strangles can be advantageous in this environment.  For the "buy and hold" stock and mutual fund investor, this volatility can only be digested with a six-pack of Dramamine and Pepto Bismol. 

Another takeaway for long premium option players is that the level of volatility that we have seen will likely not last forever.  Periods of high volatility will generally result in a lower one, as these periods tend to cycle in and out.  This trend will likely go into a dormant stage with declining volatility and less price fluctuations (although the explosion in growth of ETFs, Options, Ultra-ETFs, etc, may lessen the decline in volatility somewhat). 

Thus, having an arsenal of options strategies beyond long option premium (which is always useful) will be even more important when the volatility wanes.  Learning how to trade vertical credit spreads, iron condors, shorting straddles, shorting strangles, writing puts and covered calls will be important to add to one's repertoire.

About The Author
Moby Waller first worked with Price Headley in the mid-90's doing research and options analysis. He then moved on to the CBOE where he was a market maker in the AOL pit during the boom of the late 90's and turned $100,000 into over $1 million in about 2 years. Later he moved on to trading European Index Options from "off" the trading floor in London, England.

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