Volatility is a term that describes how much the prices of financial assets fluctuate over time. It is an important concept for investors and traders. This is because it reflects the level of risk and uncertainty in the markets. High volatility means that the prices can change significantly and unpredictably in a short period of time. Low volatility means that the prices are more stable and consistent. One of the most widely used indicators of volatility is the CBOE Volatility Index, or VIX.
Also known as the “fear index”. The VIX measures the market’s expectation of volatility over the next 30 days, based on the prices of options on the S&P 500 index, which is the benchmark for the US stock market. It is calculated and updated in real time by the CBOE and is expressed as an annualized percentage.
The Makings of the VIX
The VIX is derived from the prices of both call and put options on the S&P 500. A call option gives the buyer the right, but not the obligation, to buy the underlying asset at a specified price (the strike price) before a certain date (the expiration date). A put option gives the buyer the right, but not the obligation, to sell the underlying asset at the strike price before the expiration date. The prices of these options reflect the market’s perception of the probability and magnitude of the future price movements of the S&P 500.
The VIX is calculated using a complex formula. It takes into account the prices of various options with different strike prices and expiration dates. The formula essentially aggregates the implied volatilities of these options, which are the volatilities that are implied by the option prices, rather than the historical volatilities that are based on the past price movements. The implied volatilities are weighted and averaged to produce a single number that represents the market’s expected volatility.
The VIX as a Measure of Fear
Generally, a high VIX indicates a high level of fear or pessimism among investors. It means they expect large price swings and are willing to pay more for options to hedge or speculate on the market movements. Conversely, a low mar indicates a low level of fear or optimism among investors. It signifies that they expect small price changes and are less interested in options. The VIX is inversely correlated with the S&P 500. Usually, when the VIX goes up, the S&P 500 goes down, and vice versa.
The VIX is not only a measure of volatility, but also a tradable instrument. Investors and traders can use various products, such as futures and exchange-traded funds (ETFs). These let you gain exposure to the VIX or to hedge against volatility risk. For example, one can buy VIX futures or options to profit from an increase in volatility. Alternatively, one can buy or sell ETFs that track the performance of the VIX or its inverse, such as the iPath S&P 500 VIX Short-Term Futures ETN (VXX) or the ProShares Short VIX Short-Term Futures ETF (SVXY).
To Sum it Up
The VIX is a useful tool for investors and traders who want to measure and trade volatility in the market. However, it is not a perfect indicator, as it is based on market expectations and not on actual outcomes. Therefore, it is important to use the VIX in conjunction with other tools and indicators, such as technical analysis, fundamental analysis, and economic data, to get a more comprehensive and accurate picture of the market conditions and trends.
You can treat it as another lens to use while looking at the markets.
December is often a good month for stock investors, as many markets tend to rally during this period. According to historical data, the S&P 500 has gained an average of 1.3% during December, the highest average of any month and more than double the 0.7% gain of all months. Even in the Philippines, stocks in December tend to do better vs. previous months.
But what are the reasons behind this seasonal phenomenon?
Why Does This Happen?
There could be many reasons why stocks in December typically do better.
Window dressing: This is a practice where fund managers buy stocks that have performed well during the year to improve the appearance of their portfolios before the year-end. This creates a positive feedback loop, as more buying pushes the prices of these stocks higher, attracting more buyers.
Tax-loss harvesting: A strategy where investors sell stocks that have declined in value during the year to offset their capital gains and reduce their tax liability. This creates a negative feedback loop, as more selling pushes the prices of these stocks lower, attracting more sellers. However, some of these investors may buy back the same stocks in December, after the 30-day wash-sale rule expires, to restore their positions. This creates a rebound effect, as more buying pushes the prices of these stocks higher, attracting more buyers.
Holiday spending: This is a factor that affects consumer discretionary stocks, such as retailers, restaurants, and entertainment companies, that benefit from the increased spending during the holiday season. Some believe that retailers tend to invest more during the holiday season.
Santa Claus rally: The term refers to the tendency of stocks to rise during the last five trading days of December and the first two trading days of January. This phenomenon is attributed to various factors, such as the optimism and cheerfulness of investors during the holiday season, the anticipation of the January effect, and the low trading volume that makes the market more susceptible to price movements. In effect, stocks in December could be benefitting from the positive feedback loop created.
Should You Buy Stocks in December?
Of course, these factors are not guaranteed to work every year. Factors like the economic outlook, the monetary policy, and geopolitical events can all affect stocks in December. Therefore, investors should not rely solely on seasonality. Treat it as a tailwind, and use other tools and indicators to better time your investments.
In summary, stocks in December tend to perform well, as there are several seasonal factors that create a positive momentum for the market. However, investors should also be aware of the risks and uncertainties that affect the markets.
The Intercontinental Exchange (ICE) is a leading global operator of financial and commodity markets and exchanges. It offers a range of products and services that enable customers to trade, hedge, invest, and manage risk across various asset classes, such as equities, derivatives, fixed income, commodities, and currencies. It also provides data, technology, and analytics solutions that support market participants and regulators in making informed decisions and enhancing efficiency.
History and Background
ICE was founded in 2000 by a group of energy traders and brokers who wanted to create a more transparent and efficient marketplace for trading over-the-counter (OTC) energy contracts. ICE initially focused on the electronic trading of natural gas and power contracts, and later expanded into other energy and environmental products, such as oil, coal, emissions, and renewable energy.
In 2001, ICE acquired the International Petroleum Exchange (IPE), a London-based futures exchange that offered contracts on crude oil, natural gas, and refined products. ICE transformed the IPE into an electronic platform and renamed it ICE Futures Europe. In 2005, ICE became a publicly traded company on the New York Stock Exchange (NYSE).
Since then, the Intercontinental Exchange has grown through a series of strategic acquisitions and organic growth, diversifying its product offerings and geographic reach.
Products and Services
The intercontinental exchange operates several business segments, each offering a variety of products and services to meet the diverse needs of its customers. These segments include:
Exchanges
ICE operates 12 regulated exchanges around the world, where customers can trade futures and options contracts on various asset classes, such as energy, agriculture, metals, interest rates, equities, indices, and currencies. ICE also operates six cash equities exchanges, where customers can trade stocks and ETFs. Some of the most popular contracts traded on ICE’s exchanges include Brent crude oil, WTI crude oil, natural gas, gold, silver, Eurodollar, U.S. Treasury bonds, Euro Bund, FTSE 100, MSCI EAFE, and U.S. Dollar Index.
Clearing
ICE operates six CCPs that provide clearing and settlement services for OTC and exchange-traded derivatives, as well as cash equities and fixed income securities. Clearing reduces the counterparty risk and operational complexity of trading, as the CCP acts as the buyer to every seller and the seller to every buyer, and guarantees the performance of the contracts. ICE’s clearing houses also offer margining, collateral management, and risk management services to enhance the safety and efficiency of the markets.
Data Services
ICE provides a comprehensive suite of data, analytics, and connectivity solutions that enable customers to access, analyze, and act on market information. ICE’s data services include pricing and reference data, indices and benchmarks, valuation and risk analytics, desktop and mobile applications, and network and infrastructure services. ICE’s data products cover a wide range of asset classes and markets, such as fixed income, equities, derivatives, commodities, currencies, mortgages, real estate, and environmental, social, and governance (ESG) factors.
Mortgage Technology
ICE offers a leading cloud-based platform that connects all participants in the mortgage lifecycle, from originators, lenders, and investors, to service providers, regulators, and consumers. ICE’s mortgage technology solutions streamline the origination, processing, underwriting, closing, and servicing of mortgages, as well as the secondary market activities, such as securitization, trading, and risk management. ICE’s mortgage technology products include Encompass, Velocify, Mavent, AllRegs, Simplifile, and MERS.
Customers
ICE serves a diverse and global customer base, including:
Corporations: Companies that use ICE’s products and services to hedge their exposure to various market risks, such as commodity price fluctuations, interest rate movements, currency fluctuations, and credit events.
Financial Institutions: Banks, brokers, dealers, asset managers, hedge funds, pension funds, insurance companies, and other financial entities that use ICE’s products and services to trade, invest, and manage risk across various asset classes and markets.
Market Makers: Firms that provide liquidity and price discovery to the markets by buying and selling securities and derivatives on ICE’s exchanges and platforms.
Market Data Vendors: Firms that distribute ICE’s data products to their end-users, such as Bloomberg, Thomson Reuters, FactSet, and S&P Global.
Regulators: Government agencies and authorities that use ICE’s data and technology solutions to monitor, supervise, and enforce the rules and regulations of the financial markets.
Consumers: Individuals and households that use ICE’s mortgage technology solutions to obtain, refinance, or service their mortgages.
Competitors
ICE faces competition from other operators of financial and commodity markets and exchanges, as well as providers of data, technology, and analytics solutions. Some of ICE’s main competitors include:
CME Group: The world’s largest operator of futures and options exchanges, offering contracts on various asset classes, such as interest rates, equities, currencies, commodities, and metals. CME Group also operates a CCP that clears OTC and exchange-traded derivatives, as well as a data and analytics business that provides pricing and reference data, indices and benchmarks, and trading and risk management tools.
Nasdaq: The world’s second-largest operator of stock exchanges, offering trading in equities, ETFs, options, futures, and fixed income securities. Nasdaq also operates a CCP that clears OTC and exchange-traded derivatives, as well as a data and analytics business that provides pricing and reference data, indices and benchmarks, and trading and risk management tools.
London Stock Exchange Group (LSEG): A global operator of stock and derivatives exchanges, offering trading in equities, ETFs, options, futures, and fixed income securities. LSEG also operates a CCP that clears OTC and exchange-traded derivatives, as well as a data and analytics business that provides pricing and reference data, indices and benchmarks, and trading and risk management tools.
Deutsche Börse: A German operator of stock and derivatives exchanges, offering trading in equities, ETFs, options, futures, and fixed income securities. Deutsche Börse also operates a CCP that clears OTC and exchange-traded derivatives, as well as a data and analytics business that provides pricing and reference data, indices and benchmarks, and trading and risk management tools.
Overall
The Intercontinental Exchange is a leading global operator of financial and commodity markets and exchanges, offering a range of products and services that enable customers to trade, hedge, invest, and manage risk across various asset classes and markets. ICE also provides data, technology, and analytics solutions that support market participants and regulators in making informed decisions and enhancing efficiency. ICE has grown through a series of strategic acquisitions and organic growth, diversifying its product offerings and geographic reach. ICE serves a diverse and global customer base, including corporations, financial institutions, market makers, market data vendors, regulators, and consumers. ICE faces competition from other operators of financial and commodity markets and exchanges, as well as providers of data, technology, and analytics solutions.
If you are looking for ways to invest your money, you may have heard of stocks and bonds. These are two of the most common types of securities that investors can buy and sell in the financial markets. But what are the differences between them, and how do they fit into your portfolio?
What Are Stocks?
Stocks, also known as equities, are shares of ownership in a company. When you buy a stock, you are buying a fraction of the company’s assets and earnings. You become a shareholder, and you have the right to vote on important decisions and receive dividends if the company distributes them.
Stocks are traded on stock exchanges, such as the Nasdaq or the New York Stock Exchange. The price of a stock depends on the supply and demand of the market, as well as the company’s performance, growth potential, and future expectations. Stocks can be classified into different categories, such as common, preferred, growth, value, or dividend.
What Are Bonds?
Bonds, also known as debt securities, are loans that investors make to a company or a government. When you buy a bond, you are lending money to the issuer, who promises to pay you a fixed rate of interest and return the principal amount at a specified maturity date.
Bonds are mainly sold over the counter, rather than on a centralized exchange. The price of a bond depends on the credit quality of the issuer, the interest rate environment, the duration of the bond, and the inflation expectations. Bonds can be classified into different types, such as corporate, municipal, treasury, or junk.
Pros and Cons of Stocks
Stocks offer the potential for higher returns than bonds, but they also come with higher risks. Here are some of the pros and cons of investing in stocks:
Pros
Capital appreciation: Stocks can increase in value over time, especially if the company is growing, profitable, and innovative. You can benefit from the price appreciation by selling your stocks at a higher price than you bought them.
Dividends: Some companies pay dividends to their shareholders, which are regular cash payments from the company’s earnings. Dividends can provide you with a steady income stream and increase your total return on investment.
Liquidity: Stocks are generally easy to buy and sell on the stock exchanges, which means you can access your money quickly if you need to. You can also diversify your portfolio by buying stocks from different sectors, industries, and countries.
Cons
Volatility: Stocks are subject to market fluctuations, which can cause the prices to rise or fall dramatically in a short period of time. Stocks are influenced by various factors, such as economic conditions, political events, industry trends, and company news. You may experience significant losses if the market goes against your expectations.
No guarantee: Stocks do not guarantee any return or income. The company may perform poorly, cut or eliminate dividends, or go bankrupt. You may lose some or all of your initial investment if the company’s value declines or disappears.
Emotional stress: Investing in stocks can be stressful and emotional, especially if you are not prepared for the market volatility and uncertainty. You may be tempted to buy or sell stocks based on your emotions, such as fear, greed, or regret, rather than on your rational analysis and strategy.
Pros and Cons of Bonds
Bonds offer a more stable and predictable return than stocks, but they also have some limitations. Here are some of the pros and cons of investing in bonds:
Pros
Interest income: Bonds pay you a fixed rate of interest, which is usually higher than the interest you can earn from a savings account or a certificate of deposit. You can rely on the interest income to supplement your income or reinvest it to grow your wealth.
Principal protection: Bonds promise to repay you the principal amount at the maturity date, as long as the issuer does not default on its obligations. You can get back your initial investment if you hold the bond until maturity, or sell it at a higher price if the market interest rates decline.
Risk reduction: Bonds are generally considered less risky and more stable than stocks. Bonds have a lower correlation with the stock market, which means they tend to move in different directions. You can reduce the overall risk and volatility of your portfolio by adding bonds to your asset allocation.
Cons
Lower returns: Bonds have a lower potential for growth than stocks, as they are limited by the fixed interest rate and the principal amount. You may miss out on the opportunity to earn higher returns from the stock market if you invest too much in bonds.
Interest rate risk: Bonds are sensitive to changes in the market interest rates, which move inversely to the bond prices. When the market interest rates rise, the bond prices fall, and vice versa. You may lose money if you sell your bonds at a lower price than you bought them, or if you buy new bonds at a lower interest rate than your existing bonds.
Inflation risk: Bonds are vulnerable to inflation, which erodes the purchasing power of your money over time. The fixed interest rate and the principal amount of your bonds may not keep up with the rising cost of living, especially if the inflation rate is higher than the interest rate. You may lose money in real terms if the inflation rate exceeds your bond returns.
Which Should You Choose?
There is no definitive answer to whether you should invest in stocks or bonds, as it depends on your personal goals, time horizon, and risk tolerance. However, here are some general guidelines to help you decide:
If you are looking for higher returns and can tolerate higher risks, you may prefer stocks over bonds. Stocks can offer you the opportunity to grow your money faster and benefit from the long-term growth of the economy and the companies. Of course, these all come with inherently more risk. If you are looking for lower risks and more stability, you may prefer bonds over stocks. Bonds offer you a more predictable and reliable income stream and protect your principal amount.
Auto-investing is a simple and effective way to grow your wealth over time. It is a strategy that involves setting up regular and automatic contributions to an investment account. We all know that continuously investing will let you take advantage of compound interest. However, actually doing so is what often hinders people. Through auto-investing, you can take the friction away!
Auto-Investing in the Investa Platform
If you’re an existing Investa user, you can take full advantage of our auto-invest feature. On the platform, you can find it on the left side of the webpage:
Step 1
You will have different frequencies to choose from. You can either invest weekly, monthly, or semi-monthly.
Step 2
Afterwards, you’ll have to pick the fund you want to invest in. As always, make sure to do your own research before choosing a fund.
Step 3
Of course, you also have to indicate the amount you want to invest per month.
Step 4
Next, link your bank account:
Once completed, something like this will show up on your auto-invest page:
Take note that you will have to agree to an Auto Debit Arrangement (ADA). A prompt will show-up asking you to fill-up a form which you will have to submit to your bank of choice. Afterwards, you should be good to go! Just make sure the bank account you linked will have the necessary funds available during the intervals you’ve set.
Is this worth the time and effort?
It definitely is! As mentioned, everyone knows the benefits of regularly investing. However, many often forget to do so consistently – so why not use technology to your advantage? By using auto-investing features, all you’d have to worry about is making sure there’s money set aside, and the Investa platform will take care of the rest!
Social media feeds are filled with content that keeps you scrolling. They are often created by algorithms that filter and recommend content based on user preferences, behavior, and network. Or, they also be created by users who deliberately follow, like, or comment on certain topics or sources.
Social media feeds are the cause for why users typically scroll through feeds for hours on end. So, how can you use them to your advantage?
Motivate Yourself
One of the benefits of creating an alternate account with a feed full of financial advice is that it can motivate you to improve your own situation. By seeing posts from experts, influencers, or peers who share their tips, strategies, or success stories, you can get inspired and encouraged to follow their example. You can also learn from their mistakes, challenges, or failures and avoid them in your own journey.
Educate Yourself
Another benefit of curating your own social media feed is that you can educate yourself with it. By reading articles, watching videos, or listening to podcasts from reputable sources, you can gain valuable knowledge and skills that can help you make better decisions and actions. You can also ask questions, seek feedback, or join discussions with other users who have similar interests or experiences and learn from them.
Hold Yourself Accountable
A third benefit of curating your own social media feed in a way is that you can hold yourself accountable. When you hold yourself accountable for creating your own echo chamber, you gain back control over what content you feed yourself. You can also join online communities, where you can further fuel your learning. You can also receive support, recognition, or constructive criticism from others who can help you stay on track and overcome obstacles.
Conclusion
Social media feed are not inherently good or bad. They are what you make of them. By working towards filling your feed with helpful content, you can make scrolling a more value-adding experience.
It also might be worth looking for other niche social media platforms. Aside from our own Investagrams platform, forums like Reddit’s r/InvestPH can help you find a lot of opinions that are worth looking over!
Cash flow is the amount of money that flows in and out of your bank account over a period of time. In essence, it’s your income sans expenses. It can be a measure of how well you manage your money.
Cash flow is important for your finances because it affects your ability to achieve your longer-term goals. Whether you want to buy a house, start a business, retire early, or travel the world, you need to have a good stream of money coming in.
What is a positive cash flow?
A positive cash flow means that you have more money coming in than going out. This allows you to save more, invest more, and grow your wealth over time. A negative cash flow means that you have more money going out than coming in. This can lead to debt, stress, and financial problems.
How can you improve your it? There are two main ways: increasing your income and reducing your expenses.
Increasing Your Income
One of the best ways to improve your cash flow is to increase your income. This can be done by:
Seeking a raise or promotion from your current employer
Finding a new job that pays better or offers more benefits
Starting a side hustle or freelance work that generates extra income
Creating a passive income stream that earns money without much effort
Increasing your income can help you achieve your goals faster. However, it is not enough to just earn more money. You also need to manage it wisely.
Reducing Your Expenses
Another way to improve your cash flow is to reduce your expenses. This can be done by:
Creating a budget and meticulously tracking your spending habits
Cutting down on unnecessary or wasteful spending
Looking for lower rates or fees for your bills and services
Switching to cheaper alternatives or providers
Taking advantage of discounts, coupons, or rewards programs
Saving energy and water at home or using public transportation
Avoiding debt and paying off high-interest loans
Reducing your expenses can help you free up more money for your cash flow and goals. However, it is not enough to just spend less money. You also need to allocate it smartly.
Allocating Your Money
The final step to improve your cash flow is to allocate your money according to your priorities and goals. This can be done by:
Setting up an emergency fund that covers at least 3-6 months of living expenses
Paying yourself first by saving or investing a portion of your income every month
Using the debt snowball or avalanche method to pay off your debt faster
Diversifying your portfolio and investing in different asset classes
Reviewing and adjusting your budget and goals regularly
Allocating your money can help you optimize your cash flow and grow your net worth over time.
Having the Right Mindset and a Long-Term Vision
The final factor that affects your cash flow is your mindset. Your mindset is how you think and feel about money and yourself. It influences your behavior, decisions, and actions. You have to focus on opportunities that come your way and find solutions rather than complaining about problems and challenges.
You also have to remember that no matter the amount of money you’re handling, you have to stick to your plan.
Conclusion
Cash flow is the key to financial success. By properly managing your money, you can improve your finances and achieve your longer-term goals. Always remember that:
Money attracts money.
As you continue to build up your wealth, more doors eventually open up for you to further improve your finances.
