Educational articles

How Does the Rise of the US Cash Rate Affect Australia?

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Interest rates can convey the health of a country’s economy. Lower interest rates can help promote borrowing and therefore stimulate an economy which is struggling. The downside is that lower rates can stoke the fire of inflation. When the economy is doing well, central banks will raise rates to take a bit of heat out of the system. A hike in interest rates therefore means that the economy is doing well. The Australian cash rate has been on hold since …

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Reasons for a Stock Market Correction

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The definition of a stock market correction is when stocks decline more than 10%from a recent high. A crash however is when the stock market falls 10% in one day. We recently saw the Dow Jones drop 831.86 points on 10 Oct 2018. This was a 3.1% drop and the biggest sell-off of the year to date. However, this would only be considered a correction and not a crash. These are the reasons a stock market may correct. What causes …

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What are preference shares?

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The most common type of share on the stock market are ordinary shares but there is also another type of share called preference shares. These are sometimes referred to as hybrids as these are products which have debt and equity characteristics. Preference shares provide investors with a regular stream of income which means it is similar to the characteristic of a bond. They may also have a fixed maturity date. Preference shares are similar to ordinary shares where the instrument …

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Covered Call Writing – A How To Guide

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Introduction to Covered Calls A call option gives the holder the right to buy a security at a certain price (the strike price) by a certain date (the expiry date). Writing (selling) options is a strategy used to protect portfolio’s and also pick up additional income. It is ideal for long term investors who want to protect their shares without selling them. Only 15% of options are exercised and the rest are either closed early or expire worthless. An option …

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Why has the price of gold dropped?

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Gold is below the US$1200 per ounce mark for the first time in more than two and a half years.  But despite recent global uncertainty, the price of gold has not been going up. Gold is usually a safe haven when there is instability or uncertainty in the market place. So what are the reasons for the drop in this precious metal? Strong US dollar Strength in the US dollar works against gold. Gold is denominated in US dollars so …

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