Financial Information
Posts tagged Modern
Modern challenges AND MEANS FOR financial audit of electronic data processing (EDP) or STATEMENTS Financial Statements
01 year ago
by admin
in Accounting
Introduction
Electronic data processing is the function of planning, acquisition, management and reporting of transactions by the use of computers and related peripherals. On a PDE is first taken from the source documents such as invoices, receipts of income, payment receipts, checks, etc. Then, after the data inputs to the computer where it is entered from the keyboard or other input device data. The captured data is then processed by the accounting software in use, because there are different structures of the modules in application software and account number, processing the same data from one package to another are different. As I said, that the relationship is one of the functions of treatment, it is obvious, no doubt that the reports of several types of packages can be made vary from one system or another package. For example, some systems provide almost all basic financial reports such as
balance the state’s financial situation known as the balance, status of financial performance, commonly called the state revenue and expenditure or profit and loss statement, cash flow statement, statement of changes in shareholders’ equity
This type of packaging, almost all financial reports can be considered compatible with all types of financial requirements and treatment facilities is very expensive and in many companies and non-commercial.
Moving to other packages that not all the statements we see that they are specific and limited applications that go from one company to give not only some have the equilibrium, while the rest of the report be prepared by the auditors. Others give other than statements of cash flows. These problems require the need for the system analyst in an organization called. These professionals have a responsibility to consider the need of the organization on issues of electronic data processing. They do it with the words of a feasibility study to be facilitated through communication with senior financial executives of the organization.
Electronic data processing has its advantages and disadvantages of the business and professionals. Following are some advantages and disadvantages that can be observed in the daily life of our company.
BenefitsQuick and service time of a financial institution or banks in terms of manual data processing, are used only formally even harder to get your tax savings or the stock received banque.Records pensioners of the civil service were not easily accessible problems in the past and caused a lot of seniors who are in government for many years, which had served as in the modern electronic data processing of these services very quickly and made pensioners from the old souffrances.Performance in the production and related work by automated systems are improved, are that the inventory purchases and inventory control so there is no money in unnecessary idling pick ups.
DisadvantagesThe electronic data processing reduces jobs for accountants, are represented as tasks that could have happened to run by five people. acquired, for example when entering a transaction in which purchases with cash or credit card were the stock will be automatically adjusted, total purchases and bank account will be adjusted when it is paid in cash will also be adjusted, the total amount of creditors are set when the purchase on credit, and finally, the financial statements as a balance sheet and statement of financial position and results when the purchase was in cash automatically adjusted. These are just some of the activities to be performed after a simple registration of the transaction in the system by a professional comptable.Traitement electronic data requires more know-how and a lot of money to be invested in IT that the organization is not possible to work correctement.Il providing electronic data processing and use without a computer, where it can no regular power supply
After reviewing the advantages and disadvantages of electronic data processing in the modern business world a little today about the challenges for organizations and systems. It is an undisputed fact that the electronic data processing is now popular with the majority of business associations won. However, some problems before and after the organization decided to focus away from manual to electronic data processing. The first thing to do by the organization to ensure that its own ICT policy, management, replacement and maintenance of computers and peripherals, addresses, and last but has larger and the access policy to focus on access codes and passwords . There is talk about a cure or answer to the challenge of security risks that I wanted. Yes, safety is a big or a huge opponent of the electronic data processing. As some people to malicious programs like viruses in the system of electronic data processing and destruction of important files can register known or even run programs, even disloyal others can access to remove records and or modify records about their interests and now a loss for society. There are many risks, but let me stop here.
For many years
audit carried out in open environments and as a result of the audit with accounting tools made to save as manual work, which leaves the listener used to his job. Control risk in the treatment manual and electronic processing are not the same, that the use of modern techniques of risk assessment and testing are necessary. to be related Apart from the use of computer-based technologies on the market, following the introduction of electronic data processing put in many organizations.
EDP AUDIT AND ENVIRONMENTALSense of electronic data processing ( IT)
auditing computer information system environment or CIS electronic data processing exists when an organization uses one or more computer (s) of any kind and size for the preparation of financial statements. While there are changes in the overall objective and scope of the examination within the CIS or computer science are, the examiner should the impact of computers on (a) treatment, (b) storage (c) recovery, and (d) the disclosure of financial information.
Sub electronic data processing system, it is practically eliminate errors such as arithmetic errors, display errors, total, etc. However, any programming errors cause serious errors and false results.
basic functionality of the computing environment
Here are the basic features of the CIS or the environment:
(a) the infrastructure
hardware.
hardware consists of CPU (central processing unit), monitor, printer, mouse and keyboard, we can build on them differently, egI Personal Computer (PC) of a person and leads to process data a single machine: .. ii Local Area Network (LAN), where there is a connection between two or more computers in a specific place small (eg Desktop) to save the program and all associated files centrally iii remote PC, the location of the PCs in different locations or cities, but are interconnected. iv treatment. distributed computing, where a central computer, the main and the subsidiary processes in distributed processors instead. v. Electronic Data Interchange (EDI), making it there is a transfer of structured data without manual verification on individual computers, sparing them the need for the data itself “
Operating systems
This can process windows, Microsoft (MS) Office, the Disk Operating System (DOS) LUNUX, etc. You monitor the transmission of data between the processor of the computer and diskettes and managing files and programs onto discs.
Application Soft ware
This is a set of computer programs, such as TALLY, MYOB, Simply Accounting, etc. Quicken particularly accounting software development, including the operating system, compiler, packages, and user programs that allow a data center for special operations.
(b) The lack of track records and transactions
Guide to the accounts, there is a trail of transactions. First comes a document (vouchers, invoices, etc.) transaction. Then there is the entrance to the transaction in the account of the original books (newspapers, magazines, etc.) Then there was an agreement on the most important books (general ledger, etc.). Finally, the net effect of the transaction reflected in the financial statements .
EDP, on the other hand, there is often no transaction -. authoring, and no visible trace of the transaction, for example, if it can direct input of information into the computer so they do not all physical input documents, such as well, invoice, etc., and no trace of the transaction. For example, in an electronic system, seller directly power sales into the computer without evidence, or there may be some transactions through the system to program commands such as reminders to be generated based Customershave failed to consider, therefore, as the electronic data processing can affect the process of audit review, it should consider the availability of data
(a) entry into the computer
( b stored) in the files and
(c) the creation of the output.
The data can be consulted in the machine -. a readable and only for a short period of time
In some cases, the examiner at the request of the customer to keep this data under consideration. The absence of visible inputs increases the risk of errors remain hidden, which is in direct contradiction with manual accounting records, where such errors are visible due to the presence the physical input documents.
(c) the amount of information processing in a few hands.
In the computer environment, but few people all the information. By the drawbacks, this is the manual system are based there division of labor among the same people several. Accordingly, controlled use of the separation of the various functions may be absent or ineffective. Other people to achieve the operation of the system of electronic data processing expertise with respect to data sources and methods of treatment, and the production and distribution of production. Sometimes you can work your sole control use of electronic data processing, the data or the program itself, to commit fraud is change.
likelihood of such fraud is higher in organizations with systems such as Electronic Data Interchange “where almost all data and programs are available at headquarters or a few sites.
(d) The possibility of error.
Although
electronic data processing reduces the risk of human errors, such as computational errors, programming errors can lead to improper treatment of all transactions. In addition, in the absence of continuous monitoring by observing the error in the manual system, errors in processing electronic data can be hidden for long. There is also the chance of mistakes when persons without authorization to access data, changes in the stored data.
(e ) increased management control and effective monitoring.
to review electronic data processing facilities management and monitoring to enable the activities of the company. C ‘because it has effectively a system of internal control electronic by several analysis tools which data processing generated.
The examiner may make even computerized verification tools to carry out the audit review more efficient. In fact, the electronic data processing software and hardware orders, a feature not included in the manual system.
SERVICES
computer systems AUDIT
(a) computer systems are more reliable.
/ p A
Computer> work as planned. If the process was to be considered taking into account all possible circumstances, the computer is more reliable and consistent than the manual system. In the manual system, the examiner, a detailed investigation of a series of transactions, errors, and behavior was still some may still unknown. Not so in the case of electronic data processing. It is sufficient to determine whether effective internal control over programs and, where appropriate, review of certain transactions are significant or guarantee unusual. accurate accounting
(b ) can computer system integrated control procedures
built -. is in automatic control methods, systems of electronic data processing, show some unusual or significant transactions such as late payments, stocks fell below prescribed levels, etc. In the manual system to double the adjuster their efforts in that direction. The requirement of “password” in the electronic data processing is the data secure from access by unauthorized persons. In the manual system, there is always the possibility of “unauthorized access to accounts.
(c) Automatic update of all relevant computer files in a single transaction.
power of a single transaction in the computer updates its records in all files. For example, the purchase of raw materials from a provider will update to the supplier’s accounts, purchasing and inventory. In the manual system, different people will need to update the relevant records in their care. Likewise, with suitable programming, computer systems can perform some tasks without human intervention. For example, production of monthly accounts for the credit customers no longer for manual preparation of financial statements in individual cases.
procedures required to review
IT / IEC ENVIRONMENTAL
processed in the handling of information on computers, the examiner may adopt a traditional approach of assuming that information processing under the manual system was not of computers. The only difference is that he realized the object of his review of the test is a computer printout, not change the books by hand. The result is that they do not sufficiently change its audit program and runs and runs as before. However, this approach has some inherent weaknesses. First, it is not possible to assess the internal control system on the computer, which can lead to more errors and fraud in the manual system. Second, the audience can spend too long on certain business activities such as monitoring and display of the transaction can not avoid, when an effective internal control exists. Thirdly, it ignores the benefits of the costs and risks which might be available to the auditor, it would take appropriate techniques, the test by computer.
(b) examination in the IT environment.
In this case, the, the examiner should the internal controls assessed in terms of data processing and other electronic controls, and thus make extensive use of computer (s) to determine the nature, timing and degree of compliance with the audit procedures or material. But what it needs to have sufficient knowledge of computer systems to plan, run, monitor and review the work of others. But he can acquire the necessary expertise or hire people suitable for the job.
how auditors discuss the audit
IT environment
(a) the reliability of financial reporting and assessment of .. Internal Control Systems
The Examiner notes how the accounting and internal control of the company should be reliable for this purpose, he must check the following:
(i) There are no restrictions on the access to electronic data processing
This restriction should be in terms of access to files on the device, programs and data. A computer room should be in the custody of an officer. He alone has to manage the program files and data. In addition, it has to be available only to authorized persons shall do so, and a recording of the broadcast program and data files. Another limitation is by giving the password (PIN) to authorized users computer. Yet another restriction can be given different rights for different users, for example, some can not read files, read and modify other data files, some as the program files.
The auditor should also see if there are suitable methods of control engineering. For example, almost all of the computers has been started to verify the proper functioning of the various components and peripherals. Otherwise, a message on the screen. If the computer system has parity check to be seen if, due to causes such as dirt or moisture, there is a disturbance in the data transfer between devices O. This error can result in loss or corruption of data, including computer system, be corrected by a new attempt for transmission. The computer system with a double check by reading the data, put it on a hard drive and writes media boxes, error shows in the process.
(ii) Are there plans for rapid detection and correction of errors
error may occur when entering data, treatment, or by a defect in the computer system . Here provide the auditors that the transactions are processed by the computer should have duly authorized their inclusion in the computer files correct, there is no more loss, duplication, or inappropriate change in them, and there are real and further erroneous transactions He should also see that there should be a proper use of master files, transaction and program files, the examiner checked the error -.. The correction procedure, because it shows the proper functioning of the internal control system
.
(iii) an agreement to acquire the system if itis the case of electronic data processing broken systems due to power failure or mechanical failure, should be appropriate arrangements for the resumption of the system without that the entries or records.
(iv) is the electronic data processing – Output generates accurate and complete
correctness and completeness of production will depend on the accuracy and completeness of the data in the computer and its treatment application. Entry and adequate controls. Recalculation of the numbers and compare the output with hand-written notes are other methods for this purpose. The auditor should see that it provide restrictions on access to treatment of these data, that production produces accurate and complete, and that only authorized persons to receive on time.
(v) Are there plans adequate security for stored data
due to wrong treatment or by natural or artificial, it may be the loss or destruction of stored data. The auditor should see that there are safety devices to protect information stored in this case. In this case, the auditor should also see if there are backup and recovery. These methods include keeping copies of programs and data to a different location than where the computer. Most applications have a building system of maintaining two versions of the computer file, the current and the previous one. The current version contains the changes during the last change made, and the previous version of pre-change. Some computer systems have the same three cases, the current, above the previous version and the previous version to the previous version.
(vi) The code source application software in a safe place?.
The examiner ensure that the source code of the application software under guard of a manager should. There must be access by a duly authorized person (s) and maintain a register of people have access to. “Inherent and control”
(b) review of risks.
The auditor should assess the risks and control large financial irregularities.
Risk assessment and internal control. Riskin an environment of electronic data processing may occur for the following:
It can happen to any appropriate procedures for change control program or système.Matériel or faulty software can inaperçus. Pendant can transfer it from loss or damage données.Ordinateurs is easily, and program files are available to unauthorized users can access autorisé.Les fully in the review and approval to ensure their reasonableness and responsibility to obtain the permit.
(c) the effects of inherent and control .and the risk control in the field of electronic data processing can completely effect on all accounts, or the effect of specific account
:.
(I) risk does not affect all accounts
it of deficiencies in program development, support conservation flexible system, electronic data processing, physical security and access control result, special programs utility privilege. These errors affect all systems of application processed in the computer and cause material misstatements in the financial statements. Specifically,
(ii) at risk:
the special risks can to fraud and error as the summary of recent cases has lead to the inherent risks and control LED:
a) The Dodgers Trolley case-control deficiencies in the accounting transaction cycle allowed for an Accounting Manager to hundreds of thousands of dollars to redirect
b) Goodner Brothers, Inc. -. Employee This tire wholesaler was in serious financial difficulties. To remedy this problem, the staff took the weakness of internal controls use of the employer to steal a large inventory, which he then sold to third parties.
c) is stored Troberg important but often neglected internal controls to ensure “compliance with applicable laws and regulations,” The management of the company has violated the provisions of national law imposing a heavy toll on society money in the process.Technical Audit
(a) objectives of the test remains the same if the Data processing is manual or computerized .
In the design of audit procedures in an environment of electronic data processing, should bear the examiner in mind two things: ensure
1) adequate compliance and substantive procedures and data are accurate and complete
2) Apply professional skepticism by cross checking of documents, the reconciliation between the primary and secondary books, questions and critical evaluation of evidence. may adopt procedures for this purpose manually assisted on the technical examination of computer, or a combination of both.
Audit “round” or “by” computer
In an environment of electronic data processing, assign an auditor to perform procedures compliance and substantive testing of transactions with the computer, or without them . If it is checked in the traditional way by examining the data and information by the customer’s computer system-generated revenue, it will be around to check on the computer. In this case, the examiner relies exclusively on data and printed information to him by the client.
On the other hand, if the examiner himself the computer to perform compliance and substantive testing procedures used, it will be considered by the computer. However, this requires the auditor and / or its employees have adequate knowledge of electronic data processing.
(b) Computer -. Verification techniques
This can as follows:
1 . test data:
You have a set of test data by the auditors themselves were prepared, or use of such data developed by the internal audit of the customer. Test data include transactions of all types specifically to test for a program or client programs available.
Commodity Trading – Part 2: Modern Exchanges
0commodity trading
The second in a multi-part series on commodity trading. Modern commodity exchanges and futures are detailed. For more information, be sure to check out www.econoutlook.net
Modern systems can produce huge savings of debt management
0consumer and personal debt is perhaps the number one problem today in most American families. The reasons linked to the huge increase in debt to the new socio-economic models suggest that we are a nation obsessed with the lifestyle and consumption.
America has always been a nation of consumers and the American people have always been one of the highest living standards in the world has enjoyed. Something else has contributed to this national crisis.
What has changed in recent decades is that we have a very sophisticated technology, designed to buy debt. Purchase of bonds is closer to your cell phone or a personal computer and can be performed in a few seconds.
However, we have more slowly in the development of these sophisticated systems to manage this demand at the level of consumers. We have been victims of a technology gap between the acquisition debt and debt reduction.
> Or, more accurately, your creditors to manage your debts for you and they are naturally in a way that is most favorable to them, is not necessarily to be administered.
consumer level, we tend to hold our debt separate, divided and isolated into separate accounts, which makes it impossible, until recently, the strategic management of that debt.
automated debt management were required by banks, insurance companies and other institutions, to maintain cash reserves have been used, but until recently were not available to consumers because the cost of development and support of these specialized systems management cash flow .
many people in other parts of the world to reduce access to various systems had debts. In this country there is a relatively new opportunity for a systematic management of our personal and consumer debt. We now have access to affordable technology to manage the debt, rather than managing us.
Let me explain first what is a modern system of debt management is not there.
This is not a set of instructions or “How …” Book from a variety do from sources well-meaning, that collect too much weight on evidence teaches us, “stop spending so much money,” or “cut off our credit cards. This is not a metamorphosis of the system that assigns difficulty our daily consumption.
This is not a static chart or a plan of debt reduction that does not consider our daily personal finances.
It is not the refinancing of existing debt or consolidation of small short-term debt in greater long-term debt. This is not a self administered or pre-calculated plan to accelerate the repayment. This is not to negotiate with your creditors or other means to reduce debt, that payment of the legitimate demand, dollar for dollar “‘avoids. / P>
the model of the Bank, and modern systems of debt management are integrated into your daily and monthly financial transactions. They are dynamic. Modern systems of debt management have the ability to analyze and manage all your debt including your mortgage, side by side in a single environment and strategic adjustments to your cash daily or monthly basis.
A modern system of debt management is planned for the liquidity. The liquidity is the debt that the water is for the fire. If you have an abundance of cash, you can be out of debt in a short time. On the other hand, if you have a lack of liquidity, it may take decades to get out of debt.
A modern system of debt management focuses on ways to raise cash and current efforts to develop their full potential future liquidity. He uses the money to systematically eliminate the debt. It can develop multiple sources of liquidity and the use of the liquidity of the debt as leverage against.
because of the importance of liquidity, debt management is equipped with modern and efficient systems of debt reduction in full with your current monthly income and cash flow cost integrated. This does not mean that the increase in your income and / or reduce your costs is a necessary condition. > A system of good debt management uses the existing cash flow, not necessarily change.
A modern system of debt management is to monitor relatively painless and require no significant changes in your spending habits into force. It may be adjusted dynamically to repay debts, to maintain a certain level of debt, but bear the costs or reduce fund a retirement or college savings for retirement.
today are sophisticated, versatile and not an efficient system of debt management cheap. But in view of future interest rate savings, they increase the cost of the system in the first months of use and over time to achieve the interest savings in excess of total debt present and future.
an inexpensive system is or do-it-yourself probably not a good alternative. While you may be able to redirect some money and do good, you would not be able to mathematical algorithms embedded prompts a sophisticated system to produce the best results again.
current financing plan worth ‘weight of the paper should address both sides of the balance sheet and a modern system of debt management.
David Haslett is Senior Director of the National Freedom Equity Group. To find out how modern technology in the debt-management can help you repay your mortgage and other debts, go to:>
Debt Management
Enhance your costing software system. (includes related articles on costing software options and Bremer Manufacturing Co.)(Computers in the Foundry): An article from: Modern Casting
01 year ago
by admin
in Accounting
This digital document is an article from Modern Casting, published by American Foundrymen’s Society, Inc. on August 1, 1998. The length of the article is 2727 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.
Citation Details
Title: Enhance your costing software system. (includes related articles on costing software options and Bremer Manufacturing Co.)(Computers in the Foundry)
Author: John F. Brockschlager
Publication: Modern Casting (Magazine/Journal)
Date: August 1, 1998
Publisher: American Foundrymen’s Society, Inc.
Volume: v88 Issue: n8 Page: p46(3)
Distributed by Thomson Gale
List Price: $ 5.95
Price: $ 5.95
Modern Auditing: Assurance Services and the Integrity of Financial Reporting
51 year ago
by admin
in Accounting
Auditing counts!
With recent incidents at WorldCom, Enron, Xerox, Tyco, and other companies, auditing has never been so important. Auditing is perhaps our single best defense in ensuring the integrity of our financial reporting system.
That’s why this new Eighth Edition of Boynton and Johnson’s Modern Auditing focuses on decision making and the critical role auditors play in providing assurance about the integrity of the financial reporting system. Known for its clear writing and accessibility, this text provides comprehensive and integrated coverage of current developments in the environment, standards, and methodology of auditing.
Features
* Real-world examples relate issues discussed in the chapter to ethics, audit decision making, and the integrity of the financial reporting system.
* Focus on Audit Decisions sections highlight key factors that influence an auditor’s decisions.
* Includes discussion of the role of the Public Company Accounting Oversight Board (PCAOB) Auditing Standards, and a chapter feature highlights PCAOB standards that differ from Generally Accepted Auditing Standards for private companies.
* Expanded case material related to the integrated audit case (Mt. Hood Furniture) provides a variety of databases that allow students to utilize generalized audit software (IDEA) to accomplish various audit tasks. Multiple databases allow the case to be reused with different data from term to term.
* A flowchart style chapter preview begins each chapter.
* Chapter summaries reinforce important audit decisions included in the chapter.
* End-of-chapter material organized by audit decisions provides a clear link between audit decisions discussed in each chapter and the problem material.
Rating: 
(out of 7 reviews)
Price: $ 44.90
The Modern Necessity of Save the Date Cards
0Save the Date Cards is preliminary predecessors to your important event, such as a wedding, anniversary party, or family Christmas celebration. They?re typically used when the invitees simply must be in attendance, such as when extended families from both sides have to be present at a wedding. Because the chances of all those in-laws and relatives living within the same city, let alone the same state, is highly unlikely, save the date cards act as little forerunners to help the guests prepare for the big day. They?re used especially with destination weddings when the wedding may be up to 6 to 12 months away.
Even though save the date cards grew out of weddings, it?s common to see them in use by people, corporations, and non-profits for ceremonies, grand openings, cocktail parties, gala events, art shows, and other public events endemic to society. Save the date cards have no inherent reservation for weddings any longer. It?s extremely appropriate to use them with any event. It was thought, in the past, that because weddings were so significant, save the date announcements should be used them for especially. However, with the importance of social events being not too far behind, other people and formats began adopting save the date announcements.
Save the date cards are extremely necessary for weddings, under any circumstances, even when all the guests live close by. The reason is that you have plan for the ?edge case? scenario. Since it?s vitally important that every single family member be in attendance, you have to send save the date cards to allow for ?what if?, extenuating circumstances. Sometimes, certain family members work schedules, work-related events, children?s events, birthday parties, special occasions, and other events, especially planned vacation time, accidentally coincide with your wedding. With save the date cards, the family members can re-arrange their plans to be able to attend your wedding. Engineers, planners, and mathematicians, especially any kind of perfectionist, will be perfectly inclined toward save the date cards. They virtually guarantee the presence of your entire guest list. That brings up another good point. It?s critical to compile the entire guest list before sending out the save the date cards because some guests will be inadvertently missed if you don?t do this. It just wouldn?t do to have mismatches on the guest list of those who received wedding invitations and save the date cards versus that group that just received the actual invitations. That would defeat the purpose of total guest list enclosure.
Destination weddings, cities with busy tourist seasons hogging up all the hotel rooms, and small towns without enough travel accommodations all benefit from save the date cards because guests are able to make cheap travel plans, get cheap reservations, and ascertain all the elements of the event way ahead of time.
Save the date cards are a vital component of any modern wedding.
Pellet Fireplace Inserts – The Modern Way to Have a Fireplace
0Having a fireplace at home provides a certain warmth and coziness that simple dim lights and heater cannot provide. Fire burning in a fireplace provides us a sense of romance as well as a very literal sense of warmth and heat. If you ask people whether they would like to have their very own fireplace in the home, most would say yes. But the problem lies not with wants but with our capacity to have traditional fireplaces. For most people having an authentic wood burning fireplace just takes up too much space, too much money to construct, and too much time to maintain. Because of these reasons, various type of fireplace inserts have been born.
Once such example of modern-day fireplace is pellet fireplace inserts and stoves. The main difference lies in structure as well as in the type of fuel used for burning. When it comes to the form and structure, pellet fireplace inserts can complement an existing fireplace or it can take the place of one. Fireplace stoves, for instance, can stand alone by themselves bringing you fire and warmth in any room. When it comes to the source of fuel, pellets are used. These pellets are much shaped like rabbit food pellets but are made from recycled saw dust, wood shavings, peanut, corn and walnut shells â all of which are ground to fine power then compressed.
Many people now make use of pellet fireplace inserts as they are not only clean but also very convenient. Compared to the traditional wood burning fireplaces, pellet fireplace inserts burn more efficiently and produce cleaner smoke. The moisture content of these fireplace pellets are low so they can burn very well, providing you more controlled warmth. You can also expect these pellet fireplaces and stoves to release much less smoke and soot to the point that they do not require having a chimney at all. For this reason too, such fireplace inserts are much easier to clean and maintain than the traditional wood or log fireplaces and stoves.
Pellet fireplace inserts also make use of a kind of mechanism that provides automatic stoking. This means that once the pellets ignite, you need not maintain the fire nor do you have to control it. The automatic fire stoking mechanism allows you and your family to have a controlled fire that does not go out unexpectedly nor one that blazes up too much heat. Some models even have their own thermostat that temperature control is much easier.
Having your own fireplace in the house does not have to be a far-off dream. You also do not need to be wealthy to own a romantic fireplace as they can now be bought and ordered at reasonable prices. When it comes to style and design, you will also be glad to know that there are many types of pellet fireplace inserts that can easily fit in any house theme. With such fireplace inserts, you can be guaranteed not only of warmth, romance, relaxation but also a very convenient and practical way to have a fireplace.
Stock and Bond Trading Powers Modern Asset Allocation
0For most individual investors, trading is approached in a totally speculative manner. Stock trading, in its more popular forms (Day Trading, Swing Trading, etc. ) includes none of the elements that a conservative investment strategy would contain: little if any attention is given to the Quality of the equities selected; Diversification is determined by chance alone; no attempt is made to develop an increasing and dependable stream of Income. But stock trading by individual investors doesn’t deserve quite as bad a “rep” as it has earned. After all, its very foundation is profit taking, probably the most important and most often neglected of the activities required for successful investment management. Unfortunately for most equity traders, loss taking is a more common occurrence.
Bond, and other income security trading is generally avoided by most non-professionals. Obviously, it takes more investment capital to establish positions in corporate and municipal bonds, real estate, and government securities than it does in equities, and the volatility that traders thrive upon is just not a standard feature of the mundane world of income investing. Surprisingly, most investment professionals avoid a more exciting approach to income investing that is actually safer for investors and less inflexible in the face of changing interest rate expectations. Certainly, Wall Street financial institutions pressure their representatives to push individual new issues and/or investment products, but I think that the market value fixation that stretches from Wall Street to Main Street is the real culprit. Income securities need to be assigned a value that recognizes the safety of their income production and market value changes should only to be viewed as opportunities for increasing yield or taking rare, but wonderful, profits.
Consequently, most trading is done in an equity only environment that is too speculative for most mature (in whatever sense you choose) investors. But this is not the way it needs to be. Since stock prices are likely to remain volatile in the short run and cyclical in the long run, there will always be opportunities for profit taking. Similarly, there are no rules against taking advantage of the cyclical nature of interest-rate-sensitive security prices. Trading is the world’s oldest form of commercial activity, and it is unfortunate that it is treated with such disrespect by our dysfunctional tax code. It is even more unfortunate that it is looked at askance by client attorneys and brokerage firm compliance officers. . . masters of hindsight that they are.
Trading does not have to be done quickly to be productive, and it doesn’t have to focus on higher risk securities to be profitable. And perhaps most importantly, it doesn’t have to avoid the interest-rate-sensitive income securities that are so important to the long-term success of any true investment portfolio. Once a trader/speculator is weaned off the gambling mentality that brought him to the shock market in the first place, he can apply his trading skills to investing and to portfolio management. The transition from trader/speculator to trader/investor requires some education. . . education that generally cannot be obtained from product salespersons.
Step one is to gain an appreciation of the power of Asset Allocation. Asset Allocation is the process of dividing the portfolio into two conceptual securities buckets. The primary purpose of the equity bucket is to produce growth in the form of realized capital gains. The other bucket contains securities whose primary purpose is to produce some form of regular income. . . dividends, interest, rents, royalties, etc. The percentage allocated to each is a function of a short list of personal facts, concerns, goals, and objectives. The cost basis of the securities must be used in all asset allocation calculations. Asset allocation itself is a portfolio planning exercise that is based on the purpose of the securities to be purchased, and long term in nature. It should not be “rebalanced” or altered due to current market conditions or suppositions about the future.
Market values are used in the selection process that identifies potential trading candidates and as the trigger mechanism for profit taking decisions. Cash from all income sources is always destined for one bucket or the other, depending on the cost-based asset allocation formula. Selecting equities must first be fundamental, then technical. . . quality first, and market price second. My trading experience is that higher quality companies purchased at a 20% or more discount from the 52-week high, with a profit target of approximately 10%, is a very manageable approach. The proceeds find their way back into the “smart cash” pot for asset allocation according to formula. There will be times when smart cash will grow quickly while the list of new trading candidates shrinks, but when trading candidates are all over the place, smart cash can only be replenished with income produced by both securities buckets. Thus, insistence upon some form of income from all securities owned makes enormous sense.
What about trading the income bucket securities? Enter the managed closed-end income fund (CEF), as tradable as any common stock, and in a surprising variety of income producing specialties ranging from preferred stocks to royalty trusts, treasuries to municipals, and REITs to mortgages. No more worries about liquidity and hidden markups. No more cash flow positioning or laddering of maturities. And best of all, no more calls of your highest yielding paper when interest rates fall. Instead, you are taking capital gains, compounding your yield, and paying your dues to the equity bucket with every transaction. And when interest rates move back up. . . you’ll have the luxury of reducing your cost basis by adding additional shares. Of course its magic. . . that’s what we do here on Wall Street!
