facebook stock – – Tradingsim

When investors are choosing between stocks vs. ETF’s, QQQ(NASDAQ:QQQ) can be an excellent ETF(exchange-traded fund) choice for new investors. In this TradingSim article, I’ll explain why QQQ stock can be a great addition to investors’ portfolios. This article will also explain what top 10 holdings in QQQ are the best for investors who want to start early investing.

What is QQQ stock?

The Invesco QQQ is a popular ETF that tracks the NASDAQ 100, which is full of tech growth stocks. If investors want to own many tech stocks at once, they can choose QQQ stock that holds many tech stocks. The QQQ stock has $120 billion in assets.

What is TQQQ stock?

In addition to QQQ stock, investors can buy TQQQ stock (NASDAQ:TQQQ). The leveraged ETF uses debt and derivatives to increase the returns of the NASDAQ 100. When investors use leverage to track the TQQQ, they can use borrowed capital to buy assets to make the price movement impact grow.

For example, the TQQQ tracks the NASDAQ 100. If the NASDAQ 100 moves up 1%, a regular ETF moves up 1%. However, with a leveraged ETF like TQQQ, a trader can have a 2 or 3% gain if the NASDAQ 100 rises.

Financial expert David Kreinces from ETF Portfolio Management notes the strong performance history of the TQQQ stock.

“The historical performance data strongly favors the Nasdaq-100 3x (TQQQ) for core equity exposure. The unleveraged Nasdaq-100 (QQQ) appears to be the “next-generation S&P 500” and adding moderate leverage can be priceless at times. “In fact, TQQQ returned 80x your money over the past 10-years, while the S&P 500 delivered just under 3x, or 285% in total return,” wrote Kriences.

Kriences advocates that investors who want to choose high-risk ETF’s can pick TQQQ.

“Past performance can never guarantee future results, but a continuation of the TQQQ growth rate above would turn $500 into $2 million within 19 years. Even if the TQQQ rate of return falls by half, to 28% annualized, a $500 investment could still reach $2 million in 34 years. Given this extraordinary long-term growth potential, we named TQQQ the ‘American Dream ETF, ” wrote Kreinces.

ProShares advise caution about TQQQ

While Kreinces says investors should buy TQQQ, buying leveraged ETF’s can be risky for investors. Even the TQQQ issuer ProShares warns traders that keeping the TQQQ stock too long can increase risk.

“Due to the compounding of daily returns, ProShares’ returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. These effects may be more pronounced in funds with larger or inverse multiples and in funds with volatile benchmarks,” noted ProShares.

While investing in TQQQ can have a huge payoff, traders should still exercise caution when buying the ETF with leverage.

Why should investors buy QQQ stock to track the NASDAQ 100?

If investors are interested in QQQ stock, they’re making a good choice since it follows the NASDAQ 100. The NASDAQ 100 has some advantages over the Dow Jones. While the Dow Jones only has 30 stocks, the NASDAQ 100 has three times as many stocks in its index. As the Dow Jones changes the stocks in its index, the NASDAQ 100 doesn’t have human input into which stocks are in that index.

In addition to being more rules-based, the NASDAQ 100 is outperforming the Dow Jones. While the Dow Jones had a volatile year, the NASDAQ 100 soared. As Sarah Ponzcek noted in Bloomberg, large-cap tech stocks are a strong buy.

“Last year, when the economy and earnings were booming, the Nasdaq 100 Index put together its best rally in a decade, rising 38%. In 2020, amid a raging recession and plunge in profits, it’s doing a little less well: up 37%,” wrote Ponzcek.

“Megacap tech firms have emerged as unshakable market leaders. Adored for their sturdy balance sheets and business models that not only hold up in a lock-downs but excel, the Nasdaq 100’s performance is making history by the day,” added Ponzcek.

Here are 10 of QQQ’s top tech holdings that are part of the ETF.

1. Amazon

Amazon (NASDAQ:AMZN) is a QQQ holding that had an incredible last quarter. The e-commerce behemoth reaped $89 billion in profits during the nationwide quarantine. As people stayed home, they ordered from the company’s website in record numbers. Because of the massive increase in Amazon’s revenue, CEO Jeff Bezos’ net worth ballooned to $200 billion. During the Q2 2020 earnings report, Bezos spoke about the results and how the company was contributing to keep workers safe during the COVID-19 pandemic.

“As expected, we spent over $4 billion on incremental COVID-19-related costs in the quarter to help keep employees safe and deliver products to customers in this time of high demand—purchasing personal protective equipment, increasing cleaning of our facilities, following new safety process paths, adding new backup family care benefits, and paying a special thank you bonus of over $500 million to front-line employees and delivery partners,” said Bezos.

Bezos tried to quell the controversy about Amazon having temporary, part-time workers by speaking about the full-time employees the company added.

“We’ve created over 175,000 new jobs since March and are in the process of bringing 125,000 of these employees into regular, full-time positions,” said Bezos.

In addition, Bezos touted how much money Amazon pumped in to the economy.

“Third-party sales again grew faster this quarter than Amazon’s first-party sales. Lastly, even in this unpredictable time, we injected significant money into the economy this quarter, investing over $9 billion in capital projects, including fulfillment, transportation, and AWS [Amazon Web Services],” said Bezos.

Amazon wants to increase empire with wearables

With its dominance in e-commerce, Amazon wants to get into the $50 billion fitness tracker market. Amazon is launching its Halo device to sell to consumers. Halo’s vice-president, Melissa Cha, spoke about the research that went into developing the Halo wearable.

“We did a global search to find the best experts. We found cardiologists, fitness experts, and people who had spent their careers researching sleep and wellness,” said Cha.

Analysts say Amazon is a top QQQ holding

Because of its meteoric growth, Daniel Salmon, an analyst at BMO Capital Markets rates Amazon a buy. He said that Amazon’s “long-term opportunity is stronger than ever, and we also continue to see outperformance over the next 12 months.”

In addition to BMO Capital, Wedbush is bullish on the e-commerce stock. Wedbush analyst Michael Pachter wrote in a note to clients the consumer demand led to a short-term strain on Amazon’s supply.

“Consumers are clearly spending more of their time and money shopping online in order to avoid crowds, driving the supply shortages and delivery delays on non-essential items that Amazon has disclosed in [April],” wrote Pachter.

Canaccord’s Maria Ripps said the continued increase in online shopping should help Amazon’s stock in the long term.

“Over the long-term, we[Canaccord] anticipate that the COVID-19 pandemic will accelerate existing eCommerce trends, benefitting platforms such as Amazon,” said Ripps.

Ripps also sees growth from its Amazon Web Services.

“For AWS, we [Conaccord] see revenue growing 36% year-over-year (vs. 34% in Q4) as demand for cloud computing also spiked in Q1 due to COVID-19, leading to pricing power that should drive AWS operating margin back to 27% (vs. ~26% in full year 2019),” said Ripps.

Amazon is a high-performing part of QQQ’s stock holdings.

2. Google

Google parent Alphabet (NASDAQ:GOOG) is another profitable QQQ holding. Google’s Q2 2020 earnings slightly dipped from last year with $38 billion in revenue. However, Google is still performing well overall. CEO Sundar Pichai spoke about how more people used Google services more during the quarantine.

“We’re working to help people, businesses and communities in these uncertain times. As people increasingly turn to online services, our platforms — from Cloud to Google Play to YouTube — are helping our partners provide important services and support their businesses,” said Pichai.

Google stock a tech stock that’s profitable in QQQ stock

Ruth Porat, Google’s chief financial officer, also spoke about Google’s success with cloud technology.

“In the second quarter our total revenues were $38.3B, driven by gradual improvement in our ads business and strong growth in Google Cloud and Other Revenues. We continue to navigate through a difficult global economic environment,” said Porat.

Google a buy to some analysts

Financial expert Maria Ripps thinks that despite a decline in ad revenue, Ripps says the stock is a buy.

“Somewhat offsetting these advertising trends, we also see COVID-19 likely driving heightened demand for cloud computing as some online businesses see a surge in demand from increased time spent at home while others are forced to migrate systems and employees to remote operations,” said Ripps.

Google is a strong holding in QQQ’s ETF.

3. Apple

In addition to Google, Apple (NASDAQ:AAPL) is a QQQ top holding. The tech giant’s Q3 2020 earnings report surpassed expectations with $59.7 billion in revenue.

CEO Tim Cook spoke about the company’s results.

“Our June quarter performance was strong evidence of Apple’s ability to innovate and execute during challenging times. The record business results drove our active installed base of devices to an all-time high in all of our geographic segments and all major product categories. We grew EPS by 18% and generated operating cash flow of $16.3 billion during the quarter, a June quarter record for both metrics,” said Cook.

Cook also spoke about Apple’s efforts to contribute its profits to social change measures.

“This is a challenging moment for our communities, and, from Apple’s new $100 million Racial Equity and Justice Initiative to a new commitment to be carbon neutral by 2030, we’re living the principle that what we make and do should create opportunity and leave the world better than we found it,” said Cook.

Apple stock split may help QQQ stock grow

Apple recently announced a four-for-one stock split to make the stock more affordable to investors.

“The Board of Directors has also approved a four-for-one stock split to make the stock more accessible to a broader base of investors. Each Apple shareholder of record at the close of business on August 24, 2020, will receive three additional shares for every share held on the record date, and trading will begin on a split-adjusted basis on August 31, 2020,” said Apple in a statement.

Morgan Stanley’s Katy Hubert spoke about the Apple stock split.

“In the 3 and 6 months following past stock split, Apple shares have also outperformed the S&P 500, albeit by a lesser degree – by a median of 700bps and 610bps, respectively (1). The most significant post-split outperformance came in C2H14 after the 7-for-1 stock split (2), although this period also coincided with strong outperformance of the iPhone 6,” said Hubert.

Hubert also noted that the stock split may not be as influential on Apple stock as a future iPhone. However, she sees that the stock split will help the company’s stock.

“Nevertheless, we don’t believe the stock-split will be a “sell the news” type of event among institutional investors given the increasing expectations for the fall iPhone launch, and therefore the increase in retail demand following Monday’s stock split is more likely to be a positive catalyst for Apple shares, in our view,” said Hubert.

“Following Apple’s 4-for-1 stock split, we’d expect near-term retail demand for Apple shares to increase, especially given the current market environment (retail traders have accounted for up to 25% of stock market activity during the pandemic vs. 10% in 2019, although we’d note that retail investors have already been able to buy fractional shares, so the overall retail impact may not be as overwhelming as some perceive,” added Hubert.

Apple’s stock soared 30% after the stock split announcement. In QQQ stock, Apple is a valuable holding.

4. Tesla a key QQQ stock holding

Tesla (NASDAQ:TSLA) is a valuable holding in QQQ stock. The company has become the most valuable car corporation worth $209 billion.

Tesla has strong Q2 2020 earnings report

In its latest revenue report, CEO Elon Musk spoke about the company’s $6 billion in revenue.

“First of all, I’d like to thank the Tesla team for exceptional execution in the second quarter despite tremendous difficulties. They’ve done an incredible job, and it’s an honor to work with such a great team. I mean, there were so many challenges, too numerous to name, but they got it done and just what a great group to work with,” said Musk.

“Like I said, it’s just an honor to work with such a great team. And as a result, we were able to achieve our fourth consecutive profitable quarter. And although the automotive industry was down about 30% year over year in the first half of the year, we managed to grow deliveries in the first half of the year. So despite that massive industry decline, we actually went up, ” added Musk.

Musk also touted Tesla’s positive cash flow.

“On cash flows, our cash balance increased to our highest level yet of $8.6 billion, which included free cash flows of over $400 million. This is a strong result on its own despite an increase in capital expenses associated with Shanghai and Berlin, as well as movements in working capital,” said Musk.

Tesla stock split boosts shares

Similar to Apple, Tesla is also enacting a five-for-one stock split to make shares easier for investors to buy. Since the stock announcement, Tesla stock skyrocketed 76%.

Some analysts say stock splits help QQQ stock

Wedbush’s Dan Ives believes the split will help Tesla as a QQQ holding.

“We believe the stock split decision was a smart move by Tesla and its board, given the parabolic move in shares over the past six months, with another stock split by Apple and likely other larger tech stalwarts will follow this same path over the coming months, in our opinion,” Ives wrote in a note to clients.

He added that Tesla and Apple shares should continue to rise after the stock splits.

“I think this was a smart move by the companies and the board[s] and ultimately I think there’s going to be more stalwarts that follow. And I think right now, they’re just in a position of strength if you see what’s happening in terms of the market, of course on the EV[electric vehicle] side with Tesla and then Apple going into a supercycle. And this was the smart move at the right time in terms of the stock split and I view it as putting more sort of gasoline in the tank in terms of these stocks moving higher.”

JJ Kinahan is the chief market strategist at TD Ameritrade. He believes that the stock splits will lead to more demand for Tesla and Apple stock.

“I do think it will add to some increased demand. It’s become a lot more affordable for people overall,” said Kinahan.

Some experts think stock split will hurt QQQ stock

While some analysts are bullish on the stock splits, some are wary of the stock splits. Sarat Sethi, the managing partner at Douglas C. Lane, thinks that the stock split will hurt the long-term investors in QQQ stock.

“I think the idea that you can have more pieces of a pie for the same pie is concerning, especially for long-term investors and I think the ability for some of the retail investors to get in there and trade. So, that’s kind of making me a little wary when you look at how fast some of these stocks are moving when they’re announcing splits and some of the stocks that are just moving in these huge ranges even though the broader market’s not moving”, said Sethi.

Leon Cooperman is the Omega Family Office chairman and CEO. He doesn’t think that the stock split will help QQQ stock.

“Everybody understands that splits don’t create value. My dad once told me if he gave me five singles for a $5 bill, I’m no better off. … Apple’s up 30% with the S&P up 6% and everybody’s talking about the split. The splits don’t create any value,” said Cooperman.

Roger McNamee, co-founder of Elevation Partners, is also bearish on tech stocks in the QQQ ETF.

“I look at the market. I look at the stock split. And you never know when the momentum’s going to end, and I’m not trying to make a call on that issue. I’m just saying that, for me, this is enough. It’s been a great ride. And it’s not just Apple that I’ve been selling. I’m looking broadly through my tech portfolio — and I own a bunch of names — and I have been reducing positions across the board simply because I want to reduce the level of risk I’m taking in the market,” said McNamee.

5. Facebook

Facebook a profitable holding in QQQ stock

QQQ holdingFacebook (NASDAQ:FB) is a profitable QQQ holding. The social media giant had a healthy Q2 2020 earnings report. Chief financial officer Dave Wehner spoke about the company’s results.

“Q2 total revenue was $18.7 billion, up 11% or 12% on a constant-currency basis,” said Wehner.

Wehner noted that Facebook’s ad revenue increased as well.

Facebook stock a profitable QQQ stock holding

“Had foreign exchange rates remained constant with Q2 of last year, total revenue would have been $297 million higher. Q2 ad revenue was $18.3 billion, up 10% or 12% on a constant-currency basis,” said Wehner.

Maria Ripps said Facebook could benefit from people meeting more online and from “virtually all social interactions have been moved online during the pandemic.”

6. Netflix

Netflix (NASDAQ:NFLX) is a top holding in QQQ. The streaming company had an impressive Q2 2020, with $6.15 billion in revenue. During the quarantine, many people stayed home and watched the thousands of shows available on the streaming service, like Tiger King, Self-Made, and Love is Blind. After the last earnings report, chief financial officer Spence Neumann spoke about the positive results.

“We just added 10 million members, which is the largest growth we’ve ever had in a second quarter. And if you look at the — so we kind of look at the totality across the Q2 and Q3 period”, said Neumann.

Financial experts bullish on Netflix stock

Because of Netflix’s strong subscriber growth, Jefferies analyst Alex Giaimo said Netflix is a key QQQ holding.

“While the soft third-quarter outlook may put the stock in the penalty box near-term, there is no change to our positive long-term thesis. We view Netflix as a consistent high double-digit growth story with sizable margin expansion over time,” said Giaimo.

In addition to Jefferies, Jeff Sica is a financial advisor that is bullish on Netflix stock. He thanks Netflix has an advantage because of its dominance in online content. The streaming service is often the first choice for producers of programming that reaches a wide audience.

“The real story with Netflix is that many producers always want Netflix to be their first choice of distribution. This is why they will continue to have the advantage in content,” said Sica.

Netflix is a tech stock that helps make QQQ stock a top pick for investors.

7. Zoom

Videoconferencing website Zoom (NASDAQ:ZM) had a spectacular Q2 with revenue of $663 million. That number surpassed the expected $500 million Wall Street expected. During the worldwide quarantine, millions of people used Zoom to work and communicate with each other. Zoom’s chief financial officer Kelly Steckleberg spoke about the results.

“Q2 was a remarkable quarter for Zoom as we continued to rapidly grow and invest in our business to meet the demands of our customers and communities. Let me start by reviewing our financial results for Q2, then discuss our outlook for Q3 and the increased view of our full-year FY ’21. Total revenue grew 355% year over year to $664 million in Q2,” said Steckleberg.

Analysts rate Zoom a buy for investors

Zoom’s stock is part of a reason that QQQ stock is a top pick for investors. Walravens is bullish on the QQQ stock holding.

“I have been doing this for 20 years, and I have never seen a story like this one. And it shows you the power of a really well-run company with a good mission that has exactly the service everyone needs in a crisis,” said Walravens.

Morgan Stanley also rates Zoom a buy. Before the company’s earnings report, the firm expected Zoom to surpass Wall Street expectations.

“Morgan Stanley analysts said ahead of the report that buy-side analysts expected Zoom to beat its own forecast by about 30%”, said the firm.

8. Nvidia

As a tech holding in QQQ stock, Nvidia (NASDAQ:NVDA) is a stock that is performing well in the ETF. The chipmaker had an impressive Q2 2020 earnings report. Founder Jensen Huang spoke about the company’s record $3.8 million revenue.

“Adoption of NVIDIA computing is accelerating, driving record revenue and exceptional growth. Growth in GeForce gaming accelerated as gamers increasingly immerse themselves in realistic virtual worlds created by NVIDIA RTX ray tracing and AI,” said Huang.

The company noted that despite COVID-19, its next-generation gaming cards will help Nvidia’s profits. During the pandemic, the gaming industry has soared as many people stay home. Nvidia provides many of the gaming cards for popular games like Fortnite.

“Despite the pandemic’s impact on our professional visualization and automotive platforms, we are well-positioned to grow, as gaming, AI, cloud computing and autonomous machines drive the next industrial revolution around the world,” said Huang.

Analysts bullish on Nvidia stock

Wells Fargo analyst Aaron Rakers noted that the Ampere graphics processing units will have a price increase. That upgrade can lead to Nvidia stock growth.

“The new Ampere lineup carries the same price points as the prior Turing GeForce line-up w/ GeForce RTX 3080 priced at $699. This compares to some reports pointing to a potential like-to-like increase; note that prior gen Turing (2018) and Pascal (2016) had $100 and $50 price increases, respectively,” said Rakers.

Mizuho analyst Vijay Rakesh also thinks the graphics processing units will help boost Nvidia stock.

“We believe the combination of a strong 3D rendering GPU platform boosted by RTX and AI drive a step up in its value proposition for developers and gamers and create a deeper moat versus the competition for NVDA,” said Rakesh.

Cowen also says Nvidia key part of QQQ stock

Cowen analyst Matthew Ramsay also thinks Nvidia’s chips for gaming devices make the stock a buy.

“We believe Nvidia is pricing the cards aggressively to ensure it maintains its dominant gaming ecosystem leadership and wallet-share given upcoming new GPU launches from Advanced Micro Devices Inc.’s Big Navi line, and new Sony/Xbox game consoles,” said Ramsey.

“Coupled with strong underlying gaming demand driven by COVID-19, we do expect the 3080 to represent a compelling upgrade for consumers, and expect that product cycle to drive gaming growth for the next several quarters,” added Ramsey.

9. Microsoft

Microsoft (NASDAQ:MSFT) is a top tech holding that is in QQQ stock. The tech giant had a profitable Q2 2020. With many people home quarantined, many people used Microsoft’s cloud technology. Chief financial officer Amy Hood touted the results.

“This quarter, revenue was $36.9 billion, up 14% and 15% in constant currency. Gross margin dollars increased 22% and 25% in constant currency. Operating income increased 35% and 39% in constant currency, and earnings per share was $1.51, increasing 37% and 41% in constant currency”, said Hood.

“Revenue was $11.9 billion, increasing 27% and 28% in constant currency, ahead of expectations, driven by continued customer demand for our hybrid offerings,” said Hood.

Microsoft stock — Microsoft part of QQQ stock

Microsoft also spoke about the company’s cloud growth with its Azure division.

“On a significant base, server products and cloud services revenue increased 30% and 32% in constant currency. Azure revenue grew 62% and 64% in constant currency, driven by another quarter of strong growth in our consumption-based business across all customer segments,” said Hood.

Experts bullish on Microsoft stock

Because of Microsoft’s Q2 2020 impressive earnings report, Amana Mutual Funds says the stock will continue to grow.

“Microsoft has done an excellent job building its Azure cloud services business, while we believe a strong period of semiconductor demand will arrive in the new decade supporting Microchip and Taiwan Semiconductor. Whether the rally starts in 2020 or 2021 remains to be seen but recent signs have been positive,” said Amana.

Microsoft’s Azure cloud technology has also made the company’s stock a buy to other financial analysts.

Wedbush’s Dan Ives said that Microsoft “has seen robust cloud deal activity around Azure in the field during the June quarter with modest cloud upside expected, as this current work from home environment is further catalyzing more enterprises to make the strategic cloud shift with Microsoft across the board.”

As more customers use Microsoft Teams and other products to work from home and communicate, Microsoft is a solid part of QQQ stock.

10. Adobe

In addition to Microsoft, Adobe (NASDAQ:ADBE) is a tech holding that’s boosting QQQ stock. Adobe had a strong Q2 2020, with more customers using the company’s Photoshop and Document Cloud e-signing technology. The software company’s CEO Shantanu Narayen touted the company’s robust results.

“Adobe drove strong Q2 performance across Adobe Creative Cloud, Adobe Document Cloud, and Adobe Experience Cloud. We delivered $3.13 billion in revenue in Q2, representing 14% year-over-year growth. GAAP earnings per share for the quarter was $2.27, and non-GAAP earnings per share was $2.45,” said Narayen.

“We continued to drive strong adoption for Adobe Sign, our cloud-based electronic signature solution, with usage increasing 175% since the start of our fiscal year. Mobile usage exploded with Acrobat Reader installations increasing 43% year-over-year and Adobe Scan installations, up 66% year-over-year,” added Narayen.

Experts say Adobe is vital part of QQQ stock

With Adobe’s strong last earnings report, Amana Mutual Funds say investors should add QQQ stock to their portfolio.

“Digital media leader Adobe has also appeared as a top contributor over multiple years. Its appreciation wasn’t as great but it’s a large position, leading to the strong contribution,” said Amana Mutual Funds.

Qualivian Investment Partners is also bullish on Adobe as part of QQQ stock. Despite Adobe’s diminished sales in its Digital Experience division, but still is a top holding in the QQQ ETF.

“ADBE Reported strong Q2 results in the Digital Media and Document Cloud segments. The third segment, Digital Experience, was negatively impacted by COVID which led to a decline in advertising and delays in booking and consulting services for enterprises. COVID also negatively impacted the small and medium-size business segment. The business model and market position of Adobe remains strong and we have confidence in it as a long-term holding,” said Qualivian Investment Partners.

Adobe’s 14% growth from a year ago shows that many people are dependent on tech to navigate working from home during the COVID-19 pandemic.

QQQ stock a good addition to investors’ portfolios

With the most profitable tech holdings in the world, QQQ stock would be a strong choice for any trader or investor. QQQ is an ETF that is a one-stop shop for the best tech stocks on the NASDAQ. With TradingSim’s charts and blogs, traders can monitor QQQ and practice trading before diving into one of the most prominent ETFs in the stock market.

Traders have two main options for their accounts: margin vs. cash. When deciding to choose a margin account vs. cash account, there are many factors to consider. In this TradingSim article, I’ll explain the difference between a margin vs. cash account. I’ll also write about how experienced day traders or people who are new to investing can choose the best account for them to have the best trading strategy.

What is a margin account?

If an investor is investing on their own, they may have limited funds. If they need more money, they can deposit cash and a brokerage firm can loan them money, too. That’s leveraged investing for traders. In a margin account, day traders can borrow money to fund their accounts. It’s similar to using credit cards to make purchases when a card company extends credit to a customer.

Ali Hashemian is president of Kinetic Financial. He likens buying stocks on margin to buying a house.

“Using margin to buy stocks is similar to using a mortgage to buy a house. In both instances, investors borrow money to purchase more equity in stocks or real estate,” said Hashemian.

What do brokers like Robinhood charge to trade on margin?

When traders are trading on margin, they’re charged interest on a margin interest loan. In the popular Robinhood app, users are required to have $2,000 in their accounts before they can trade on margin.

In Robinhood’s $5 monthly fee, the first $1,000 of margin is included. If traders borrow more than $1,000, they pay 5% interest on the leveraged investing. For example, if a trader uses $3,000 of margin, they’re charged a daily interest rate of 5% divided by 360 for each day of the trading year.

In that case, $1,000 is deducted from the $3,000. The remaining $2,000 has interest added on to that amount. Then, it’s $2,000 x 5%/360= $0.28 daily interest. While Robinhood charges 5% interest, each brokerage firm has its own interest and may be significantly higher. Investors should check margin interest rates with their firms.

What are the rules for a margin account?

Before an investors trades on margin, there are some rules a trader must follow. When an investor trades on margin, the Financial Industry Regulatory Authority(FINRA) that regulates trade has requirements. FINRA mandates that a trader must have either $2,000 in their account or 100% of the stock purchase prices.

Once a trader has $2,000 in their account, they can trade 50% of the securities they’re going to purchase. For example, if a trader has $2,000 in a margin account, they can buy $4,000 worth of stocks on margin.

After a trader buys an asset on margin, they have to maintain a certain balance in their accounts. A trader has to outright own 25% of assets in their accounts.

A brokerage firm may also ask for a trader’s net worth and income. In addition, a firm may conduct a credit check before an investor can trade on margin.

What are the advantages of a margin account?

If traders need to trade on margin, there are some benefits. There is a potential to profit from trades. For example, a person buys shares of Apple stock for $100,000 with a mix of $50,000 cash and $50,000 margin. If you sell the stock for $125,000, the trader has a $25,000 profit.

If a trader borrows on margin, they can have a brokerage firm give them extra leverage to make larger trades.

Scott Bishop is a certified financial planner with STA Wealth Management. He noted that buying on margin can help investors who need extra financial assistance.

“The margin can almost be like an overdraft line of credit,” said Bishop.

Margin can help bring more investors into trading

Bloomberg writer Nir Kaissar notes that Robinhood is helping more investors get into the stock market with its Robinhood Gold plan.

“One of the things I love about Robinhood is it’s … drawn millions of new people into the market. If we want people to become more savvy about personal finance and investing — and I think we generally say that we do — then I think they need to have the experience of being an investor. I don’t think those are things that you can necessarily learn just in a textbook,” wrote Kaissar.

A Robinhood spokesperson said that the platform is helpful to new investors.

“We believe that broader participation in the markets is more democratic and can bring opportunities to many. Those who dismiss retail investors as ‘gamblers’ or ‘gamers’ perpetuate the myth that investing is only for the wealthy and highly educated,” said the Robinhood spokesperson.

Some financial advisors say margin wins in margin vs. cash accounts

Colby Davis is portfolio analyst for RHS Financial in San Francisco. He encourages clients to buy stocks on margin if they’re pressed for cash.

“We generally encourage [margin accounts] with our clients even if we don’t plan to do leveraged investing with them. Sometimes a client needs money in a hurry, and instead of having to sell securities and wait two days, you can take the money out immediately and sell the securities the next day or the next week. You don’t have to wait as long to get the cash out,” said Davis.

“If you really want to buy an investment and you don’t have the cash instantly available, it’s a quick way to make sure that you have it,” added Davis.

In addition to that benefit, buying stocks on margin can give investors more time to repay the loans. A brokerage firm gives a trader extra time to repay a margin loan. An investor can repay a loan whenever they can as long as they maintain a margin account balance.

Trading on margin better for experienced traders

For some experienced traders, trading on margin can be effective. Tom Watts is the chairman of Watts Capital Partners. He advises that traders use margin if they’re experienced traders and have extra money. The margin can be used for those traders as an emergency fund for transactions.

“For most of our clients, we like to have a margin account even if they never buy stocks on margin because they can transfer money faster,” said Watts.

“With a margin account, they don’t have to wait: They can access cash instantly,” added Watts.

Watts also recommends margin trading if you have time to actively trade and stop losses to limit trading mistakes.

“If you’re in front of your terminal every day, you have strict loss limits and you have a trader mentality, margin investing can be a great thing in up markets. But investors should only do it when the market is going to keep going up and have very strict loss limits,” said Watts.

Buying stocks on margin can postpone capital gains taxes

Nate Wenner is a certified financial planner with Wipfli Financial Advisors. He notes that margin loans let investors postpone paying capital gains taxes. If investors need to make a large purchase, selling investments would lead to capital gains taxes. When traders buy stocks on margin, they can postpone capital gains taxes.

“By taking a margin loan, [you] don’t have any transactions and there’s no tax recognized. In most cases, our clients don’t keep this margin loan for months and years on end…They try to pay it back when they have the cash flow, maybe from a bonus at work,” said Wenner.

In addition to that tax advantage, the interest on a margin loan may be tax-deductible under certain circumstances.

Forex trading on margin is most common

While margin can used for regular stock trades, forex (foreign exchange) margin is the most generous.

Peter Klink is the director of risk management at TD Ameritrade. He said that forex rules gives investors the most leverage.

‘Generally, forex rules allow for the most leverage, followed by futures, then equities. Depending on the product, forex and futures leverage can be at 20:1 or even 50:1 compared to equities’ overnight margin of 4:1,” said Klink.

Adam Hickerson is a senior manager of futures and forex at TD Ameritrade. He noted that the volatility of forex makes it ideal to trade on margin.

“Geopolitical tensions, economic news, central bank policy decisions … a multitude of things move the forex market every day, and so there are several different reasons to consider using margin in forex trading,” said Hickerson.

“Currency prices change every day, meaning margin requirements for forex positions may also change every day. It’s important to understand that if the base currency is anything other than the U.S. dollar, the margin requirement is going to fluctuate on a real-time basis as the price of the base currency changes relative to the U.S. dollar,” added Henderson.

What are the disadvantages of a margin account?

While there are advantages to having a margin account, there are drawbacks as well. Scott Bishop is a certified financial planner with STA Wealth Management. He advises against traders, especially new investors, from buying stocks on margin because investors may be too emotional and trade too quickly.

“Should the average investor buy stock on margin?” asked Bishop. “No, because the average investor buys on greed and sells on fear,” said Bishop.

Timothy Hooker is a co-founder and accredited investment fiduciary at Dynamic Wealth Solutions. He commented that experienced traders can trade on margin with minimal risk. However, too much leveraged investing can be dangerous.

“If you’re an experienced trader and know what you’re doing, there’s nothing wrong with using margin. But if you’re really trying to take your account to the moon and back, then that’s where you can blow up your account and really derail your financial plan,” said Hooker.

John Person is the founder of Persons Planet, a trading education and advisory service company. He advises investors not to borrow more than 25% from their accounts to buy stocks on margin.

“A small amount of your portfolio can be used to extract cash for small loans. Borrowing more than 25% of your total portfolio is ludicrous because the market can go down,” said Person.

High interest rates can cause problems for margin accounts

Brian Cody is a certified financial planner with Prudent Financial. He noted that margin interest rates are often higher than for other kinds of debt.

“Interest rates on margin loans quite consistently seem to be 3% or 4% higher than what you would get for a home equity line or some other reasonable type of debt,” said Cody.

Colby Davis is a portfolio analyst for RHS Financial. He cautions traders not to use too much leverage investment before stocks lose value.

“Anything you buy can go down in value, so when you buy investments on margin, you’re exposed to more risks because you have liability in terms of the cash you’re borrowing. You have to make sure your investments don’t lose so much value that you lose more than what you owe,” said Davis.

What do financial experts say about trading on margin?

Many financial experts advise traders to buy stocks on margin with a high rate of return. S. Michael Sury is a lecturer of finance at the University of Texas at Austin. He advocates that traders invest in assets with high returns if they’re trading on margin.

“Take an investment that offers an expected return of 15 percent, but with actual results that might range between 15 percent and 30 percent,” said Sury. “Even if the cost of borrowing is low, say 4 percent, the transaction is very risky.

“On the other hand, if a collection of diversified investments can offer a 10 percent rate of return with a narrower range of 9 percent to 11 percent, then the risk of the transaction has been dramatically reduced,” added Sury.

Expert investor Warren Buffett also has a warning for traders who are practicing leveraged investing.

“When leverage works, it magnifies your gains … but leverage is addictive. Once having profited from its wonders, very few people retreat to more conservative practices,” said Bufffett.

Financial expert Lyn Alden also said that traders should be experts in the industry they’re investing in before they trade on margin.

If you understand your industry and you’re trading something of value, you should be able to use debt to trade more,” said Alden.

“These types of ‘good debt’ give far lower interest rates for people with good credit than the typical margin rates offered by brokers,” added Alden.

Tesla margin requirements impact investors

As Tesla raised its margin requirement from 55 to 79%, there have been consequences for investors. Tesla’s margin requirement is the amount of cash a trader has in their account instead of credit.

Benzinga founder and CEO Jason Raznick noted that he was notified about having to sell his Tesla shares.

“A lot of people that got this message yesterday had to sell shares. Multiple people I talked to overnight were forced to liquidate Tesla shares. Multiple people. And these are people who were positive, up on Tesla, and they had to sell by the close yesterday,” said Raznick.

“This is happening because large institutions are buying shares of Tesla, and brokerage firms want to free up shares to sell these large institutions,” added Raznick.

Raznick said that traders are selling Tesla stock because of their margin.

“There are people selling this stock right now not because they want to, not because they have bad fundamentals; they are being forced to. Including myself and including some others, we are forced to sell stock because of the margin we have on it, and I do believe that represents a potential long-term trading opportunity,” said Raznick.

Investors shouldn’t buy too many stocks on margin, experts warn

Davis also advises traders not to buy stocks regularly on margin.

‘I would only recommend using a margin account for the purpose of having additional flexibility on when you can withdraw cash. But I wouldn’t recommend having a margin account to invest as part of their strategic plan unless they’re working with a sophisticated financial advisor or are a sophisticated investor themselves,” said Davis.

Ali Hashemian says that investors can buy more stocks on margin in a bear market. However, he warns that traders not to buy too many shares on margin when the stock market is down.

“An investor might want to use margin to purchase more shares in a down market. The problem is that nobody can predict the bottom,” said Hashemian.

Jose Remy is a partner at Alvarium Investments. He says investors should only trade on margin if they expect great returns on their investments.

“This should be done when the expected return of the investment being made is greater than the cost of leverage. And when the risk profile of the investment and the client’s overall portfolio is commensurate with his or her risk tolerance,” said Remy.

Financial advisers advise traders to borrow on margin carefully

Many young investors are flocking to trading on margin. Chris Larkin is managing director of trading and investment product at E-Trade Financial.

When it comes to Millennials and Gen Z investors, time is on their side, but that doesn’t mean they can be complacent or act emotionally,” said Larkin.

“Access to the market has never been easier, so investors just embarking on trading should walk before they run. A thoughtful and disciplined approach is key—do your research, set up watch lists, and align your trading strategy with your goals and risk tolerance,” added Larkin.

Borrowing on margin can also create problems, like being on margin call.

What happens when an account is on margin call?

When an account is on margin call, a trader is in trouble. If a trader hasn’t maintained a minimum balance of 25% outright owned assets in their account, they’re put on margin call.

Margin call is when maintenance margin falls below a certain limit

Nate Wenner is a certified financial planner. He notes the danger of trading on margin if investors can’t maintain their margin account balances.

“This makes it a dangerous game to play,” said Wenner.

For example, a trader wants to invest $150,000 in a stock whose shares are $100. A trader invests $25,000 and borrows the rest on margin. A brokerage firm can then institute a 30% margin maintenance on their accounts.

If shares fall to $70, a trader’s margin can fall down to $87,000. That amount may be above the margin maintenance threshold. However, if the stock keeps falling and the margin maintenance account drops to below the 30% threshold, the trader is placed on margin call.

Will margin accounts be in more danger after the quarantine?

Christopher Gerold is president of the North American Securities Administrators Association. He noted that the increase in trading during the quarantine will lead to more margin calls on traders.

‘In the coming weeks, I expect that we will see a significant increase in complaints related to suitability, specifically use of margin in retail accounts. I expect many will have been unsuitable and will require investigations by regulators,” said Gerrold.

Gerrold also noted that more staff will be needed to deal with margin call accounts.

“Processes, procedures, and staff must be in place so that investors can reach their financial professional to ask questions, raise concerns, and discuss investment options. We’ve heard–and these have been very public–about trading delays and crashes of electronic systems at some of the largest broker-dealers in the last couple weeks,” said Gerrold.

What should investors do when they’re on margin call?

If an investor is on margin call, then an investor has to take action. A trader has to have deposit funds to meet the margin minimum, usually within three business days. If a trader doesn’t have the funds right away, they may have to sell stocks in order to meet the margin minimum. Firms may also totally liquidate a trader’s account if they can’t pay off their margin call.

If a trader can’t pay the margin call, a brokerage firm may have to report your debt to a credit agency. A trader’s credit could be negatively impacted for a long time.

How can an investor avoid margin call?

There are ways for investors to avoid margin call. If an investor is able, they should have an emergency fund on hand in case there is a margin call. A trader should also be knowledgable about the margin requirements before buying stocks on margin. In addition to those measures, traders can use stop-loss measures to prevent themselves from plunging into debt. With stop-loss measures, traders can limit their margin losses.

As TradingSim’s own Al Hill told Mint, traders shouldn’t use all of their margin when buying individual stocks. Only a small percentage is best fro each individual trade, especially for beginning investors.

“Only use 10 percent of your margin. For example, if you have $100k cash, which would afford you $400k in margin, only use $40k on any one position”, said Hill.

Where do investors trade on margin?

Some investors have personal accounts of trading on margin. In one example, Zaki Ahmed trades with Oanda. He uses a lot of leveraged investing when he makes trades.

“Oanda recommends a moderate leverage amount of 20 to 1 or lower. My leverage is almost 50 to 1,” said Ahmed.

While Ahmed trades on margin, he admits that it’s wreaked havoc on his finances.

“I’ve been through the ringer in terms of all manner of investment and gambling. To be honest, I regret that I’m doing this now. I won’t tell you how much I’ve lost but it’s in the thousands,” said Ahmed.

If traders want to trade on margin, they have to exercise a lot of caution and be prepared for losses.

How can investors trade with a cash account?

If trading on margin is too risky, investors can trade using cash accounts. In cash accounts, investors can simply buy stocks with their available cash. For instance, if a trader has $1,000 in an account, they can only buy $1,000 worth of stocks.

What is the difference between a margin account vs. cash account?

While a trader can trade right away by borrowing on margin, having a cash account requires an investor to have more patience.

Brandon Herman is the senior manager of margins clearing at TD Ameritrade. He commented on the differences between the two different kinds of accounts.

“In a cash account, if you buy and you sell, you have to wait for that sale to settle before you can use the funds again. Some clients may find it worthwhile to use a margin account every now and then to be able to buy what they want to buy, when they want to buy it, and borrow with margin for a short period of time,” said Herman.

What are the benefits of using cash accounts?

In contrast to margin trading, cash accounts are a one-time investment. Patrick Lach is a certified financial planner and assistant professor of finance at Indiana University. He noted that investing on margin requires extra cash to maintain an account. On the other hand, cash accounts don’t have that requirement.

“This is a major risk of margin investing. It may require the investor to come up with additional cash to maintain the position. This is not an issue with cash accounts—they only require a one-time, up-front investment of cash,” said Lach.

He also noted that when there is a margin call, investments have to be sold and lose value quickly. However, Lach noted that with a cash account, investors have time to recover from their losses with cash accounts.

“With a cash account, the investor has the luxury of waiting for a stock to recover in price before selling at a loss,” said Lach.

What are the disadvantages of a cash account?

While there are advantages to having a margin account, there are drawbacks as well. If a trader wants to trade in a hurry, they’re unable to with a cash account. Cash must settle before a trade officially takes place.

For instance, if a trader uses $500 in their account to make a trade on Monday, they can’t make a trade with that same $500 until Thursday at the earliest. That delay is called a settlement and is part of the transfer of assets to a buyer’s account and cash to a seller’s account.

Another problem with cash accounts is having good faith violations. A good faith violation is when investors make trades before cash has settled. If traders make these violations three or four times, they can put into a 90-day trading restriction.

Dan Merritt, manager of margin risk at TD Ameritrade, advises investors to exercise caution before having good faith violations.

“It’s not like there’s a lot of wiggle room for exceptions, so it’s best to know how to stay on the right side of the regulations,” he said.

Merritt also advises traders to call their brokerage firms before they reach the 90-day trading restriction limit.

“If you call us after you do something, it’s harder for us to assist you, so calling us and asking what will happen in a situation is sometimes better. That way we can walk you through all of your choices at that point,” said Merritt.

What other violations can jeopardize a cash account?

In addition to good faith violations, free riding violations can hinder a cash account. Freeriding occurs when a trader tries to buy or sell a stock without depositing enough funds before settlement. One way to have a free riding violation is to use the same capital on the same day on two separate trades. A trader can buy a security and sells it before settling the first purchase.

For example, a trader has 500 shares of Ford (NYSE:F) with shares at $20 on Thursday. A trader needs $10,000 to settle the transaction. On Friday, Ford’s stock rises to $25. As a result, the trader earns $25,000. However, if a trader didn’t settle the original trade without the new sale’s profits. If an investor can’t settle the first trade, then the trader is freeriding.

If a trader is freeriding, a brokerage firm can freeze a trader’s account for 90 days. In the middle of the freeze, a trader can use a cash account to make trades. However, a trader has to settle all purchases on the trade date.

How to cash in a margin account

In a margin vs. cash account, cashing in a margin account takes certain steps. A trader can close their account and completely cash out their margin accounts. First, an investor has to sell their investments. Then, a trader has to make sure their margin loan balance is at zero. Then, an investor has to close the officially close the account through a broker.

If an investor wants to cash out their margin loan balance, there are steps that traders can take. They can request a cash withdrawal with available funds minus the margin loan amount. Once the cash is withdrawn, a trader can make sure the money is transferred to another account. Then, an investor’s brokerage margin account shows the next margin loan balance.

Which account wins in margin vs. cash account?

When choosing between a margin vs. cash account, a trader has to make many considerations. If a trader wants to day trade often without fear of pattern day trader status, a cash account may be best. A cash account may also be best for traders who have the patience to wait until their settlement period of two or three days.

If a trader wants to trade right away but has limited funds, margin trading may be best for them. Also, if a trader wants to trade volatile and high-risk assets like forex, margin trading may be their best option.

Ultimately, a trader has to make the best decision for them about deciding between a margin vs. cash account.

Regardless of which account a trader uses, TradingSim can help traders whether they choose a margin vs. cash account. With TradingSim’s blogs and charts, traders can find the best accounts for them to potentially increase their profits.

Restricted stock units (RSUs) are a top perk for employees. Many tech companies that are growth stocks offer this stock-based compensation once an employee joins a company. In many cases, they are an alternative to stock options similar to ETFs.

In this TradingSim article, I will explain what a restricted stock unit is. Throughout this article, I will also explain which stocks can be added to rebalance portfolios and help their trading strategies because they are profitable enough to offer employees the best RSUs.

What are restricted stock units?

When a company hires an employee, at first they may receive the units as part of their compensation. RSUs are grants that are part of stock-based compensation that are equal to the value of a corporation’s common stock. When companies issue the grants, they are based on the value of the company’s stock.

How do RSUs work?

Employers distribute restricted stock units to employees after a vesting period. A vested definition means that an employee will own shares. During a vesting period, a certain amount of time an employee has to work at a company before they receive the shares.

For example, a company can give an employee 2,000 RSUs. If 25% of the RSUs vest each year, after one year, 500 shares will vest. In addition, employees can also receive the shares as cash. Once they vest, an employee can receive sell the shares.

If employees want to donate their RSUs to charity, they can help a good cause– and themselves at tax time. One benefit is that employees can get an itemized deduction that’s equal to the stock’s market value. The second benefit is that employees can avoid capital gains taxes by giving RSU shares to charities.

What are double trigger RSUs?

Double trigger RSUs are another kind of restricted stock unit that employers offer. They are offered by new companies before their IPOs(initial public offerings. Double trigger RSUs are not taxed until they are vested and the companies go public with their IPOs.

Garrett Perez, a CPA, notes that many companies have double trigger restrictive RSUs to protect their workers.

“Most companies who do in fact issue RSUs have this requirement [of double-trigger vesting] as it would be extremely punitive on their employees to have them recognize it as income with essentially no market to sell it in. I’ve never seen a pre-IPO company that does not have the double vesting requirement,” said Perez.

What is a restricted stock unit vested schedule?

Some employers offer RSUs on a graduated vesting schedule. In that case, the units may vest 10% after one year, 20% after two years, and so on.

Vested schedules for restricted stock units vary in three ways. For example, say an employee receives 120 RSU’s in January 2020. In cliff vesting, workers receive 100% of their benefits after a certain amount of time. In a three-year vesting schedule, an employee receives all their shares in January 2023.

With a graded vesting schedule, a company gives fewer shares of its stock at an annual rate. If there’s a three-year graded vesting schedule, an employee may receive 30 shares of a stock every January until 2023.

In a cliff/graded vesting hybrid, there is a mixture of the two vesting schedules. A company can issue 40 shares of its stock in January 2020. Then, they may issue 3-4 shares a month until the vesting period is over.

How do RSUs differ from stock options?

Similar to stocks vs. ETFs, RSUs are similar to stock options, but have key differences. In most instances, restricted stock units

don’t expire. They convert into shares after a vesting period. Because of the conversion, they don’t ever have an expiration date.
have the same fair market value during the vesting period.
complete a vesting schedule usually after five years.
are taxed as regular income when they’re vested.

In contrast, stock options

expire 10 years after employees receive them.
tie into the stock price. If a stock price drops below the grant price, the option’s value plummets. When a stock price rises, the stock option’s value jumps as well.
aren’t vested.
are taxed at the time the options are exercised.

What are the advantages of restricted stock units?

In a bear market, restricted stock units can be a safer option for employees. Because stock options are tied to a stock price, a diminished stock price can hurt an employee’s stock options. However, employees take RSUs at a stock’s current market value when they’re vested. At the time the units are vested, they could have a higher value to employees.

What are the disadvantages of RSUs?

Because restricted stock units are different from stock options, they may not reap all the benefits. Since most RSUs vest after five years, many employees may leave their jobs before they enjoy the stock perks. If an employee quits, their former employer forfeits the RSU that remain.

Even if employees stay with a corporation for five years, the value of their RSUs may not be the same after the vesting period. If the stock loses value during an economic downturn, the RSUs may lose value when the employee receives the shares.

How are restricted stock units taxed?

In the year they’re vested, RSUs are taxed as income if an employee keeps the units. If an employee sells the units, capital gains taxes will due at the time of the sale. Restricted stock units aren’t tax-free investment expenses. For example, if an employee vested 20,000 shares of a company’s stock at $20, the value of the RSUs will be $200,000. That amount is treated as taxable income by the IRS.

It’s important to have the RSU vested income set aside to pay taxes because tech companies usually may not pay them themselves. The success of tech companies may ironically mean that they don’t make withdrawals for employees.

Corporations usually withhold state, federal, Social Security, and Medicare taxes on RSU’s. The taxes are usually at a flat rate of 22%.

However, because tech companies are often in high tax brackets, a tech company’s workers often have to pay higher taxes on their RSUs. They would often owe more than what employers would set aside to cover taxes.

Special tax election can collect RSU taxes sooner

If an employee wants to take their taxes out before the restricted stock units vest, they can make a special election. The special Section 83(b) election taxes employees before the RSUs vest. The RSUs are taxed as extra compensation.

If employees keep the restricted stock units for more than a year, the RSUs are taxed at a lower rate as capital gains. However, the units are taxed in the year that employees receive them, even if the stock unit declines in value.

What are the RSU tax withholding methods?

There are four main tax withholding methods for restricted stock units.

In a same-day sale, all of the shares sell on the day they’re vested. The money can be used to pay taxes.
With a cash transfer, money is deposited from an employee’s account to pay taxes.
In the sell-to-cover method, an employee receives shares at the end of the vesting period. An employee’s broker can sell the shares to cover tax expenses. Then, a worker can keep the remaining shares.
With a net share settlement, an employee’s company can retain some of the vested RSUs. The shares are equal to the withholding tax amount. After that, the units that are left can be deposited to a brokerage account.

What is the cost basis for restricted stock units?

The cost basis for RSUs is the fair market original value of an employee’s shares on the day that the units vest and they receive the shares. That value will likely never change throughout the vesting period of the restricted stock units. The cost basis usually stays the same. It isn’t adjusted to calculate an employee’s tax calculations unless the unit amount is $0.

All of the corporations below offer generous RSUs to employees. These companies are the top corporations that offer restricted stock units to employees.

1. Amazon

Amazon’s stock soars during COVID-19

During the coronavirus pandemic, Amazon’s (NASDAQ:AMZN) stock soared 68% a year after hitting its rock-bottom low. Financial experts like Wedbush analyst Michael Pachter said the e-commerce boom during quarantine will boost Amazon in the long term.

“E-commerce is likely one of the biggest beneficiaries. E-commerce is likely to see a permanent shift away from offline stores,” said Pachter.

FBN Securities analyst Shebly Seyrafi believes that Amazon stock will continue to rise even if another quarantine happens in the U.S.

“To us[FBN Securities], AMZN[Amazon] is the ultimate ‘stay-at-home stock,'” wrote Seyrafi in a note to clients.

Amazon raises wages, but cuts RSUs for hourly workers

Amazon’s RSUs usually vest after four years. They vest on a 5-15-40-40 schedule. That means that after year 1, the restricted stock units vest 5%. Then they vest 15% the second year. In the last two years, they vest at 40%.

During 2018, Amazon eliminated RSUs for its hourly workers. In exchange for raising the wage of hourly workers to $15, Amazon ended RSUs as part of employee benefits. As noted in a company blog post, Amazon restricted stock units will vest this year, and in 2021. The corporation replaced the RSUs with direct stock. An Amazon spokesperson explained the changes.

“The significant increase in hourly cash wages more than compensates for the phase-out of incentive pay and RSUs,” said the spokesperson.

“We can confirm that all hourly Operations and Customer Service employees will see an increase in their total compensation as a result of this announcement. In addition, because it’s no longer incentive-based, the compensation will be more immediate and predictable,” added the spokesperson.

Amazon RSUs help employees buy homes

For salaried employees that still receive RSUs, the units make it easier to buy pricey homes in the company’s home base of Seattle. Diana Bowar, a loan officer at 1st Security Bank, offers restricted unit stock loans to Amazon employees to buy million-dollar homes. Bowar noted that the employees receiving RSUs are more likely to stay in Seattle.

“There’s a need in our backyard. And we’ve seen that people who are getting RSU income and have contracts with Amazon, the likelihood that they’re going to stay in that job making that kind of income is good,” said Bowar.

In 2019, bank lenders usually need employees to show two years of RSU income before they consider restricted stock units as income. Don Zender is branch manager of Evergreen Home Loans and Veterans Lending. He noticed that Amazon employers couldn’t use their RSUs as a down payment on houses.

“But if you start at Amazon, you can’t do that. The biggest hurdle has always been the first couple years,” said Zender.

Many lenders like Evergreen are now open to providing loans to employees with Amazon RSUs.

“Some lenders are starting to say, well, RSUs are not really a one-time thing,” said Steve Geri, a financial adviser at Denny Park Investments in South Lake Union. “They’re a continuing form of compensation in many industries.”

Amazon is a top stock offering restricted stock unit

2. Uber

Uber stock strong as it moves beyond ridesharing

Uber(NASDAQ:UBER) stock recently rose 3% after recent reports it was purchasing food delivery service Postmates. The acquisition would be a welcome addition to Uber’s own food delivery division, Uber Eats. Canaccord Genuity Maria Ripps wrote a note to clients that suggested that Postmates would help Postmates raise Uber’s stock more.

“Postmates should continue to benefit from restaurant selection and strong positions in key markets. However, as the fourth-largest player in the US market, we also see it as a potential consolidation target,” wrote Ripps in the recent client note.

Uber benefits from being rideshare leader

The ridesharing giant has benefitted from being a rideshare leader. Uber CEO Dara Khosrowshahi noted that the company has an advantage over competitor Lyft because of its global reach and diversified businesses under the Uber umbrella.

“We[Uber] are structurally set up more efficiently and more optimally than anyone else to move to profitability. This environment is perfect for us,” said Khosrowshahi.

Uber established restricted stock units in beginning

When Uber first went public in 2019, it detailed in its IPO filing how it would distribute its RSUs.

Uber is a top tech stock that offers RSUs

“As we transition to become a publicly-traded company, we expect that the mix of service- and performance-based components of our equity compensation will shift,” said Uber.

To help us achieve our objectives of rewarding our executive officers for their experience and performance and motivating them to achieve our long-term strategic goals following this offering, we anticipate that performance-based vesting conditions applicable to RSUs granted to our executive officers will become more prevalent,” added Uber.

Uber employees see downside to RSUs

While Uber’s IPO has been successful, there was an unexpected tax burden to its employees. When the IPO launched, Uber recorded its shares at $45. The company tied the restricted stock unit settlement to its IPO launch in 2019. Uber was optimistic that the stock would rise and give a bigger payoff to employees.

In a letter to employees in May 2019, Uber hoped that the move would “mitigate the risk that the company could be responsible for paying a significantly higher amount in taxes if the stock price increases meaningfully after the IPO.

However, the opposite happened. Uber stock dropped to $23. Because the stock fell, employees have to pay extra taxes on capital losses. If the stock had gone up, Uber and its employees would have had to pay less tax in the long run. Employees at the time noted how the extra tax bill shocked them at the time.

“Word started dripping out to say, ‘Hey, I actually owe quite a bit of money to the government. There was a bit of panic and a lot of anxiety’,” said the former employee.

Uber’s RSU is cautionary tale for employees

While Uber offers generous benefits to employees like RSUs, at first, they weren’t implemented with the best advantages to employees. Barbara Baksa, director of the National Association of Stock Plan Professionals, noted that Uber thought its RSUs would rise as its stock was supposed to grow.

“If you think that you’re going to IPO and the stock price is going to continue to accelerate and in six months that stock is going to be worth a lot more, then it would definitely be to the employees’ advantage to have the tax withholding done at the IPO because it would reduce their tax liability and start their capital gains earlier,” said Baska.

Parkworth Wealth Management principal Bruce Barton said that Uber and other tech companies have untraditional ways to compensate employees. Restricted stock units are part of a new compensation package.

“We’re talking about large private companies that got very large, very fast and had to adopt this nontypical way to compensate employees. They’re still experimenting,” said Barton.

Uber offers generous RSUs, but employees must be aware of the possible tax responsibilities they may have when they receive them.

3. Apple

Apple stock rises during COVID-19

The tech giant’s stock skyrocketed by 46%, during the nationwide shutdown. Credit Suisse analyst Matthew Cabral raised his price target on Apple stock because the company’s App revenue grew 35% over the last few months.

“Despite a slow start, increased screen time amid widespread ‘stay at home’ measures is now translating into a rapid acceleration in App Store revenue,” wrote Cabral in a note to clients.

“We’re[Credit Suisse] encouraged by building App Store momentum, both as evidence of Apple’s ability to increasingly monetize its nearly 1 billion iPhone user base and in support of multiple expansion for the stock as the mix shifts to higher-quality, more recurring revenue,” added Cabral.

Evercore ISI analyst Amit Daryanani also expects Apple stock to rise as customers buy more Apple Watches and other devices.

“We expect wearables and services to sustain double digit growth driven by uptick in [average revenue per user] and better monetization of the install base,” said Daryanani.

Daryanani also expects Apple stock to outperform as the corporation recently announced that it would make its own chips in-house.

“It is encouraging that Apple continues to demonstrate its leading chip design capabilities as in-housing semi design remains key to product margin expansion,” noted Daryanani.

Apple’s restricted stock units expanded to many employees

Apple (NASDAQ:AAPL) has a generous restricted stock unit package for employees. The RSUs were implemented by CEO Tim Cook in 2018.

The tech company revealed that it will offer $2500 in restricted stock units to some employees. Cook explained the RSU compensation in an email.

“To show our support for our team and our confidence in Apple’s future, we’ll be issuing a grant of $2,500 in restricted stock units to all individual contributors and management up to and including Senior Managers worldwide. Both full-time and part-time employees across all aspects of Apple’s business are eligible,” said Cook.

While many employees received many RSUs, Cook benefitted the most from restricted stock units. When he reached the five-year mark of leading Apple, he gained 700,000 RSUs as part of a whopping $100 million bonus compensation deal.

Apple RSUs can be beneficial to part-time and full-time employees if they stay with the company for the long haul.

4. Verizon

Verizon(NYSE:VZ) offers substantial restricted stock units to employees. The phone company’s early adoption of 5G technology and high-paying dividend make the stock attractive to Goldman Sachs analysts. The analysts rate Verizon as a buy.

“We add Buy-rated VZ to the Conviction List as we see the stock offering investors the most attractive combination of total return and risk owing to its stable wireless business, well-covered dividend (4.6% yield) and strong balance sheet,” noted the analysts.

“We believe Verizon’s financial performance will not be materially impacted by a short-term economic shock. This is because a large majority Verizon’s revenues come from selling wireless connectivity services to consumers and businesses in the US,” added Goldman Sachs.

Verizon’s restricted stock units help employees

Verizon’s” Stock Together” program gives RSUs to its employees. Verizon RSUs have a three-year vesting period. On a graded vesting schedule, workers receive one-third of the units on the anniversaries of the date they started with Verizon. In order to receive the RSUs, an employee has to stay through the entire vesting period. If an employee leaves before the vesting period is over, an employee can get the RSUs depending on the reason they left.

In the Verizon RSU program, the amount awarded to employees depends on certain factors. Verizon gives the restricted stock units after dividing the employee’s fixed dollar amount by Verizon’s stock price at the end of the vesting date.

If an employee’s award amount is $3,000 and Verizon’s stock price on the vesting date is $50, the equation is 3,000/50. In that equation, 3,000/50=60. So, a Verizon employee will receive 60 RSUs at the end of each vesting date.

5. Bank of America

Despite the difficulty banks had during the recession, Bank of America (NYSE:BAC) still had a strong Q1 2020. The bank’s CEO, Brian Moynihan, touted the company’s $22.8 billion revenue.

“Our results reflect the strength of our balance sheet, the diversity of our earnings, and the resilience of our teammates to serve clients around the world. Despite increasing our loan loss reserves, we earned $4 billion this quarter’,” said Moynihan.

Bank of America offers large RSU bonuses to employees

During the bull market of 2019, the Bank of America gave 200 to 500 restricted stock units to part-time and full-time employees. The RSUs are for employees that earn between $100,000-$350,000 a year. In this graded vesting period, employees are given the RSUs over four years at the same annual time. Moynihan wrote in a company email about how he wanted the RSUs to lead to employee retention.

“This stock award…will further align the role these teammates play with our continued performance and our shareholders’ objectives,” wrote Moynihan.

Even though the Bank of America is struggling during the global recession, there is still a strong RSU program for employees.

6. Microsoft

Microsoft (NYSE:MSFT) essentially pioneered the restricted stock unit program for workers. Bill Gates spoke about why he thought RSUs were better options for its employees.

“The fact is that the variation in the value of an option is just too great. I can imagine an employee going home at night and considering two wildly different possibilities with his compensation program. Either he can buy six summer homes or no summer homes. Either he can send his kids to college 50 times, or no times,” said Gates.

“The variation is huge; much greater than most employees have an appetite for. And so as soon as they saw that options could go both ways, we proposed an economic equivalent. So what we do now is give shares, not options,” added Gates.

Microsoft stock struggles after closing physical stores

While Microsoft stock rose 45% after physically closing stores, the company’s stock dipped 2% after permanently closing the stores. Despite the slight decline, Microsoft Corporate Vice President David Porter said the closures signal a more cloud-based system to help customers.

“It is a new day for how Microsoft Store team members will serve all customers,” said Porter. “We are energized about the opportunity to innovate in how we engage with all customers, maximize our talent for greatest impact, and most importantly help our valued customers achieve more,” said Porter.

Microsoft restricted stock unit vesting schedule

Despite the drop in Microsoft stock, the Microsoft RSUs are still significant. The restricted stock units are granted every August . After three months, new RSUs are vested five percent over five years. Employees with older grants have them vested 10% every six months in the five year vesting period.

Microsoft’s restricted unit stock system has long been a benefit to its workers.

7. Starbucks

Analysts bullish on Starbucks after stock rise

Starbucks’ growth potential in the next quarter has garnered the attention of financial experts. The investment firm Ensemble Capital, says the coffee company’s stock is a buy. Ensemble Capital is bullish on Starbucks even though many stores were closed during the COVID-19 pandemic. Ensemble Capital believes Starbucks stock can rebound once the economy re-opens this summer.

“Starbucks, which nearly tagged $100 a share over the summer as investors finally realized that the company could return to solid levels of same store sales growth, backed off earlier in the quarter before another strong quarter of same store sales growth in both the US and China reminded investors just how dominant this company actually is,” wrote Ensemble Capital.

RSU’s from Starbucks pay off quickly

Starbucks’ RSU’s are very generous. The coffee giant’s Bean Stock program gives restricted stock units to employees. CEO Howard Schultz increased the benefit in 2016. He touted the plan in a statement.

“Every day, I strive to build the kind of company that my father never had a chance to work for, one that not only cares for its people but gives them opportunities to be their best selves,” wrote Schultz in his statement.

The RSU’s vest over a two-year period. In the graded schedule, 50% of the units vest a year after an employee starts working for the coffee company. After the second anniversary of a worker’s tenure, the other 50% of the restricted stock units vest.

If an employee leaves before all the units vest, all the vested RSUs are for the employees to keep. When there are unvested restricted stock units, they are forfeited once a worker leaves the corporation.

Starbucks’ RSUs pay off for employees in a shorter period of time than other corporations. Schultz has created a restricted stock unit system that greatly helps its employees.

8. IBM

The tech company IBM( NYSE: IBM) saw its stock rise as it bought the tech company Red Hat. Red Hat’s sales increased 18% from a year earlier after the acquisition. Victoria Greene, an analyst with G Squared Private Wealth, rates IBM stock a buy. She praises the company’s focus on cloud-based technology.

“IBM’s AI is leaps and bounds ahead of competitors since they have invested heavily in it for 10 years,” said Greene.

IBM’s restricted stock units benefit employees and CEO

Because of IBM’s strong stock, the corporation’s employees receive restricted stock units over a four-year vesting schedule. The RSUs vest at 25% each year on a graded schedule. The tech company’s CEO, Arvind Krishna, gets a similar deal to his employees. IBM detailed its RSU vesting period.

“RSUs will vest 25% on June 8, 2021, 2022, 2023 and 2024, provided Krishna is an active IBM employee on these dates ( unless certain requirements are met to be eligible for continued vesting. PSUs will be adjusted based on performance and will be paid out in February 2023,” noted IBM in its SEC (Securities and Exchange Commission) filings.

IBM’s graded vesting period enables employees and its CEO to reap many benefits from its compensation package.

9. Facebook

Facebook stock tumbles on ad boycott

A free speech debate is affecting Facebook stock. Facebook stock fell slightly after many companies are refusing to place ads on the social media company’s site to protest a Facebook policy. Facebook won’t take down controversial posts that are considered hate speech or misleading political ads by the companies.

The corporation pledged that it was trying to weed out misinformation on the site.

“We invest billions of dollars each year to keep our community safe and continuously work with outside experts to review and update our policies. We know we have more work to do,” said a Facebook spokesperson.

Despite the controversy, Rohit Kulkarni, executive director at MKM Partners says that the ad boycott of companies like Proctor & Gamble won’t greatly affect Facebook stock.

“Procter & Gamble is the largest advertiser in the world, but we think it accounts for less than 0.50% of FB’s revenues,” said Kulkarni.

Kulkarni agrees with Wall Street’s projections for 7% Q3 2020 growth.

“We believe near-term[Wall] Street estimates are reasonable and that there is upside potential given ad market recovery,” said Kulkarni.

Facebook RSUs helpful to workers

Despite the negative publicity, Facebook’s restricted stock units are beneficial to its employees. In Facebook’s RSU vesting period, the units vest on a quarterly schedule. In the graded vesting period, the employees vest 6.25% every three months. After vesting 25% a year, the RSU’s are fully vested after four years.

10. Intel

After the news that the aforementioned Apple was dropping Intel as a chip maker for its devices, Intel stock dropped. Despite the severance of their relationship, Intel took the partnership ending well.

“Apple is a customer across several areas of business, and we will continue to support them. Intel remains focused on delivering the most advanced PC experiences and a wide range of technology choices that redefine computing,” said Intel in a statement.

Despite the decline, some financial analysts want investors to buy the dip. Goldman Sachs rates Intel as a buy. The analysts say that more use of devices during the nationwide quarantine helped Intel.

“Despite the headwinds related to Covid-19, we are maintaining our estimates as we believe there are multiple near-term positive developments (i.e., potential strength/resilience in the high-end client CPU[ computer processing unit] and server CPU markets given a growing number of people working/studying from home) that could largely offset the headwinds (i.e., weaker consumption and enterprise spending),” wrote the analysts in a note.

Intel RSUs help employees even when they retire

The chipmaker’s restricted stock unit program is generous to employees. Intel RSUs distribute on a graded vested schedule. The restricted stock units vest at 25% over four years.

If retirees have unvested RSUs at the time of their retirement, they receive one extra year of vesting. That occurs for every five years of employment with Intel.

Intel’s restricted stock units are beneficial to workers even at the ends of their careers.

Restricted stock units a pivotal part of employee compensation

Corporations offer RSUs as a way to reward and retain employees. While it may not seem relevant to investors, they are connected. If a stock performs well, they can offer more benefits to employees and investors. With TradingSim charts and analysis, investors can find the best stocks that pay the best restricted stock units to its employees.

Working from home during the COVID-19 pandemic

Day trading stocks can be a successful way to create income- but it’s not easy. Many people want to make a profit in this bear market, but there are many challenges that day traders face in the COVID-19 era. This TradingSim article will explore how the real benefits and costs of being a day trader. The article will also teach day traders how to trade stocks from home and help them find the best strategies and stock picks to become a successful trader.

How do you get started day trading part-time?

Day trading involves quickly trading securities several times a day. Traders buy and sell stocks often throughout a trading day to make a quick profit. Volatility in the stock market helps day traders make a larger profit. However, stock fluctuations can backfire if a trader trades too hastily or makes a bad trade.

When is the best time to trade?

The best time to day trading is at the start of the day at 9:30 AM EST. The first hour of the trading day can be the most pivotal because there is more liquidity, when there is a higher volume of trading in the first trading hour. and there is the most volatility at the start of the trading day.

The other ideal time to day trade stocks is at the end of the trading day from 3 PM-4PM EST. Just as at the beginning of the trading day, high volatility at the end of the day can help day traders maximize profits.

What is a good day trading strategy?

Before traders get serious about day trading, they have to make some important decisions. Here are some things to consider before they start day trading stock strategy.

Determine whether you have the time and patience to day trade. Day trading is not a hobby. It’s a time-consuming job that takes up hours of a trader’s day. Even though day trading moves fast, a lot of methodical thinking is required to day trade stocks. Day traders also need excellent math skills, risk-taking abilities, and discipline to study the changes in the stock market.
Study the stock market. Day traders need to diligently study the stock market to be a successful trader. Traders have to possess a wide range of financial knowledge to withstand the ups and downs of the Dow Jones and NASDAQ. It can take years to master the stock market, so studying the nuances of the market is essential.
Study the different securities to trade. Day traders not only trade stocks. Traders have to research ETFs, foreign currency, or other assets to trade if they want to branch out beyond stocks. Novice traders may not realize that there are different rules and strategies for various assets.
Practice trading with simulated trading. Before traders risk their own capital, they should test their trading strategies. TradingSim would be a perfect outlet for traders to try out simulated trades before they decide to risk real money in the markets.
Start small, then expand. Once a trader has the capital, they should still slowly delve into trading stocks. Day traders should start small to minimize risk. If a day trader suffers losses, it won’t be as devastating if there is less money on the line. When a trader experiences success after three months, they can incrementally put more money into the markets. If they are still struggling after 90 days, they should maintain or even decrease the amount they have invested.

How much money do day traders need to start?

While there is no set amount to start day trading stocks, there is an amount that should be sufficient to weather the unpredictability of the stock market. When a day trader is ready to invest, they must have a lot of money saved to quickly buy and sell shares.

A trader should have at least $10,000 in disposable income ready to invest in the stock market. The Securities Exchange Commission notes that ideally, a day trader should have at least $25,000 in their day trading accounts. If a potential trader can’t afford to risk that much capital to withstand market volatility, they aren’t ready to day trade stocks.

A beginning day trader’s account also depends on what asset is being sold. To buy stocks, a trader needs at least $25,000. However, for day trading futures, $10,000 is recommended. For trading forex, $100 is likely the lowest amount needed. No matter what asset day traders buy and sell, all traders shouldn’t risk more than 1% of their trading income on one trade. For instance, if a day trader has $25,000 in their account, they should risk more than $2,500 on a single trade.

What equipment does a day trader need to work from home?

In order to treat day trading stocks like a work-from-home business, a day trader needs the right equipment. Traders should invest in a trading machine and trading software. Day traders should also have two monitors to watch charts and data.

The most important day trading equipment may be a steady internet connection. With a reliable wi-fi connection, traders have less risk of missing important trades if there’s an internet crash. A backup internet connection is also recommended for traders who are day trading at home.

Why is there a resurgence in day trading stocks?

Once investors start day trading stocks, they can join a plethora of new investors. There has been a recent revival in day trading for two key reasons. The recent volatility in the stock market has led many people to try to make money by day trading stocks.

Goldman Sachs analysts noted that the new influx of traders is driving movement in the options market.

“Investors are increasingly asking us about the participation of individual investors in the shares and options market. Our data suggests that individual investors are indeed a significant proportion of daily volume, ” noted Goldman Sachs analysts.

Sports betting drought leads to day trading increase

Another reason for the resurgence in day trading stocks is strangely enough because of sports. COVID-19 shut down sports events, so there were fans missing games to watch- and bet on as well. Instead of betting on the performance of LeBron James, gamblers are now betting on the performance of Tesla (NASDAQ:TSLA) stock.

In addition to trading on their own, sports gamblers are also following the stock picks from the head of a sports website. Barstool Sports’ Dave Portnoy has picked winning stocks during this bear market. He compares day trading in the current market to the unpredictability of a sports event.

“With the volatility, it is kind of like watching a sports game,” said Portnoy.

Jim Bianco is president and macro strategist at Bianco Research and monitors day trading trends. He noted that young gamblers are moving to day trading with the latest sports hiatus.

“Sports gambling is a huge business in this country and a lot of sports gamblers and a lot of these millennial gamers are now playing the stock market, day trading,” said Bianco.

What are the benefits of day trading?

After Buffett dropped his airline holdings, Portnoy bought stock in the troubled industry. When the airline stocks rebounded, he felt vindicated as a budding financial expert.

“I’m a little surprised that it’s become pretty well known within the financial community. That’s kind of our target audience regardless of what we’re covering and I think Barstool was popular in those circles to begin with,” said Portnoy.

Portnoy’s contrarian investing is a day trading strategy that can work if a day trader is diligent and studies the markets well. If a day trader is savvy with their trades, they may profit from going against the popular opinion of Wall Street experts.

Zero-commission apps lead to more day trading

The rise of Robinhood and other zero-commission trading apps are helping drive the rise of day trading. Andrew Laphorne is a stock analyst at Societe Generale. He said that new day traders bought cheap stocks as the economy cratered and profited as the market is slowly rebounding now.

“For all the mocking of Robinhood investors, their timing back into the market looks impeccable, with a significant pick-up in holdings as equity markets bottomed in mid-March,” noted Laphorne.

Airlines rebound with new day traders

Despite Warren Buffett selling airline stocks, young day traders are lifting the industry back up. An airline ETF, JETS, saw its value rise a whopping 2,000%. Millennial day traders purchasing the ETF led to its rebound.

Frank Holmes, chief executive officer of JETS issuer U.S. Global Investors, loves the recovery. He believes that young day traders buying the dip helped JETS’ value grow to $1 billion.

“All these millennials, being stuck at home with no bars to go to and no beaches to travel to, took their money and became day traders. They’re bored, they want to make money,” said Holmes.

Financial advisors cheer new growth in day trading stocks

Many financial advisors welcome the new breed of day traders. Nate Geraci is president of the investment advisory firm, the ETF Store. He sees Portnoy as a social media savvy version of investing giant Warren Buffett. Geraci also credits Portnoy for making day trading entertaining to his millennial followers.

“It’s really been a perfect storm. Investors are seeing firsthand the thrill of victory, the agony of defeat, and he’s doing it with large sums of money, so I think for younger investors, that’s really enticing,” said Geraci.

Day trading may be best for people who want to make quick profits from short sales. For short-term investors, day trading can be a quick way to earn money. Josh Brown is the chief executive of Ritholz Wealth Management and says day traders are just having fun day trading stocks.

“They’re not expecting to retire off of trading stocks. They’re having fun and they’re learning the market, and I think it’s great,” said Brown.

Day trading can also best for self-starters who want to work independently. Day trading stocks may be best for traders who learn best by learning on their own.

What are the risks of day trading?

While there are some benefits to day trading stocks, there are many risks associated with day trading.

Despite his recent success with day trading, Portnoy cautions that his Twitter followers shouldn’t heed all his financial advice.

“I’m not a financial advisor. Don’t trust anything I say about stocks,” said Portnoy.

While Portnoy’s day trading venture is currently paying off, it’s risky to follow advice from people who aren’t financial experts. In addition to not listening to experts, day traders shouldn’t just follow their emotions. Making rash trades based on emotion leads to more losses. Traders who buy and sell stocks without stop-loss limits can risk losing more capital than they can afford.

Day traders can lose a lot of money if they don’t limit their number of trades. Trading too much can lead to a lot of fees for traders. Setting stop-loss orders can help minimize risk. Many traders also buy stocks on margin and borrow too much money to trade stocks. Day traders should stick to a set limit on how much to trade and not depend too much on margin and leverage.

Financial experts warn about day trading inexperience

Day trading novices may feel a rush from their new venture, but there are risks. Caleb Silver, Investopedia’s editor-in-chief, believes that day trading beginners should be cautious with the large volatility in the stock market.

“People are new to trading and new to investing and want to take advantage of these wild swings,” said Silver.

“These are the most dangerous times to start day trading … This is when people really get hurt,” added Silver.

Silver noted that day traders must know their limits when trading so they don’t lose too much money.

“This is a super volatile time. You could lose your shirt in a day. You could gain two shirts back the next day, but you have to know what your limits are,” said Silver.

Mark Cuban cautions about day trading boom

Shark Tank star and Dallas Mavericks owner Mark Cuban is wary about the day trading boom. He thinks that zero-commission costs enable day traders to take more unnecessary risks.

“We have day traders who are able to go into margin with next to 0% interest. They’ve got nothing else to do. Their transaction costs are zero,” said Cuban.

Cuban also believes that once the economy slows again, there will be huge sell-off among day traders.

“You can also make the argument that this whole run-up is just buying the rumor. Once we start to really have definitive data on the other side, people are going to sell on the news, and if I had to make a bet, that’s it,” said Cuban.

Cuban also noted that the resurgence in the stock market will depend on how many workers are rehired.

“A key question is how many workers will be rehired and how consumer spending will fare once enhanced unemployment benefits end on July 31,” noted Cuban.

Cuban doesn’t think that day traders are fully prepared for another economic slowdown.

“We don’t know if all the jobs are going to be there, and we don’t know what happens with demand. I don’t think the market is truly understanding the challenges that we may be facing,” added Cuban.

Day trading rarely leads to profits

In addition to the risk of losing money, there is the risk of not earning much money at all. While many day traders tout the quick money that can be made, those profits rarely come through. A Brazilian study found that only 0.1% of day traders earned more than the nation’s minimum wage after almost a year of day trading stocks. The study noted the poor success rate of independent day traders.

“97% of them lost money, only 0.4% earned more than a bank teller (US$54 per day), and the top individual earned only US$310 per day with great risk (a standard deviation of US$2,560). Additionally, we find no evidence of learning by day trading,” noted the study.

Day traders should expect to lose a lot of money before they see any profits. Even if traders earn any income, they can lose portions of their wins through high taxes. Short-term gains are taxed at a higher rate than long-term capital gains.

What advice do day traders give?

Day traders can get advice from more experienced traders. Jason Bond is an experienced trader that touts his experience as a trader.

“Having trained multiple clients who’ve gone from cubicles with small trading accounts between $10,000 to $37,000 to successful, full-time day traders, making millions in just a few years, I have verified proof people can make the leap from their career to trading full time,” said Bond.

Bond also suggests that beginning day traders should get mentors to help them navigate the ups and downs of the markets.

“The best way to become a day trader is to learn from existing profitable day traders. There’s an overwhelming amount of theoretical material on the internet about how to day trade, but nothing beats learning from someone who is currently successful at it,” said Bond.

Day trading expert Brandon Wendell also says that not holding stocks for too long can lower risk.

“One of the best ways to control risk is limiting the length of the trade. The longer you are in a position, the greater the likelihood is that price could move against you. By day trading, you eliminate overnight and weekend risk, especially when you trade markets that close, like stocks,” said Wendell.

Discipline is key to day trading stocks

While Bond had success as a trader, many other day traders note that success doesn’t come easily. Deeyana Angelo is a managing director of Market Stalkers. She stresses that being a day trader requires a lot of training and discipline.

“Becoming a day trader is something that a lot of people see as an easy way to make money where you don’t need much experience – just click a few buttons and hey presto, you’re rich! But nothing is further from the truth,” said Angelo.

Brandon Wendell, an investment expert, noted that limiting risk and not holding stocks for too long is key to success as a day trader.

“Day trading is a very difficult performance discipline, much like becoming a professional football player or playing a musical instrument to a virtuoso level. You first need to have a natural talent, followed by years of practice,” added Angelo.

Merlin Rothfeld is an investment strategist that studies day trading. Rothfeld advises investors who are day trading stocks to be patient because they will monitoring screens all day. Rothfeld also doesn’t want traders to stray from a well-thought-out trading strategy out of fear or haste.

“Quite often, day traders will take trades because they are just sitting in front of their screen all day. A forced trade is generally going to be a losing trade. Always follow your rules,” said Rothfeld.

How much do day traders make?

A day trader’s salary can vary greatly. If a trader is working independently, they face an uphill climb to a steady salary. Freelance day trading is similar to a sales position. There are times when income is high, especially if trades are executed well. A day trader may also make very little money if the stock market tumbles or a trading strategy backfires.

An independent day trader’s salary will also depend on how much capital they have invested in the stock market. As noted in a previous TradingSim article about a day trader’s salary, an average day trader’s salary has a 20% annual return. If a trader has $100,000 in an account, they may have profits of $20,000 in the best-case scenario.

Day trading for a firm has a more stable salary. According to ZipRecruiter, the average salary of a day trader is $80,000. However, that depends on experience and the city a trader is located in as well.

If a day trader has years of experience and lives in a small town, that’s a substantial amount of money. However, if a day trader has substantial debt from buying stocks on margin, lives in a major city, and has other major expenses, that amount may not go as far as originally thought.

How does day trading at home compare to working from a firm?

There are many differences between day trading stocks at home and at a proprietary trading firm. When a day trader is working from home, they have more flexibility. Day trading stocks requires a lot of studying and commitment. Traders can focus on the stock market in their home offices and their trades without distractions in a noisy firm. Day traders can also keep more of their profits than a trader in a firm.

However, there are downsides as well. Many distractions from friends, family, and IT emergencies can derail a trading day. Day trading at home means that they have to shoulder economic burdens on their own.

For day traders in private trading firms, there are some advantages. Day traders in an office can have more help on a trading floor from more experienced traders. Day trading with a firm’s funds lessens a financial burden of day traders.

There disadvantages of being a day trader in a proprietary firm as well. Day traders in proprietary firms are just paid as contractors and not salaried employees. They also keep less of their profits than an independent trader. Day traders in firms often have to pay for training fees or give their employers a cut of their profits.

How does day trading at home compare to other work-from-home jobs?

Day trading can be much more challenging than other work-from-home jobs. There is a range of jobs that pay less and some that pay more than day trading at home.

Working from home is a growing option. A study from Upwork and the Freelancers Union found that over 50% of workers were working from home just three years ago. After the COVID-19 pandemic, that number is sure to increase.

If a trader from home can make $40,000 a year on average, there are jobs that pay less. Virtual assistants that perform administrative duties can make on average $26,000 a year. Freelance writers can earn a range from $10,000 to $30,000 a year.

Those careers pay less than an average day trader’s salary. There are some work-from-home jobs that pay more like in the customer service industry.

Brie Reynolds is a career development expert at work-from job site FlexJobs. She notes that customer service is an in-demand job that can pay more steadily than day trading stocks at home.

“Customer Service is the No. 1 field for remote jobs right now. This is a field without a lot of barriers to entry in terms of experience or education levels. Unemployed retail workers who enjoy helping people may be able to use their skills in communication, problem- solving and sales to transition to a remote customer service job,” said Reynolds.

Customer service jobs may pay as much as $60,000 a year. Data and IT work-from home jobs are the most lucrative. Data analysts can make $50,000 a year. A website support specialist can earn $100,000 a year.

Some jobs pay less and some are more lucrative than day trading from home. Day trading is on average at the low end of the spectrum with earnings of $20,000-$30,000 a year

How do day traders find the best stocks?

As noted in a previous TradingSim article about finding the best stocks to day trade, there are methods to pick top stocks. Day traders should look for stocks that have high volume to move quickly in and out of their positions. They can monitor them on financial websites like Yahoo Finance. TradingSim charts enable day traders to simulate trading and test out their strategies before investing in stocks.

Below are five stocks that would be best for day traders that are day trading at home.

1. Apple

As a TradingSim article noted, Apple(NASDAQ:AAPL) is a perfect stock for day traders. Apple is moving 22 million shares are bought and sold daily. The tech giant’s high volume makes the stock attractive to day traders.

Financial experts rate Apple as a buy

Many financial experts think that Apple is a buy in this bull market. Todd Gordon is managing director at Ascent Wealth Partners and monitors Apple stock. He believes that Apple stock can rise 40% over the next few weeks.

“If you look at the three advances since 2013, each has been at least 130% followed by a one-third giveback. The current advance is only 66%, so we can easily — if history is to repeat — see another 70% in years to come, putting us at $490 potentially,” said Gordon.

Steve Chiavarone, portfolio manager at Federated Hermes, also believes that a strong balance sheet and consumer demand will drive high volumes of Apple stock.

“Growth has been the new defensive. Strong cash flows have met strong balance sheets which means you haven’t been under pressure because you needed external financing, and your return on capital is safe,” said Chiavarone.

He also believes Apple “consumers have pent-up demand. They have stockpiled savings, and we expect the consumer to have a good second half.”

Charts show Apple stock a top pick for day traders

Blue Line Capital President Bill Baruch noted that charts show that Apple avoided a death cross. A death cross is when the 50-day moving average moves below the 200-day moving average. Apple has avoided that drop, which makes it a top pick for day trading, according to Baruch.

“It broke out above last year’s high, a big resistance level at $327. Now, that is support, and overall you also have a rising trend line from the lows in March, and for me $327 to $330 is going to be a huge support level,” said Baruch.

“I also want to point out that it did not get the death cross, and the fact that the 50-day moving average rejected crossing below the 200-day moving average in May — it fueled the upside as it has done in many of the tech stocks,” added Baruch.

Apple’s high volume of stock movement and bullish analysis from financial experts make the stock a top pick for day traders.

2. Facebook

As noted in a TradingSim e-book, Facebook(NASDAQ:FB) is a favorite stock for day traders. Facebook has 25 million shares moving daily. The liquidity makes Facebook an ideal stock for day traders to quickly exit positions. Facebook CEO Mark Zuckerberg noted that the company’s success depends on its Marketplace division and dependence on small businesses.

“Overall, though, our business depends on the success of small businesses. So, this is a moment where we feel that we’re well-positioned to be champions for small businesses interests and supporters of important infrastructure that they’re going to need in order to move online,” said Zuckerberg.

Financial experts bullish on Facebook stock

Financial expert Jim Woods says Facebook’s stock is outpacing other tech stocks.

“That stock is outpacing 97% of all other publicly traded companies in terms of relative price strength,” said Woods.

Citi’s Jason Bezinet predicts a $7 billion growth for the company because of its upcoming Shops e-commerce division. “

“The firm should benefit from: a) the continued growth in e-commerce and b) the growing propensity of consumers to shop within social media apps,” said Bezinet.

3. Tesla

Tesla(NASDAQ:TSLA) would be a great stock for day traders that want a stock with high volume and volatility. The corporation’s stock is trading at 16 million shares a day. The electric car company’s stock soared to $1,000 a share after a better-than-average rate of car deliveries.

Jefferies upgraded its price target of Tesla up to $1,200 after Tesla’s stock climbed. Analyst Phillipe Houchois wrote in a note to clients that coronavirus will drive consumers to want more electric automobiles like Tesla.

“We see COVID-19 as an accelerator of the transition to EVs and renewables, from consumers and public policy,” said Houchois.

Horchois also noted that Tesla is more advanced than its automobile competitors with its technology.

“Tesla remains significantly ahead of peers in product range, capacity and technology. Near term, EV-friendly incentives in the European Union and lower-priced Model 3 support second-half volume, making Tesla more resilient than peers,” wrote Horchois.

“Against expectations even a few months back, the gap with peers is widening, from product to battery tech/capacity,” added Horchois.

Some analysts bearish on Tesla stock

While Jefferies upgraded Tesla to a buy, Goldman Sachs downgraded its rating of Tesla down to neutral because of its high valuation.

“We’d look to become more positive on Tesla stock again if we had more confidence in the near to intermediate-term trajectory of fundamentals, or if valuation became more attractive. We maintain our view that the electric vehicle market offers attractive long-term growth, and we think Tesla will be able to sustain a leading position in EVs[electric vehicles] (and with solid margins),” noted Goldman Sachs.

Morgan Stanley also downgraded its rating because of something that may be a benefit to day traders- Tesla’s high volatility.

“While Tesla has long been an expensive stock, and we recognize that valuation has expanded for the entire market, we believe that there is a higher bar for Tesla’s fundamentals than other stocks that may have challenging near-term results given Tesla’s premium absolute multiple along with the historical volatility of Tesla shares,” said Morgan Stanley.

While establishment banks may disapprove of Tesla’s volatility, the high volatility and volume make the stock a good choice for day traders.

4. Microsoft

Microsoft (NASDAQ:MSFT) is another large-cap, high-volume stock that may be good for day traders. The corporation’s stock rose after a positive Q1 2020 earnings report. Jefferies analyst Brent Thill rated Microsoft stock a solid buy. The work-from-home boom during the recent quarantine boosted its Microsoft Teams service.

“The biggest beneficiary of the new work from home environment is in the productivity suite and especially Microsoft Teams, which has seen a large spike in demand,” wrote Thill in a note to clients.

5. Roku

Roku (NASDAQ:ROKU) is a streaming disruptor that has soaring stock and volume. The company has 19 million shares moving each day. Roku will partner with Kroger to use data to attract more customers. The move led Rosenblatt analyst Mark Zgutowicz to rate Roku stock a buy.

“Roku shopper data program, launched with one of the largest global grocery retailers, shows significant potential to alleviate friction between linear and CTV ad buys,” said Zgutowitz.

Roku’s stock rose 6% this year as more customers stayed home and canceled their cable subscriptions.

The high volume of Roku stock makes it a good buy for day traders.

Laura Martin is also bullish on Roku stock as more American viewers move from cable to streaming TV services.

“Roku had 45% (40 million of 88 million) of total connected TV homes in the US at 3/31/20, and therefore we believe Roku will be the winning aggregator of streaming TV and film content apps,” said Martin.

Analysis and patience key to day trading from home

To make money quickly from day trading at home, ironically, a lot of waiting is required. Building an effective trading strategy and studying the stock market is key. Working from home as a day trader can be a nice side hustle for beginners, but not a lucrative career to retire from in 30 years.

Despite what some traders on zero-commission apps may say, day trading is not a harmless get-rich-quick scheme. The stock market is cyclical and what goes up always eventually comes down. With TradingSim’s blogs, charts, and insights, day traders can learn more about how to withstand the unpredictability in the stock market to make money in the stock market.

A quick ratio of a company can determine a lot of assets about a corporation. Similar to the Treynor Ratio, a quick ratio formula can help determine a corporation’s financial strength- or lack of strength. In this era of COVID-19 and an economic downturn, a quick ratio of a company can help investors determine if a corporation has enough liquidity to weather a financial storm. With the quick ratio formula, investors can help plan their investment strategies.

This TradingSim article will help investors calculate the quick ratios of 10 of the top corporations. In this article, I will also compare them to see which one has the most liquidity to pay off short-term debts. Investors can use this information to possibly rebalance their portfolios.

What is the quick ratio formula?

A quick ratio formula measures a company’s short-term liquidity. A quick ratio definition means that the ratio incorporates a corporation’s ability to use its cash-ready assets to pay off debt. The short-term liquidity measure is also known as the acid test. The term quick ratio comes from a company’s ability to quickly convert assets into cash.

When calculating the quick ratio of a company, the formula is as follows:

[Current assets-inventory-prepaid expenses]/current liabilities=quick ratio

When including a corporation’s marketable securities, they include common stock, certificates of deposit, or government bonds. Accounts receivable is money a customer owes a company that can be collected in 90 days.

How to calculate a quick ratio

When determining liquidity, there are specific steps to calculate the quick ratio of a company.

Run a balance sheet. Corporations can run a standard balance sheet that takes into account liability and asset information. When companies run a balance sheet, a standard balance sheet can be better than a summary balance sheet. A standard balance sheet provides more details than a summary balance sheet.
Calculate assets. A quick ratio of a company can calculate liquid assets. When calculating assets, a corporation can include cash, accounts receivable, and funds that haven’t been deposited. Corporations don’t include inventory and prepaid expenses in calculating assets. They can’t quickly be converted to cash.
After running a balance sheet and calculating assets, companies can calculate current liabilities. Short-term debt that’s paid off within a year is part of a current liability. When a company calculates liabilities, the liabilities can include payroll and accounts payable. The liabilities can also include credit card debt and payable sales tax.
Complete the quick ratio of a company. Once a corporation has calculated its assets and liabilities, that quotient will determine the ratio.

What is a good quick ratio?

In determining a good quick ratio of a company, there are some numbers that are important. A total of one is usually a good number. That quotient means that for every $1 of liability, there is $1 of assets. A ratio below one typically means that a corporation may not have enough cash to pay off short-term liabilities.

A ratio of 15 means that for every $1 of liabilities, a company has $15 of assets. While a high ratio can be good, one that is too high can be detrimental. If a ratio is too high, that means the company may not be efficiently using its cash reserve.

What does a quick ratio of a company tell investors?

Corporations on Dow Jones can determine a quick ratio of a company

When investors look at the quick ratio of a company, a quick ratio interpretation can give investors a lot of information. A low ratio can lead to a negative quick ratio interpretation. A lower ratio tells investors that a corporation doesn’t have enough liquidity to withstand a bear market. A high ratio tells investors that a company has enough cash on hand to cover near-term debt-especially in an economic downturn.

What is the difference between quick ratio vs. current ratio?

While a quick ratio of a company is one way to determine the liquidity of a company, there are other ways as well. A current ratio also measures a corporation’s short-term liquidity. However, a quick ratio is more stringent than a current ratio because it has fewer items to configure its calculations.

A current ratio is calculated as follows:

Current assets/current liabilities

In contrast to a quick ratio’s shortened criteria, a current ratio calculates more factors. While a current ratio’s formula is shorter, it includes all the current assets of a corporation. For example, a current ratio includes inventory and prepaid expenses. Those factors are excluded from a quick ratio of a company.

Another difference in current ratio vs. quick ratio is that a current ratio measures liquidity over a longer period of time. A quick ratio of a company measures assets that are converted to cash in three months.

While there are slight differences between current and quick ratios, there are similarities. Both ratios calculate the liquidity of a company. In addition, a current ratio of one and above is a good sign for a company. A current ratio below one is a sign a company can’t pay its debt.

Is a quick ratio the best measurement of a stock’s liquidity?

A company’s liquidity can help sustain it even during a difficult economic period. Despite having a poorly performing Q1 2020 and quick ratio of 0.37, upscale retailer Nordstrom’s still has strong liquidity. Even though it isn’t a value stock , Nordstrom reported it has enough liquidity to survive a worse-than-expected earnings report.

Nordstrom’s CEO, Erik Nordstrom, noted that Nordstrom still has enough liquidity to carry it through Q2 2020.

“We’re entering the second quarter in a position of strength, adding to our confidence that we have sufficient liquidity to successfully execute our strategy in 2020 and over the longer term,” said Nordstrom.

While the quick ratio of a company is not the ultimate arbiter of a stock’s financial health, it is a strong measurement to determine a company’s liquidity.

Comparison of quick ratios: Amazon vs. Walmart

Both Amazon and Walmart are the biggest retailers in the world. I will compare both corporations’ quick ratios to see which corporation can better cover short-term liabilities.

Amazon resilient in bear market

Amazon (NASDAQ:AMZN) is the most valuable company in the world. The online e-commerce behemoth has been a recession-proof stock during the current recession. Chantico CEO and asset allocation expert Gina Sanchez noted that Amazon has benefited from the recent quarantine.

Amazon’s quick ratio can be related to stock performance

“Amazon is the big winner in all of this because everyone [putting] off going to the grocery store has ordered directly from Amazon, has ordered anything they need from any store as most retail has been shut down from Amazon. I think Amazon has the longest, broadest story that would come out of this with the trends still intact,” said Sanchez.

Amazon is also performing so well that during a recession, the corporation hired 125,000 temporary workers since the nationwide shutdown. Amazon CFO Brian Olsavsky noted that demand for workers will grow during the summer.

“Demand has been strong and the biggest questions we have in Q2 are more about ability to service that demand,” said Olsavsky.

Amazon’s strong sales and hiring surge prove that the corporation and its stock are robust in this economic downturn.

What is Amazon’s quick ratio?

As of March 2020, Amazon’s current assets are $67.13 billion. Amazon’s current liabilities total $79.71 billion. So, the quick ratio formula is:

67.13/79.71=0.84.

Amazon’s quick ratio is 0.84. While I mentioned earlier that a quick ratio below 1 is a negative sign for a corporation, obviously Amazon is financially sound. Amazon may have other reasons why it may be more difficult for the company to meet its short-term obligations.

The quick ratio of a company may be lower than one because of high inventory turnover or increased inventory, especially in the retail industry. Inventory isn’t accounted for in a quick ratio formula.

Walmart performs well during COVID-19

Walmart(NYSE:WMT) is another stock that has performed well during the coronavirus crisis. In Walmart’s Q1 2021 earnings report, CEO Doug McMillon noted that increased sales of groceries and cleaning materials helped the corporation reach $134.62 billion while people were quarantined.

“We experienced unprecedented demand in categories like paper goods, surface cleaners, and grocery staples. For many of these items, we were selling in two or three hours what we normally sell in two or three days,” said McMillon.

Analysts rate Walmart a buy

Because of Walmart’s strong sales, financial analysts rate Walmart stock a buy. Garrett Nelson is a senior equity analyst at the CFRA research firm. Nelson rated Walmart as a strong pick for investors in a note to clients.

“Walmart remains one of our top picks, as we see it as a ‘pandemic winner’ that is likely to pick up share from the distress taking place across retail, particularly small businesses, department stores, and others levered to shopping malls,” wrote Nelson.

Neil Saunders, managing director at GlobalData Retail, also noted that Walmart is a buy-even more so than Amazon.

“That Walmart has outperformed Amazon, at least in growth terms, underlines both the deficiencies of Amazon in grocery – which generated the bulk of sales this quarter – and Walmart’s growing power in the segment,” said Neil Saunders, managing director at GlobalData Retail.

What is Walmart’s quick ratio?

As of April 2020, Walmart’s current assets excluding inventory is $22.1 billion. Walmart’s current liabilities are $82.65 billion. The equation would then be:

22.1/82.65=0.27

In comparison between Amazon and Walmart, 0.84 is greater than 0,27. Amazon’s quick ratio is higher than Walmart’s ratio.

Walmart inventory make company’s liquidity lower than Amazon’s quick ratio

Walmart has a lower quick ratio because of its increased inventory. Because Walmart has more physical inventory than Amazon, which isn’t included in quick ratios, Amazon ranks higher.

In addition to inventory, Walmart’s quick ratio is lower than Amazon’s quick ratio because of debt. Even though Amazon has expenditures of $4 billion, Walmart’s expenditures are topping $900 million for Q1 2021. Because Walmart has more inventory and increasing expenses, its quick ratio is lower than Amazon’s quick ratio.

Walmart’s expenses increased because of its extra bonuses to workers and increased spending on sanitizing store locations. Brent Biggs, Walmart’s chief financial officer, noted that added expenses could add to Walmart’s liability.

“[W]e’ve already announced a second round of special bonuses in the U.S. which that will financially hit in the second quarter,” said Biggs.

The increased expenses and physical inventory give Amazon’s quick ratio an edge over Walmart.

Comparison of quick ratios: Apple vs. Google

Apple and Google are rivals in the smartphone market with Apple’s iPhones battling Google’s Android system. Both corporations have become giants in tech with their innovation. But which company has the best quick ratio?

Apple has positive Q2 2020 earnings report

In Apple’s(NASDAQ:AAPL) Q2 2020 earnings report, Apple had an increase in revenue. The company’s iPhone sales declined because of the coronavirus slowing down production in China. Chief financial officer, Luca Maestri, noted that Apple Watches and other wearable devices still had strong sales.

“Today Apple reports $58.3 billion in revenue, an all-time record for services and a quarterly record for Wearables, Home and Accessories. It was also a quarterly revenue record for Apple Retail, powered by phenomenal growth in our online store. Amid the most challenging global environment in which we’ve ever operated our business, we are proud to say that Apple grew during the quarter,” said Maestri.

Apple stock can rise with high quick ratio

Maestri also noted that Apple would continue its growth and commit and contribute more to the U.S. economy.

“We are confident in our future and continue to make significant investments in all areas of our business to enrich our customers’ lives and support our long-term plans — including our five-year commitment to contribute $350 billion to the United States economy,” added Maestri.

Analysts pick Apple stock as a buy

Even though Apple’s sales increased in the U.S., Apple has struggled to maintain a foothold in India. Despite that, JP Morgan Chase Samik Chatterje rates Apple stock as a buy. He believes that if Apple iPhone SE sales increase in India, Apple’s price target could rise from $350 to $365.

“Apple has struggled to date to build a material presence in India on account of premium price positioning as well as other drivers,” he wrote, We estimate if Apple were able to capture roughly half of the 30 million to 35 million opportunity, it would translate into a 215 million steady annual replacement run-rate for iPhones globally and a $7 billion revenue or $0.70 cents of EPS upside,” noted Chatterje.

Evercore ISI analyst Amit Daryanani is another financial analyst that’s bullish on Apple stock. He believes that Apple is a stock that will continue to outperform.

“Apple continues to offer the best risk/reward in large-cap tech and long-term investors should use any weakness to add to positions,” said Daryanani.

Daryanani also noted that Apple could also have a $2 trillion market value in the future.

“This implies EPS growth of 14% over next several years driven by combination of operational tailwinds and buyback support,” said Daryanani.

What is Apple’s quick ratio?

As of March 31, Apple’s assets minus inventory total $140.42 billion. The company’s liabilities equal $96.09 billion. The quick ratio formula is:

140.42/96.09=1.46.

Therefore, Apple’s quick ratio is 1.46. That’s well above the standard for a quick ratio of a company.

Google Q1 2020 earnings report shows minimal fallout from ad revenue drop

Google’s (NASDAQ:GOOG) Q1 2020 earnings report was $41.16 billion, a strong showing despite a drop in ad revenue over the last few months. As a result of the economic slowdown, many corporations are not spending as much to advertise on Google as they did pre-pandemic.

YouTube drives Google revenue growth

Despite the decline in ad revenue in March, the decline wasn’t as deep as expected. YouTube has been a bright spot with its surge in revenue. The video-sharing site’s Q1 2020 revenue jumped by 36% to $15 billion. Google’s parent Alphabet chief financial officer Ruth Porat, spoke about YouTube, one of Google’s most valuable acquisitions.

“[For YouTube], the biggest part of ad revenue is Brand and we’re really excited about that and the upside there… One of the things we’re extremely focused on is ensuring that we’re providing advertisers with the tools they need to really present their brand the way they want, how they want and really to protect and measure that,” said Porat.

Analysts bullish on Google stock

Morgan Stanley analyst Brian Nowak says Google stock is a buy because the corporation is branching out into gathering health care data and moving into education.

“We are particularly positive on its emerging e-commerce products (shopping listings, virtual show rooms, deep linking, etc), focus on [small and medium-sized businesses], and efforts to drive digital transformation in the healthcare and education industries. Google’s Waymo autonomous vehicles business is also the market leader in AV technology,” said Nowak.

What is Google’s quick ratio?

In this equation to determine Google’s quick ratio, I’ll look at the current assets excluding inventory and liabilities. Google’s assets as of March are $146.13 billion. Google parent Alphabet’s liabilities total $40.19 billion. Therefore, the quick ratio formula is:

146.13/40.19=3.64

Google’s quick ratio is 3.64. That quotient is much higher than Apple’s 1.46. Google is more likely than Apple to be able to pay off short-term liabilities.

Quick ratio comparison: Twitter vs. Facebook

Trump war on social media affects Twitter stock

President Donald Trump has affected Twitter’s(NASDAQ:TWTR) stock. The social media site has been under fire from the president for fact-checking several of his latest controversial tweets and flagging some other messages. Twitter explained why it felt the need to flag a recent tweet of Trump’s for “glorifying violence.”

“We’ve taken action in the interest of preventing others from being inspired to commit violent acts, but have kept the Tweet on Twitter because it is important that the public still be able to see the Tweet given its relevance to ongoing matters of public importance,” noted Twitter.

Trump has threatened to sign an executive order to give the Federal Communications Commission more power to regulate Twitter.

While Twitter stock initially fell 4% last week after Trump’s threat, financial analysts say that Twitter stock won’t stay down for long. Baird Capital analyst Colin Sebastian wrote in a note to clients that Trump’s criticism won’t always adversely affect Twitter stock.

“It is difficult for us to see how the dispute over content moderation would meaningfully impact the vast majority of social media usage. Consequently, we would not expect any material impact on revenue, as advertisers will follow traffic and eyeballs,” wrote Sebastian.

Twitter has better-than-expected Q1 2020 earnings report

Twitter had a positive past earnings report in Q1 2020. However, Twitter had a downturn in its ad revenue.

“Revenue was $808 million in Q1, up 3% year over year, reflecting a strong start to the quarter that was impacted by widespread economic disruption related to COVID-19 in March. Reduced expenses partially offset the revenue shortfall, resulting in an operating loss of $7 million,” said Twitter.

Twitter also suffers from advertising decline

In addition to Google, Twitter also had a decline in ad revenue because of the COVID-19 crisis slowing down business. The company noted the at economic downturn hurt advertising revenue numbers.

“As an indication of the rapid change in advertising behavior, from March 11 (when many events around the world began to be canceled and we made working from home mandatory for nearly all our employees globally) until March 31, our total advertising revenue declined approximately 27% year over year,” noted Ned Segal, Twitter’s chief financial officer.

What is Twitter’s quick ratio?

As of March 2020, Twitter’s current assets minus inventory total 8467.579. Twitter’s liabilities equal 710.02. In the quick ratio formula,

8467.579/710.02=11.93

Therefore, Twitter’s quick ratio is 11.93.

Facebook stock caught in Trump tirade

Just as Twitter stock dropped slightly after challenging Trump, Facebook(NASDAQ:FB) stock dipped after the company also caught in Trump’s war on social media.

Facebook CEO Mark Zuckerberg noted that he disapproved of Trump’s attempts to control social media companies.

“I’ll have to understand what [the President] actually would intend to do, but in general I think a government choosing to censor a platform because they’re worried about censorship doesn’t exactly strike me as the right reflex there,” said Zuckerberg.

In contrast to Twitter, Facebook isn’t flagging Trump’s posts and refuses to fact-check posts on their site.

“I just believe strongly that Facebook shouldn’t be the arbiter of truth of everything that people say online. Private companies probably shouldn’t be, especially these platform companies, shouldn’t be in the position of doing that,” said Zuckerberg.

Analysts bullish on Facebook because of foray into online shopping

Before the controversy around Facebook, analysts rated Facebook as a buy. Many of them believe that the controversy will have a short-term effect on Facebook stock. Financial analysts believe that since Facebook announced an e-commerce division of the site, Facebook Shops. Deutsche Bank analysts wrote in a note to clients that Shops could be a multibillion revenue stream for Facebook.

“We think Facebook Shop in a simplistic bull case could drive up to as much as a $30 [billion] revenue opportunity, across a combination of take-rate driven transactional and advertising revenue,” wrote the analysts.

Facebook stock can be independent of a quick ratio

AB Bernstein analysts also rated Facebook stock a buy because of the new Shops venture. They believe that Facebook can be a vital part of e-commerce like Amazon.

“We have long viewed FB as the ‘rent’ to the digital economy and a core component of the online retail ecosystem,” the analysts wrote.

What is Facebook’s quick ratio?

As of March 2020, Facebook’s current assets excluding inventory are $69.349 billion. The social media’s company’s liabilities total $15.69 billion. To calculate the quick ratio formula, the equation would be as follows:

Facebook’s quick ratio formula is: 69.349-/15.69=4.60

Therefore, Twitter’s quick ratio of 11.93 is much greater than Facebook’s 4.60. Twitter has a greater ability to pay off short-term debt than Facebook.

Comparison of quick ratios: Uber vs. Lyft

Uber (NASDAQ:UBER) and Lyft (NASDAQ:LYFT) are competing ride-sharing services that have been struggling as people are staying home during the quarantine. Despite the troubles the companies are experiencing, they have different quick ratios.

Uber touts liquidity in Q1 2020 earnings report

Uber’s Q1 2020 earnings report was positive despite COVID-19’s effect on the company’s ridership numbers, creating $2.9 billion in losses. The corporation made $3.5 billion in revenue, a 14% increase. Uber’s chief financial officer, Nelson Chai, noted that the company has enough liquidity to weather the current economic volatility.

“Our ample liquidity provides us with substantial flexibility to navigate the current crisis, but we are being proactive and taking actions to emerge stronger and more focused as a company,” said Chai.

Uber also said that while ridership fell, the company had success with its food delivery service Uber Eats. CEO Dara Khosrowshahi noted that Uber stock should rise once the economy re-opens.

“Along with the surge in food delivery, we are encouraged by the early signs we are seeing in markets that are beginning to open back up,” said Khosrowshahi.

Some analysts bullish on Uber after cost cuts

Financial analysts rate Uber stock after its positive earnings report. As Uber cut its workforce, the company has cut costs. Ironically, Uber’s decision to eliminate 6,000 jobs lifted the stock up and is a good sign to CFRA analyst Angelo Zino. Zino wrote in a note to clients that Uber’s ride-sharing division can be more profitable with fewer overhead costs.

“We[CFRA] applaud [the cost savings] as it will allow the Rides segment to be profitable at a much lower run rate. We anticipate a tempered recovery in the ridesharing market without a vaccine for Covid-19, with the segment unlikely seeing previous peak volume over the next 2 years,” wrote Zino.

“That said, we see UBER being profitable on an adjusted EBITDA basis by the second half of ‘21. We believe the moves (includes office reductions) will allow UBER’s cost structure to become more variable,” added Zino.

Bank of America Securities analyst Justin Post is also bullish on Uber stock after the cost-cutting measures.

“We think these changes underscore a more focused and mature Uber and will likely result in an accelerated path to break-even if end markets recover,” wrote Post.

Other analysts see slow recovery for rideshare stocks

Even though Uber and Lyft have survived the economic slowdown, there are other financial analysts who think the ridesharing services still face an uphill climb. Wedbush analyst Dan Ives noted that Uber and Lyft need more time to recover after the economy re-opens.

“It’s still a slow thaw, and with multiple macro levers over the course of the year, and likely an even longer return to normal environment, including business travel, there’s still a long road ahead for rideshare,” said Ives.

What is Uber’s quick ratio?

As of March, Uber’s current assets are $11.11 billion. Uber’s liabilities are $6.63 billion. The quick ratio formula is:

11.11/6.63=1.68

So, Uber’s quick ratio is 1.68.

Lyft perseveres despite COVID-19

Even though Lyft stock was adversely affected by the nationwide lockdown, the company still reported good news. Lyft reported Q1 2020 sales of $955.712 million. That figure beat experts’ expectations of $897.860 million.

Lyft stock also jumped after reporting that ridership increased by 26% in May. CEO Logan Green noted that Lyft was able to withstand economic headwinds.

“While the COVID-19 pandemic poses a formidable challenge to our business, we are prepared to weather this crisis. We are responding to the pandemic with an aggressive cost reduction plan that will give us an even leaner expense structure and allow us to emerge stronger,” said Green.

Similar to Uber, Lyft’s chief financial officer Brian Roberts also noted that the corporation was reducing costs.

“In these uncertain times, we are building on that progress by taking decisive action to reduce costs and further improve our operating efficiency. We expect to remove approximately $300 million from our annual expense run-rate by the fourth quarter of 2020 relative to our original expectations for 2020,” said Roberts.

Analysts split on whether Lyft is a buy

Financial analysts are divided on whether Lyft is a buy. Piper Sandler’s Alex Potter downgraded his rating of Lyft. He believes that riders will be hesitant to enter Lyft cars because of COVID-19 fears.

“Sequential gains are encouraging, but since ride-hailing involves sharing indoor air with strangers, we expect riders may remain wary for some time,” said Potter.

While Potter is bearish on Lyft stock, Needham’s Brad Erickson is bullish on Lyft stock. He rates the ridesharing company’s stock as a buy.

“We are unwavering in our view that the secular story of ride-hailing adoption is intact if and as we move through COVID,” noted Erickson.

What is Lyft’s quick ratio?

As of March, Lyft’s current assets totaled $3.144754 billion. Liabilities equaled $2551.14 billion. In the quick ratio formula,

3.144754/2551.14= 1.23

Lyft’s quick ratio of 1.23 is less than Uber’s 1.68. Uber has a greater ability to pay its short-term liabilities than Lyft.

Quick ratio comparison: Tesla vs. GM

Tesla was founded just a few years ago, but is already challenging the established automobile company General Motors (GM). I will examine which corporation has a higher quick ratio.

Tesla makes a profit despite COVID-19 challenges

Like all automobile corporations, Tesla’s( NASDAQ:TSLA) production ground to a halt after coronavirus caused a nationwide shutdown. Despite the shutdown, Tesla turned a profit in a better-than-expected Q1 2020 earnings report with revenue of $5.99 billion. CEO Elon Musk spoke about the results.

“So, Q1 ended up being a strong quarter despite many challenges in the final few weeks. This is the first time we have achieved positive GAAP( generally accepted accounting principles) net income in a seasonally weak first quarter,” said Musk.

Musk also spoke about how Tesla has $8 million available in cash despite a reduction in demand for Tesla during the economic slowdown.

Analysts divided on whether Tesla is a buy

Tesla’s positive Q1 2020 earnings report makes Tesla a buy to Wedbush’s Dan Ives. He wrote in a note to clients that he believes Tesla stock can continue to perform well now that the company’s factories are re-opened.

“Tesla appears to be turning the corner from both a demand and production perspective heading into the month of June,” wrote Ives.

Ives also believes that the international demand for Tesla’s Model 3 will help the company’s stock.

“While second-quarter delivery numbers remain in flux due to a host of logistical issues as well as overall lockdown conditions now starting to ease across the U.S. and Europe, it appears underlying demand for Model 3 in China is strong with a solid May and June likely in the cards and clear momentum heading into the second half,” added Ives.

While Ives is bullish on Tesla stock. Bank of America analysts are bearish on Tesla stock. The analysts believe that even though Tesla is re-opened, production restarts will still be difficult to implement.

Analysts also noted Tesla’s re-opening “will likely prove toughest with production restarts/ramps that continue to be pushed out, which may disproportionately hit (Tesla) by derailing its ongoing capacity/production expansion across its plants (Model Y in Fremont, Model 3 in Shanghai, Giga (Berlin)”.

What is Tesla’s quick ratio?

As of March, Tesla current assets excluding inventory are $14.893 billion. The company’s liabilities equal $ 11.986 billion. The quick ratio formula would be:

10.40/11.986=0.87.

Tesla’s quick ratio is 0.87.

GM touts liquidity despite economic slowdown

GM had a better-than-expected earnings report despite COVID-19 slowing down production. Chief financial officer Dhivya Suryadevara touted the corporation’s liquidity in its latest financial results.

“Our liquidity continues to be very strong at $33.4 billion at the end of first quarter. Even in an extreme scenario with zero production, our current levels of liquidity will take us into Q4 of 2020. In addition, the capital markets continue to be open as a way to access additional layers of liquidity to take us beyond that time frame,” said Suryadevara.

Deutsche Bank bullish on GM stock

Because of GM’s positive earnings report, Deutsche Bank upgraded its rating of GM stock to a buy in May.

“GM’s strong 1Q performance and forward-looking outlook, in our view demonstrate the benefit from its proactive actions to transform the business, right size its costs and boost profitability. They should leave GM best positioned to weather challenging 2Q conditions, and yield considerable improvement in profit and free cash flow in 2H and into 2021.”

GM’s stock rose 6% after the Q1 2020 earnings report. The company had its stock slide 40% throughout the year. However, GM is showing resilience as it re-opens its factories as the economy re-opens.

What is GM’s quick ratio?

As of March, GM’s current assets equaled $86.90 billion. GM’s liabilities totaled $91.29 billion. Therefore, the quick ratio formula is:

86.90/91.29=0.95.

GM’s quick ratio is 0.95.

GM’s 0.95 is greater than Tesla’s 0.87. GM has more liquidity and can more easily pay off short-term debt better than Tesla.

How can traders use quick ratio interpretations to pick stocks?

While a quick ratio of a company is just one way to measure a corporation’s success, it is a vital metric. A quick ratio interpretation can help investors choose the best stocks that can pay off short-term debt. TradingSim charts and blog posts can also help investors find the best stocks with the most liquidity to easily pay off debt and give investors better results.

There are many ratios to measure a stock’s performance. That is especially true with mutual funds. The COVID-19 crisis caused the current bear market. With that uncertainty, traders want to use the most precise formulas to determine the best mutual funds for investment. The Treynor Ratio is one formula that can measure a mutual fund’s performance.

This TradingSim article will provide an overview of the ratio and then explain how investors can use the ratio to measure the top 10 mutual funds.

What is the Treynor Ratio?

The Treynor Ratio is a reward-to-volatility formula. The ratio measures an investment’s performance per unit of risk.

In the Treynor formula, beta is measured in risk. Beta is the measure of a stock’s volatility in relation to a benchmark like the S&P 500. The ratio calculates beta and the returns on risk-free returns.

With the Treynor formula, The S&P 500 usually has a beta of one. Stable stocks have a beta below one. Volatile stocks have a beta over one.

In the Treynor Ratio, the formula is: (Ri-Rf)/B, where:

Ri=return of investment

Rf= risk-free rate. That’s typically the yield on short-term Treasury bills.

B-= the beta of the portfolio.

Beta is considered to be measured against a key benchmark. It’s measured with the return that could be earned on a risk-free asset like the Treasury bill in the reward-to-volatility ratio. The risk-free rate is subtracted from the portfolio’s return of investment. The result of that equation is divided by the portfolio’s beta. A higher Traynor ratio means that there is a better return.

The S&P500 and the Dow Jones 30, since 1970’s — The S&P 500 and the Dow Jones 30, since 1970s

What do the numbers in a Treynor ratio mean?

A high Treynor Ratio means an investment has added value related to its risk. In addition to that result, a negative Treynor Ratio means the mutual fund performed worse than a risk-free asset.

Who created the Treynor Ratio?

Jack Treynor was the economist who created the method. He was one of the first economists to discover the capital asset pricing model (CAPM). That CAPM model codified investment return risks that became the basis for the Treynor Ratio.

How can investors use the Treynor formula?

Matt Ahren is a financial advisor with Integrity Advisory in Overland Park, Kansas. He notes how the Treynor Ratio is used to justify risks in investments.

“I manage the portfolios for our firm, so if I am reviewing an individual fund then I first look at the fund’s beta to see how much market risk that manager is taking,” said Ahrens.

Aherns inspects a mutual fund’s Treynor formula to see if a portfolio’s performance justifies its risk.

“Then I look at the Treynor ratio to see how much return am I getting per unit of risk. Basically, am I getting bang for my buck?” said Aherns.

What is the Treynor Ratio’s legacy?

Robert Merton knew Treynor well. He is a Nobel Prize-winning economist at the Massachusetts Institute of Technology. Merton credits Treynor with bringing more mathematical analysis to finance.

“It wasn’t that he just did a particular theory,” he said. “He was very creative and also was a leader in bringing the quantitative finance science to finance practice. That was his bridge.”

Bruce I. Jacobs is a principal of Jacob Levy Equity Management. He also credits Treynor for bringing mathematical formulas to better analyze stocks and mutual funds.

“Jack had incredible insights about the markets and models and helped bring quantitative finance into practical application,” said Jacobs.

How Treynor Ratio is vital to analyzing risk

MIT finance professor Andrew Lo also praised the Treynor Ratio and CAPM. He also credits the Treynor Ratio with acknowledging the importance of beta when analyzing a stock.

“In part, it acknowledges that there’s a trade-off between risk and return and CAPM quantified what the trade-off is. That relationship is what gave rise to the notion of beta,” said Lo.

In addition, Lo also noted that the beta of a mutual fund can be crucial to measuring a mutual fund’s risk.

“So, when we talk about the beta of a stock, that comes out of that framework. When we do discounted cash flow analysis, we’re using some kind of cost of capital. CAPM is the tool we use to calculate that cost of capital,” added Lo.

Treynor Ratio builds on work of Sharpe Ratio

The Treynor formula builds on the work of fellow economist William Sharpe. Lo noted that the capital asset pricing model championed by economists is vital to the mutual fund industry.

“CAPM is also the basis of the mutual-fund industry, particularly for passive investing. You ought to just buy and hold the market, and you’ll do just fine,” said Lo.

“Vanguard[ a large mutual fund corporation] and all of the index funds out there came about because of the contributions of Sharpe, Treynor, and others made in finding the capital asset price model. The multi-trillion-dollar passive-index business — we can thank Sharpe and Treynor for that wonderful gift,” added Lo.

Michael B. Miller, CEO of Northstar Risk, also noted the importance of the Treynor Ratio in evaluating the performance of mutual fund portfolios. While he’s critical of the method, he still praises the Treynor ratio as effective.

“The ratio is motivated by two important concepts First, you should care about risk-adjusted returns, not absolute returns,” said Miller.

“Second, in a well-diversified portfolio, you should worry more about the macroeconomic factors that could impact your portfolio and less about the risk from individual securities,” added Miller.

What is the difference between the Sharpe ratio and Treynor Ratio?

The Treynor formula builds on a previous measurement of the Sharpe Ratio. Both formulas can be beneficial to an investor to assess mutual fund investments. William Sharpe created the formula to help investors understand the risk of an investment in relation to its return.

The Sharpe Ratio is similar to the Traynor Ratio because they both assess risks of portfolios. While both formulas have similarities, there are differences between the two ratios.

The Treynor Ratio assesses a systemic risk of a portfolio against a benchmark like the S&P 500. However, the Sharpe Ratio measures the performance of a portfolio based on the overall total risk of a portfolio.

William Sharpe creator of Sharpe ratio, a counter to Treynor Ratio

What is the Sharpe Ratio formula?

The Sharpe Ratio equation is:

(Rp – Rf)/σ , where:

Rp= return on portfolio

Rf= risk-free rate

σ =standard deviation on the return of the portfolio

The Sharpe Ratio subtracts the risk-free rate of return from a portfolio’s return. The result is divided by the investment’s return’s standard deviation. A standard deviation measures the investment risk in a mutual fund. It’s applied to an investment’s annual rate of return to calculate risk.

The higher the Sharpe ratio, the better for a mutual fund. A Sharpe Ratio of 1 and over is considered good for a mutual fund. A negative Sharpe Ratio means the expected return may be negative. The negative quotient could also mean that the portfolio’s return is worse than the risk-free rate.

Which is better to measure mutual funds, the Sharpe Ratio or Treynor Ratio?

Both formulas can effectively measure the performance of a mutual fund. However, there are two differences between the measurements. The Sharpe Ratio can be applied to all portfolios that are in specific sectors.

In specific sectors, specific mutual funds may have unsystematic risk as to the best measure of risk. In that case, the Sharpe Ratio may be the better formula because it measures overall risk.

However, with the Treynor Ratio, there is a difference. The Treynor Ratio measures systematic risk. Unsystematic risk is not a factor with diversified mutual funds.

Because of that, the Treynor Ratio can measure systematic risk. The Treynor Ratio can be a better metric to evaluate the performance of a well-diversified mutual fund portfolio.

What are the downsides to the Treynor ratio?

While the Treynor Ratio can be an effective measure of a portfolio’s performance, it’s not perfect. Some financial experts say that the metric has a downside.

S. Michael Sury is a lecturer in finance at the University of Texas at Austin and studies the Treynor index. He noted that the Treynor formula isn’t perfect. Sury because it only looks at past performance.

“Treynor ratio does have some drawbacks. Importantly, by definition, it is a backward-looking ratio. Thus, it tends to be more useful for its evaluative – rather than its predictive – power,” said Sury.

Some financial experts like Aherns believe that a mathematical analysis may not be the best way to analyze stocks for beginning traders.

“The trap do-it-yourselfers fall into is being unable to decipher where outperformance is coming from,” said Ahrens.

In addition, Aherns also noted that taking on more risk may benefit them more than using the Treynor formula to calculate risk.

“A manager may be performing well versus their peers just because they are taking on more market risk,” said Ahern.

Is the Treynor Ratio helpful to investors?

While many financial advisors use the Treynor Ratio, there are financial managers that aren’t fans of the formula.

Paul Ruedi of Ruedi Wealth Management doesn’t believe that the Treynor formula is best for the average investor. He believes that two factors are more crucial to evaluate mutual funds.

“At the end of the day, over 90 percent of an investor’s lifetime return is a result of two things. The first is their allocation to equities versus fixed-income,” said Ruedi.

“And second to that, but probably just as important – or maybe even more important – how they behave when the portion of their portfolio that is invested in the great companies of the U.S. and the world is temporarily down 30 percent or 50 percent,” added Ruedi.

In addition to that, Ruedi also believes that the Treynor ratio return is not an accurate measurement of a mutual fund’s return.

“Nobody goes into the grocery store with their Treynor ratio return, they go into the grocery store with their actual return,” said Ruedi.

While the Treynor Ratio may not be for every investor, the Treynor formula could be a good option for measuring risk. In the rest of the article, I will analyze comparisons of 10 mutual funds. I will look at their financial statistics to compare the Treynor Ratios of the assets.

Comparison: Fidelity Advisor Series Growth Opportunities Fund vs. Morgan Stanley Insight Fund Class A

Fidelity Advisor Series Growth Opportunities Fund ( FAOFX) is a mutual fund that tracks growth stocks. The mutual fund has tech holdings like Tesla (NASDAQ:TSLA) and Uber (NASDAQ:UBER). Because of those stocks, Fidelity Advisor Series Growth Opportunity Fund had a high 1-year annual return of 12.55%.

Tesla stock rises after reopening factory

Tesla stock helps Fidelity Advisor Series Growth Opportunities Fund increase its annual return. The corporation’s controversial founder, Elon Musk is famous for his comments. Musk gets as much attention for his tweets as much as his company’s electric cars.

Musk defied California’s shelter-in-place orders to increase production at Uber’s Fremont factory. He recently tweeted about resisting the order on Twitter.

“Tesla is restarting production today against Alameda County rules. I will be on the line with everyone else. If anyone is arrested, I ask that it only be me,” tweeted Musk.

Tesla stock jumped 4% after the factory recently reopened after gaining county approval.

With that boost to its production and bottom line, Tesla’s HR head, Laurie Shelby, touted the re-opening of the factory.

“We have local support to get back to full production at the factory starting this upcoming week. We’re excited to continue to get back to work,” said Shelby.

The growth of Tesla stock helped Fidelity Growth Opportunities Fund have a strong annual return.

What’s the Treynor Ratio of Fidelity Growth Opportunities Fund?

I will explain the Treynor Ratio of the fund with a risk-free rate of 0.16%. This risk-free rate I chose is based on the yield of the one-year Treasury rate as of May 6.

The average annual return on the Fidelity Growth Opportunities Fund is 12.55%. Once that is calculated, the risk-free rate of 0.16% is subtracted from the return. After that, the result is divided by the beta. The beta, in this case, will be 1.1, the current benchmark of the S&P 500.

With those statistics, the Treynor formula would be:

12.55%-0.16%/1.1=0.01.

With that equation, The Treynor index would be 0.01. The quotient is below 1, which could potentially be a low number for potential investors. However, in comparison to other similar figures in the 0-1 range, the Treynor formula can vary in its risk-to-reward quotient.

As a result, the risk is increased with this portfolio if compared with other mutual funds. However, I will now examine the Treynor Ratio comparison to the Morgan Stanley Insight Fund Class A.

Morgan Stanley Insight Fund Class A

As a potential investment, Morgan Stanley Insight Fund Class A(NYSE: CPOAX) is a mutual fund that has a high annual return of 19.37%. Along with the high annual return, the risk-free rate is 0.16%. The beta will be 1 in this example.

With that risk-free rate, the Treynor formula would be:

Ri-Rf/B

19.37%-0.16%/1=0.19.

Spotify stock helps Morgan Stanley fund

With well-performing holdings, the Morgan Stanley fund has less risk. Spotify(NASDAQ: SPOT) is a holding that has helped Morgan Stanley’s Insight Fund Class A grow. The streaming company’s Q1 revenue increased to $1.90 billion because of many people being quarantined.

With many people sheltering in place, Spotify noted that the number of paid subscribers climbed to 130 million.

Because may people are at home, Spotify has been a background soundtrack.

In the quarantine era, Spotify listeners are more devoted to the service. “Listening time around activities like cooking, doing chores, family time, and relaxing at home have each been up double digits over the past few weeks,” noted Spotify in a statement.

Joe Rogan signing sends Spotify stock soaring

In addition to a positive earnings report, Spotify’s stock surged by 8% . That jump came after popular and controversial podcaster Joe Rogan moved his program to the streaming service.

After Joe Rogan joined the streaming service, Spotify spoke about the acquisition in a statement.

“The Joe Rogan Experience, one of the most popular podcasts in the world, is coming to Spotify via a multi-year exclusive licensing deal. The talk series has long been the most-searched-for podcast on Spotify and is the leading show on practically every other podcasting platform,” said Spotify.

With this new addition to its podcast stable, Spotify has become a holding that helped lessen the risk of the Morgan Stanley Insight Fund Class A.

Which Treynor Ratio is higher: Fidelity or Morgan Stanley?

In comparison between the Fidelity mutual fund’s 0.01 and Morgan Stanley’s 0.19, the Morgan Stanley Insight Fund Class A has a higher Treynor Ratio.

In that equation, the Treynor Index would be 0.19. Even though they’re both below one, the Morgan Stanley Ratio has a higher Treynor index than the Fidelity mutual fund. Because Morgan Stanley Insight Class Fund A has a higher Treynor ratio, it has less risk than the Fidelity Growth Opportunities Fund.

T. Rowe Price Global Technology Fund vs. Janus Henderson Global Technology

With tech stocks, the T. Rowe Price Global Technolgy Fund ( NASDAQ:PRGTX) and the Janus Henderson Global Technology mutual funds have performed well this year. Though they’re in the same sector, the T. Rowe Price fund has been singularly praised as of the best mutual funds of the decade.

T. Rowe mutual fund a top investment

The T. Rowe Price Global Technology Fund “invests primarily in companies we expect to generate a majority of revenue from development, advancement, and user of technology.” With that mission statement, the fund has an annual return of 12% with its tech holdings like Facebook and Netflix.

Facebook stock part of successful T. Rowe mutual fund

Facebook is a holding that helps the T. Rowe Price fund become a top mutual fund. As part of the fund, Facebook earned $17. 74 billion in its Q1 2020 earnings.

With online shopping growing, Facebook is pushing for more profits with Shops, an upcoming marketplace on the social networking site.

Despite economic volatility, Zuckerberg wants to expand into online shopping to reach more customers.

“I’ve always believed that in times of economic downturn the right thing to do is to keep investing and building the future,” said Zuckerberg.

With Facebook’s Q1 2020 success, “This is really the first very major push that we’re going to be making into that next step around commerce,” said Zuckerberg.

“All these tools are open for business even when your physical storefront can’t be,” added Zuckerberg.

Netflix part of T. Rowe mutual fund growth

In addition to Facebook, Netflix is a strong tech holding in the T. Rowe Price Global Technology Fund. The streaming service has seen a whopping 35% growth in its stock in 2020.

With that success, Netfiix has been a stock that’s helped the T. Rowe mutual fund. Michael Bapis is the managing director of Vios Advisors at Rockefeller Capital Management. He spoke about Netflix’s subscriber growth.

“Demand is off the charts right now, and it’s the integral driver for Netflix. You’re going to have subscriber growth continue to grow. It’s a massive market and people aren’t going to go to the movies. I think they are starting to capitalize on a massive market,” said Bapis.

As Netflix grows, “They’re[ Netflix] going to keep market share at this point because they offer the best product,” added Bapis.

What is the Treynor ratio of T. Rowe Price Global Technology Fund?

With that success, the Treynor ratio of the fund can be calculated, where:

Ri-Rf/B: 12%-0.16%/1=0.12.

In that equation, the Treynor Ratio will be 0.12.

Janus Henderson Global Technology Fund

In contrast to the T. Rowe fund, the Janus Henderson Global Technology Fund(NYSE:JANIX) has a lower annual return. As of May, the Janus mutual fund’s annual year-to-date return is 6.23%. Despite the lower return, the fund has many strong holdings in its portfolio.

Microsoft a strong buy in Janus Henderson Global Technology Fund

As Goldman Sachs analyzes stocks, Microsoft is a strong holding in the Janus mutual fund. Goldman Sachs rated the software giant’s stock as a buy.

“Our partner checks continue to reflect the relative strength in the AWS platform, as incremental demand from customers to accelerate their migration into the cloud,” said Goldman Sachs in a statement.

In its analysis, Goldman Sachs noted that Microsoft can ” provide full virtual-desktop coverage (AWS WorkSpaces), and other work-from-home and business continuity needs.

As a tech stock, Microsoft’s stock rose because of its cloud services. After a positive Q1 2020 earnings report, the software company touted its $35 billion Q1 revenue.

In its earnings report, Microsoft noted that “cloud usage increased, particularly in Microsoft 365, including Teams, Azure, Windows Virtual Desktop, advanced security solutions, and Power Platform, as customers shifted to work and learn from home.”

What is the Treynor Ratio of the Janus Technology Mutual Fund?

As a result of Microsoft’s strong performance, the Janus mutual fund has performed relatively well. With the current statistics, the Treynor formula for the Janus Technology Mutual Fund would be:

Ri-Rf/B, where: 6.23%-0.16%/1.1=0.06.

Which Treynor Ratio is higher: T. Rowe or Janus?

With the comparison between the two tech mutual funds, 0.12 is greater than 0.06. The T. Rowe Technology Fund has a higher Treynor Ratio than the Janus Technology Mutual Fund.

Vanguard Healthcare Fund

In this COVID-19 era, the Vanguard Healthcare Fund(NYSE:VGHCX)has outperformed other mutual funds. The mutual fund’s annual return was an impressive 17.35% in 2020 so far. Vanguard Healthcare Fund’s returns are doing well because of its healthcare holdings. One holding that is helping the Vanguard Healthcare Fund is Pfizer.

Pfizer COVID-19 vaccine trial gives stock a boost

Pfizer(NYSE:PFE) stock grew 35% despite a declining stock market. The pharmaceutical company is working on a promising vaccine for COVID-19. As Pfizer CEO Albert Boula noted, the company is gathering information for its trials.

“We are collecting data as we speak in real time so we know, we are monitoring the safety of the doses,” said Bourla.

BNT162 is the potential vaccine that is being tested later this year. The corporation hopes to have 360 people in a clinical trial. If this vaccine is successful, Bourla hopes that the treatment will be available by the end of the year.

“If things go well, and we feel that the product is safe and efficacious, and the FDA [Food and Drug Administration] and EMA [European Medicines Agency] and other regulatory agencies feel the same, we will be able to deliver millions of doses in the October time frame,” said Bourla.

Pfizer plans to produce hundreds of millions of the potential COVID-19 vaccine by next year. With Pfizer’s promising vaccine, the Vanguard Healthcare Fund has been a reliable mutual fund for investors.

What is the Treynor Ratio of the Vanguard Health Care Fund?

With a high annual return of 17.35%, the equation would be:

Ri-rf/B, where: 17.35-0.16%/1.1=0.16

In that equation, the Treynor ratio of the Vanguard Health Care Fund is 0.16.

Invesco Health Care Fund Class A

The Invesco Health Care Fund Class A (NYSE:GGHCX) had a well-performing one-year return of 15.61%. The portfolio has outperformed because of Abbott Labs, one of its successful holdings.

Abbott Lab stock rises on COVID-19 antibody tests

Abbott Laboratories (NYSE:ABT) is an Invesco Health Care Fund holding that’s rising in the COVID-19 era. The stock rose 8.6% year-to-date with its antibody tests to detect the virus.

As the coronavirus crisis continues, Abbott is developing antibody tests for the virus. The corporation received Food and Drug Administration approval for more antibody tests for COVID-19.

With this second authorization, Abbott hopes to ship 30 million antibody tests to hospitals and potential patients.

“We wanted to provide hospitals and labs with as many broad and reliable testing options as possible during this pandemic,” said an Abbott spokesperson.

What is the Treynor Ratio of Invesco Health Care Fund Class A?

As Abbott Labs raises the Invesco Health Care Fund’s annual return, the Treynor ratio can be calculated. The formula is:

Ri-rf/B, where:

15.61-0.16/1.1=0.14

In this quotient, the Treynor Ratio is 0.14.

Which Treynor ratio is higher: Vanguard or Invesco?

In this comparison of the healthcare mutual funds, Vanguard’s 0.16 is greater than Invesco’s 0.14. The Vanguard Health Care Fund has a higher Treynor Ratio than Invesco’s Health Care Fund Class A.

JP Morgan Large Cap Growth Fund

The JP Morgan Large Cap Growth Fund( NYSE:OLGAX) is a large-cap mutual fund with a healthy 12% annual yield. The mutual fund has some of the fastest-growing companies in its portfolio.

AMD recession-proof stock in JP Morgan portfolio

AMD(American Micro Devices)(NYSE:AMD) is a holding in the JP Morgan Large Cap Growth Fund that is performing well during the recession. The semiconductor company is performing well as its computing revenue grew.

In AMD’s Q1 2020 earnings report, revenue surged 40% to $1.79 billion. The corporation touted its positive results. Dr. Lisa Su, AMD’s CEO, noted the results in a press release.

“While we expect some uncertainty in the near-term demand environment, our financial foundation is solid and our strong product portfolio positions us well across a diverse set of resilient end markets,” said SU in a statement.

“We remain focused on strong business execution while ensuring the safety of our employees and supporting our customers, partners and communities. Our strategy and long-term growth plans are unchanged,” added Su.

What is the Treynor Ratio of the JP Morgan Large Cap Growth Fund?

When finding the Treynor index of the JP Morgan Large Cap Growth Fund, this is the equation:

Ri-Rf/B, where:

12-0.16%/1.1=0.11

In this case, the Treynor Ratio is 0.11.

Glenmede Quantitative U.S. Large Cap Growth Equity Portfolio

Fidelity’s Glenmede Quantitative U.S. Large Cap Growth Equity Portfolio(NYSE:GTLLX) is another large-cap mutual fund. The fund has large-cap holdings, but has a small one-year return of 1.86%.

Accenture a vital part of Glenmede portfolio

In the Glenmede portfolio, Companies like Accenture (NYSE:ACN) is a valuable holding. Accenture is a technology consulting services company. The corporation has an expected 10% growth rate over the next three years.

Financial analyst Ben Castillo-Bernaus rates Accenture as a buy for investors.

“Accenture remains ‘best in class’ and the recent weakness is an opportunity to gain a position in this IT Services global leader delivering 40% returns on capital,” stated Castillo-Bernaus.

“Accenture has been a pioneer in developing ‘the New’ with 65% of revenues now coming from high growth Digital, Cloud and Security services,” added Castillo-Bernaus.

What is the Treynor Ratio of the Glenmede mutual fund?

In the equation Ri-Rf/B, where:

1.86%-0.16%/1.1=0.02.

The Treynor formula shows the Glenmede mutual fund’s ratio is 0.02.

Which Treynor Ratio is higher: JP Morgan Chase or Glenmede?

When contrasting the JP Morgan Chase and Glenmede’s Treynor indexes, the JP Morgan Chase Large Cap Growth Fund has a higher Treynor Ratio. The Glenmede Quantitative U.S. Large Cap Growth Equity Portfolio has a lower Treynor Ratio, so it may have a lower reward.

State Street Institutional Premier Growth Equity Fund Service Class

The State Street Institutional Premier Growth Equity Fund Service Class mutual fund (NYSE:SSPSX) that features small and medium cap companies. Its annual rate of return is high at 12.80%. United Health is a holding in the portfolio.

United Health a strong holding for State Street

Since healthcare stocks are outperforming, United Health(NYSE:UNH) is a robust part of State Street’s portfolio.

Financial analyst Michael Wiederhorn touted United Health as a buy.

“Overall, UNH produced strong results and seems well-positioned to navigate the COVID pandemic due to a relatively stable top-line, a diversified business mix and a dominant position across its businesses, ” wrote Widerhorn.

What is the Treynor Ratio of the State Street Institutional Premier Growth Equity Fund Service Class?

In the State Street mutual fund equation, where:

Ri-rf/B: 12.80%-0.16/1.1=0.11.

Baron Fifth Avenue Growth Retail Fund

The Baron Fifth Avenue Growth Retail Fund (NYSE:BFTHX) is a mutual fund that invests in large-cap companies. The mutual fund has a hefty 12.70% annual return. One of the Baron Fifth Avenue holdings is the legendary credit card corporation Visa (NYSE:V).

Visa a reliable Baron Fifth Avenue holding as it expands into data

Visa is a strong holding as the credit card company invests in Good Data, a global analytics company.

“With insights from data, we can help sellers, financial institutions and Visa’s extended global business network better understand and meet consumer needs, especially when those needs are changing fast,” said Melissa McSherry, head of Visa’s Data, Security, and Identity products.

Oppenheimer’s Glenn Greene rated Visa a buy because of its recent stabilization in April.

“While the depth/duration of COVID-19 headwinds are hard to handicap we remain confident in V’s intermediate/long-term potential, wrote Greene.

What is the Traynor formula for Baron Fifth Avenue Growth Retail Fund?

In this equation, where Ri-Rf/B, where:

12.70%-0.16%/1.1= 0.11.

Which Treynor Ratio is higher: State Street or Baron Fifth Avenue?

Since both funds have very similar annual returns, the Treynor Ratios of both funds are the same at 0.11. The State Street Institutional Premier Growth Equity Fund Service Class and Baron Fifth Avenue Growth Retail Fund have equal risk-to-reward ratios.

Treynor formulas can be determined by small differences

The Treynor Ratios of mutual funds can be determined by small factors like decimal points. However, the decimal points in a Treynor formula make a big difference in figuring out a mutual fund’s risk-to-reward ratio. TradingSim charts and analysis can help investors find the best mutual funds with the least risk.

10 Best Holdings in QQQ Stock

What is QQQ stock?

What is TQQQ stock?

ProShares advise caution about TQQQ

Why should investors buy QQQ stock to track the NASDAQ 100?

1. Amazon

Amazon wants to increase empire with wearables

Analysts say Amazon is a top QQQ holding

2. Google

Google a buy to some analysts

3. Apple

Apple stock split may help QQQ stock grow

4. Tesla a key QQQ stock holding

Tesla has strong Q2 2020 earnings report

Tesla stock split boosts shares

Some analysts say stock splits help QQQ stock

Some experts think stock split will hurt QQQ stock

5. Facebook

Facebook a profitable holding in QQQ stock

6. Netflix

Financial experts bullish on Netflix stock

7. Zoom

Analysts rate Zoom a buy for investors

8. Nvidia

Analysts bullish on Nvidia stock

Cowen also says Nvidia key part of QQQ stock

9. Microsoft

Experts bullish on Microsoft stock

10. Adobe

Experts say Adobe is vital part of QQQ stock

QQQ stock a good addition to investors’ portfolios

What is a margin account?

What do brokers like Robinhood charge to trade on margin?

What are the rules for a margin account?

What are the advantages of a margin account?

Margin can help bring more investors into trading

Some financial advisors say margin wins in margin vs. cash accounts

Trading on margin better for experienced traders

Buying stocks on margin can postpone capital gains taxes

Forex trading on margin is most common

What are the disadvantages of a margin account?

High interest rates can cause problems for margin accounts

What do financial experts say about trading on margin?

Tesla margin requirements impact investors

Investors shouldn’t buy too many stocks on margin, experts warn

Financial advisers advise traders to borrow on margin carefully

What happens when an account is on margin call?

Will margin accounts be in more danger after the quarantine?

What should investors do when they’re on margin call?

How can an investor avoid margin call?

Where do investors trade on margin?

How can investors trade with a cash account?

What is the difference between a margin account vs. cash account?

What are the benefits of using cash accounts?

What are the disadvantages of a cash account?

What other violations can jeopardize a cash account?

How to cash in a margin account

Which account wins in margin vs. cash account?

What are restricted stock units?

How do RSUs work?

What are double trigger RSUs?

What is a restricted stock unit vested schedule?

How do RSUs differ from stock options?

What are the advantages of restricted stock units?

What are the disadvantages of RSUs?

How are restricted stock units taxed?

Special tax election can collect RSU taxes sooner

What are the RSU tax withholding methods?

What is the cost basis for restricted stock units?

1. Amazon

Amazon’s stock soars during COVID-19

Amazon raises wages, but cuts RSUs for hourly workers

Amazon RSUs help employees buy homes

2. Uber

Uber stock strong as it moves beyond ridesharing

Uber benefits from being rideshare leader

Uber established restricted stock units in beginning

Uber employees see downside to RSUs

Uber’s RSU is cautionary tale for employees

3. Apple