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Inside: Here is the real answer from a day trader and long term investor on how fast can you make money in stocks? Increase freedom by day or swing trading.

The answer depends.

It depends on what your particular objectives are for making money.

If you are a day trader, you obviously can make quick money during the day.

If you are a swing trader, you can make money over the course of typically two to five days. Most swing trades are closed within 30 days.

If you are a long-term investor, it takes longer to make money in the stock market since the rate of return is slower with index funds or mutual funds.

The biggest caveat for the average person to make money with stocks quickly is they buy at the wrong times and sell at the wrong times.

Everyone has heard the mantra of buy low, sell high. Right?

Sounds simple enough.

However, the amateur investor does not understand how the overall market moves, the momentum of the day, and their particular stock of choice.

Personally, I know I can make money with stocks quickly. For me, I average $300-500 in a day easily (and way more using options). But, I have moved from novice investor by taking this investing course. I have practiced with paper trading (simulated account) and I have worked hard to get the results that I see on a consistent basis.

My mantra is… I need to be consistent enough to achieve remarkable results in the stock market.

That is your answer to how fast can I make money in the stocks.

Even Jean-Jacques Rousseau, a philosopher, writer, and composer has a perfect quote when it comes to making money fast in stocks, “Patience is bitter, but its fruit is sweet.”

If you don’t understand what patience means, you are not prepared to make money fast in stocks.

You have to be disciplined enough to pull the trigger at the right time and exit before you get greedy or lose everything.

This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.

Trading involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Past performance is not necessarily indicative of future results.

Your results will vary. Trade at your own risk.

How Fast Can you Make Money In Stocks?

You can make money quickly in a matter of seconds. You can also lose money in a matter of seconds.

The brutal truth… day trading is not made for everyone.

However, you can make consistent income to supplement your paycheck. And that right there is enticing for anyone.

As a day trader, you close out all of your trades on the same day. Thus, you will have a realized gain or loss at the end of the day. This is the fastest way to make money in the stock market.

As a swing trader, you will hold your trades until the stock moves to your desired price. Once you close your trades, that is when you have a realized gain or loss.

For long term investing, that is normally a buy and hold strategy of holding a stock, EFT, or index fund for longer than a year.

The best part is you can design what type of trading style works best for your personality and maximize the profits you are capable of.

In order to have the highest success rates of making money in the quickest time possible, I highly recommend that you take this course.

Trading has been a life-changing event for her, as well as her 1000s of students that have all made over $1,000 per day. That is a testament to the quality education that you would receive on how to trade.

So, if you were wondering can you make $1000 a month trading stocks? The answer is yes and you can make $1000 a day if you take the course I have taken.

Personally, I truly believe that spending the money on this online investing course is money better spent paying a financial advisor or paying for college.

Is Day trading worth It?

Can you make a living day trading?

Yes, it is very possible to make day trading a viable career path for you.

There are many benefits to being a day trader because you set your own hours. Since you are your own boss, you do not have to answer to anybody else. And in many cases, you could possibly work fewer hours than a regular salaried position.

On the flip side of being a day trader is you will have highs and lows. Until you fully grasp the concept that as a trader you will not win 100% of the time, you will struggle. In fact, most traders are probably executing trades with 50% wins and 50% are losses; that is what they call their batting average.

As an active trader, you must be careful to protect your account balance through the proper execution of risk management. (If you don’t understand this risk concept, then you must watch this video).

The goal for a day trader is to lose small amounts of money and reap a bigger reward of profit at the end of the day.

According to Glassdoor, the average day trader makes $71,260 a year. Thus, day trading is a very viable career because this is a higher potential than the average salaried $60000 per year that somebody else can provide for you.

Now, let’s break down how much does the average day trader make in days, weeks, and months.

The stock market is open for trading for about 252 days per year. This can fluctuate slightly based on holidays, Leap Year, or major events.

Average Trader Makes
Daily $282.78
Weekly $1,370.38
Monthly $5,938.33
Yearly $71,260.00
Your results will vary. Trade at your own risk.

Now, what if you love your job and just want to supplement your income with trading? That is completely possible and something many people do today.

Check out this person’s journey.

Serious About Learning How Fast You Can Earn Money In Stocks?

The stock market can be tricky. The stock market can be a beast to try to understand. That is why so many financial gurus are always making predictions and a very small handful actually pan out.

In the most simplistic form, a stock price is when a buyer and seller agree on a specific price. That price can move up and it can move down throughout the day. But at that particular moment in time, that is where the buyers and sellers agree on a price.

Once you move from a novice investor to a beginner investor to a good investor to an advanced investor, you are able to increase how fast you can potentially earn money.

The biggest mistake is to just jump into the market and start trading without any clue to what you are doing.

To have a greater probability of success, then you must take a top-notch investing course. The other option is to skip the cost of the course and lose even more in the stock market. Your choice.

I picked this top-notch investing course and am very happy with my decision. Thus, I highly recommend it to others who are serious about trading to supplement their income.

Check out my Trade and Travel Review – Join the $1000 in a Day Club!

If you don’t have cash for the full course upfront, just start with the basic Trade and Travel course. You can always upgrade to VIP once you begin profiting off the stock market and move to advanced trading strategies of shorting and options.

On top of that, you need to spend time practicing your trades in a simulated account; also known, as paper trading.

Practice everything you are learning from the course without losing money. You are trading with fake money until you can get the hang of day and swing trading.

  • Learn how the stocks move.
  • Learn how the market reacts.
  • Master your trading plan.
  • Refine your trading mindset.

Once you are comfortable and ready, then you can move on to a live trading account. That is where you actually start reaping what you have sown.

Day trading or swing trading is not a waste of time or a bad idea if you know how to execute properly and know your long term goal.

Plus it helps you find time freedom in your life.

Best Stocks to Invest in 2023

Are you trying to find the best stocks to invest in the current year? It may remind you of looking into an eight ball, taking your best guess, and then throwing a dart to hit a bullseye.

There are over 6000 stocks that trade on the NYSE & Nasdaq (source)!

That is a lot of companies to search through to find the best stocks for 2021. Typically, day traders look heavily on technology stocks and growth stocks.

So, how do you go along and pick the best stocks?

  1. One option is to listen to the big financial gurus on TV or in the news telling you to buy this or that stock. They may have some good ideas, but they also may have a few misses. Plus those stocks may be at all time highs.
  2. Another option is you copy what your friend has done. See the stocks they picked, and hopefully, you don’t get burned by a bad stock pick.
  3. Look around your house and find products that you use and believe will continue to do better. (Buyer beware… your favorite products may not be the best stocks in their sector.)

If you truly want to be a savvy investor, then you need to find an easier way for you to pick stocks that fit within your financial portfolio. Even better to find stocks that align with your values and ethics.

More importantly, do this research without spending a ton of your own time!

If you are looking for the best stocks to invest in right now, you can use the Motley Fool’s services to help you pick the best stocks right now.

The other option is to do all of your due diligence and time picking your own company.

Personally, I use Motley Fool’s Stock Advisory. It is an easy way to start with a group of solid companies and less time for me to search out all other detailed information provided.

Is it possible to make a living trading stocks?

Most aspiring day traders will never become profitable. Even though this is the perfect early morning job.

Sad, but true.

That is because they do not have a system (aka trading plan) in place. They were not taught how to trade effectively, manage risk, and happily close a trade for a profit or a loss.

Unfortunately, trying to trade by the seat of your pants and whatever fits your fancy, will not work. The same goes for trading with you you hear on popular Reddit forums, Discord groups, or Twitter.

You have to know when to buy, how much to buy, what your risk tolerance is, when you plan to sell (win or lose), and your potential profit.

Just because you calculate a potential profit of $1,000 does not mean that it is a great trade since you may lose 3000 dollars to make that $1,000 profit happen. And in that case, that trade is not worth it.

There is a consensus out there that day trading is not worth it. Probably because those people lost a ton of money in the market because they were clueless on how to trade.

The question becomes are you willing to advance your knowledge more than the average person to make a living trading stocks.

To be successful at making money in stocks, you must understand how the market moves, be able to make solid decisions on buying or selling the stock or option.

If you struggle to make simple decisions on what you are going to have for dinner, then day trading might not be for you. So, stick with long-term investing with index funds.

If you have an inkling to add another type of income, then day trading or swing trading might be favorable for you. Or a desire of I don’t want to work anymore.

Day trading is a good idea if you are looking to change your personal finance situation and find freedom by increasing your net worth.

Think about how your life and how your stress level can be transformed by short term investing. What can you possibly accomplish by using the stock market as another stream of income?

I cannot stress enough that you must take a solid investing course.

Are you Ready to Make Money Fast in Stocks?

In conclusion, the real answer is yes, you can make money fast in the stock market. Even more when you have successful trade options (VIP level). The market comes with risk and you can also lose money fast in the stock market.

Yes, now is a good time to invest in stocks.

The determination will be decided by how much time you spend truly learning about how to make real money in the stock market.

  • If you’re following Twitter, discord, Reddit groups, or just following the trends, you may have some success, but it is not guaranteed for a long time.
  • If you have a proven reliable trading system, like I have taken I you can make the progress you need to start making real money in the stock market.

But remember, nothing is guaranteed.

Nothing that I have said in this post is a promise that you are guaranteed to make money in the stock market. All I’m saying is…it is possible.

You can learn how to make 300 dollars fast. Or even make 5000 fast.

You just have to put in the time, the dedication, and the desire to do it.

Just remember, do not start trading with real money until you have made significant progress in a simulated account and feel confident in your ability to make money in a live account.

You must be able to take money away from other people in the stock market and not have them steal your money.

LearnHow to Get Weekly Paychecks From The Stock Market

Trading involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Past performance is not necessarily indicative of future results.

Your results will vary. Trade at your own risk.

Know someone else that needs this, too? Then, please share!!

Did the post resonate with you?

More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!

Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.

Source: moneybliss.org

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When investing, you often want to know how much money an investment is likely to earn you. That’s where the expected rate of return comes in; expected rate of return is calculated using the probabilities of investment returns for various potential outcomes. Investors can utilize the expected return formula to help project future returns.

Though it’s impossible to predict the future, having some idea of what to expect can be critical in setting expectations for a good return on investment.

Key Points

•   The expected rate of return is the profit or loss an investor expects from an investment based on historical rates of return and the probability of different outcomes.

•   The formula for calculating the expected rate of return involves multiplying the potential returns by their probabilities and summing them.

•   Historical data can be used to estimate the probability of different returns, but past performance is not a guarantee of future results.

•   The expected rate of return does not consider the risk involved in an investment and should be used in conjunction with other factors when making investment decisions.

What Is the Expected Rate of Return?

The expected rate of return — also known as expected return — is the profit or loss an investor expects from an investment, given historical rates of return and the probability of certain returns under different scenarios. The expected return formula projects potential future returns.

Expected return is a speculative financial metric investors can use to determine where to invest their money. By calculating the expected rate of return on an investment, investors get an idea of how that investment may perform in the future.

This financial concept can be useful when there is a robust pool of historical data on the returns of a particular investment. Investors can use the historical data to determine the probability that an investment will perform similarly in the future.

However, it’s important to remember that past performance is far from a guarantee of future performance. Investors should be careful not to rely on expected returns alone when making investment decisions.

💡 Quick Tip: When you’re actively investing in stocks, it’s important to ask what types of fees you might have to pay. For example, brokers may charge a flat fee for trading stocks, or require some commission for every trade. Taking the time to manage investment costs can be beneficial over the long term.

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How To Calculate Expected Return

To calculate the expected rate of return on a stock or other security, you need to think about the different scenarios in which the asset could see a gain or loss. For each scenario, multiply that amount of gain or loss (return) by its probability. Finally, add up the numbers you get from each scenario.

The formula for expected rate of return looks like this:

Expected Return = (R1 * P1) + (R2 * P2) + … + (Rn * Pn)

In this formula, R is the rate of return in a given scenario, P is the probability of that return, and n is the number of scenarios an investor may consider.

For example, say there is a 40% chance an investment will see a 20% return, a 50% chance that the investment will return 10%, and a 10% chance the investment will decline 10%. (Note: all the probabilities must add up to 100%)

The expected return on this investment would be calculated using the formula above:

Expected Return = (40% x 20%) + (50% x 10%) + (10% x -10%)

Expected Return = 8% + 5% – 1%

Expected Return = 12%

What Is Rate of Return?

The expected rate of return mentioned above looks at an investment’s potential profit and loss. In contrast, the rate of return looks at the past performance of an asset.

A rate of return is the percentage change in value of an investment from its initial cost. When calculating the rate of return, you look at the net gain or loss in an investment over a particular time period. The simple rate of return is also known as the return on investment (ROI).

Recommended: What Is the Average Stock Market Return?

How to Calculate Rate of Return

The formula to calculate the rate of return is:

Rate of return = [(Current value − Initial value) ÷ Initial Value ] × 100

Let’s say you own a share that started at $100 in value and rose to $110 in value. Now, you want to find its rate of return.

In our example, the calculation would be [($110 – $100) ÷ $100] x 100 = 10

A rate of return is typically expressed as a percentage of the investment’s initial cost. So, if you were to sell your share, this investment would have a 10% rate of return.

Recommended: What Is Considered a Good Return on Investment?

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*Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

Different Ways to Calculate Expected Rate of Return

How to Calculate Expected Return Using Historical Data

To calculate the expected return of a single investment using historical data, you’ll want to take an average rate of returns in certain years to determine the probability of those returns. Here’s an example of what that would look like:

Annual Returns of a Share of Company XYZ
Year Return
2011 16%
2012 22%
2013 1%
2014 -4%
2015 8%
2016 -11%
2017 31%
2018 7%
2019 13%
2020 22%

For Company XYZ, the stock generated a 21% average rate of return in five of the ten years (2011, 2012, 2017, 2019, and 2020), a 5% average return in three of the years (2013, 2015, 2018), and a -8% average return in two of the years (2014 and 2016).

Using this data, you may assume there is a 50% probability that the stock will have a 21% rate of return, a 30% probability of a 5% return, and a 20% probability of a -8% return.

The expected return on a share of Company XYZ would then be calculated as follows:

Expected return = (50% x 21%) + (30% x 5%) + (20% x -8%)

Expected return = 10% + 2% – 2%

Expected return = 10%

Based on the historical data, the expected rate of return for this investment would be 10%.

However, when using historical data to determine expected returns, you may want to consider if you are using all of the data available or only data from a select period. The sample size of the historical data could skew the results of the expected rate of return on the investment.

💡 Quick Tip: The best stock trading app? That’s a personal preference, of course. Generally speaking, though, a great app is one with an intuitive interface and powerful features to help make trades quickly and easily.

How to Calculate Expected Return Based on Probable Returns

When using probable rates of return, you’ll need the data point of the expected probability of an outcome in a given scenario. This probability can be calculated, or you can make assumptions for the probability of a return. Remember, the probability column must add up to 100%. Here’s an example of how this would look.

Expected Rate of Return for a Stock of Company ABC
Scenario Return Probability Outcome (Return * Probability)
1 14% 30% 4.2%
2 2% 10% 0.2%
3 22% 30% 6.6%
4 -18% 10% -1.8%
5 -21% 10% -2.1%
Total 100% 7.1%

Using the expected return formula above, in this hypothetical example, the expected rate of return is 7.1%.

Calculate Expected Rate of Return on a Stock in Excel

Follow these steps to calculate a stock’s expected rate of return in Excel (or another spreadsheet software):

1. In the first row, enter column labels:

•   A1: Investment

•   B1: Gain A

•   C1: Probability of Gain A

•   D1: Gain B

•   E1: Probability of Gain B

•   F1: Expected Rate of Return

2. In the second row, enter your investment name in B2, followed by its potential gains and the probability of each gain in columns C2 – E2

•   Note that the probabilities in C2 and E2 must add up to 100%

3. In F2, enter the formula = (B2*C2)+(D2*E2)

4. Press enter, and your expected rate of return should now be in F2

If you’re working with more than two probabilities, extend your columns to include Gain C, Probability of Gain C, Gain D, Probability of Gain D, etc.

If there’s a possibility for loss, that would be negative gain, represented as a negative number in cells B2 or D2.

Limitations of the Expected Rate of Return Formula

Historical data can be a good place to start in understanding how an investment behaves. That said, investors may want to be leery of extrapolating past returns for the future. Historical data is a guide; it’s not necessarily predictive.

Another limitation to the expected returns formula is that it does not consider the risk involved by investing in a particular stock or other asset class. The risk involved in an investment is not represented by its expected rate of return.

In this historical return example above, 10% is the expected rate of return. What that number doesn’t reveal is the risk taken in order to achieve that rate of return. The investment experienced negative returns in the years 2014 and 2016. The variability of returns is often called volatility.

Standard Deviation

To understand the volatility of an investment, you may consider looking at its standard deviation. Standard deviation measures volatility by calculating a dataset’s dispersion (values’ range) relative to its mean. The larger the standard deviation, the larger the range of returns.

Consider two different investments: Investment A has an average annual return of 10%, and Investment B has an average annual return of 6%. But when you look at the year-by-year performance, you’ll notice that Investment A experienced significantly more volatility. There are years when returns are much higher and lower than with Investment B.

Year Annual Return of Investment A Annual Return of Investment B
2011 16% 8%
2012 22% 4%
2013 1% 3%
2014 -6% 0%
2015 8% 6%
2016 -11% -2%
2017 31% 9%
2018 7% 5%
2019 13% 15%
2020 22% 14%
Average Annual Return 10% 6%
Standard Deviation 13% 5%

Investment A has a standard deviation of 13%, while Investment B has a standard deviation of 5%. Although Investment A has a higher rate of return, there is more risk. Investment B has a lower rate of return, but there is less risk. Investment B is not nearly as volatile as Investment A.

Recommended: A Guide to Historical Volatility

Systematic and Unsystematic Risk

All investments are subject to pressures in the market. These pressures, or sources of risk, can come from systematic and unsystematic risks. Systematic risk affects an entire investment type. Investors may struggle to reduce the risk through diversification within that asset class.

Because of systematic risk, you may consider building an investment strategy that includes different asset types. For example, a sweeping stock market crash could affect all or most stocks and is, therefore, a systematic risk. However, if your portfolio includes different types of bonds, commodities, and real estate, you may limit the impact of the equities crash.

In the stock market, unsystematic risk is specific to one company, country, or industry. For example, technology companies will face different risks than healthcare and energy companies. This type of risk can be mitigated with portfolio diversification, the process of purchasing different types of investments.

Expected Rate of Return vs Required Rate of Return

Expected return is just one financial metric that investors can use to make investment decisions. Similarly, investors may use the required rate of return (RRR) to determine the amount of money an investment needs to generate to be worth it for the investor. The required rate of return incorporates the risk of an investment.

What Is the Dividend Discount Model?

Investors may use the dividend discount model to determine an investment’s required rate of return. The dividend discount model can be used for stocks with high dividends and steady growth. Investors use a stock’s price, dividend payment per share, and projected dividend growth rate to calculate the required rate of return.

The formula for the required rate of return using the dividend discount model is:

RRR = (Expected dividend payment / Share price) + Projected dividend growth rate

So, if you have a stock paying $2 in dividends per year and is worth $20 and the dividends are growing at 5% a year, you have a required rate of return of:

RRR = ($2 / $20) + 0.5

RRR = .10 + .05

RRR = .15, or 15%

What is the Capital Asset Pricing Model?

The other way of calculating the required rate of return is using a more complex model known as the capital asset pricing model.

In this model, the required rate of return is equal to the risk-free rate of return, plus what’s known as beta (the stock’s volatility compared to the market), which is then multiplied by the market rate of return minus the risk-free rate. For the risk-free rate, investors usually use the yield of a short-term U.S. Treasury.

The formula is:

RRR = Risk-free rate of return + Beta x (Market rate of return – Risk-free rate of return)

For example, let’s say an investment has a beta of 1.5, the market rate of return is 5%, and a risk-free rate of 1%. Using the formula, the required rate of return would be:

RRR = .01 + 1.5 x (.05 – .01)

RRR = .01 + 1.5 x (.04)

RRR = .01 + .06

RRR = .07, or 7%

The Takeaway

There’s no way to predict the future performance of an investment or portfolio. However, by looking at historical data and using the expected rate of return formula, investors can get a better sense of an investment’s potential profit or loss.

There’s no guarantee that the actual performance of a stock, fund, or other assets will match the expected return. Nor does expected return consider the risk and volatility of assets. It’s just one factor an investor should consider when deciding on investments and building a portfolio.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

FAQ

How do you find the expected rate of return?

An investment’s expected rate of return is the average rate of return that an investor can expect to receive over the life of the investment. Investors can calculate the expected return by multiplying the potential return of an investment by the chances of it occurring and then totaling the results.

How do you calculate the expected rate of return on a portfolio?

The expected rate of return on a portfolio is the weighted average of the expected rates of return on the individual assets in the portfolio. You first need to calculate the expected return for each investment in a portfolio, then weigh those returns by how much each investment makes up in the portfolio.

What is a good rate of return?

A good rate of return varies from person to person. Some investors may be satisfied with a lower rate of return if its performance is consistent, while others may be more aggressive and aim for a higher rate of return even if it is more volatile. Ultimately, it is up to the individual to decide what is considered a good rate of return.

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Redwood Trust is the latest nonbank lender to turn to the debt markets to support its operations.

The Mill Valley, California-based real estate investment trust has priced $85 million of senior unsecured notes due in 2029 at 9%. The underwriters have an option to purchase an additional $12.75 million for 30 days to cover over-allotments.

Proceeds can be used for Redwood’s residential and business purpose mortgage lending operations, acquiring mortgage-backed securities for investment and/or for funding long-term portfolio investments and potential acquisitions.

The new funds can also be used to purchase or pay down prior debt, including the 5.75% exchangeable senior notes due 2025 issued by one of its subsidiaries or the 7.75% convertible senior notes due 2027. The notes will be traded on the New York Stock Exchange. It is expected to close on June 18.

Net proceeds from this offering are expected to be approximately $81.7 million, or about $94 million if the underwriters exercise their over-allotment option in full.

This is Redwood’s second debt offering this year. In January, it sold $60 million of senior unsecured notes at a 9.125% interest rate, with the primary reason being to pay down or repurchase the older debt above, as well as from the 5.625% convertible senior notes due 2024 offering.

In the latest offering, note payments will be made on the first day of each quarter, starting on Sept. 1. They can be redeemed in whole or in part anytime after Sept. 1, 2026.

Morgan Stanley & Co., Goldman Sachs & Co., RBC Capital Markets, Wells Fargo Securities, Keefe, Bruyette & Woods and Piper Sandler & Co., are acting as joint book-running managers for this offering, while Citizens JMP Securities is the co-manager.

In the first quarter, Redwood Trust had GAAP net income of $29 million. It locked $1.8 billion of jumbo mortgages during the period, up from $1.2 billion in the fourth quarter. 

The REIT participated in three jumbo securitizations during the quarter totalling $1.2 billion, as well as whole loan sales of $202 million. 

Redwood Trust also funded $326 million of residential investor loans in the first quarter, down from $343 million in the fourth quarter of 2023.

In March, Redwood Trust entered into an agreement with the Canada Pension Plan Investment Board for a $750 million transaction. The deal included a $250 million corporate secured revolving financing facility CPP provided to Redwood Trust, as well as creating a $500 million joint venture that will invest in residential investor bridge and term loans.

The CPP facility has a two-year term, with a one-year extension option.

Among some recent debt transactions involving publicly traded nonbank mortgage lenders includes Loandepot exchanging nearly $500 million in 6.5% notes coming due in 2025 for 8.25% notes due in 2027. 

Rithm Capital, the parent of Newrez that is also structured as a REIT, in March conducted a $775 million offering of 8% unsecured senior notes to come due in 2029.

A January $1 billion debt offering from Mr. Cooper was one of the factors that pushed its common stock to a new high at that time. Subsidiary Nationstar Mortgage Holdings priced the senior notes at 7.125%, and they are due on Feb. 1, 2032.

Pennymac upsized its December debt sale by $100 million to $750 million of senior unsecured notes at a 7.875% rate.

Source: nationalmortgagenews.com

Apache is functioning normally

Earnings calls and earnings reports recap a company’s quarter or fiscal year, giving investors critical information as to how a company is functioning and faring. Understanding what’s going on with stocks can be tricky for both new and seasoned investors. It’s not always clear where you can turn for accurate information that will help with investment decisions — that’s why earnings calls or reports may be helpful.

But an earnings report doesn’t tell the whole story. Therefore, companies will hold earnings calls to provide context and backstory behind the data in an earnings report to help investors make informed decisions.

What Is an Earnings Call?

An earnings call is a conference call between the management of a public company and any interested outside party — usually investors, analysts, and business reporters — to discuss the company’s financial results and future outlook. Earnings calls are generally held quarterly, in the form of a teleconference or webcast; anyone can listen to an earnings call.

The earnings call often comes on the heels of the release of an earnings report and covers a given reporting period, typically a fiscal quarter or fiscal year.

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The Securities and Exchange Commission (SEC) requires that public companies disclose certain financial information regularly and on an ongoing basis. Companies must file Form 10-Q quarterly reports during the first three fiscal quarters of the year. A 10-Q includes unaudited financial statements and provides the government and investors with a continuing account of the company’s financial position throughout the year.

For the fourth quarter of the year, a company will file a Form 10-K, an annual report that shares audited financial statements, a look at the company’s business overall, and financial conditions over the previous fiscal year. The financial information and metrics included on these reports, like earnings per share, is discussed during an earnings call.

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What Is the Importance of Earnings Calls?

An earnings call is important because it allows a company’s management to discuss pertinent financial information and a company’s outlook.

Publicly-traded companies are not required to hold earnings calls; they are only required to release the details of their financial performance in a Form 10-Q or Form 10-K. However, most public companies have quarterly conference calls to keep shareholders up to date with the latest financial developments and provide context beyond the earnings data.

Earnings calls are also important for investors, especially those practicing fundamental analysis. These calls help long-term investors decide whether or not to invest in or continue investing in a company. For short-term traders, earnings calls may be helpful to capitalize on short-term volatility in a stock’s price immediately following an earnings call.

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The Structure of an Earnings Call

A company will announce upcoming earnings calls several days or even several weeks before the event. The company will usually issue a press release containing dial-in or webcast access information for stakeholders interested in participating in the call.

Earnings calls are generally scheduled in the morning, before the stock market’s opening bell, or in the afternoon, following the end of the day’s trading. These calls occur shortly after an earnings report is made public.

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Safe Harbor Statement

When the call begins, a company representative will likely share a safe harbor statement, which is a disclaimer about some of the comments executives will make. Specifically, some statements might be “forward-looking” and discuss future revenue, margins, income, expenses, and overall business outlook. Because no company can predict the future, the SEC requires that each warns investors that forward-looking statements may differ from actual results and trends.

Overview of Financial Results

The earnings call is usually led by the CEO, CFO, or other senior executives. During the call, these executives will deliver prepared statements covering financial results and the company’s performance for the reporting period.

This section of the call allows company leaders to give a more in-depth look at the company from their own eyes beyond the data found in the earnings reports. Executives may discuss market trends or even unpredictable factors that could influence how the company moves forward. Management will also likely share risks and their plans to take them on.

Question and Answer Session

At the end of the call, there may be a chance for investors and analysts to ask questions about the financial results the company presents. However, not everyone will get to ask a question. The company’s management may answer these questions, or they may decline or defer answering until they have the correct information to make an accurate response.

Preparing for an Earnings Call as a Shareholder

Before listening in on an earnings call, it may help to research the company and its earnings history and listen to previous earnings calls. Here’s additional information to know how to listen to an earnings call.

Where to Find Earnings Call Info?

Companies will send out a press release announcing when they will give an earnings call. Investors can also check the investor relations section of a company’s website for scheduled earnings calls. Additionally, some financial news websites may keep calendars of expected upcoming earnings reports and calls investors can check to stay current.

Many companies will post audio from the call on their website, making it available to investors and analysts for a few weeks. Companies also frequently offer transcripts of the call to read. This is especially useful for investors who may have missed an earnings call.

Much of the information discussed in conference calls, including Forms 10-Q and 10-K, are part of the public record and searchable on the SEC’s website. To find a company’s public filings, the SEC has a searchable Electronic Data Gathering, Analysis, and Retrieval system (EDGAR).

How Long is an Earnings Call?

An earnings call usually lasts for less than an hour. However, there are no requirements for how long an earnings call should be.

What to Listen For

Investors should treat earnings calls as valuable information on a company but know that it doesn’t typically paint the complete picture of its potential performance.

Some key things investors should listen for in an earnings call are:

•   How the company performed compared to analysts’ expectations

•   What the company attributes its financial performance to

•   Any changes in guidance for the future

•   Any significant challenges or headwinds the company is facing

•   Questions from analysts and how management responds to them

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Additionally, it may help to listen to the tone of the company’s executives when they are talking about the company’s performance. It isn’t quantifiable, but learning to pick up on the tone of management’s description of the company’s financials and the answers to analysts’ questions can help investors better understand the outlook for the company.

The Takeaway

Earnings calls provide investors with valuable insights into a company’s financial performance and outlook. These calls, paired with quarterly earnings reports, give investors a thorough understanding of the company, which helps with making investment decisions.

While earnings calls and earnings reports can be helpful to investors, keep in mind that they don’t tell the whole story. You’ll want to do your due diligence and further research to better inform your investment decisions, too.

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Apache is functioning normally

A cloudy mortgage outlook might cause consternation among lenders, but it is opening the door a bit wider for growth in home equity investments.

A confluence of events over the past few years, including rising interest rates, a dearth of refinances and surging property values are driving some consumers to borrow against home equity. With a spate of securitizations and new issuers recently entering the market, investors are seeing a range of opportunities on offer as a result, coming from both established home equity lines of credit or loans and new alternative credit platforms. 

“It will take years and years for the market to recover. And our thought is that even if interest rates were to fall 100 basis points, you’re still not going to see a refi boom,” said Bill Banfield, chief business officer at Rocket Cos. 

Rocket Mortgage introduced a closed-end home equity loan in 2022 and has since issued three securitizations backed by its originations, with hopes to at least double that total for the remainder of 2024. The Detroit-based lender rolled out the lien in the same period several other nonbanks launched similar products.

Since that upswing in product offerings, the secondary market has seen a wave of aggregators or originators offering HELOC-backed residential mortgage-backed securities, including Figure, Achieve, JPMorgan and Goldman Sachs all with issuances over the past 12 months. As the number of securitizations increase, it brings with it better pricing.

“In 2022, there was really no liquidity. There was not a secondary market for HELOC or home equity loans. Now that’s materially changed,” Banfield said.

“We’ve gone from taking the leap of faith that we’re going to use portfolio money to do proper risk management around that, to building out a buyer base, to then ramping up our securitization platform,” he said about Rocket’s strategy.

Huge potential — on a theoretical basis 
While growing, numbers today just represent a tiny slice of the total addressable second-lien market that totals into trillions. In May, ICE Mortgage Technology reported home equity rising to a record $17 trillion in the first quarter this year, but other reports estimate it to be as high as $35 trillion. Home equity totals hit a record high in 2017 and the amount only increased in the years since, according to Vadim Verkhoglyad, vice president and head of research at dv01, a Fitch Rating subsidiary. 

“This is a real market, massive, huge,” he said. “It’s a borrower-demand question much more than a supply question at this point.”

According to Clayton, a due diligence solutions provider and reviewer of MBS pools prior to issuance, $12 to $14 billion worth of second-lien products are expected to be securitized in 2024 based on current trends. Volumes have grown by at least threefold in the past three years, the company said.  

The rate of growth the market sees depends on what the consumer decides to do. “Borrowers in general, homeowners in America — are just not using that much debt,” Verkhoglyad said.

Although home equity securitizations have existed for years, the growth in issuances coming to market over the past several months may seem like a new development to some in the investment community, leading to hesitation. But the sentiment is largely shifting, as issuers have addressed some of the initial reasons driving investor wariness.  

Concerns emerged in some industry offerings that included both closed-end junior loans and HELOCs, according to Banfield. “It made it more difficult to be transparent.”

“The investor has to understand what they’re investing in,” he said. 

Rebuilding a market framework and investor confidence
With home equity originations languishing for a prolonged period when mortgage rates were at historically low levels, the financial structure supporting the secondary market also had to be created.

“The correspondent relationship had to get redeveloped around second liens,” said Pete Pannes, chief business officer at Covius, parent company of Clayton. 

“It was something that had to re-emerge from the credit crisis,” but as those issues have resolved, “I think the market became very efficient,” Pannes said.

“There were entities that came to the table, like our clients, to regenerate capital to put back into the market and go upstream to the originators,” he said, referring to independent mortgage banks and other nonbalance sheet lenders. 

Meanwhile, borrower performance also eased worries, according to Kyle Enright, Achieve’s president of lending. Since late 2022, the personal finance company has issued four rated securitizations backed by HELOCs from its home loan unit. Target customers for the HELOCs are concentrated among consumers with credit scores under 700, below the average of American homeowners.

For Achieve’s first securitization, “Nobody really looked at it seriously,” Enright said. 

“We basically didn’t talk to almost anybody who was a traditional RMBS buyer because it was just too weird,” he added. But sentiment has shifted as some of the first originations reach their five-year point. 

“I think a lot of the questions that investors had back early in the day have been answered for the most part. Other people joining the party has helped us,” Enright added.

HEIs bring something new to the table
The growth in home equity is also driving an influx of alternative credit platforms entering the field in recent years, including companies such as Aspire, Button Finance and Easyknock. Through equity sharing agreements with originators, homeowners tap into their appreciating property values for financing needs.

Home equity investment, or HEI, products represent a new frontier for the secondary markets, though, as they are based on what seems like an unfamiliar business model. “It’s not a loan. It’s junior, and you’re living in equity appreciation,” Verkhoglyad said.

HEIs’ recent arrival means much of the industry will be learning about product performance and possible risk in real time, particularly if homeowners end up struggling or face foreclosure.

With the first lien prioritized, “There’s not going to be equity appreciation because you’re taking sales proceeds,” according to Verkhoglyad. 

“The servicer is going to advance; they are going to be recouped. Legal fees, they’re going to be recouped. All those things are kind of going into the fold.” 

A more significant question in the short-term might be whether HEI volume can build to a point to sustain demand in secondary market trading. 

“Where do you consistently find these borrowers?” said Pannes, whose company also provides originations services for companies in the home equity investment community.

“There’s certainly enough equity out there. Can you find those borrowers? Can those borrowers find you to create substantial, substantially sized securities consistently enough, so it’s not a flash in the pan?” he asked. 

Still, despite the unanswered questions, HEI securitizations are hitting the market, recently coming from the likes of Unison and Point, which issued its third in mid 2024. Other platforms have publicly announced intentions to issue transactions later this year. 

The aggregators and investors drawn to the newer HEI products thus far appear to fit a different profile than purchasers of more established loans. 

“We’ve got a set of clients that are your more traditional securitizers and investors that are dealing in closed-end seconds and HELOCs. We’ve got some of the newer folks in the niche for HEI. There is a little bit of crossover but not much to speak of at all,” Pannes said.

Recognition by stakeholders
A potentially pivotal point for HEI development in the investment community came with the addition of a ratings methodology by Morningstar DBRS a year ago. Kroll Bond Rating Agency followed with its own in early 2024.

“Based on the feedback we have received from the issuers, rated transactions allow for expanded investor base (and consequently better pricing) as certain investors are mandated to invest only in rated securities,” Morningstar’s leaders and researchers said in a comment. 

In an April 2024 primer, the ratings service said it “anticipates continued interest in the features of the HEI product as it is a diversified source of funds for homeowners, as well as an attractive source of returns and diversification for investors.” 

The value of a rating assigned to any type of home equity loan pool can be significant, making some attractive to a set of investors who might look for long-term returns based on creditworthiness, Enright said.  

“These folks have been there since day one, participating in the AA tranche, buying that AAA slice, and they continue to do so,” he said of Achieve’s issuance history. “I think that appetite is also growing quite substantially,” he said.

Recent developments shone a spotlight on the role home equity liens might end up having in the home finance system, with Freddie Mac’s proposal to potentially purchase some closed-end home equity loans. The controversial plan garnered a range of reactions, with concerns raised that the government-sponsored enterprises might displace current issuers. Some leaders, though, welcomed the likelihood of additional liquidity it would bring should the proposal come to pass.

No resolution appears to currently exist that the entire industry would likely find agreement. Freddie Mac said it intends to make a decision on the proposal in June.   

But the suggestion of GSEs participating in the second-lien market points to how recent trends have shifted the conversation within the home finance system, as mortgage originations return at a slower pace than what many lenders would prefer. 

The future of the market, though, is not entirely in lenders’ hands. 

“We’re still talking about a space that is largely very nascent, and the question of how much it’s going to grow is far more a question of what borrowers want to do than lenders,” said Verkhoglyad.

Source: nationalmortgagenews.com