Precious Metals Investing
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Mutual Fund Investing
Diversification Is Key To Success When investing in Stocks, Bonds, Mutual Funds, , FOREX, Commodities and ETF’s and just about every other legit investment available. Why is it that some people only buy one or two stocks? Others may have 15 stocks but have 50 percent of their investment assets in just one of those 15 stocks. In Wall Street we refer to this type of behavior as concentration. Some firms call it over-concentration. When this happens in a brokerage firm it is always considered dangerous. It is so dangerous, in fact, that if the brokerage firm is using a concentrated stock position as capital, then the market value of the security in question is given a haircut. This means that the full market value of the security is chopped by some fixed percentage in any capital computation. In other words, if you are over-concentrated, you don’t get full value. Some of you may have margin accounts. Its always best to have cash ownership of stocks you invest in. If you own stocks on margin, it is our opinion that you will get sold out on margin. Normally in a margin account you put up 50 percent of the value of the stock you acquire in cash. If equity falls below 35 percent, you get a margin call. Now, brokerage firms love it when clients have 15 or 20 different stocks in a margin account. If there are some bonds in that account, guess what, they love it even more. Why? Because brokerage firms know that stocks represent risky investments. Something can always go wrong in any one situation.... read more
ETFs Investing
Diversification Is Key To Success When investing in Stocks, Bonds, Mutual Funds, , FOREX, Commodities and ETF’s and just about every other legit investment available. Why is it that some people only buy one or two stocks? Others may have 15 stocks but have 50 percent of their investment assets in just one of those 15 stocks. In Wall Street we refer to this type of behavior as concentration. Some firms call it over-concentration. When this happens in a brokerage firm it is always considered dangerous. It is so dangerous, in fact, that if the brokerage firm is using a concentrated stock position as capital, then the market value of the security in question is given a haircut. This means that the full market value of the security is chopped by some fixed percentage in any capital computation. In other words, if you are over-concentrated, you don’t get full value. Some of you may have margin accounts. Its always best to have cash ownership of stocks you invest in. If you own stocks on margin, it is our opinion that you will get sold out on margin. Normally in a margin account you put up 50 percent of the value of the stock you acquire in cash. If equity falls below 35 percent, you get a margin call. Now, brokerage firms love it when clients have 15 or 20 different stocks in a margin account. If there are some bonds in that account, guess what, they love it even more. Why? Because brokerage firms know that stocks represent risky investments. Something can always go wrong in any one situation.... read more
Options Investing
Although there are hundreds of terms that are used in the financial language, beginners have to understand first the most important and commonly used words. Option – is the right of the buyer to either buy or sell the underlying asset at a fixed price and a fixed date. At the end of the contract, the owner can exercise to either buy or sell the option at the strike price. The owner has the right to pursue the contract but he or she is not obligated to do so. Call option – gives the owner the right to buy the underlying asset. Put Option – gives the owner the right to sell the underlying asset. Exercise – is the action where the owner can choose to buy (if call option) or sell (if put option) the underlying asset or, to ignore the contract. If the owner chooses to pursue the contract, he must send an exercise notice to the seller. Expiration – is the date where the contract ends. After the expiration and the owner does not exercise his or her rights, the contract is terminated. In-the-money – is an option with an intrinsic value. The call option is in-the-money if the underlying asset is higher than the strike price. The put option is in-the-money if the underlying asset is lower than the strike price. Out-of-the-money – is an option with no intrinsic value. The call option is out-of-the-money if the trading price is lower than the strike price. The put option is out-of-the-money if the trading price is higher than the strike price. Offsetting – is an act... read more
Options Investing
Understanding the components of option trading clearly outlines how much advantage a trader has. Without a doubt, people who have sufficient knowledge of a certain trade have better chances of profiting from it. In the same way, a trader who is knowledgeable in options trading has better control of his profits. In this article, three basic concepts will be presented. Let it be noted that the information covered here are intended for neophytes in options trading. What is option trading? Option trading is a category of trading stocks, bonds or any type of assets that acts more like a contract, which allows for liberty to buy or sell the asset but does not necessarily oblige the holder to exercise his powers within a certain period of time. In layman term, it simply means “buying” the right to buy or to sell an asset within a specified duration. It should be noted that buying the option is very different from buying the stock itself. What are the types of options? There are two types of options: the calls and the puts. Both of them work in exactly opposite principles. The calls are options that provide the right for a holder to buy a certain asset at a specific price, during a specific period. This investment will be profitable only if the stock would increase during the period of the option. Calls are also oftentimes considered long positions. The puts, on the other hand, are options that provide a holder to sell the asset at a certain price, within a specific period. This will yield profit for the holder if the... read more
Bonds Investing
Diversification Is Key To Success When investing in Stocks, Bonds, Mutual Funds, Commodities and ETF’s and just about every other legit investment available. Why is it that some people only buy one or two stocks? Others may have 15 stocks but have 50 percent of their investment assets in just one of those 15 stocks. In Wall Street we refer to this type of behavior as concentration. Some firms call it over-concentration. When this happens in a brokerage firm it is always considered dangerous. It is so dangerous, in fact, that if the brokerage firm is using a concentrated stock position as capital, then the market value of the security in question is given a haircut. This means that the full market value of the security is chopped by some fixed percentage in any capital computation. In other words, if you are over-concentrated, you don’t get full value. Some of you may have margin accounts. Its always best to have cash ownership of stocks you invest in. If you own stocks on margin, it is our opinion that you will get sold out on margin. Normally in a margin account you put up 50 percent of the value of the stock you acquire in cash. If equity falls below 35 percent, you get a margin call. Now, brokerage firms love it when clients have 15 or 20 different stocks in a margin account. If there are some bonds in that account, guess what, they love it even more. Why? Because brokerage firms know that stocks represent risky investments. Something can always go wrong in any one situation. Maybe something... read more
Bonds Investing
Convertible bonds are bonds issued by corporations that are backed by the corporations’ assets. In case of default, the bondholders have a legal claim on those assets. Convertible bonds are unique from other bonds or debt instruments because they give the holder of the bond the right, but not the obligation, to convert the bond into a predetermined number of shares of the issuing company. Therefore, the bonds combine the features of a bond with an “equity kicker” – if the stock price of the firm goes up the bondholder makes a lot of money (more than a traditional bondholder). If the stock price stays the same or declines, they receive interest payments and their principal payment, unlike the stock investor who lost money. Why are convertible bonds worth considering? Convertible bonds have the potential for higher rates while providing investors with income on a regular basis. Consider the following: 1. Convertible bonds offer regular interest payments, like regular bonds. 2. Downturns in this investment category have not been as dramatic as in other investment categories. 3. If the bond’s underlying stock does decline in value, the minimum value of your investment will be equal to the value of a high yield bond. In short, the downside risk is a lot less than investing in the common stock directly. However, investors who purchase after a significant price appreciation should realize that the bond is “trading-off-the-common” which means they are no longer valued like a bond but rather like a stock. Therefore, the price could fluctuate significantly. The value of the bond is derived from the value of the underlying... read more
FOREX Investing
There have been some extremely successful traders in the history of the various markets, people who have made so much money in fact that they have been able to retire before the age of thirty in some cases. Whether the idea of being retired before you are even half way to the legally-mandated retirement age thrills or terrifies you, it has to be said that there is a real upside to having the opportunity. If we could all do what those super traders have done, we would surely do it, giving us more time to spend with loved ones. It probably comes as no surprise that such a way of operating is impossible. As impressive as the idea of making billions and quitting before the market has the chance to take it back may be, we cannot just ape the actions of past successful traders and expect that to work for us. The market is constantly changing, and things that were true yesterday, a month ago or before we were even born are not necessarily so now. You need to find your own way, and this is as true of market trading as it is for anything else. As much as any other reason, this is true because sometimes you need to react instinctively. If you have been following someone else’s strategy, then you’ll be sunk because you do not have their instincts. Play it your way – learned through years of effort if needs be – and you will have a much greater chance of making a... read more
FOREX Investing
To really understand the behavior of a currency on the Forex market it is important to see how it has behaved over a period of time. Taken over the course of a very short space of time, it is possible to make data mean just about anything. This, in turn, means that the data will be almost worthless. Over a longer period of time, however, patterns always seem to assert themselves, and establish a firm basis for predicting the future behavior of a currency price. Among the most important figures that appear in a pattern are the support and resistance points. The point of “support” for any currency is the price level beneath which a currency never trades – effectively its market “bottom”. Whenever the price reaches this level, it almost always bounces back upwards, and for this reason many people will invest when a currency hits that point. Conversely, the “resistance” point is the traditional high point of a currency price, above which it never trades. If you are looking to cash out, this is a good reference point. Of course, the old saying “there’s a first time for everything” exists for a reason. There will come a time when a currency breaks its support or resistance levels, and this is seen as hugely important. When a currency does this it will be expected to continue this trend, possibly for an extended period of time. It is therefore a good time to get “in” if it is rising or “out” if it is... read more
FOREX Investing
Technical analysis of currency movements is now, more than ever, part of the Forex market. As time has passed, different ways of collecting and displaying data have arisen. These differing ways can be taken in isolation to either create or back up a strategy, or can be combined in order to read how the market has arrived at its present point, and how it is likely to move forward. This enables more confident predictions and sounder investments. As time goes on, more data is collected and trends are reinforced. The awareness of a trend allows a more realistic understanding of the market. For someone just starting as a Forex trader, this kind of data is all-important. One method of technical analysis is looking at diagrams and graphs. Taken over a period of time, this allows us to define and explain a pattern. One of the most popular styles of graph is the “Candlestick pattern”, which tells at a glance for any given day where the price was at the start of a period, at the end of the same period, and its highs and lows in the intervening time. Thus you can see at a glance if a currency is genuinely rising fast or slow, or falling at the same rate. The use of Fibonacci figures is another popular analytic tool. It looks at certain points in the rise or fall of a market and – with incredible regularity – predicts when it will stabilize or “retrace” (this means reversing its... read more
Mutual Fund Investing
While mutual funds have become one of the most popular and accessible forms of investing, they do come with a few strings attached. It doesn’t matter what sort of investing you are trying, stocks, bonds, securities and even mutual funds come with fees. But how can you tell what kind of fund has what kind of fee and what are the different kinds of fees out there? A common fee connected to mutual funds that are bought through a broker or a third party is a sales charge. One of the major advantages of buying your mutual funds directly through the company that sells them is that you can usually avoid the sales charge fee. One of the most important lessons you can learn about mutual fund investing is to always look for no-load mutual funds. A no-load fund has no fees attached. But what if you see a load fund that you really want to try? Load funds are broken down into thee classes: A, B and C. Each letter carries a different set of fee rules. For A load funds, you can expect to have a 4-6{f50081c0ec796da126603b263a099f347acb98e56a69dffae82b7eb84c3f1a5d} chunk of your investment taken once you buy the fund. There is an additional annual fee of about .25{f50081c0ec796da126603b263a099f347acb98e56a69dffae82b7eb84c3f1a5d} that is also taken out. For B funds, there is no fee taken out at the beginning, but there is a fee once you want to take your money out of the mutual funds. This fee does go away after six years of having the fund, but you will get dinged if you try to take your money out any sooner.... read more
