ETFs: Investing for the 21st century

By Jordan J. Weir

For many years, investors have attempted to diversify their overall portfolios by trying to pick stocks across a diverse set of asset classes. Which is all well and good, but the problem it generally runs into is you should also be diversified within any given asset class, lest something adverse happen to the company you happened to bet on. Yet as soon as your diversifying both within, and between asset classes, now your running a portfolio of potentially 40+ equities, and even the active investor rarely has time to do due diligence on the hundreds of companies required to find 40 excellent investments.

The answer lies in a little tool known as the ETF. ETF stands for Exchange Traded fund. Think of it as a mutual fund that isn't actively managed, focuses on a certain area, and can be traded like a stock without incurring extra penalties. Each ETF holds a number of companies, similar to a mutual fund, and its listed price is simply the overall value of the companies it holds.

The purpose of an ETF is to allow an investor to purchase a single equity that represents an investment in a sector. So if an investor is interested in buying financial stocks, they could buy XLF. If they want some small cap goodies, they can choose to buy IWM. For some exposure to the Chinese stock market, they could invest in FXI. Finally, if they simply want to emulate the returns of the S&P 500 index, the SPY has them covered.

Yet if ETFs are so similar to mutual funds, why not just use a mutual fund. There really are a couple reasons to do so. First off, mutual funds have a history of underperforming the stock market as a whole after fees are included. This makes simple index investing, through an ETF representing a large basket of stocks, such as the SPY, an extremely effective way of matching the markets returns with nearly no cost. There are also slight tax advantages with ETFs compared to mutual funds. Mutual funds have to pay capital gains tax whenever they sell one of their holdings, and whenever they have a large wave of redemptions, they have to sell their positions to come up with the money. This leads to excess fees, some of which get passed on to the remaining investors.

Another advantage held by ETFs is their great convenience over their mutual counterparts. Many mutual funds have redemptions fees if you exit within 30 days, whereas ETFs aren't plagued by this problem. Also, unlike mutual funds, you can go short an ETF, benefiting from a fall in a sector instead of a rise. ETFs can also be bought and sold any time during the trading day, using limit orders, stop losses, and all the other tools you can use for buying stock.

A great boon to ETF investors, never before experienced by mutual fund holders, is the ability to use stock options to control risk. Stock options can be used to reduce the risk by using covered calls, or buying protective puts. Alternatively, call options can be used to control maximum loss, and potentially increase profits.

When investing in ETFs, its important to consider how exactly that ETF works. This can usually be found with a quick google search. While most ETFs attain their returns simply by holding the underlying securities, other ETFs use more exotic means to match their benchmark/investment objective, sometimes with varying success. Particularly important is the differentiation between an ETF and an ETN. ETNs are debt based investments, similar to bonds in some ways, and so their value is also partially dependent on the issuer. For this reason, investments in ETNs should be approached with caution, especially in the current, credit-tight market.

ETFs are a powerful tool for both the intelligent investor, and the active trader. Their ability to hone in and diversify within a given industry, or region of the world is invaluable when riding the larger megatrends that happen periodically in investment. Similarly, the ability to trade them just like a stock, using techniques such as shorting, options, and the various order types make them an invaluable asset for the active trader. For those believing the efficient market hypothesis, they even allow passive index investing at a cost far below that of a mutual fund. - 23200

About the Author:

You must learn the ways of the market before you can truly succeed there, so visit my website and become a market virtuoso! Come and master "insider secrets" such as ETF Investing, stock option strategies, sector rotation, and shorting stock! Release the true power of ETFs in your portfolio, and allow your portfolio to be the best it can be

Is Investing really Just Gambling?

By Carter B. Banes

Gambling is a game, a contest. When you gamble, you take a chance that you will increase your money or lose your money. There's no way of knowing what will happen.

For some, investing is also a game. By investing, you are putting your money into something that you really believe will increase in value and be successful. If the investment is successful, you make money. Some people play with the market as a game and have fun with it. Others do it solely to make money and have no desire for enjoyment. Why don't they look at it as a game?

When you invest your money, you aren't gambling. Some investments are very far from gambling, they're not even close. Take government bonds for example. You might even say they are more likely to pay you back with interest than your employer is, assuming it's not a government employer. There is a tiny chance they won't pay you back, but only in the severest of cases.

What about stocks? How does the stock market work in a way that's not gambling? Buying stock means buying part ownership in a company. You invest in that company with expectations that they will make a profit and you'll get paid dividends and/or the value of the stock will increase and you could sell for capital gains.

If you bet money at a horse race or put money down at a poker game, you own absolutely nothing. Whether or not you make money doesn't depend on the success of a business. It is completely by chance if yo make money.

Investing is another way to earn an income. When you invest, your money is earning money, not simply taking a chance on itself. If you ever fall into a large sum of money and you aren't sure which way to go, remember that investing is much less risky and could earn you a lot more money over the long run.

Let's say you inherit $10,000 from a long lost Uncle. If you have a chance to gamble your money and double it, you could have $20,000. You could double it again and have $40,000 and so on and so forth. The problem is that the possibility that you'll even double it the first time is slim to none. If instead you invested it into the stock market and got an average 8 percent return and didn't touch it for 30 years, you would have about $100,000. Which would you choose? - 23200

About the Author:

Want to know know how the stock market works? Don't let the stock market keep you perplexed. Learn how to buy stocks quickly and easily to start safely investing your money today.

What Can Forex Yard Do for Your Trading?

By Jack Spencer

In order for you to get started trading on the Forex market, you must have a qualified broker by your side. It is impossible for you to trade directly with the market so one of the first things that you're going to need when you decide to get involved is an online platform. One that we would recommend is Forex yard. Why would we do so?

If you are just starting out trading on the Forex market, you will enjoy what ForexYard brings to the table. They have a number of different tutorials that can teach you everything that you know and walk you through the entire process of placing a trade. This is one of the things that we make sure is at a premium whenever we do a review.

The reason why this is so important is because they can get somebody comfortable with trading on the Forex market rather quickly. When they have the reassurance of this kind of platform behind their trading, they seem to advance much more quickly in their knowledge and practices. Having a system well-established that you enjoyed using such as Forex yard is a good idea to have in place when you first start.

Of course, ForexYard is not only designed to be good for people who are just starting out with their trading practices. If you are an experienced trader, you will also enjoy this excellent platform. One of our favorite things about it is the fact that it has advanced tools which will walk you through the process as you continue to learn. It will help you to trade faster and also to make decisions which can affect the success of your trading in a positive way. You might not use all of the tools but it's nice to have them there.

People who have been trading for quite some time are not the only ones who are going to benefit from these advanced tools. If you are just starting out, you may not use the tools right now but having them available will allow the platform to grow with you as you continue to learn more. This keeps you from having to switch platforms eventually.

Another thing that we look for whenever we are reviewing a Forex platform is customer service. ForexYard does very well in this regard. By giving you a number of different options to contact them 24 hours a day, you can ask them any questions that are necessary, regardless of when you have them. For those of you that already understand how urgent some Forex questions can be, that can provide some real comfort.

Deposit options are also another thing that you should look at whenever you are thinking about going with a Forex platform. ForexYard gives you a number of different deposit options, some of which will allow your cash to be available immediately. The only thing we personally would avoid is a bank check as it would take time for this to clear.

All in all, ForexYard gives you the ability to work within the Forex market rather easily. Regardless of whether you are new to the system or if you have been doing it for quite some time, it is a platform that we recommend very highly. - 23200

About the Author:

ForexYard Can Help Make Your Forex Trading Easier. Visit our Website for a Complete Forexyard Review

Using Stocks To Manage Your Investment Risk

By C.P.Billows

Whenever you invest, you are taking a risk. The goal is the manage it and not avoid it.

Every good investor knows that he should set aside some of his portfolio for long-term, lower-risk investments. The other portion can be used for medium to higher-risk investments depending on your financial circumstances and other life factors.

Allocate Wisely

A good rule of thumb to follow is: Allocate 50% of your portfolio for the long-term, lower risk category no matter how great a speculative short term pick may appear.

This will take discipline, but on more than one occasion it will probably save you in no small way.

Most of the systems and strategies you find on the Internet are high-risk, high-gain where you can be wiped out in a single transaction.

Take a risk! I do, but only with a certain percent of my funds. You should do the same.

So let's say for example that you choose to invest in long-term, lower-risk stocks with 50% of your portfolio.

Let's start by defining what a good long-term stock is. Some will call them large-cap stocks, other's call them Blue Chip stocks.

Blue Chips will be the common stock of a nationally known company that has a long record of profit growth, dividend payments, and a reputation for quality management, products, and services. Some examples would be International Business Machines, General Electric, and DuPont. They are relatively high priced and have moderate dividend yields.

There is no true master list of Blue Chip stocks. That is because the definition of what is and isn't a blue chip stock varies greatly. Essentially though, its a consistent top performing stock.

Look to such indexes as Dow Jones Industrial Averages and Standard and Poor's 100 Averages to see such lists.

The problem is that you may invest in long-term, lower-risk stocks that stagnate for years on end. Yet, even such stocks have their ups and downs and the profit you see (or don't see) can be exacerbated by current market conditions.

Your entry time could be poor and you may have to wait years to see a break-even point on such a stock.

You still need a proven strategy with so-called "stable" investment stocks.

Buy and Sell Wisely

To get the most gain out of the stocks you buy and help to minimize your risk, you need to employ one of the tools used by professionals, which is Technical Analysis. You will use some Technical analysis to help you determine the price to buy in and the price to sell. Technical analysis is merely putting a stock through a mathematical formula.

When you employ this tool properly, you can get many times the profit you currently get or others get with the old 'buy and hold' strategy.

Each technical indicator is made to tell you something slightly different. Some will tell you the momentum of a stock, its trend strength, volatility limits, how much its diverging from previous price patterns.

Some of these indicators, while good, are for short-term action. Others are more geared for long-term action. So just because someone swears by an indicator, it doesn't mean that its the right indicator for you in a certain application.

The indicator that we have become familiar with is called the Stochastic oscillator. This indicator is a momentum indicator that is based on closing prices of a stock that doesn't take into account wild daily fluctuations. It bases the current close against previous closes to indicate buying pressure or selling pressure.

Simple use of this indicator can make you lose money quick should you not understand how to properly use it. If you have ever traded using momentum indicators, you know that many false signals can be created. Whipsaws or false movements that quickly reverse in the indicator create further problems. The more people try to compensate for the weaknesses in the indicator, the worse it seems to get.

That is until development of the K-39 Theory, also called the Last Stochastic Theory. This theory will guide you in how to ignore those false signals and take advantage of the built-in momentum of the stock.

This way you can find ways to trade the best Blue Chip stocks and know when are the better times to buy and sell. You will then have the bluest of the blue chips thanks to this method. - 23200

About the Author:

C.P.Billows is the publisher of In The Money, the Stock Options Trading Course, a 60 page eBook available at www.mandalainvesting.com. The eBook has given hundreds of people the investing edge they need to keep ahead of inflation and taxes. Click here to submit article.

your different choices for Mortgage Refinance in 2009

By Amanda Jackson

When looking at Mortgage Refinance there are quite a few details to which you will want to pay attention. It is very important to realize there are variations from one state to the next when it comes to interest rates, Loan to Value, supply vs. demand and these items will fluctuate without warning.

If you plan on moving or can foresee paying off your loan very soon, then a Mortgage Refinance probably makes very little sense. You won't be paying your monthly bills long enough to see the savings that would cover the refinance costs. "There are too many factors working against lower rates, including the smaller stimulus this time in terms of payment reduction, falling home prices and tighter mortgage standards." Deutsche Bank analyst Nishu Sood wrote in a report to clients on Tuesday.

Deutsche Bank analyst Nishu Sood wrote in a report to clients on Tuesday, "There are too many factors working against lower rates, including the smaller stimulus this time in terms of payment reduction, falling home prices and tighter mortgage standards." We are aware of the changing conditions in the U.S. Finance Market. This means uncertainty for people considering a Mortgage Refinance.

Change in restrictions has caused what could be a temporary decrease in lending. In January of 2009, Wall Street Analysts suggested the market for 2009 may show deeper losses, as last year's ripple effect works its way through the U.S. We will also see to what degree the growing unemployment rate will affect both original loans and Mortgage Refinance in 2009.

"There are too many factors working against lower rates, including the smaller stimulus this time in terms of payment reduction, falling home prices and tighter mortgage standards." Deutsche Bank analyst Nishu Sood wrote in a report to clients on Tuesday. The outlook for the other leg of the real estate market: commercial properties, not looking any better. We will also see to what degree the growing unemployment rate will affect both original loans and Mortgage Refinance in 2009.

We will also see to what degree the growing unemployment rate will affect both original loans and Mortgage Refinance in 2009. The outlook for the other leg of the real estate market: commercial properties, not looking any better as the $3.4 Trillion commercial market began to show its struggle in the fourth quarter of 2008.

Discussion about investing money you would spend on a Mortgage Refinance rather than actually Refinancing is becoming a popular topic as stocks have gone down. There is an alternative being suggested; comparing the cost of refinancing that would go into the life of a 30 year loan compared to putting the same amount into a 30 year investment. An investment that shows a 9% growth rate on $2,000 could grow to an approximate $26,500 in 30 years. This is simply another option in which to take a look.

Today's finance rates are subject to change at any time and as mentioned previously, without warning. Take a look at both options then make a decision based upon the reason for looking at a Mortgage Refinance in the first place. Try not to rush out and make a rash decision simply to beat the interest rates possibility of going back up, but don't sit around and wait until it is too late if it truly turns out to be in your best interest to Refinance. - 23200

About the Author:

This article is brought to you by the team at Best Mortgage Refinance. Visit them for More free information and articles about Mortgage Refinance