The Move To Commodity Trading

March 12th, 2009 at 03:58pm Under Investing

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Commodity trading is remarkable, especifically because it is possible to make large amounts of money in a short period of time. It is simply a means of trading any physical material that is exchangeable with another like item that investors buy or sell. Commodity trading is basically speculation on the future price actions of a basic raw material. Commodity trading is the one area of the financial markets where any individual with persistence, money to risk, and discipline can be extremely successful. Commodity Trading is also a way to make money fast, but carries considerable risk to your principal. Commodity trading is too risky to try without some sort of trading system or strategy.

Traders enter commodity trading with a view to making big money. Contrary to what many traders say, the mechanics of trading is uncomplicated. You can gain a thorough understanding of how the commodity markets work just by reading a basic guide to Commodity Trading. It should include how to place a trade, contract sizes, margin requirements, and more useful information for newbie traders. Short-term trading is how the majority of traders and would-be traders take part in the markets. Discover what professional commodity traders do that separates them from the losing masses. You will also want to find a firm that offers commodity traders low commissions, quick executions, charts and free quotes.

You should be advised that commodities trading is not for everybody, and if you decide to open a commodity trading account be sure you understand all the risks involved. You may make all of your own trading decisions. Or, for individuals who prefer to leave trading up to a professional commodity trading advisor, a managed account may be the better choice for them. Discuss your commodities trading plan with a commodity broker.

Commodity trading is one of the few remaining level playing fields available to traders. Commodity trading is certainly not for everyone because it can be one of the most volatile markets you can trade. If you are thinking about trading on the futures markets, please do your research and read a commodities trading guide to see if commodity trading is for you.

For more information on commodity trading visit Commodity Trading Strategy
Be sure to sign up for their free commodity trading guide at www.commoditytradingstrategy.com

Author: William McWilliams
Keywords: commodity trading, traders, advisors, systems, strategies, commodities
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Investing: Topdown Or Bottomup

March 12th, 2009 at 03:58pm Under Investing

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When it comes to investing in good companies, there has been much debate on the top-down and bottom-up approaches. Most fund management companies use the top-down approach and recommend that investors examine the economic and industry outlooks first before deciding on which stocks to purchase.

On the other hand, investment experts like Warren Buffet and Peter Lynch favor the bottom-up approach. They say that macroeconomic forecasts are actually major distractions for investors as the projections might turn out to be wrong. Instead, investors’ efforts should be placed more on detecting the quality of earnings and asset value of the company.

Both approaches have their strengths and weaknesses, but they share a common goal, which is identifying good fundamental companies to invest in.

With the top-down approach, investors study the economic trends and then determine the industries and companies that are likely to benefit the most from them. Say, for instance, the reduction in prices of imported paper will contribute to lower operating costs for media companies and increase their earnings. Investors will then search for more efficient and cheaply priced media companies. On the other hand, negative events like high interest and inflation rates or currency depreciation, can affect a country’s economy and definitely cause stock prices to tumble.

Top-down investors will first look at the entire forest instead of specific trees and try to identify the main market theme ahead of the market in general. They believe that picking individual companies comes second because if the economic conditions are not right for the industry that a company operates in, it will be difficult for the company to generate profits, regardless of how efficient it is. However, such investors may sometimes miss good companies that are still performing well, even in a depressed sector.

Conversely, bottom-up investors conduct extensive research on individual companies. As long as the company’s future prospects look strong, the economic, market or industry cycles are of no concern. In fact, the downturn in the stock market may provide investors with a good margin of safety to buy stocks at depressed levels and ride them up to big gains.

So, bottom-up managers will buy stocks even though the macroeconomic and industry outlooks look uncertain. When the industry may be out of favor and most investors are ignoring the true earnings of companies, bottom-up managers can detect good and well-managed ones selling at prices that are far lower than the intrinsic value.

However, to top-down managers, bottom-up managers may be attempting to catch a ‘falling knife’ (a stock whose price has fallen tremendously in a short period of time) in a down market. Unless bottom-up managers have plenty of bullets to average down on their purchase prices, they may run out of cash if the stock prices continue to lower. Moreover, they may sometimes fail to see the wood for the trees; they may identify certain companies but miss the overall industry trend.

The top-down and bottom-up approaches are two distinct and fundamentally very different approaches to investing. Investors can combine the top-down and bottom-up approaches by applying top-down analysis on asset allocation decisions while using a bottom-up approach to select the individual securities in the portfolio.

Michael Russell

Your Independent guide to Investing

Author: Michael Russell
Keywords: investing
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Investing: ETF And CEF

March 12th, 2009 at 03:58pm Under Investing

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If you’re looking for a more cost-effective instrument, you may want to consider exchange-traded funds (ETFs), which have been described by US supporters as revolutionizing the world of investing, with their low expense ratios and ease of transaction. Another pooled-investment tool that shares cost-effective similarities with ETFs is closed-end funds (CEFs).

ETFs are baskets of stocks or bonds that trade on a stock exchange, just like shares. ETFs are unique because of their indexing feature. Just like an index unit trust fund, ETFs aim to track the performance of a benchmark.

ETFs are also unique in that they have market makers. Usually, investment banks work behind the scenes to create or redeem ETF units. So, don’t look at the average trading volume as a reflection of liquidity. Market makers are there to create or redeem units based on demand.

A lower expense ratio is most commonly cited as the ETF’s greatest advantage. Another positive feature is flexibility. Like stocks, ETFs can be bought and sold at on-the-spot prices. It’s a very transparent investment. Even if there is a premium or discount, it will be very small and will quickly narrow.

However, ETFs don’t necessarily provide better returns. As it tracks an index, ETFs will only do well when the underlying stocks or bonds perform well. When the reverse happens, the ETFs will do just as badly. Thus, investors are still subject to market risk and volatility.

What is considered as the biggest benefit can also be a drawback. As the investor incurs a trading fee each time he buys or sells units, the costs add up when more transactions are made, eventually eroding any cost benefits. Therefore, investors are not advised to trade ETFs frequently.

A CEF is essentially a fund that has a fixed number of shares and trades on the stock exchange. However, it is a company and is governed by company law. Investors are regarded as shareholders. Because they are listed on the stock exchange, like shares, the price and liquidity of CEFs are determined by market demand and supply.

CEFs have a fund management team that works towards the funds’ objectives. As CEFs are normally smaller than unit trust funds, some believe ‘active management’ of the fund is easier, thus allowing them to perform better.

As a listed entity, the buying and selling of CEF units are done between investors on the stock market. This way, the base capital of a CEF is fixed and management can focus on investing without worrying about investors leaving or coming into the fund with large sums of money.

CEF investors also enjoy the same price flexibility as ETFs as CEF units are traded at whatever price it happens to be at during the day. Unlike ETFs, CEFs can invest in foreign-listed securities with the approval of shareholders and the Securities Commission. CEFs don’t need to market or distribute their funds and cost savings on these expenses can be quite hefty.

However, as a listed security, the price of a CEF is determined by market sentiment. So, there is no assurance that CEFs will trade at their NAVs. In contrast, ETFs have fund houses and market makers respectively, to ensure that their units trade close to their NAVs. As with ETFs, CEFs are subject to market volatility and risk. Price changes may be temporary or extended and these changes can impact the CEF’s NAV.

While there are risks and benefits, the existence of these investing instruments provides investors with a choice.

Michael Russell

Your Independent guide to Investing

Author: Michael Russell
Keywords: investing
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Investing for Retirement The New Way

March 12th, 2009 at 03:58pm Under Investing

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One of the biggest myths in investing funds to your retirement portfolio is that the investor should stick to mainly conservative investments such as bonds and cash reserves. The idea is that as you grow older, you’ll need money more readily, so playing it safe is the idea here. Interestingly, there’s an old method of determining your asset allocation by subtracting your age from 100. The difference is the amount (percentage) that you should devote your assets to for stocks. So a 60 year old person would have 40% in stocks. Sounds like a plan? Not for many.

Today, the retirement investing may not have the same goals for various reasons. One, the age of retirement could vary dramatically. Individuals could retire in their 80s, or others may want to retire in their 60s, depending on their retirement assets.

There are also investors who have saved very little for retirement. Often they find themselves in a catch-up mode. This isn’t the age-old pension plan that older generations relied on for their savings. More retirement plans are now defined benefit plans so the plan participant will have to provide how much they will contribute and how they will allocate their investments.

Sometimes, you’ll find investors not willing to place part of their paychecks for retirement. It behoves individuals facing a close retirement to accelerate their contributions and place assets in more aggressive stocks. Since aggressive assets such as stocks can help you increase your returns, catch-up employees need to weigh investment risks and returns carefully.

Retirement participants also underestimate their longevity and as such, they assess their length of retirement incorrectly. As individuals live longer, retirement income may erode over time. Especially for the person that takes the conservative approach to investing, less money may be available during the later years of retirement. One must evaluate other sources of income and determine if these sources can contribute. Consider Social Security or income from a part time job. Such alternatives may allow the investor to rely less on the retirement accounts and allow the person to adjust the allocation accordingly.

The fact remains that the investor needs to assess time horizon, risk tolerance and retirement goals in today’s environment, like any non-retirement portfolio. With people living longer, it makes sense to evaluate your investment portfolio for the long retirement. A 60 year old person thinking that he or she will retire soon may want to consider living in the 90s, a 30 year stretch for the retiree. How does one account this long duration? One would clearly have to account for the time horizon, which means allocate more to stock funds. Remember, stocks outperform bonds in the long run. A person at the age of 60 will be left out if their asset allocation is 40% in stocks. The long-term range may push the investor to take a more aggressive stance such as a 60% stock and 40% bond ratio.

Planning for retirement is not an easy step. One has to assess goals and other factors that will lead to proper asset allocation. More specifically, investors need to consider aggressive vehicles such as stocks, even at the beginning of retirement. There’s still hope. Retirement asset allocation tools are available that can help you plan for retirement. Ask your investment company if they have online calculators, or, simply, go to one of the two largest mutual fund companies (vanguard.com or fidelity.com). Personal financial advisors are a good way to get professional help as well.

Michael Russell

Your Independent guide to Investing

Author: Michael Russell
Keywords: investing
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Oil Speculations

March 12th, 2009 at 03:58pm Under Investing

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Mainstream media frequently talks about the price of oil being high because of speculators driving the price up. I think that oil is undervalued and will be over $100 a barrel by the end of the decade. Heres why.

Inflation

If the money supply doubles the price of oil should double. The Federal Reserve will probably increase the money supply dramatically to ease the suffering housing market. With a 9 trillion dollar national debt the fed will likely need to inflate to pay its bills. Not to mention, having excess money available for retiring baby boomers starting in 2008. Inflation factors alone could probably push oil to $100 a barrel.

China and India

China and India continue to grow sucking up many resources including energy. With no signs of slowing down well over 2 billion people are going to consume more oil. This will lower supply and increase demand, so much so that this alone could probably push oil over $100 a barrel by the end of the decade.

Turmoil in the Middle East

The Middle East produces a massive amount of oil. Every time a war breaks out or there is conflict in the region the price of oil jumps. All you have to do is listen to politicians talk and you can form the impression that meddling in the Middle East is not going to cease soon. There are at least three conflicts in the Middle East, Afghanistan, Iraq, and Lebanon. The continuation of these conflicts could push oil over $100, without factoring possible future conflicts involving Iran, and Syria.

Peak Oil

Peak Oil is the theory that the world production of oil cannot sustain its growth and will begin to decline. When looking at the history of United Stases oil production, peak oil becomes more than a theory. Existing wells around the globe are increasing in age leading many experts to believe that we can expect less production out of the older wells. New production doesnt look much more promising. Many new discoveries are small and are located in places that are expensive to bring into production. Peak oil paints a bleak picture for a low oil price.

Commodity Bull Market

Commodities are currently in a long-term bull market. Commodities that have no business going up in price will experience an increase, just like questionable tech companies grew in price during the tech bubble. Even if oil were a questionable commodity (which its not), oil staying at a low price would be unlikely. The fact that we are in a commodity bull could easily drive the price of oil over $100.

Other Factors

Other factors like weather, oil cartels, and government regulation play a huge role in the price of oil. It could take the oil industry a few years to recover from a bad hurricane season not to mention threats of production cuts from the wannabe cartel OPEC (or threats from the communist bark dog Chavez). New taxes, increased requirements, and other government meddling can also cause difficulties in the industry driving the price per barrel higher.

Importance of Oil

Oil is directly or indirectly related to every product and business in the world. Oil is how we ship all of our goods. A high oil price can wreak havoc on an economy. This is probably the reason that the mainstream media always predicts that the price of oil is going down. Oil will not be in the double digits for long. By 2010 oil could easily be $150-$200 a barrel. I am curious if the media will say its because of the reasons stated above or speculators driving the price up.

Mychal Raynes is an investment analyst for the Explosive Speculations Investment Blog; a publication geared towards researching the best possible investment opportunities. To find out more about Explosive Speculations and excellent investment opportunities, please visit http://www.ExplosiveSpeculations.com or email info@explosivespeculations.com.

Author: Mychal Raynes
Keywords: oil speculations,energy,investing
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Metals Markets On Fire

March 12th, 2009 at 03:58pm Under Investing

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Just when Wall (Bay) street has you looking one way, out of nowhere emerges a sector that catches everyone by surprise. Well, the metals markets have been in the news for some time now and if you didnt know this, well then you are really out of the loop. The gold price was at about $260 per ounce back in April of 2001 while silver was trading in and around four bucks. At $623 and $12.60 respectively tonight, its been a nice place to be hiding some money.

You cant turn on ROBtv nowadays without reference being made to Chinas appetite for the base metals. There have been differing opinions on whether the seven per cent growth in Chinas economy is sustainable. Its the zinc chart that is most dramatic looking. The five-year chart is something to behold. Scott Wright from the Zeal Intelligence Newsletter quotes the inventory of zinc at 108,000 metric tons on November 3, 2006 representing an approximate four-day supply. The Red Dog mine in Alaska operated by Teck Cominco is the worlds largest zinc producer. One wonders of the affect from winter freeze and the closure of shipping lanes on further inventory pressure.

The copper chart has retraced slightly off its summer peak but is holding firm. Nickel is taking a pause but appears to be forming a base. One cant help but think that the emerging economies are about to go on a run while the industrialized economies continue to farm out manufacturing, wallow in excessive debt, and blindly spend like theres no tomorrow. Its a fascinating economic environment right now. The affect of globalization is coming home to roost and free trading promoters may have been caught off guard. Miners have been in the doldrums for fifteen years. With the wind in their sails, can new mines be built fast enough?

November 6th, 2006

Blair Sveinson
President
DMX Ecom Station
http://mentorme.biz
423-376-0197

Author: Blair Sveinson
Keywords: metal markets, mining, base metals, investing, invest, penny stocks, micro-cap
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Overview of Investment Products: Whats Out There?

March 12th, 2009 at 03:58pm Under Investing

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For those who have just started the long journey of products at Amazon.com’>investment and financial planning, the obvious question is: What are the products out there? Here is a brief introduction.

Cash and money market funds

  • Cash or CDs (certificate of deposit) generate returns in terms of interest income. Money market funds, which comprise of high-quality, short-maturity debt instruments, give a yield similar to CDs but can be traded once a day. While they are the safest instruments, the return may not be high enough to compensate for inflation.

Stocks / Equities

  • Owning a stock means owning a piece of a company. As an owner, you get the most benefit at good times, but take the most risk when bad. Statistically, this high-risk-high-return products at Amazon.com’>investment gives the best products at Amazon.com’>investment return on a long-term basis.

Bonds / Fixed-income products

  • A products at Amazon.com’>bond is a loan made to the products at Amazon.com’>bonds’ issuer (e.g. government or corporations) by an investor (e.g. an individual). In return, the investor receives regular interest payment (the rate is called the yield) until the products at Amazon.com’>bond is matured, at which point the issuer repays the principal.
  • At the same time, products at Amazon.com’>bonds can be traded in the market. Similar to stocks, products at Amazon.com’>bond prices go up and down depending on many factors, and this fluctuation affects the effective yield.
  • Therefore, although products at Amazon.com’>bonds give fixed, regular interest income, they are by no means a riskless financial instrument.

FOREX (foreign currency exchange)

  • Economies around the world use different types of currencies, creating the need to trade and exchange currencies.
  • When we buy a stock or products at Amazon.com’>bond from a foreign country, we are inherently buying into FOREX. For example, you live in US and own shares in a French company. If euro is strengthening against US dollar, even if the shares stay unchanged you are already better off with a foreign exchange gain.

ETF (exchange traded funds)

  • ETF is a basket of securities that tracks the performance of a stock, products at Amazon.com’>bond, or commodity index.
  • It can be easily bought and sold in the market (same as stocks), gives you diversity (exposure to different industry/regional indices), and generally incur lower cost than mutual funds.

Mutual funds

  • Mutual fund is a portfolio of stock or products at Amazon.com’>bonds created for a particular industry, country or product. It can be traded once a day based on the price (called NAV, net asset value) calculated at the end of the day.
  • Unlike ETFs, mutual funds are actively managed by fund managers and their performance could vary greatly.

Real estate / REIT

  • The products at Amazon.com’>investment can be in the form of: (1) owing a physical property, (2) owning stocks of a publicly-listed property companies, or (3) owing shares in REIT (real estate products at Amazon.com’>investment trust).
  • Real estate is an interesting and complicated type of products at Amazon.com’>investments and has a lot of unique properties; but in general, we can expect its products at Amazon.com’>investment return to fall between stocks and products at Amazon.com’>bonds on a long-term basis.

Commodities

  • Commodity products were once open to private wealth clients only.
  • As energy and commodities kick into a big upward cycle, the products have become very popular and related funds /ETFs are being introduced to the mass market.

Apart from the above products at Amazon.com’>investment products, sophisticated investors may include structured products, hedge funds, private equity products at Amazon.com’>investments, and collectibles (e.g. antiques, fine arts, special editions) in their portfolios. The range and diversity of products at Amazon.com’>investment products could be endless!

The author is a private banker by profession and a manager of her family fund, which has generated a cumulative 54% return in the last 3 years. Please visit her blog, bankernotes.blogspot.com, for daily products at Amazon.com’>investment workshops and ideas. She can also be reached at bankernotes@gmail.com

Author: Y. Ng
Keywords: products at Amazon.com’>investment, product, products at Amazon.com’>overview, products at Amazon.com’>beginner, stock,products at Amazon.com’>bond,money market,mutual fund,ETF,real estate,
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