Why Investing In Gold Is Smart Especially For Retirement Plans

By Richard Suchorzewski   

 

    

I recall my time, originally as a Bank Manager and more latterly as a Wealth Manager when my customers would ask me what are the best accounts they can place their money in to get the maximum interest possible. Diligently I would refer them to some form of High Investment Account subject to a notice period or Money Market Account for overnight deposits.

Then in the 80's and 90's - Privatisations resulting in wider share ownership - opened all sorts of avenues to stock market investments, unit trusts, investment trusts, mutual funds etc for the ordinary "man in the street". More serious investors and corporations placed their money into hedge funds, corporate bonds and other more elaborate on and off-balance sheet investment vehicles.

In addition to the above, Property Investment became prevalent and anyone with capital or access to borrowing became a "buy-to-let" property investor. The less risk averse individuals took courses on, and dabbled in, options and other highly geared investment strategies.

All of the above have their place and have provided wealth to a large number of individuals. However, that wealth has been eroded to some considerable extent by inflation, currency devaluation and taxation.

It's wonderful to earn a capital gain on an investment which then becomes less exciting once 40% tax (or more in some countries) is levied. It's wonderful to see one's savings rise each year, and less attractive when those savings purchase less than they would have done the year previous, even allowing for the addition of interest earned.

Now I come to the "Boom and Bust" Scenarios in Property, the Stock-Market and Currencies. For those who purchased those investments when their price was at an all time high then experienced 10%, 20%, 30%, 40% falls within weeks. I remember the 1987 Stock Market Crash when I sold all of my shares at a considerable loss and these bubbles and collapses continued in each passing decade.

I remember purchasing a House in 1989 having to wait 5 years before it reached the price I originally paid.

Despite all of this, the one investment I have made which has protected me against inflation, stock-market crashes and property fluctuations and most important of all, currency devaluation, have been my investments in gold.

My only regret is that I did not have more liquid funds available in which to invest in this commodity.

The past 10 years has witnessed the rise in the price of gold from $360 per oz to $1900 with it currently standing at $1360 as I write this article. A number of experts predict that $1200 is the approximate extraction price of gold (i.e. the cost to get it out of the ground) and therefore, if accurate, the downside appears very limited indeed.

What captures my interest in Gold is the number of Countries, which in recent years have purchased considerable volumes of the commodity, especially China and India (Two of the world's fastest growing economies). They consumed 52% of the world's gold in 2010. In 2011, increases in demand from China and India have driven a 7.5 percent increase in demand for gold jewellery during the first half of the year, despite a 25 percent increase in the price. In 2012 China averaged an import of 65 tons of gold per month placing it in the top 6 World holders of gold.

Even conspiracy theorists advocate gold investment because of the information derived from Wiki-Leaks (now in the public domain) which specifies China's motives for this investment onslaught:
"The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold's function as an international reserve currency.They don't want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold."
- Leaked Wiki-leaks Cable

Quantitative Easing, resulting in currency devaluation and the building up of future hyper-inflation, only bodes well for Gold (and Silver) as an important asset to own for the future.

All of these circumstances lead to only one logical conclusion (in my view) and that is the inevitable rise in the Gold Price over the long-term.

We have seen in the UK, Europe and the US major pension devaluations and with an increasing aged population, the need for increased personal pension provision has never been greater.

With currencies devaluing at the rate of 40% every 10 years, hyper-inflation being predicted for the latter end of this decade and unemployment rising to unacceptable levels, to me, it makes sense for everyone to consider Gold as both an investment purchase requirement (not just a hedge) for existing portfolios and any retirement plan.

As Billionaire Thomas Kaplan who has $2 Billion invested in gold recently stated:
"People view gold as emotional, but when they demythologize it, when they look at it for what it is and the opportunity it represents, they're going to say, "We really should own some of that.' The question will then change to "Where do we get the gold?"

For more information on this subject view my website at:
http://www.goldirafund.com

Article Source: http://EzineArticles.com/?expert=Richard_Suchorzewski

"Secured Retirement Investing" Requires Thoughtful Planning and Education

By Randall D Cox

 

    

 

Many financial pundits embrace grandiose theories and use mathematical formulas to convince the vast sea of American Investors to accept their vision of the perfect American Retirement Account Balance. They make statements like "by the time you are sixty five you should have X$ in your retirement portfolio to cover health care costs or to live the perfect dream of exotic travel and extravagant lifestyle of spend, spend and more spending. Retirement plans and accounts, however, are like "beauty" it is in the "Eye of the Beholder"! My perfect retirement lifestyle is not necessarily my cousin's or for that matter my next door neighbor's. We all have different interests, needs, and desires. But we all do share one thing in common we deal in a risky business indeed called Investing.

It may not be a forgone conclusion; that Penny Stock Investors are investing for retirement. Some will develop an investment portfolio to hedge their current business needs whatever that may be. Some may invest just to prove to themselves and others that they can, while still others invest as a business to generate their monthly income in order to meet obligations. Still others invest for one goal, to build up a massive amount of cash these are typically referred to as "Day Traders.

This article is not an attempt to convince anyone how to invest or why for that matter, it is simply to give another point of view for the motivation of investing. The need to think about retirement whether you are a full time investor or just starting out or you have been a "bi-vocational" investor for years.

No matter your motivation allow me to make a case for you to invest with one eye looking down the road to retirement regardless of how long or short that may be. We all know instinctively that one day we will "give up", "give out", or "wear out"! Now I am not trying to be pessimistic or to be a bearer of bad news especially for those of you in your twenties and thirties. But what I am tying to impress on everyone is that just like in the market, life has no guarantees! By that I mean life and the market share the same propensity for change, volatility, risk, and dare I say fees, loads, and charges. Why do you think that the game of Monopoly is so popular? Because Monopoly like real life reflects the whole concept of "Time and Chance".

For those folks who are the always the winner at Monopoly remember this, life isn't a board game and you cannot ever memorize all the cards that will be thrown at you. This is just like Investing! Multiple volatile conditions affect your investments 24/7 and there is nothing that can stop Time and Chance from happening to you or anyone else for that matter. Since we are all equipped with this basic knowledge wouldn't it be prudent to at least look down the road and work up for yourself a basic vision of what kind of retirement you would like to have and at what age? Here are a few topics for your consideration.

Living arrangements - Family residence, condo/town home, retirement village? How much will that cost based on today's economy and then calculate from your current age to your perfect retirement age how many years that is multiplied by 3% for inflation. You will need to revisit this about every year to adjust for current inflation rates. Currently inflation isn't really an issue but that wont always be the case.

Health Care Costs- we don't really know what these will be any more than we can actually count the stars in the night sky. This is true for most investors living in the U.S. now days. Since this is a High Risk area we need an alternative plan other than just cash accumulation. There are two key concepts you need to study "Mortality & Morbidity". They will make you feel real happy! Not!

Food - Now here is a topic that whole 2hr seminars have been based around. Many folks living today who are in the Boomer generation can remember when the cost of a loaf of bread was.75
Cents and a cup of coffee at a restaurant was.25 cents. How about the incredible edible Egg? from 1985-1987 the price per dozen ranged from 42.9 cents to 51.5 cents.
(Cooperative Extension University of California Number 85 June 30, 1988)

Currently in 2012 one dozen large grade "A" eggs are selling for $1.7059 while the organic brown shell eggs in a carton range from $2.61- $3.16
(http://www.ams.usda.gov/pymarketnews.htm or PYMNDSM@ams.usda.gov)

Based on just these three areas of life we can deduce that living will be more expensive in the future than it is right now. And this is not taking into consideration the punitive tax system we are under in the United States currently or the new taxes that have and will be voted into existence before and during our retirement.

What areas can we offset the risk with careful planning? Well for one, risk can be reduced by a well thought out investment plan focusing on an annual return that will beat inflation and keep up with the market while never delivering bad news like a negative return. I think that you would agree that these types of accounts would be the perfect holding area for your "Bread and Butter" retirement fund.

What are these types of accounts? Well they are widely available in every city, state and the whole nation for that matter they are Indexed Annuities.

The Indexed Annuity with safety and a guaranty income provision can provide income protection for you for life and while you wait to start the income the account can grow and compound the returns on the interest generated, and on the Taxes you would have paid if the money were in another type of interest bearing account. And never give you a negative return.

Some investors work from a forward looking strategy and determine what there Social Security income will be when they reach either their max retirement age or when they can take it the earliest and begin to accumulate that much cash reserves or purchase an annuity with that much money and let that keep up with inflation. Then go along there happy way being the raging stock investor they are on the inside.

Now couple this with a disciplined Investment Strategy and you have a retirement focused plan where you can have the peace of mind that your retirement funds will always be safe and growing, while at the same time focus on the business at hand that of being the best penny stock investor you can be.

All the Best & Happy Investing!
Randall Cox
www.PennyStockSuccessTips.com

P.S. In my next article entitled "Create an Investment "Safety Net" with Old Fashioned Insurance". I am going to reveal little known tips and strategies that most married couples have not considered. These concepts will help married couples who have one investor minded partner and another who is so frightened about risking their financial future that they wont even dole out a quarter in a payphone for fear of losing it.And the secrets that affluent people have used in order to get their hands on tax free cash to invest and buy businesses.

http://www.PennyStockSuccessTips.com

A site dedicated to providing information and resources to help you along your Investing Journey.

Article Source: http://EzineArticles.com/?expert=Randall_D_Cox

Understanding Forex Trading

By Stephen S Alison

 

 

 

The Foreign Exchange market, also referred to as the "Forex" or "FX" market, is the largest financial market in the world, with a daily average turnover of well over US $1 trillion - 30 times larger than the combined volume of all U.S. equity markets. The word FOREX is derived from the words FOReign EXchange.

Spot and Forward Foreign Exchange

Forex trading may be for spot or forward delivery. Spot transactions are generally undertaken for an actual exchange of currencies - delivery or settlement - for a value date two business days later.
Forward transactions involve a delivery date further in the future, sometimes as far as a year or more ahead. By buying or selling in the forward market, it is possible to protect the value of any anticipated flows of foreign currency, in terms of one's own domestic currency, from exchange rate volatility.


Difference Between Foreign Currency and Foreign Exchange

Anyone who has traveled outside their country of residence would have had some exposure to both foreign currency and foreign exchange.

For example, if you live in the United States and travelled, lets say, to London, England you may have exchanged your home currency i.e. US $ for British Pounds. The British Pounds are referred to as a foreign currency and the act of exchanging your US $ for British Pounds is called foreign exchange.


The Foreign Exchange Market

Unlike some financial markets, the foreign exchange market has no single location as it is not dealt across a trading floor. Instead, trading is done via telephone and computer links between dealers in different trading centres and different countries.

The FX market is considered an Over The Counter (OTC) or 'interbank' market, as transactions are conducted between two counterparts over the telephone or via an electronic network. Trading is not centralized on an exchange, as it is with the stock and futures markets.


Reasons for Buying and Selling Currencies

Through the mechanism of the foreign exchange market companies, fund managers and banks are enabled to buy and sell foreign currencies in whatever amounts they want. The demand for foreign currency is stimulated by a number of factors such as capital flows arising from trade in goods and services, cross-border investment and loans and speculation on the future level of exchange rates. Exchange deals are typically for amounts between $3 million and $10 million, though transactions for much larger amounts are often done.

There are two basic reasons to buy and sell currencies. About 5% of daily turnover is from companies and governments that buy or sell products and services in a foreign country or must convert profits made in foreign currencies into their domestic currency. The other 95% is trading for profit, or speculation.


Currency Speculation

Speculators desire to trade forex for the opportunity to profit from a movement in currency exchange rates. For example, if a trader believes that the Euro will weaken relative to the U.S. dollar, then the trader can sell Euros against U.S. dollars in the Forex market. This is referred to as being "short Euros against the dollar" which, from a trading perspective, is the same as being "long dollars against the Euro". If the Euro weakens against the dollar, then the position will profit

For speculators, the best trading opportunities are usually with the most commonly traded and therefore most liquid currencies, called "the Majors." Today, more than 85% of all daily transactions involve trading of the Majors, which include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar.


True 24 Hour Market

Forex is a true 24-hour market and trading begins each day in Sydney, and moves around the globe as the business day begins in each financial centre, first to Tokyo, then London, and then New York. Unlike any other financial market, traders can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night.

As with all financial products, FX quotes include a "'bid" and "offer". The "bid" is the price at which a dealer is willing to buy - and clients can sell - the base currency for the counter currency. The "offer" is the price at which a dealer will sell - and clients can buy - the base currency for the counter currency.


The US Dollar is the Centre-piece

The US dollar is the centre-piece of the Forex market and is normally considered the "base" currency for quotes. In the "Majors," this includes USD/JPY, USD/CHF and USD/CAD. For these currencies and many others, quotes are expressed as a unit of $1 USD per the other currency quoted in the pair.

The exceptions to USD-based quoting include the Euro, British pound (also called Sterling), and Australian dollar. These currencies are quoted as dollars per foreign currency as opposed to foreign currencies per dollar.


What Affects the Currency Prices

Currency prices are affected by a variety of economic and political conditions, most significantly interest rates, inflation and political stability. Moreover, governments sometimes participate in the Forex market to influence the value of their currencies, either by flooding the market with their domestic currency in an attempt to lower the price, or conversely buying in order to raise the price.

This is known as Central Bank intervention.

Any of these factors, as well as large market orders, can cause volatility in currency prices. However, the size and volume of the Forex market makes it impossible for any one entity to "drive" the market for any length of time.

Currency traders make decisions using both technical factors and economic fundamentals. Technical traders use charts, trend lines, support and resistance levels, and numerous patterns and mathematical analyses to identify trading opportunities. Fundamentalists predict price movements by interpreting a wide variety of economic information, including news, government-issued indicators and reports, and even rumour.


Rewards and Risks in the Forex Trading Market

Trading foreign currencies is a challenging and potentially profitable opportunity for educated and experienced traders.

However, there is considerable exposure to risk in any foreign exchange transaction. Any transaction involving currencies involves risks including, but not limited to, the potential for changing political and/or economic conditions that may substantially affect the price or liquidity of a currency.

Moreover, the leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds. This may work against you as well as for you. The possibility exists that you could sustain a total loss of initial margin funds and be required to deposit additional funds to maintain your position. If you fail to meet any margin call within the time prescribed, your position will be liquidated and you will be responsible for any resulting losses.

Before deciding to participate in the Forex market, you should carefully consider your investment objectives, level of experience and risk appetite. Most importantly, you should not invest money you cannot afford to lose.

As an investor you may lower your exposure to risk by employing risk-reducing strategies such as "stop-loss" or "limit" orders.

There are also risks associated with utilizing an Internet-based deal execution software application including, but not limited to, the failure of hardware and software.

Stephen S Alison is a retired "bean counter" who spent 26 years in middle management positions for major US financial institutions in Europe and a further 10 years as an adviser/consultant to a number of European financial institutions. He owns and operates a number of "hand built" niche websites including: [http://www.24carat-gold.com] [http://www.forex-arbitrage.com]

Article Source: http://EzineArticles.com/?expert=Stephen_S_Alison

Forex Options Trading for Hedging Currency Risk

By Nelly Naneva   

 

Currency risk is part of the financial risks associated with adverse movement in the exchange rate of a particular currency relative to another. As compared to investments in local assets, the fluctuating foreign exchange rates represent an extra risk factor for traders who want to protect their portfolios. The control and management of foreign exchange risk is part of business management. One generally accepted method for hedging currency risk is the Forex options trading. This article reviews the practices of currency risk hedging and their efficiency to control foreign exchange risk through Forex options trading. (Hedging is any action or a set of activities, aiming reduction or neutralization of identified potential risks.)

The use of Forex options trading for exchange-rate risk management is widespread in developed economies and a routine part of the business of financial institutions and companies. By its nature, the currency option differs from the other types of options by its economic function; it hedges the exchange-rate risk and the underlying asset is a particular currency or set of currencies.

Options are derivatives, they derive its price from the value of a particular underlying security, currency or commodity. Forex Options trading are an agreement that gives the buyer the right, but not the obligation, to buy or sell the underlying asset (currency) at a strike price on or before a predefined future date when the option expires. In legal essence, the Forex options trading are provisional and fixed-term transactions. The deal is conditional, because it becomes effective only if the buyer desires. It is also a fixed-term agreement, because its execution is at some time in the future. Currency option is a financial asset like shares or bonds and forms a legally binding agreement between two parties with strictly defined terms and conditions.

There are two basic types of options. The buyer of a Call option owns the right, but not the obligation to buy the base asset on or before specified date at an agreed-on price. Put option confers the holder the right, but not the obligation to sell the underlying asset on or before expiration date (depending on the style of option) for a specified price. Each option contract is a legally binding agreement between two counterparts. On the one side is the buyer of the option who takes "long position." On the other side of the agreement is the seller (issuer) who issues the option and takes the so-called "short position." The seller normally receives from the buyer a specific monetary compensation, named "premium" for the underwriting; at the same time he takes in practice unlimited risk of adverse price movements of the underlying asset.

The strike price is the agreed-on price, at which investors buy or sell options (also "exercise price".) The holder of an American-Style option may exercise his right to sell or buy the asset at any time before the end date. The owner of a European-Style option exercises it at the expiration date only. Options are both exchange-traded and OTC traded financial instruments. They are suitable for hedging and speculative purposes in both upside and downside price movements of the underlying assets by diverse options trading strategies.

When an investor determines a particular type of risk can affect his business, he may decide to protect himself against the particular risk by becoming a party to options contract. A European importer of goods from the United States, apprehending of eventual rise of the dollar and increased delivery costs, could decide to fix the U.S. Dollar to EUR buying a call option. Let us assume that the U.S. Dollar falls at the date of purchase. In such case, the importer will lose only the premium paid for buying the option. However, if the U.S. Dollar rises steadily, the value of the option will also go up thus compensating the increased value of the delivery denominated in EUR.

The derivative contract leads to financial result, just the opposite of the result generated by the risk. When the market price of the hedged currency falls, the value of the derivative contract increases, and vice versa. Although most participants on the derivative market use these instruments for hedging purposes, the companies often trade derivatives for speculation: aiming to generate profits for when of favorable price movements.

Let us assume a Great Britain company expects to receive $ 420,000 after three months and must exchange the US Dollars to Pounds (USD/GB). The current exchange rate is 1 = $ 1.50. The company anticipates revenue of 280,000 (420,0001.50), but the conversion rate of US Dollar to Pound Sterling may move up or down at maturity. During the three-month period, the firm takes the risk of an adverse movement of exchange rates, unless it decides to take some measures to hedge the currency risk.

• If the exchange rate at maturity of the obligation is 1 = $ 1.60, the revenue in GB will be only 262,500, 17,500 fewer than initially expected and the financial result will be a loss as a result of exchange rate impact. If the company finds the risk acceptable, it may do nothing. In case it decides to hedge the potential currency risk, the firm can buy a put option to sell $ 420,000 against GB at executive price of 1 = $ 1.50. This means the seller of the option will need to buy the dollars for 280,000.

• If the exchange rate in three months is 1 = $ 1.40, the revenue of the company in Pound Sterling will be 300,000 (420,0001.40), i.e. with 20,000 more than expected. This way the company profits as a result of foreign exchange rate movements. In such a situation, the option will expire worthless and the company will lose only the premium paid for the purchase of the option.

Currency options trading are widely used investment tools for management and protection against currency risk. Forex options trading makes future risks negotiable; it leads to removal of uncertainty through the exchange of foreign currency risks.

The investors and financial institutions use Forex options trading as insurance against undesired price fluctuations, which in turn leads to more reliable forecasts, lower capital requirements, and higher productivity. Besides, Forex options trading provide protection against currency risk with minimal investment and consumption of capital at exceptionally high adaptability of the contractual terms and conditions. Forex options trading also allows investors to deal with future price expectations, purchasing a derivatives instead of the base security at a very low transaction price in comparison with direct investment in the underlying asset. In addition to hedging currency risks, currency options are also proper instruments for exchange-rate speculations.

Nelly Naneva works as CEO of the Financial Institution Freetrade JSC, Sofia, Bulgaria and as Editor of the Online Financial Magazine Markets Weekly. ( http://marketsweekly.net )

She holds Masters' Degrees in Law from Sofia University St. Kliment Ohridski, Bulgaria and in Banking and FInance from Institute of Financial Services, School of Finance, London, Great Britain.

Article Source: http://EzineArticles.com/?expert=Nelly_Naneva