Are Stock Funds Good Investments For 2014 and 2015? 

By James Leitz  
 

    
 

For five years running stock funds (equity funds) have been very good investments, and in 2014 & 2015 the right funds might still be good investments. It's all a matter of where to invest money going forward, because there are few good stock funds in a bad stock market.

Over the long term stocks have returned about 10% a year (on average) and stock funds have been good investments for investors in search of where to invest for higher returns. This does not mean that you can simply invest money in one and expect to make 10% every year. Yearly returns are heavily influenced by the general trend in the stock market.

While most investors follow the DOW (Dow Jones Industrial Average), most professional investors, like fund managers, are evaluated based on how well they perform vs. the S&P 500 Index. For most of these money managers, their job is to pick good investments and beat the S&P 500 (the stock market in general). Even good stock funds fail to do this on a consistent basis.

In the vast majority of cases, when an average investor asks a financial planner where to invest money for growth (higher returns) the recommendation is: invest in diversified domestic equity funds - the biggest and most widely held fund category. Where do they invest these mountains of cash?
Answer: mostly in the 500 largest, best known corporations in America... those that are included in the S&P 500.

In other words, even good stock funds are rarely good investments in a bad stock market. The vast majority of them are diversified across a broad range of industries or sectors in the economy. As goes the market, so goes the average person's stock funds. What can you expect if the market turns ugly and drops 50% in 2014 to 2015 as it did in 2000 to 2002 and again in 2007 to 2009? Diversified funds that take losses of 40% or less will look like pretty good investments. You can safely bet on one thing.

Even the truly good stock funds (diversified funds that actually beat the averages over the past five years) will lose money if we have a third major down market in 2014 and 2015. The stock market makes the rules, and in 5 years it has risen more than 150%. What can you do to avoid heavy losses in a future downturn? First, you can reduce your exposure to diversified domestic funds. Then the question to ask is where to invest money. Specifically, what are the good investments in equity funds when the market turns ugly?

There are always good investments for average investors and always a few good stock funds if you know how to find them. They don't diversify broadly - they focus on specific industries. Nobody really knows where to invest money when the sky is falling, but I'll tell what's worked in the past.
When the market has a bad week look for stock funds that bucked the trend. Also look for fund categories that underperformed in the past year or two. For example, gold stock funds were losers in 2013. They could be good investments in 2014 and beyond and are worth watching. Over the past couple of decades the following three fund categories have sometimes been good stock funds in a bad market: gold, natural resources, and real estate funds. They could again be your answer to where to invest... as an alternative investment that bucks the trend.

Uncertain times call for greater diversification because no one really knows where to invest. Up markets are always followed by down markets and good stock funds for an up market are seldom good investments in a down market. Don't stand flatfooted while your stock profits evaporate. There are always good investments somewhere, and that will be true in 2014 and 2015 as well.

A retired financial planner, author James Leitz has an MBA (finance) and over 40 years of investing experience. His complete investor guide for beginners, Invest Informed, teaches everything you need to know to put your money to work. Review his book, INVEST INFORMED at http://www.Amazon.com.

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Stock Market Investing

By Emma A John

     

There are many who want to learn about the workings of the stock markets so as to be able to make money. These individuals can actually secure their financial freedom if they are successful at the stock markets. However, these individuals have to keep in mind a few things before investing in the stock markets as they can prove to be very risky for beginners or newcomers. Those individuals who do not have much savings and yet want to try their luck at the financial markets must make sure to minimize their risks. In fact, many suggest that these individuals should have with them up to a year's expenses in reserve. Investing in stock markets also requires the individuals to manage their earnings effectively.

A know-how of the financial markets is a must for all the beginners. There are countless books available, both online and in the real world from where those who are interested can learn about the basic terms used in the stock market and issues like investing and evaluation etc. The books help the readers not only in gaining better understanding of all these issues, but also assist them in learning how to analyze corporate finances thoroughly. Other than these, there are countless articles and essays available on various stock market topics that people can read online whenever they have time to increase their understanding and knowledge.

Beginners are often advised to trade stocks on paper before actually making a real money investment.

This will also teach the new investors about recording details related to;
1. Dates of the trades
2. Number of shares
3. Stock prices
4. Profit or loss
5. Commissions
6. Taxes on dividend
7. Short or long term capital gains taxes payable for each trade

However, it is worth mentioning that in the real world, things are not as simple and there are multiple forces at work that affect the stock price etc. In most cases investors will be required to compare a particular stock price to its revenue and other factors like cash flow etc. to find out if it's under-rated or over-rated.

The simple task of trading stocks in the market may also require investors to make complicated calculations to compare a company's performance expectations to its industry. These calculations are made in a very different manner for companies depending if they belong to a slow growth rate or a high growth rate industry. Investors dealing the financial markets should make sure to maintain a portfolio that has both long term and short term stocks.

If you want to learn how stock market investing please visit http://www.forexminute.com/. Here you will also learn about the important forex tools, market analysis, news and the current trends

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Gold IRA Account: Smart Investing For Retirement

By Michael M Griffin

The Tax Payer Relief Act, adopted in 1997, has made precious metal investment possible into Individual Retirement Accounts (IRA's). Accepted metals are now silver, gold, platinum and even palladium, though the most popular kind of investment is in gold. There are many reasons why a gold IRA account is a wise choice for the future.
Money, as it is recognized by the world, consists of pieces of paper or coins. The total amount of money released on the market by a government must not exceed their value in gold. Even if countries can print the amount of money they are willing to, the amount of gold in the globe varies only slightly, as resources are limited. When a currency loses its value, or when stocks decrease in value, the price of gold rises.

This is why many individuals decide to invest in gold when it comes to their individual retirement accounts. It is important to have financial stability once you no longer need to work, so a proper balance between your retirement funds, properties and other valuable assets must be accomplished by then.

There are a few simple steps needed in order to invest in a gold IRA Account, as detailed below:

IRA Account Type
The first thing you need to determine is what type of IRA you have. Even if there is the possibility to make changes, some accounts are not compatible with precious metal investing. Still, the traditional, roth, Simplified Employee Pension (SEP) and Simplified Incentive Match Plans For Employees (SIMPLE) IRA accounts have the option of gold investing.

Finding the Right Custodian
This step is important, because even if there are many expert custodians available, not all of them understand the importance and the implications of gold investing. Look for a custodian with experience in precious metal investment and choose based on recommendations, credentials and expertise.

Funding Your Account
Funding an IRA account with the purpose of gold investment can be done by a simple transfer from your current account or even from a 401(k) or a company retirement account. A certified custodian will be able to guide you through the entire process, without hassle.

Decide What You Want To Buy
Investing in gold doesn't necessarily mean buying gold. Another option is to buy gold mining stocks, so discuss it with your custodian and follow their advice, as they will understand the market better.

Keeping Your Gold Safe
This is the most important part when choosing to invest in gold. It is mandatory to open an account with an IRS-accredited depository in order to keep your gold IRA investment. Personal handling and keeping the gold is prohibited by the IRS, as you are not able to provide insurance in case anything should happen. Also remember that not every piece of gold is in compliance with IRA accounts. The safest method is to invest in gold and silver bullion that has 99.9 percent purity, or coins like the Canadian Gold Maple Leafs, the Austrian Philharmonics, the Australian Kangaroo Nuggets and the American Gold, Silver and Platinum Eagles.

Balance
Even if investing in a Gold IRA Account is advisable, a balance between money and precious metals must be kept at all times. The economy sometimes evolves unpredictably, so having multiple options when you retire is advisable. A balance of between 10-20 percent is often recommended by most custodians and gold market advisers, keeping in mind that trade has always been - and will remain - the most profitable source of commerce.

Please visit PreciousMetalInvesting.org, where you can find more information on gold IRAs, silver IRAs, 401k's and the top rated gold IRA custodian. There, you can also request your free gold investment kit.

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Rollover Your 401k Into an IRA? Not Necessarily

By Lou Chong

     

    

Why all the fuss over 401ks and rollovers?
Due to the decline of traditional pension plans, 401ks now typically represent the bulk of retirement assets for most investors. So, making good decisions on what to do with those assets is very important.

Is rolling over your 401k account into an IRA a bad thing then?
It depends. In many cases it does make sense to rollover your 401k account. What doesn't make sense is to do anything without understanding what options you have, what costs are associated with those options and most importantly-having a financial plan which guides you in understanding what role that pot of money plays in your financial future.

Reasons to keep your 401k account with your employer

• You are happy with the current investment options in the plan.The plan has a diverse menu of good performing and reasonably priced funds.
• If you are 55 years or older, maintaining your 401k account gives you an option to take distributions without incurring the 10% penalty, as you would (with certain hardship exceptions) in an IRA.
• I'm not a big fan of this. But you could also take out a loan against your 401k balance for short term needs.
• Your 401k account is protected under ERISA, so there is general protection against creditors. IRA's are not necessarily shielded from creditor protection, depending on your state of residency.
• You minimize the potential tax impact of the pro rata rule if you plan on doing a Roth IRA conversion using non-deductible IRA assets.

Reasons to rollover your 401k account into an IRA

• You are dissatisfied with your employers plan's investment options.
• You find that you can significantly reduce overall expenses by rolling into an IRA.
• Your employer makes changes to the 401k plan which restricts how you are able to invest.
• You have too much employer stock in your account.
• You want to consolidate and simplify having to track the myriad other qualified retirement accounts you currently own.

The best decisions come from good information.

The best decision on whether to make an IRA rollover comes from having a thorough understanding of your financial situation and objectives, and then obtaining information on what those alternatives will cost you in terms of investment related expenses and potential tax impact. A competent financial planner can help you make those decisions by taking into account your total financial picture and long term goals.

This article is for informational purposes only and does not constitute a complete description of our investment advisory services. No information contained in this article constitutes tax, legal, insurance or investment advice. This article should not be considered a solicitation, offer or recommendation for the purchase or sale of any securities or other financial products and services discussed herein.
 

Lou Chong, CFP, CRPC has over 20 years of professional experience in the investment management and retirement plans industry. He is also the founding principal of Wedgewood Wealth Counsel LLC, a firm dedicated to delivering comprehensive financial planning and wealth management strategies with a fiduciary standard of care.
 

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Investing in Precious Metals - Beware of the Pitfalls

By NI Jocson

     

    

It is easy to invest in precious metals.

But what you should be mindful of, first and foremost, is to opt for physical consignment of gold. Whether you store it in your personal vault or have it stored in a segregated depository, it does not matter as long as your priority in investing in precious metals is physically owning them (the metals).

If, however, you have a solid investing background, you may go with other investment vehicles. But for the sake of saving you a lot of troubles and most specially the money you worked hard for, go for physical delivery of your metals. That should be your strong position when it comes to precious metal investing.

Beware of the Pitfalls

• ETFs or exchange-traded funds - are traded just as you do with stocks. An ETF maybe a very good medium if you are into trading but may work against you big time if you chose to use it in investing. If you'll be purchasing an ETF remember that there is no gold or silver in it - just as mentioned, you have to get physical when it comes to precious metals.


• Pools and Certificates give you a "promise" of gold or silver and many are lured to buy them because they appear to be cheaper. These do not charge you fees for storing metals because simply no metals are actually stored. And they are funding their investments collected from the buyers.


• Using leverage such as options, margins, and futures - is too risky for an investor who does not know how to use it. And you are actually giving someone your money and invest it for you. You have to get educated if these vehicles are what you want to use.


• Numismatics. Still, you have to do your own verification, buying numismatics is for collectors (most of the time). If it is your hobby to collect these types of coins then go. But getting into it as an investment may not work well for you. You will be limited to buyers of rare coins who are only a few of them out there.


• Fraudsters, scammers and con artists. Beware of customer service pushing you to buy rare coins. If they are so pushy about it, make sure you do not end up buying the coins. Commemorative coin scams - if you watch an ad about such a coin, beware of it, must be a scam. If you remember the Freedom Tower Silver Dollar (claimed to be retrieved from Ground Zero debris),the con artist refunded more than $2 million to those who purchased the fake coin. Beware of scammers online selling slabbed coins. These people can buy slabs and slide coins already counterfeited. Numismatic coins are easily counterfeited than bullion coins.

Harness your power of spotting the pitfalls! Do not fall into these schemes! Find here the best gold and silver investment company.

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Retirement Investment Choices Between Guaranteed Income, Safe Income, And Growth

By Shane Flait

     

Considering how to invest your retirement money can make you crazy. But if you think through the reasons for choosing which type investment (or combination) is best for you, you can recover your sanity. So, let's review the reasons for choosing each of the 3 retirement investments: guaranteed income, safe income, and growth.

-Taking your income from fixed annuity payouts:

When you annuitize your fixed annuity, you get a guaranteed income for the rest of your life. You can also guarantee payments to a surviving spouse or your estate, if you choose to pay extra for that option. Of course once you begin payments, you can't change this investment. So who should choose this?

Reasons for investing in a fixed annuity include:
* You don't have to worry about investing that money anymore.
* You have limited retirement savings, and are worried about how they will last
* You're in good health and expect to live a long life
* Interest rates are very high, so you can get a good monthly income, and
* You're not worried about inflation's effect on your income
* Other people depend on you for income.

-Taking your income from 'safe' income-generating investments:

To provide a fixed income from earnings you can invest in government bonds, and treasury bills and even Guaranteed Investment Certificates (GICs). And you can change your investments whenever you want. And who is this type of investment for?

Reasons for investing in a 'safe' income investment include:
* You've only a few sources of income after you retire so you can't afford to risk much.
* Other people depend on you for income.
* You like having the option of changing your investment in response to interest rate changes.
* Inflation's effect maybe worrisome but maintaining an income is more important

-Relying on growth investments to increase the value of your investment:

You may consider increasing the value of your money to preserve its purchasing power over time. To do so, you'll need to invest in growth stocks or the related growth funds. But with the potential for growth comes a higher risk of losing investment money - at least for a time. Is this for you?

Reasons for investing in growth funds include:
* You already have enough assured income investments from pension or Social Security.
* You worry about future inflation or higher expenses and have additional money to invest to offset their effects.
* You want to leave a legacy to your beneficiaries after your death.

What's also important it to realize that you don't need to confine yourself only to one of these investment types. If you're short on income and savings, but still have many years to live, try to minimize your living expenses. Then buy a fixed annuity to cover those expenses and invest in growth or income investments only for future use. Understanding the choice you make gives you some peace of mind.
 

Shane Flait gives you workable strategies to accomplish your goals in financial, legal, tax, retirement and protection issues.

Get his FREE report on Managing Your Retirement =>
http://www.easyretirementknowhow.com/FreeReportandSignUp.htm

Read his ebook: 'Wise Way to Financial Independence' =>
http://www.SovereignU.com

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401K and IRA Best Investment Strategy for 2014 and 2015

By James Leitz

     

    

If you invest money in a retirement plan on a regular basis the best investment strategy for 2014 and 2015 is an investment strategy that will keep your investment portfolio on track without subjecting you to a lot of risk. Most of the investment options in a typical 401k and many IRA plans are mutual funds. To achieve long-term growth with only moderate risk you need to invest money in both stock funds and bond funds. What's your best strategy for 2014 and beyond?

After 30 good years bond funds will turn sour when interests rates turn around and go up (that's the way bond funds work). Stock funds have returned well over 100% since early 2009. Interest rates are near all-time lows, and an abrupt reversal in rates could cause havoc in both fund categories, resulting in big losses for investors in 401k and IRA plans. It's time to get proactive to protect your retirement assets.

The best investment strategy for average long-term investors traditionally focuses on a mix of stock funds and bond funds. Picking the best stock funds and best bond funds to invest money in from your list of options is a secondary consideration. Concentrate instead on asset allocation and investment strategy. In other words, how do you spread your money across the different options offered and what kind of strategy do you use to make sure you stay in a position that fits your risk profile? We're talking money management here, and we're talking about your financial future.

Let's say that you consider yourself a middle-of-the-road investor. You are willing to accept moderate risk in pursuit of higher than average returns. Wall Street has traditionally suggested that the best investment strategy is to invest money with about 60% in stock funds and 40% in bond funds. To protect yourself against the possibility of heavy losses in the future, why not get more conservative with your asset allocation?

In a 401k plan asset allocation is your responsibility and you must make decisions on two levels. First, for the investment assets you already have in place (your portfolio allocation). Second, for the new money you invest each payday (your contribution allocation). These allocations can both be the same, or they can be different. For example, upon review of your statement you might see that 70% of your portfolio assets are in stock funds, with 30% in bond funds. And you have 50% of your new contributions going to each.

Here's my suggestion for the best investment strategy for cutting your risk while keeping stock and bond funds an integral part of your investment mix. No matter what your portfolio allocation is now, change it so that you have equal amounts invested in these three areas: stock fund(s), bond fund(s), and a safe investment option. If your 401k offers a STABLE ACCOUNT option that pays a decent interest rate, use it as your safe option. If it doesn't, go with the money market fund. Remember, interest rates are extremely low, so money market funds presently pay very little interest. On the other hand, some 401k stable accounts pay higher interest rates than you'll find anywhere else.

For your allocation for new contributions set it up the same way with one-third going into each of the three options. If you have an IRA that you intend to contribute to on a regular basis, have it set up so that money automatically flows from your bank account to your IRA account. Split the existing money in your IRA into the same three areas as above, and set it up so that equal amounts flow into a money market fund, stock fund, and bond fund each month.

The above strategy will not be the best investment strategy vs. the traditional 60%-40% strategy if both stocks and bonds continue their winning ways in 2014 and beyond. You have traded higher growth potential for greater safety. If, on the other hand, interest rates rise significantly and throw a wrench into the stock and bond markets, this investment strategy should work to your advantage.

Let's say that stock funds and/or bond funds decline significantly in value for a couple of years or more before rebounding. My suggested strategy has two primary advantages. First, your losses will be lower. Second, the new money you have flowing into stock funds and bond funds each month or each payday will buy more and more fund shares as fund prices get cheaper. When prices rebound you will break even and start to show a profit sooner because you bought stock funds and bond funds at cheap levels. That's called dollar cost averaging... which is a crucial part of the best investment strategy.

Sometimes the best investment strategy is to take aggressive action - like after a major decline in stock prices. Other times the best strategy is to be more cautious by cutting the risk in your portfolio... while you continue to invest money in stock funds and bond funds. In 2014 and beyond, I believe that caution is your best strategy.

A retired financial planner, author James Leitz has an MBA (finance) and 40 years of investing experience. His complete investing guide for beginners, Invest Informed, teaches how to invest starting with investment basics. Check out his book, INVEST INFORMED at http://www.Amazon.com.

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Investing in Shares and Stocks

By Derrick King

Things That You Might Need to Know Before Investing in Shares and Stocks
There is no doubt whatsoever that investing in shares and stocks is among the best moves that anyone who is in search of wealth can make. Investing in shares basically means that you buy a fraction of a company and you get to earn interest from the share. Stocks are available when a company wants to raise money and they choose to sell part of their stocks to the public over other methods that can be used to raise cash. Before you go to buy stocks of a company, it is important that you be familiar with the background of that particular company, look for their track record and make a decision of the type of investor that you would wish to become.

Use of Software in Buying Shares and Stocks versus Online Purchasing
As an investor, one golden move that you can make is to buy shares and stocks using stock trading software. This is highly recommended especially for those that are taking those final steps in jumping into the world of trading stocks. Although this software helps you in reducing work load involved while buying shares, you still are required to make sound financial decisions based on shares and stocks that you would wish to purchase. When one is about to buy shares, there is a lot of information that you have to do research on plus make the decisions, this work rate might easily discourage you..

Software comes in handy mostly for new beginners. This is because it analyses stocks all over the worlds markets and generates essential market information that you need before you get to decide on where to invest. One good thing about the software is that it gives you updated information and so you are set not to miss out on any chance of making cash. Another way to buy shares is through online share dealing. Although you should not rush to make any decisions before buying shares and stocks, online methods can save you a great deal of time and effort when you set out. Software provides you with relevant information that you need just by a click of the mouse. It also gives you that chance to compare performance of different stock markets all over the world.

Shares and Stocks at the Share Market and the National Stock Exchange
Everyone thinks about making cash effortlessly upon the mention of shares and stocks. This thought might be proved to be true or false at the same instance and this has been proven time and again. As an investor or one to be, it would be wrong for you to only look at the profit angle of this type of investment since a loss is also not all that impossible. How you set your sail is what determines how your wheel of fortune will turn, either in your favor or not. The process of investing in NSE has turned out to be one of the easiest processes with introduction of online trading. All that you have to do is to have an online trading account and then you are free to take part in buying and selling shares in the world over.

It is highly advised that you get yourself a broker who will handle all transactions related with your investing. You also get complete access to complete information from NSE including news updates, losers, gainers or recommended stocks. Success is guaranteed if you get to trade right irrespective of the market that you get to invest in, either it be NSE or BSE. Trading right would generally mean:

- Having enough information about a company or stock market before you set out on investing.
- Having a stock broker.
- Using a sock trading software before you carry out any transaction and make the right decisions.
- Renting shares instead of fully purchasing them when it comes to accompany that has fluctuating market performance.

I hope this gives a little insight into shares and stocks.

Derrick King is an Author and writer for many websites including http://onlinesharedealing.org but reminds you that this article is not to be considered as sound financial advice it is the point of view of the author only. All major financial decision should be verified by an accredited financial advisor. Stay lucky.

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Why You Should Buy Your First Real Estate Investment Property Today

By Ketul A. Kothari

When it comes to real estate, there are plenty of people out there that are unaware of the many tax advantages available for real estate investment properties. One of the most popular ones is that of the 1031-Exchange. For those of you unfamiliar with this, the 1031 Exchange is actually a section within the United States IRS Code which states that certain eligible properties may be exchanged for properties of equal or higher value without having to pay any taxes on the transaction.

This tax treatment of trading properties for larger ones is an absolute god-send for the serial real-estate investor. Imagine having the ability to regularly trade up one investment property for a larger one every time you had the resources to be able to upgrade? Well, that is very well possible thanks to this very important IRS provision! Larger properties mean generally higher rents allowing you to increase your annual cash flow, so it is definitely a good idea to trade up for bigger properties whenever you get a chance.

Other tax advantages for rental property owners include tax deductions on interest expenses, depreciation expenses, repairs, travel expenses, and insurance costs.

Interest Expense:
Any interest expense on a rental property is tax deductible. This means deductions for mortgage interest payments, and interest on credit cards for expenses that were used in a rental capacity.

Depreciation Expense:
As a real estate investor, you have the opportunity to claim depreciation on your property as a deductible expense by deducting a portion of the value of your property over the span of a couple of years. While this tax deduction provides the investor with immediate benefits, this benefit is eventually returned to Uncle Sam when the property is sold. This benefit is lost primarily because depreciation serves to reduce the total cost basis for the property, so any capital gains are taxed from the lowered cost basis. This concept is known as depreciation recapture.

Repairs:
Any repairs on your investment property are a deductible expense in the year that you pay for the repair. This means things like painting rooms, and replacing faulty lighting. Any improvements to the property, on the other hand, are not deductible.

Travel Expenses:
Real Estate owners are eligible for tax deductions every time they have to travel for their rental activity. This deduction could be broken down one of two ways: either as actual expenses (receipts may be required), or the standard mileage deduction (which is currently 56.5 cents per mile for the 2013 fiscal year).

From the above deductions, it should be clear that there are plenty of tax advantages available for real estate investors! If you haven't already, it's definitely a good idea to start claiming all the above deductions you are eligible for. They may very well make a difference between losing money on a property versus earning a profit.

About the Author: Ketul Kothari is an accomplished investor and entrepreneur. He is also the author of several popular business books including Invest Your Way to Riches. Ketul's upcoming book, Presenting Greatness, will reveal the presentation techniques and strategies employed by some of the world's leading presentation gurus. Follow Ketul on Twitter.

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Protecting Your Future by Investing In Gold IRA

By Arto Laakso

    

Investing in gold is considered to be the best investment these days, even suggested by various financial experts of the world. Some people are making gold investment to become wealthy whereas others are investing in gold IRA and buying silver to protect their hard-earned money for future.

Many economists and financial experts are predicting an economic disaster in near future after assessing the international economic condition and particularly the monetary policy of USA.
Economies of most of the countries in this world are facing various issues to retain their strength.

Even USA economy is staggering with $17 trillion debt with Federal deficit of nearly $ 1000 billion. These scary statements of the financial experts had compelled even the billionaires to invest in gold for their safe future.

Reasons to invest in gold

Gold investments are preferred at such an economically scary condition because it has been used as a store of value and a reliable currency since centuries apart. Any currency can be dishonored at such times by over printing the currency but at the time of such inflation gold is the only currency that maintains its value. Your investment since 2001 in paper products like bonds, stocks or mutual funds might have wiped out within no time or might have been influenced at the time of inflation but gold and silver had grown more than 400%.

Gold, the precious yellow metal, has special position for a common person since centuries and is being used as money since not less than 5000 years. The value of gold has increased during all these years whereas several currencies had faces problems in the meantime. On the contrary US dollar is losing its value every day even being a potential currency. If, in 1971, the US paper currency was not backed by gold then it would have lost its potential as currency. The credit potential of the US Government has backed the dollar at such a crucial time. All these facts are sufficient to be confident for investing in gold.

Why to invest in gold now?

Currencies of most of the countries, including USA, are facing financial crisis at present. The reason behind it is that they printed their currency whenever needed without supporting it with gold. When a country prints its currency without backing it with gold then its value decreases in international market. In such situation people lose their confidence on that currency and start avoiding it. It is the starting point of hyperinflation in the economy of the country concerned. Its situation becomes more critical if they print more currency to prove the potential. Though there can be possibilities in hyperinflation but it does not guarantees any certainty. Ultimately you have to return to gold to maintain the worth of your currency. The value of gold increases with the decrease in the worth of any currency even the dollar.

How to invest in gold?

The basic question arises at this point that how to invest in gold? You may know the facts that gold is tangible money which is used all over the world but neither can you manufacture it nor can delete through any computerized programming. It saves you at the time of economic collapse and inflation as a hedge. Though gold investment is considered as one of the most reliable investments but some people have various queries about gold IRA investment for securing their retirement. A review on gold IRA provided in this article may help you in this regard.

A review on gold IRA

E retirement account that holds approved coins and precious metal bullion instead of paper investments is known as Gold IRA. In gold IRA investing your metal is held on your behalf by a third-party. At present IRA approves bars and rounds of all precious metals including gold, silver and platinum, Australian kookaburra coins, Canadian maple leaf coins and American eagle coins for investing in Self Directed Gold Coins IRA after opening a gold IRA account.

Thus, gold IRA investment is the best investment in the present economic condition world over. Gold is considered as the purest form of money and the ultimate asset that can prove its worth in any condition. Neither any government nor any person can devalue its worth.

Gold Ira Investment

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

Why Is Dividend Investing So Popular?

By Joe Barbieri

    

There was once a time when people never invested in equities. There was ample interest earned through bonds, bank accounts and Guaranteed Investment Certificates (GICs) such that buying equities was not necessary. As inflation and interest rates went down and stayed low for a long time, people began searching for other ways of creating income. The two most popular methods are rent generated from real estate and dividend investing. Real estate investment involves buying properties and renting them, and will not be discussed further in this write-up. Dividend investing through buying of equities will be explored in this article.

There are some key things to remember when it comes to dividend investments:

Dividends are Not Guaranteed
Most people know that equities and mutual funds are not guaranteed, unless there is a situation where Canadian deposit insurance takes effect. This is generally when institutions which hold your investments go bankrupt. The same thing holds true for mutual funds as for dividends. A company can change its dividend payout or cancel it altogether without a lot of notice. This is generally communicated at shareholders meetings and via media releases. It is true that companies who discard or reduce dividends tend to get bad publicity from the marketplace, thereby discouraging them from doing this, but it still happens. When dividends are cut, it could mean a change in company direction. A possible scenario is when a company decides to invest a lot of idle cash into a new product, a new line of business or another company which requires money to allow it to grow. Rather than pay dividends, the company has now decided to conserve capital and let the profits generate capital gains instead. A second scenario is that the company is not making as much money as it used to, and it cannot afford to pay dividends any longer. A third situation is when a company has a negative surprise occur, like a lawsuit, a change in regulation that adversely affects its business, a merger, a takeover or a natural disaster that causes the company to change its course on dividends. There are also scenarios when dividends increase more than expected, such as unforeseen extra profits, a onetime dividend payout resulting from a takeover deal, a lawsuit victory or a change in regulation favouring the company resulting in a large profit increase. To find out what is going on with a company, read the media reports and decipher what the current situation is.

Dividends May or May Not Keep Up With Inflation
Many companies will increase dividends each year. In some cases, people expect this to happen since it has happened for many years. These increases are designed to keep the income from the dividends steady as the stock price rises, thereby paying more dollars for each share of stock that you own. These larger payouts serve to keep up with inflation and allow your investment to maintain its value over a long period of time. If the share price is stagnant, and the dividend payouts are stagnant, this situation will not keep up with inflation as you would receive the same dollar amounts over many years. As the prices of things go up, you will find that your money will buy fewer and fewer things, resulting in a cash squeeze. This issue is particularly important if the dividends are your only source of income, or if you are living on a fixed sum of money. Many senior citizens and people on fixed government benefits fall into this category. To find out what is happening in this case, observe the dividend payout history for the company you are investing in, and find out if there are predictable increases in payouts. If they are mostly predictable, but there are a few unexpected changes in the trend, find out what happened to the company at those times. These periods will determine how reliable the stock is when paying dividends, and when they are not reliable.

Dividend Yields are Inversely Affected by the Stock Price
The dividend dollar amount received divided by the share price at the time of the dividend payout gives you a percentage called the "dividend yield". This calculation allows you to compare this yield to other investments, like a yield on bonds or a yield on GICs. This yield can also be compared over time to see what range the yield can obtain. Since the price of the stock is the denominator of this calculation; as the stock price goes up, the percentage given to you or the dividend yield would go down. Conversely, as the price of the stock goes down, this dividend yield would go up. If you are investing for steady income and you already own the shares, this calculation would not matter to you unless you want to change investments, or would need a certain amount of principle (money invested) for an alternative to owning dividend stocks. If you are putting new money into dividend stocks, this yield serves as a comparison to tell you if the stock you want to buy is "cheap" (the yield is high) or "expensive" (the yield is low). There are many things that affect the price of the stock, so this yield will fluctuate a lot depending on the stock price at a given time. The dividend payout would not fluctuate much unless there is something unusual going on - as explained in the prior paragraphs.

What About Interest Rates?
Interest rates should be watched carefully when investing in dividend paying stocks. The higher interest rates rise, the more likely it is that dividend stocks will be sold, because someone can buy an alternative, which is bonds or other interest bearing securities. It is like a substitution effect - if one thing becomes really expensive and a cheaper version of that thing comes around, you will buy the cheaper version of that thing instead. In this case, if a dividend stock gives you a 5% income stream, and a bond gives you a 2% income stream, you would likely buy the dividend stock after weighing risks, cost and taxes. Should the bond then give you a 4% income stream due to rising interest rates, this dividend stock does not look as attractive. If the bond then returns a 6% income stream, this would now be a better yield that the dividend paying stock. People would then sell the dividend stock until the price goes down enough that the dividend yield is close to 6%, or an equivalent return after risk, costs and taxes. Since the dividend payout does not change that quickly, the only other way for the markets to balance the two alternatives is to change the price - in this case the price of the dividend stock.

The Mechanics of Dividend Investing
So how do you go about getting these dividends? The traditional way is to open up a trading account with a bank or brokerage firm. The account has to be such that it allows you to buy individual stocks. You can buy these stocks yourself or have someone do it for you. Make sure you ask questions about costs, account access restrictions and taxes before you set up the account. You would buy shares in each individual company. As an example, you would buy 100 shares of Bell Canada Enterprises (the trading symbol is BCE). These shares would cost you $50 per share as an example. If you buy 100 shares, the amount invested would be $5000 plus any fees to buy the shares. Some accounts also have fees to keep the account open, so ask questions upfront before you start buying stock because these fees will reduce the amount of money you are getting out of the whole exercise. Once the shares are in your name, you would be entitled to a dividend payment each quarter. The quarter end date is the company fiscal quarter end date, not necessarily the calendar quarter end dates. If you own the shares, your name or the name of the brokerage account will be registered with the company and when the dividend payment date approaches, the name of the account holding the shares will be scheduled to receive the payment. If you buy shares before this date, you would receive the dividend. You would then see a cash payment in your account where the shares are held. In some cases, you can have the dividends reinvested into more shares of stock instead of cash to make sure you continue to buy more shares instead of doing this yourself. This method is good if you want to grow your stock holding. If you want to use the income, this shouldn't be done because shares would have to be sold periodically to generate cash, which would incur a lot of trading fees as well as headaches trying to time your trades to get the best price. Timing the market is very difficult to do, so it should be avoided unless you have some skill in doing it.

When Should You Not Invest in Dividends?
The answer to this question depends on what your reasons are for buying dividend yielding stocks in the first place, as well as your risk tolerance. If you are only looking for income, and you can get that income through buying bonds, the latter would be a safer bet. If you are very risk averse to losing your money, and a guaranteed alternative investment presents itself to you, the guaranteed alternative should be bought instead. If you prefer dividend income but also like the capital gain that sometimes come with it, you may want to keep your dividend stocks even if other alternatives present themselves to you. If interest rates rise sharply and you take a large loss on your dividend stocks, this may be a turn off on the whole idea of dividend investing. If you love real estate and can create similar income through real estate as opposed to dividend investing, real estate investing is the way to go for you since you are more familiar with how it works.

How to Tie This All Together
Investing in dividends should always be considered along with everything else that is going on in your life, both financial and otherwise. Take note of what you want to achieve with dividend investing, what your options are, and how comfortable you feel about each of the options. The amount of knowledge you have about each alternative should also be considered. The more you know about something, the better you will be at it. If you know little about something, treat it as an experiment and wade in slowly with whatever help can be found until you know a fair amount about it.

Do you want to:
Learn how the world of money really works without the need of a time consuming or expensive course of study
Discuss what you want to achieve according to your horizon
Restructuring your finances to achieve your goals
Advice that is not affiliated with any institution or any product - an independent opinion
If you answered yes to any of these questions, contact me at: Contact me, Joe Barbieri by email at joetheinvestor.today@gmail.com, my web site at http://www.joetheinvestor.ca or by telephone at 647-286-8020 for an independent consultation on what your options are. Note: This article is intended for people who want to learn about the world of finance and how to research for themselves. If you would like to buy or sell investment products, or specific advice on investment products, tax or legal issues, please consult your investment advisor, accountant or legal counsel.

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Explaining Dividend Yield

By Chris Blanchet

 

For many investors, earning income used to be an easy and simple process. You would invest $100,000 on, say January 1 and over the next five years you would earn a steady 8% on that investment. At maturity, you would get your $100,000 back and you would have renegotiate your term deposit rates with your banker. Over the years, the process became marginally more complicated. Rates on term deposits dropped, allowing fewer people to enjoy the lifestyle they had become accustomed to. And so the choice of investment changed as well. Instead of term deposits, investors might have shifted into fairly safe government or corporate bonds. For a slightly higher rate, investors needed to take on a little higher risk. And while bond prices would fluctuate between the day you bought and the day the investment matured, at the maturity date the face value of that bond was repaid to the investor. It was all good.

But as many people know quite well these days, fixed income investments like bonds come with considerably more risk. In periods of increasing rates, those bond prices will drop. And while the face value will be repaid at maturity, there is always the "what if" of needing the investment prior to that maturity date. With liquidity such a big concern for a lot of investors, they have had to look elsewhere. And of course, to add salt to the wound, rates are just not as attractive as they used to be.

This is how dividend paying securities have gained a lot of traction recently. With the expected rate increases in the near future as well a need for liquidity thanks to the current economic state, dividend paying stocks have meant a return to higher income while taking on only marginally greater risk.

Companies like General Electric, most of the big Energy companies, many solid banks both domestic and international, as well as many other blue chip companies will pay income in the form of dividends. This income, as a percentage of the price of the security, is what is known as the dividend yield.

The dividend yield on any given security will fluctuate each time the security trades at a new price. For example, a $3.00 dividend on a $50 stock is a 6% yield; but once that stock goes to $75, that yield drops to 4.5%. In other words, as the security price increases, the yield drops. This is exactly how things work with bonds. And like bonds, the income stream to the investor remains the same.

For example, an investor who bought at $50 will control the same amount of shares regardless of what happens to price. As well, the income will always be 6% of their investment. If they invest $100,000, the income will always be $6,000, even when the security price rises to $75 and the yield drops to 4.5%. So when the stock price increases, the <i>value of the investment</i> will increase on paper. The income remains the same at $6,000.

Essentially, dividend yield matters only when the original investment is made. As the security price increases, the yield will drop, but the investor's income in dollar terms remains the same. The biggest difference with stocks versus bonds is that the investor will have a little more pressure to sell at market prices. But the problem will be how to replace the original income.

So while dividend yield only matters when making the original purchase, comparing one dividend for one stock to another dividend on another stock whenever a change is made in one's portfolio becomes an ongoing concern. And investors needs to stay abreast of these yields, rising or otherwise, so that they know what the "going" rates are.

--> Have you considered Dividend Funds? Find out the Top Dividend Fund Pick by MutualFundSite.org.

Chris has more than 17 years of financial services experience. He currently manages a website about Roll Roofing [http://www.roll-roofing.com/] at Roll-Roofing.com where he discusses different roll roofing alternatives.

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Why Add Gold and Silver to Your IRA Account?

By Josh Holliday

 

    

Adding precious metals to Individual Retirement Accounts (IRA) was made possible by the Tax Payer Relief Act in 1997. This now includes gold, platinum, and silver. As a method to achieve diversification of investment funds, some account holders place gold in their IRAs. As a general rule, when stock prices drop the price of gold rises. This can even out the value of your portfolio in a weak period for the stock market.

Steps to Take:

1. Inquire of your IRA custodian if you have the right type of account you can add gold too. Some plans do not allow this. In which case, you need to start a new silver-gold IRA.

2. Choose a custodian who has a lot of administration experience with gold-silver IRA plans. It is possible to add silver or gold to most types of IRAs, including Roth, traditional, simplified incentive match plans for employees (SIMPLE) and simplified employee pension (SEP) plans.

3. To open a silver-gold IRA account, send the signed paperwork to your new IRA custodian. Usually the charges will also include a storage fee for any silver or gold coins you keep in your account. Your gold has to be stored with an approved depository pursuant to current IRS rules, which has to be in a completely different location than your IRA custodian's location.

4. To initially fund your gold account you just transfer funds from your bank account to your IRA account. If you desire to roll funds over from a 401(k) or company retirement account your custodian can instruct how to do this, it's quite easy and they can accomplish it in one day.

5. You may want to determine if you desire to buy gold mining stocks or silver and gold coins and will have to inform your custodian to purchase them for you from the funds in your account.

Current Tax Rules RE: Precious Metals in IRA Accounts
1. Investments in Collectibles
Collectible coins are transactions prohibited via an IRA account according to the IRS. Purchasing any collectible coins with funds from your IRA is called a distribution of the same amount you used to purchase the coins. The distribution will then be added to your gross income on your tax form by the IRS and penalized 10 percent if you are under age 59 1/2.

2. Minted Coins Exception
The precious metals that are allowable with IRA investments are U.S. minted coins. The coins need to hold a minimum amount of platinum, silver, gold, or palladium metal to qualify. Gold coins need to contain either one-quarter, one-tenth, one-half or a whole one-ounce mixture of gold. Silver, minted as one-ounce coins, designated bullion, are acceptable. Any coins not designated qualified minted investments by IRA regulations need to be bought with funds outside your IRA and held outside of your IRA account to avoid a penalty.

Your IRA Custodian
3. The custodian of your account is the one responsible to the IRS to report the investments held in any IRA account including any distributions or contributions to or from the account. Which investments are allowed for investors by the account custodian is not regulated by the IRS. What the account can or cannot allow is up to each account custodian to decide. It remains extremely important to always remember coins designated precious metal must be bought through a precious metal IRA, frequently called a "gold IRA." Any good account custodian should be able to assist anyone to buy the appropriate investments for their IRA to not get hit with a penalty. You should never buy any precious metal coins through an IRA account not authorized for precious metals. If you make that mistake, it could result in what's called a distribution, which is then taxable & can cause you to lose the protection of your IRA. Be sure to study the IRA rules beforehand. Most investment counselors advocate the use of an IRA account which allows a person to accumulate profits tax-free over time.

We have many articles on related subjects you should read and learn about at Josh's blog at: http://www.financialmoneytrends.com.

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Cheers, Josh Holliday

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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.

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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]

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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.

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