- How do I start investing?
- How do I get started investing online?
- How do I invest with only a little money?
- What is the stock market and how does it work?
- How do I buy and trade stocks online?
- What are the different types of investments?
- What is an ETF and how do I invest with it?
- How do I invest in real estate?
- What is a bond and how do I use it to invest?
- How do I invest in penny stocks and are they safer?
- How do I get started with options trading?
- What are investment clubs?
- What is the most profitable way to diversify my investment funds?
- How can I know financial services firms and advisors are solid and trustworthy?
- How do I safely invest in Asian markets like Japan, India and China?
- What are the best emerging market ETFs?
- How can I invest my money wisely?
- Where should I invest now?
- What are the best long-term investments?
- What are the best bonds to buy now?
- What are the best retirement investments?
- What are the best short-term investments?
- How do I invest in the currency market (Forex)?
- How do I safely buy gold and silver online?
- What are ways that I can invest in precious metals like gold and silver?
How do I start investing?
Play Video Today we will talk about one of the most common questions our investment experts get asked: How do I start investing?
The world of investing can seem very confusing and intimidating. Where there are a lot of moving parts and a whole world of strategies, terms and aspects of investing, it is actually not that difficult to get started safely and profitably.
Here are 7 specific things you can do right now to begin your journey:
First, decide on specific goals and objectives. What do you want your future to look like? What do you expect to get out of investing? What do you need money for — school, weddings, retirement, a new RV, peace of mind … what is it?
Defining your goals and objectives is vital and the most important thing you can do to begin investing.
Second, begin saving today. You can’t invest what you don’t have.
Third, remember, you don’t need a huge pile of tens of thousands of dollars to begin. Some indexed mutual funds and exchange-traded funds (ETF) allow you to begin with a hundred dollars or less. Many online brokers do not require a minimum investment, making it easy and safe to begin. Also there are DRIP accounts — Dividend Reinvestment Plans. These allow people to buy one share at a time.
Fourth, do your homework. Start with the basics by watching the 3 minute educational videos in this series. Subscribe to free and paid financial newsletters. Look up terms and start reading up on financial news so you get a feel for what is happening in the market.
Fifth, find an online broker that meets your needs and is easy for you to work with. If you are ready to jump right in, it’s also a good idea to find an advisor to help you navigate the world of investing. The suggestion made in our video, “How can I know financial services firms and advisors are solid and trustworthy?” will help you know what to look for.
Sixth, consider practicing with fake money. There are a number of online brokers that allow you to practice with fake money. This is a great way to get your feet wet and get a feel for trading systems, fluctuations in the market and timing. But, remember, the biggest killer of profits for investors is not changes in the market, but rather it’s their own emotions. Because of this, there is nothing like investing with your own money when learning to stick with a strategy and keeping your emotions in check.
Finally, stay involved. Investing is just like anything else — the more engaged you are and the more time you spend at it, the better you will become.
In conclusion, here’s some advice from investment expert Mike Larson, “Like anything in life, start slowly and with a small amount of money. As your comfort level grows, then increase your investment amounts. Also, keep in mind that there is no one-size-fits-all approach to investing. You should do what is right and feels comfortable to you. Remember, if something seems too good to be true, it probably is.”
How do I get started investing online?
Play Video How do I get started investing online?
That is the question we are going to address today.
The first place to start is with an online broker.
Investing with an online broker has never been easier or cheaper.
Because there is so much competition between online brokers, you’ll find that the features and fees offered by various online brokers are very similar.
So, which online broker is best? The real question is: Which one is best for you? There are five key factors that will help you make this decision:
First, consider costs.
Online commissions have been falling steadily for decades, but costs still vary widely and can be complicated.
Some brokers do not require a minimum investment, while others do.
Some brokers will charge you an extra fee for personalized help with orders. Some do not.
Some brokers offer a discount for volume and longevity.
You should also know that some brokers charge an inactivity fee if you do not maintain a certain level of account activity.
The good news is that all reputable online brokers publish these details. If they don’t — or you can’t easily find these kinds of details — beware, you’re probably not dealing with a reputable broker. Remember, the burden is on you to study the posted fees, be familiar with the commission schedules and read the fine print. No one will refund you if you end up paying an ignorance tax.
Second, the world of online stock trading is complicated. Because of this, it’s a good idea to find a broker who offers simple and easy access to trading features and research. It shouldn’t be tedious to navigate your account, receive the technical indicators you want, or place and track orders.
Third, do you want advice or do you make your own decisions? Some online brokers are “execution only” — meaning they only offer the tools you need to transact investments.
Other brokers offer full-service professional advice. We suggest that you be very cautious about using the advice from brokers. Consider that the very nature of their position skews their advice. They make their money when you execute trades and transactions — whether you make money or not.
It is far smarter to seek out information and insights from independent sources like the Money and Markets publications.
Fourth, make sure the tools and services offered meet your needs. Most leading online brokers allow you to buy domestic stocks, options, ETFs and mutual funds, but not all of them let you invest in international stocks, Forex or commodities.
The likelihood of your success as an investor or a trader can be drastically boosted by the kinds of quotes, alerts, research, watch lists, charts and graphs the broker offers.
Fifth, do some additional due diligence. Take time to do additional research. Kiplinger, CNN Money and others typically do an annual review of various online brokers.
Among other things, they will review things like customer service, ease of access, trading tools and other kinds of resources.
One last word of advice from investment expert Larry Edelson, editor of our Real Wealth Report.
Larry says, ‘Like anything in life, I suggest that you start slowly and with a small amount of money. Again, you want to avoid paying any kind of ignorance tax.”
How do I invest with only a little money?
Play Video The question today is one that holds a great deal of interest for a lot of people: How do I invest with only a little money?
For the purpose of our discussion, I’m going to assume that “a little money” is $200 or less. Most investment accounts require you to have at least $1,000 to open an account — with many of them starting at $3,000.
So, let’s look at a number of options available to you for under $200.
The first thing to do is look for a broker that is able and willing to work with you. Here are a few things to look for:
- No minimum opening balance — in fact, no minimum balance period.
- Access to diversified, low-cost, commission-free stock and bond ETFs. (“Commission-free” means you can buy and sell them without paying a fee.)
- No other fees. If you’re investing $100 and get slapped with an $8 fee, you’ve just lost 8% of your portfolio.
As you look for online brokers that fit this criteria, you’ll find that most of the ones that qualify will offer you a number of commission-free ETFs. TD Ameritrade, for example, has over 100 commission-free ETFs. You can invest with $25 or $25,000. If you are not clear on what an ETF is, check out our video called, “What is an ETF and how do I invest with it”.
You will also find that a number of brokers out there will let you invest small amounts in other kinds of indexes, such as a bond index.
Another way to begin investing with little money is to invest in a “no-load mutual fund.” No-load means that you don’t pay any commissions or fees. Charles Schwabb and a number of others have no-load funds that you can get into with as little as $100.
Also, there are DRIP accounts.
Finally, there is one other option out there for you — but it requires a lot more research and due diligence on your part. Also, it requires that you know specific companies that you’d like to invest in. If you don’t mind doing the extra work, it can be worth it to get started.
This option is called Direct Purchase Plans — or DPP for short. It is exactly what it sounds like — an option where you can purchase stocks directly from a company. Not all companies offer DPPs and the SEC prohibits them from advertising their plans if they do. That’s where the legwork on your part comes in. You won’t pay commissions and you can buy fractions of shares, with no minimum.
We’ll conclude today with some insights from investment expert and editor of Real Wealth Report, Larry Edelson.
Larry says, “The first question that needs answering for any prospective investor is, what’s your individual risk tolerance? Next question is, what’s your return objective? If the investor cannot make a diversified portfolio with funds available, I’d probably counsel index funds, ETFs and actively-managed mutual funds, in that order, based on increasing risk tolerance levels. Many of our services are focused in these areas and can help you get started.”
What is the stock market and how does it work?
Play Video The question for today is: What is the stock market and how does it work?
At some point, just about every company needs to raise money. It might be to open up an East Coast sales office, build a factory or hire new engineers.
In each case, they have two choices: 1) Borrow the money, or 2) Raise it from investors by selling them a stake (issuing shares of stock) in the company.
When you own a share of stock, you are a part owner in the company with a claim (however large or small it may be). And you have a claim on every asset and every penny in earnings.
It’s that ownership structure that gives a stock its value. If stockowners didn’t have a claim on earnings, then stock certificates would be worth no more than the paper they’re printed on. As a company’s earnings improve, investors are willing to pay more for the stock.
The stock market can be split into two main sections: The primary market and the secondary market. The primary market is where new stocks are first sold through an initial public offering — an IPO. Most of these stocks are bought up by large-scale investors such as pension funds or insurance agencies.
Once the IPO is over, all the stocks enter the secondary market, where buying and selling occurs independent of the company.
Modern stock exchanges make buying and selling easy. You don’t have to actually travel to New York to visit the New York Stock Exchange. You can call a stock broker who does business with the NYSE or you can buy and sell stocks online for a small fee.
The terms "up" and "down" are used to describe the rise and fall of the individual stocks and the market as a whole. If prices rise, we call it a “bull market” because it is charging forward. As it trends downward, we call it a “bear market” because a bear is a naturally cautious animal and tends to move away from risk.
The stock market is an open auction. Each stock has an “ask” price and a “sell” price. The seller asks for a certain price and the buyer agrees to buy at a certain price. When these two numbers match up, the purchase is made. In today’s digital world, you can see prices fluctuate in real time. Because of this, often the price of a share is not totally based on the actual profits and assets of a company, but rather on the public’s perceived value of the company.
The key to making money in the stock market is to buy low and sell high. If you can do that, you can become extremely wealthy. Of course it is easier said than done. Independent publications like Money and Markets can make the task much easier by providing you expert insights.
To conclude, investment expert Mike Burnick gives you these insights, “The market ultimately works by simple supply and demand dynamics. It can be heavily influenced by investors’ perception of a company’s value. These reactions can move the price of a stock away from the real value of the company, either higher or lower. This creates a pricing gap and herein lies the trading opportunity.”
How do I buy and trade stocks online?
Play Video The question we’ll address today is: How do I buy and trade stocks online?
In precept, it is very simple. Log into your broker account, select the stocks you’d like to trade and execute an order — either to buy or sell.
In reality, it is much more complicated than that. For example, what kind of order should you place? If you’re not familiar with the different order types, it can be very confusing and very expensive.
Let’s look at the three most common order types. They are: Market order, limit order and buy or sell stop order.
A market order is an order to buy or sell a stock immediately, regardless of the price. You should use a market order when a trade needs to get done right now!
Be careful not to place a market order after normal trading hours. If a relevant news story breaks after hours it can cause a significant move in the stock price, causing you to buy or sell at an unexpected price.
Now, let’s look at the limit order.
A limit order is an order to buy or sell a stock at a specific price or better. It basically guarantees a price but doesn’t guarantee execution of the order.
Two things to consider with limit orders:
First, the stock price may never rise, or fall, to the limit you’ve established. As a result, your order may never be executed.
Second, if there is a sudden rise or fall in the stock price, your order can be executed below your limit price. For example, imagine the stock you want to buy is trading at $50 per share. You have a limit order to buy at $48 per share or better, but negative news comes out after the close and the next day the stock opens at $40 per share. Your order is triggered as the price falls below $48, but is not completed until the price hits $40.
These cases are rare and you can’t control them. But it can and does happen.
The third type of common order is a buy — or sell — stop order.
A stop order is an order to buy or sell once the price of a stock reaches a specified price.
A sell stop order is often referred to as a "stop-loss" order and helps you limit downside risks.
A buy stop order is the opposite. You identify a specific price that will trigger a purchase of the stock, in essence "stopping" the stock from getting away from you as it breaks to new highs. This type of order would guarantee your execution, but not your price.
To wrap things up, let me share with you some advice from investment expert Mike Larson, editor of our Safe Money Report.
He says, “Perhaps the biggest danger is overtrading. Remember this advice from legendary trader Jesse Livermore: ‘The biggest profits come from sitting, not trading.’ Above all, you’ve got to do your homework on the markets because, as Warren Buffett said, ‘Risk comes from not knowing what you are doing.’"
What are the different types of investments?
Play Video Beginning investors always ask this question: What are the different types of investments?
Before we look at the most common investments, consider this:
In order to maximize your returns and avoid paying a high ignorance tax, don’t make investments decision without knowing exactly what you’re getting into. As you go through the learning and decision-making process, make sure your information sources are credible and independent. Typically a broker from a major bank or brokerage firm gets paid on volume, whether you make money or not. Because of this many of them have a hard time being unbiased and independent about your money.
You need to get the facts. Because we don’t make money on your trades, publications like those offered by Money and Markets are an excellent source of sound, independent and unbiased investment information.
Here are several of the most common investments you can make today:
Bonds — Bonds are grouped in a general category called “fixed income securities.” Bonds are based on the use of debts. For example, when a person buys a bond, they are lending out their money — usually to the government or to a company. The borrower agrees to do two things: First, pay you interest on the money you loaned them. And second, to pay back the full principal of the loan once the bond matures.
Stocks — When a person buys stocks, he or she becomes part of the business. This gives you a chance to vote at shareholders’ meetings and allows you to get a portion of the profit that the company is making.
Mutual Funds — This is a collection of bonds and stocks. Mutual funds pool your money with hundreds or even thousands of other investors. Using this large pool of money, a professional manager buys and sells a variety of stocks and bonds and other investments to hopefully bring you a profit.
Certificates of Deposit — also known as CDs — These are very common and work like a savings account. You are regularly paid interest on your funds until the CD matures.
Exchange-Traded Funds (also known as ETFs) — This is a pooled investment that tracks a specific index, but can be bought and sold like a single stock. The index is usually a group of stocks which represent an industry, a sector of the economy or a certain part of the world.
Money Market Accounts — These work like a combination of a checking account and a savings account. Money market accounts pay higher returns than a traditional savings account, but typically require much higher balances.
Real Estate — If done wisely, buying real estate is one of the best investments a person can make. This is because real estate is durable and historically trends upwards over time.
Precious Metals — Precious metals have retained their value for more than 5,000 years. Physical assets like this provide a powerful way to hedge against disasters, government failures and unforeseen market shifts.
To wrap up, let’s hear from investment expert Bill Hall, editor of our Weiss Family Million-Dollar Portfolio.
Bill says: “Remember this: Not all investments are right for everyone. Each type of investment offers different benefits as well as risks. Due diligence is needed to get the facts. If you’re not getting your information from an independent source, you are definitely setting yourself up for losses.”
What is an ETF and how do I invest with it?
Play Video Today we are going to discuss this question: What is an ETF and how do I invest with it?
The long name for an ETF is exchange-traded fund, which doesn’t tell you much. So let’s look at a better definition.
An ETF is a security that tracks an index. An index is a commodity or a basket of assets, much like mutual fund. The biggest difference between an ETF and a regular index fund is that ETFs are traded like a stock on an exchange.
Like a mutual fund, an ETF pools the assets of multiple investors and invests those assets in a variety of stocks and bonds. Each share of an ETF represents an undivided interest in the underlying assets of the fund.
Most ETFs invest primarily in securities and are regulated, like mutual funds, by the Securities and Exchange Commission (SEC). These regulations help protect investors by providing independent oversight and ensuring full transparency.
A much smaller number of ETFs invest primarily in commodities or commodity derivatives and are regulated slightly differently, but still with an eye to provide you some level of protection.
Unlike mutual funds and other index funds, ETFs may be bought or sold throughout the day on a stock exchange, just like any other stock.
This makes investing with ETFs very easy. Simply select your ETF and place an order with your broker.
Remember, there are two basic orders you can place: A “market order” or a “limit order.”
A market order is executed immediately, regardless of price. You will place this kind of order if you want to buy or sell right now!
A limit order will only execute when a predetermined price is hit. For example, if the ETF market price is $50 a share, you could place a limit order to sell at $55. If the ETF price never hits $55, the order is cancelled. If it hits $56, your order is triggered and your shares are sold.
A few final things to consider before you jump into the ETF market:
ETFs are designed to trade at a price close to the market value of their underlying assets. As you consider what ETF to invest in, compare the history of the index price with the ETF price. They should match up very closely. If they don’t, beware because the ETF is likely not being managed very well.
Finally, consider fees. Because ETFs act like a regular stock, broker fees for ETF orders are typically the same as for any other order or transaction. Just be sure to read the fine print so that you avoid paying an ignorance fee.
In conclusion, let’s hear from investment expert, Mike Larson, editor of Safe Money Report.
Mike shared this with me: “By owning an ETF, you get the diversification of a mutual fund as well as the ability to sell short, buy on margin and, in most cases, purchase as little as one share. Another advantage is that the costs to trade ETFs are lower than those of the average mutual fund.”
How do I invest in real estate?
Play Video Today we will answer this common question: How do I invest in real estate?
The first and most widely known way of investing in real estate is to purchase a home or office and rent it out. You become a landlord. This can be a great investment if you can consistently keep it occupied with tenants who will take care of your property.
Being a landlord can consume a great deal of time, money and energy. Still, when done right, you can generate a monthly positive cash flow and build up equity in a property that gives you long-term profits.
Another way to invest in real estate is to participate in a real estate investment group. A large company will buy or build a set of apartments, condos or office space. They will then sell portions of those buildings to individual investors.
As a private investor you could own two or three apartments or office spaces. The company charges you a management fee and you get any profits generated and a piece of the long-term equity.
Be aware that real estate investment groups are regulated similar to mutual funds and are often subject to high fees and other regulations.
You can also invest in real estate by trading properties. This is often called “flipping” because you buy a property with the intent of selling. Some people will buy a property that is in great shape and can sell for a profit because the market is going up or the original seller was in distress and sold it under market value.
Other people will buy a property that needs repairs or can be enhanced in some way to bring up the value. They buy, remodel and sell for a profit.
The risk in flipping properties is that you’ll get stuck with a place if the market drops. This can be devastating.
Finally, there are ways to indirectly invest in real estate. The most common way is by investing in Real Estate Investment Trusts — known as REITs. A REIT is created when a corporation (or trust) uses investors’ money to purchase and operate income properties. REITs are bought and sold on the major exchanges, just like any other stock.
A corporation must pay out 90% of its taxable profits in the form of dividends to keep its status as a REIT. Because of this, REITs can be a solid investment for stock market investors that want regular income.
In conclusion, let’s hear from investment expert Bill Hall, editor of The Weiss Family Million-Dollar Portfolio.
Bill gives us this advice, “Real estate investments tend to perform well in eras of high inflation, low interest rates or strong economic growth. But when interest rates rise sharply, it can hinder the performance of REIT shares. And when the economy performs poorly, demand for office, warehouse and retail space declines, driving vacancy rates up and asking rent down.”
What is a bond and how do I use it to invest?
Play Video Today we will talk about this question: What is a bond and how do I use it to invest?
In very simple terms, a bond is security where you are the one loaning the money.
Governments and corporations borrow money from you. In exchange they give you a promise to pay the money back, plus interest — exactly like what happens when you go to the bank and ask for money to buy a car or a house.
Bonds are used by companies, municipalities, states and governments to finance a variety of projects and activities without having to front the cash.
Bonds are commonly referred to as fixed-income securities and are one of the three main asset classes, along with stocks and cash equivalents.
To understand bonds, let me explain a few terms used with bonds:
The person or entity borrowing the money is called the “issuer.”
A “coupon” is the document that describes how much is being borrowed and the interest rate that will be paid to you.
The “bond principal” is the amount of money you are loaning them.
The “maturity date” is the date when you will have all of your money back, plus the interest you’ve been promised.
A “muni” is a bond issued by a municipality, like your local county, town or state government.
“Treasuries” are bonds, notes or bills issued by the federal government by the U.S. Treasury.
Historically, bonds are one of the safest investments around — which also means that interest rates are typically fairly low. Treasuries are considered the safest bonds on the planet because they are backed by the full faith of the U.S. government.
All bonds are rated by Moody’s and Standards & Poor, with AAA being the highest ratings.
“Investment Grade” bonds have a rating at B or higher. Anything below this is considered much riskier and is called a “junk bond.” Consequently, junk bonds pay higher interest rates.
To buy a bond, simply contact your broker. You can also deal with a bond broker that specializes in bonds. Most bond brokers require an initial deposit of $5,000. If this is too high, you can work with a mutual fund that specializes in bonds.
Be aware that some brokers will say they don’t charge a commission for selling bonds. That is usually not true in the sense that they will mark-up the bond before selling it to you. Check the latest bond price to make sure you’re getting the best deal.
To wrap up, let’s hear from investment expert, Doug Davenport, editor of the All-Weather Investor.
Doug says, “Bonds have several kinds of risk attached to them. That includes interest rate risk and credit risk. As always, the key is doing your homework and the researching stability of the issuer, just like you would with any investment.”
How do I invest in penny stocks and are they safer?
Play Video Today, we’ll tackle this question: How do I invest in penny stocks and are they safe?
First, lets begin with a basic definition of a penny stock.
The answer depends on who you talk to. The SEC defines a penny stock as anything trading under $5. However, there are some very large, stable companies trading under $5 … and some smaller, volatile ones trading over $5, so this definition is not always useful.
A better way to look at this is to consider a penny stock as anything under $5 that is typically traded outside the major stock exchanges such as the NYSE or Nasdaq. Penny stocks are usually traded over-the-counter on the bulletin board (OTCBB) or through pink sheets.
The majority of penny stocks don’t meet the more stringent listing and financial reporting requirements of the major exchanges. Because of this, it is hard to get solid, accurate information on these companies, making buying penny stocks more of a gamble than say investing in a company that has more stringent reporting requirements like a large blue chip company.
Penny stocks can be far more volatile than other stocks. Liquidity can be another issue with penny stocks because often the daily trade volume is very low.
When trading penny stocks, keep these safety principles in mind to help avoid unnecessary risks.
- Watch your fees and commissions and keep them as low as possible. Many brokers charge extra fees for dealing in over-the-counter stocks. They will also charge higher commissions when you place large orders for stocks with low prices.
- Always use a limit order to buy and sell. Since many penny stocks are not very liquid or have low daily trading volume, it’s not a good idea to use a market order.
- Keep stop-loss limits to yourself: As with any type of trade, you’ll want to have a stop-loss in mind before buying. But since penny stocks are not very liquid, you may want to just keep track of stop-loss levels yourself, rather than place a hard stop-order with your broker. This is more work, but reduces your risks.
- Know what penny stocks you own and why you own them. It’s true that you can sometimes find hidden treasures in penny stocks because these stocks fly under the radar of most investors. But make certain to do your fundamental homework and have a solid, winning strategy before buying. Anything else is just gambling.
In conclusion, I’ll share with you some advice from investment expert Doug Davenport, editor of our All-Weather Investor.
Doug says, “Overall, penny stocks are very high risk and I personally don’t recommend trading them unless you are a sophisticated investor and have a clear strategy. A much safer approach is to find a neutral, transparent adviser that can help you make sound investment decisions. I recommend reviewing any of the Money and Markets publications.”
How do I get started with options trading?
Play Video The question for today is: How do I get started with options trading?
An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date.
To understand options better, consider this hypothetical example: You find a beautiful home for $500,000. You can’t afford it today, but will have the money in three months. So, you sign a contract with the seller locking in the price and giving you the option to buy at the end of the three months. To lock up the house at that price, you pay the seller $4,000.
During those three months, two things can happen. First, the value of the house shoots up to $1,000,000. The seller is still obligated to sell you the house for $500,000 because of your contract. You can turn around and resell the house and make a very nice profit.
Or, during that same time, the house either drops in value or you simply decide you don’t want to buy after all. At this point, your only obligation is the $4,000 contract fee you paid.
In this example, the house is the underlying asset. Most of the time, the underlying asset for an option is a stock or an index.
As you venture into the options market, there are a few terms you should know:
There are two kinds of options: Puts and calls. A “put” gives the holder the right to sell an option. Sellers are called “writers” and are considered to have “short positions.”
A “call” gives the holder the right to buy an asset. Buyers are called “holders” and are considered to have “long positions.”
The “strike price” is the final purchase price of the underlying asset.
The “expiration date” is the date when action must be taken on the option — either to buy, sell or let it expire without any action.
A “premium” is the total price you’ll pay for the option.
A “contract” is the actual agreement. Most “contracts” are for the option to buy 100 stocks. If you have five contracts, it means you have the option to buy 500 shares of stock at a set price on a set day.
There are many more terms, but these are the fundamentals.
Now, let’s hear from investment expert, Mike Burnick, to learn more about getting started.
Mike says, “To begin trading, open up a brokerage account through which you can trade options. Typically, you can just apply for options approval through your regular broker.
“I would recommend MoneyandMarkets.com as a good starting point for your options education. They cover all the strategies and intricacies of options trading in a way that makes sense to a beginner. Finally, start trading. You probably want to paper trade a bit to make sure you have the feel for your brokerage platform and the mechanics and features of options pricing. “
What are investment clubs?
Play Video Today we’ll talk about this question: What are investment clubs?
Amazingly enough, the SEC has a very nice definition for an investment club. It reads:
“An investment club is a group of people — usually less than 100 — who pool their money to make investments. Usually, investment clubs are organized as partnerships and, after the members study different investments, the group decides to buy or sell based on a majority vote of the members. Club meetings may be educational and each member may actively participate in investment decisions.”
The only thing I’d add to that definition is this: There is no upper or lower limit on the sum of funds invested as individuals or as a group. This is a nice feature because you can participate by investing anything from zero to millions of dollars.
There are a number of different investment club types. The most common are:
- Stock, Bonds, ETFs or Mutual Fund Clubs focused on the stock market and other securities.
- Real Estate Clubs focused exclusively on real estate deals.
- Business Clubs focused on private business deals.
- Hybrid Clubs that invest in a variety of different areas.
Here are some insights on what to look for in a club. You can use these same criteria if you ever decide to start your own club.
First, a great deal of education. An investment club is a safe and enjoyable way to learn about investing. You should be able to ask questions, do research and answer questions without feeling uncomfortable or embarrassed.
Second, consider joining smaller clubs with membership between 10 and 20 people. Yes, there are larger clubs out there, but, as the numbers grow, they become less personable. Overhead expenses increase and your ability to freely participate diminishes.
Third, organization is important. Make sure that the club is duly incorporated — usually as an LLC or other partnership structure. This gives you legal protection and makes your efforts legitimate. Also, make sure that they have a well-established brokerage and bank account. No single person should have access to these funds. Transparency is paramount.
A key indicator of how well the club is run is the meeting schedule. Do they meet regularly? What about starting and stopping on time? Are minutes taken and posted for everyone to access? These kinds of small details help you know the club is serious and well run.
Fourth, do they have clearly established investing rules and standards? You should be able to review their minutes and investment decisions to see how disciplined they are at sticking to their own standards.
Finally, consider club performance. As with any investment, you need to do your homework. Is the club winning or losing … and by how much?
In conclusion, let’s hear from investment expert Bill Hall, editor of The Weiss Family Million-Dollar Portfolio, “Investment clubs are not as prevalent today as they once were. When the market crashed, many people dropped out. Still, if they are run well, they can be an invaluable resource. Make sure they have a winning track record and are following sound investment strategies like those outlined each month in The Park Avenue Society and other Money and Markets publications.”
What is the most profitable way to diversify my investment funds?
Play Video The question for today is: What is the most profitable way to diversity my investment fund?
It is widely agreed that the best way to safeguard and grow your money is by spreading your investments around.
But in order to diversify correctly, you need to know three things:
First, what kinds of investments to buy.
Second, how much money to put into each one.
Third, how to diversify within a particular investment category.
The first step is to invest in different, unrelated categories. Here are a few categories: Stocks, bonds, real estate funds, international securities, precious metals and cash.
Investments in each of these different asset categories do different things for you.
- Stocks help your portfolio grow.
- Bonds bring in income.
- Real estate provides both a hedge against inflation and low "correlation" to stocks — in other words, it may rise when stocks fall.
- International investments provide growth and help maintain buying power in an increasing globalized world.
- Precious metals give you long-term security, privacy and portability.
- Cash gives your portfolio security and stability.
You do not need to invest in all of these categories right away, but consider putting your money in at least three of them to begin.
The next question to ask is how much of your wealth do you put in each investment category?
First, set aside enough money in insured cash and income investments to handle emergencies and near-term goals.
Next, consider this helpful rule of thumb: Subtract your age from 100 and put the resulting percentage in stocks and the rest in bonds. For example, if you’re 20 years old, put 80% of your assets in stocks and 20% in bonds.
To diversify even further, you can apply this simple formula:
- Invest 10% to 25% of the stock portion of your portfolio in international securities.
- Shave 5% off your stock portfolio and 5% off the bond portion then invest the resulting 10% in real estate.
- You can take another 10% and apply it to precious metals.
The result: Our hypothetical 20-year-old would have an emergency fund and the remaining assets would be split 65% stocks (of which 25% are international), 15% bonds, 10% in real estate and 10% in precious metals.
Once you have your assets into different categories, you need to diversify again. It’s not enough to buy one stock. Find 3-10 different industries to invest in. That protects you from being ravaged when a single industry suddenly crashes.
To sum it up, let’s hear from investment expert, Don Lucek, editor of the Weiss Million-Dollar Ratings Portfolio.
Don says, “Some people argue that the 100 year rule of thumb is too conservative. Often they suggest a better rule of thumb is to subtract your age from 110. The truth is, there is not a cut and dry answer. Everyone needs to diversity across these categories, but how they do that depends on their individual circumstances and risk tolerance. The best thing to do is get solid information from an independent source you can trust.”
How can I know financial services firms and advisors are solid and trustworthy?
Play Video Today we will address this question: How can I know financial services firms and advisors are solid and trustworthy?
Before you go out shopping for an advisor or firm to handle your money, you need to be solid on what your goals and objectives are.
Spend time carefully thinking about your life today and what you want it to look like tomorrow. Without these decisions firmly in place, it is easy for you to get confused, swayed or even scammed by a questionable advisor.
Without question, the best place to start is with a referral from a trusted friend.
Here is a checklist of do’s and don’ts when looking for a financial advisor.
First, plan on kissing a lot of frogs. This means doing interviews. Plan on interviewing at least three advisors before you make any kind of decision. Take your time. Realistically, visiting with 10 or 15 advisors is not unreasonable. In the end, it’s a great investment of your time.
Second, check their credentials. Many advisors have a lot of acronyms following their names. You can easily find out what each means by doing a quick Google search. You will also want to check their certificates. You can look them up on national registers such as Garrett Planning Network and the National Association of Personal Financial Advisors.
All advisors are required to file a full disclosure with the SEC. This is called Form ADV. Get a copy of it and review it carefully. It can be very useful.
Also, don’t be swayed by fancy charts showing their performance. Be wary of claims stating that they beat the market by two or three times. Very few advisors actually beat the market at all.
Third, find out what they actually do. Many financial planners are just accountants or insurance salesmen who took a test. If that meets your needs, fine, but at least be aware.
Fourth, do your due diligence. You need to know exactly what their fees are and how they get paid. Some advisors are paid on commissions based on transactions. Others take their fees based on growth and assets under management. Still others are paid a flat fee, much like an accountant or attorney. Remember, no one will refund you an ignorance tax.
Fifth, take control of your own finances. Advisors are just that: Advisors. You should not expect them to make all of your financial decisions. This means you should get as much education as possible about the market, the investments and products they are offering, and how it all impacts your wealth. If an advisor loses all of your money it is your fault, not theirs.
Let’s wrap up with this advice from investment expert, Charles Goyette.
Charles says, “Make sure that your assets will be held by a well-known and reputable custodian such as Fidelity or Charles Schwab. You should receive statements directly from that custodian. The most important thing is to make sure you are educated and know what is going on with your money. I believe subscribing to independent and proven financial newsletters is the best way to do this.”
How do I safely invest in Asian markets like Japan, India and China?
Play Video The question for today is this: How do I safely invest in Asian markets like Japan, India and China?
Foreign markets have always been an object of envy to domestic investors because the indexes in some foreign countries have produced double- and triple-digit returns.
Let’s look at the different ways you can invest in foreign markets, such as Japan, India and China.
First, realize that you do not need to open and fund a foreign brokerage account. You can choose from a wide variety of foreign stocks listed right here at home on U.S. stock exchanges, including American Depository Receipts (ADRs) or global mutual funds.
There are nearly 400 ADRs listed on U.S. exchanges.
Second, consider the many different ETFs traded right here in the U.S. that give you exposure to a wide varied of foreign markets and sectors.
Third, consider foreign multinational companies that are traded on U.S. exchanges. Investing in these kinds of international companies can give you the benefit of investing in international markets, without all of the typical risks.
Finally, you can take the direct approach and buy stocks in foreign countries on their exchanges. If you pursue this route, you need to realize buying foreign shares can be much harder and riskier than trading domestic shares.
If you want to go this route, the first thing to do is to contact your brokerage firm and see whether it has an international desk. Most full-service brokers such as Fidelity and Merrill Lynch have international desks. Also, many leading online brokers, such as Interactive Brokers and TD Ameritrade, do as well.
If your broker does not offer international trading, you can either open a new account with a broker that does, or try to set up a brokerage account with a firm in that foreign country.
International investing carries a number of risks. First, timely and accurate information about foreign companies is not always as easy to come by as it is in the U.S. Another concern is that the regulations in foreign countries can affect both your investments and any accounts set up in that country. For example, there may be restrictions on your ability to transfer funds from your foreign account to one in the U.S. Also, your funds may be heavily taxed whenever you try to withdraw them. Like with any investment, the key is education. Do your homework and know exactly what you’re getting into before you invest.
Investment expert, Larry Edelson, lives in Thailand and is extremely familiar with international trading.
He says, “Because of the risks and complexities of directly investing in foreign markets, I suggest that you stick with U.S. listed shares, especially ADRs, mutual funds or ETFs. Of course, one of the most powerful ways to invest internationally is by putting your money in physical assets such as gold and silver. These have sustainable value no matter where you go in the world.”
What are the best emerging market ETFs?
Play Video Today’s question is this: What are the best emerging market ETFs?
It is almost impossible to detail what the “best” emerging market ETFs are for the simple reason that it’s constantly moving. What is hot today could be ice cold tomorrow.
The real question becomes “How can I tell what the best emerging market ETFs are?”
To answer that question, let’s look at two things: First, emerging markets. Second, ETFs.
There are three key factors to look for in emerging markets:
1. Growth: Emerging markets offer the best growth potential in a slow-growth world. By reviewing different markets you can see short-term and long-term growth trends.
2. Value: Many stock markets in the developing world are available at historically attractive valuations. Carefully look at price-to-earnings and price-to-book ratios.
3. Sentiment: Emerging markets are one of the most hated asset classes in the world. For contrarians, sour sentiment can be a powerful “buy” signal. Often bad news or disdain can signal opportunity.
Now, let’s look at ETFs.
As you know, an ETF (exchange-traded funds) is an index fund that trades like stocks. As such, they have all of the benefits of plain old index funds with some added punch.
For example, the fees for ETFs are often cheaper than index funds. Because of current laws, they may also cost you less in taxes.
Today there are hundreds of ETFs available that track various emerging markets. Investors have a wide variety to choose from. Some of the leading emerging market providers include: iShares, SPDR and Market Vectors, all of which offer dozens of emerging market ETFs.
Not all emerging markets are created equal. Because of this, we suggest that you zero in on individual country-specific ETFs rather than buying broad, index-tracking ETFs that include all emerging markets.
As with any ETF investment, the two most important factors to evaluate before you invest are:
First, costs. Competition among ETF providers is fierce and growing daily. This has helped keep management fees and other expenses very low. Still, pay close attention to the total expense ratio. Fees vary widely from one ETF to another, so read the fine print.
Second, index tracking errors. The most important thing to look for is how good of a job the ETF managers have done at actually tracking the index over time. A wide deviation in ETF performance from its index can be a major red flag.
In conclusion, investment expert Mike Burnick shares some valuable insights on emerging market ETF’s.
Mike states, “The bottom line with emerging market ETF’s is this: Today, emerging markets are trading at a substantial discount to U.S. stocks. Plus, I’m seeing a bright green contrarian “buy” signal because sentiment is simply too bearish. ETF’s are an excellent way to gain exposure to these markets.”
How can I invest my money wisely?
Play Video The question today is an essential one: How can I invest my money wisely?
Investment expert and editor of The Weiss Family Million-Dollar Portfolio, Bill Hall, outlines five key building blocks to wisely and profitably investing. Let’s go through it.
Building Block #1 is to find an effective investment model.
There are four key elements of an effective investment model.
First, it must be easy to use. In today’s complex markets, you need something that can easily be applied over and over again in a time-efficient way.
Second, rely on strategy and skill, not luck. Some traders and investors live by the credo that it is better to be lucky than good. You should never consider luck as a strategy … even as a last resort or an occasional alternative.
Third, stay focused on the long-term. In too many instances, investors make the mistake of dwelling solely on short-term outcomes without considering the longer-term process required to obtain the kind of returns they need and want.
Finally, emphasize process, not results. The world’s top money masters know that it’s the continuous application of a well executed process that will make their portfolios grow over time.
Building Block #2 is superior information.
When making investment decisions, more information is not necessarily better. Information that helps you determine the potential return from an investment is all you need. Nothing else is relevant. This allows you to disregard the vast ocean of market data and economic commentary that is of little or no investment value to you personally.
Building Block #3 is control your risks.
As you invest, your objective is to make profitable moves that compound your money over time. In this process, no one wants to lose their precious investment capital.
Your primary risk management tool is patience and selectivity.
Successful investors invest with a purpose, keep their positions focused and avoid trades that don’t offer an attractive risk-versus-potential-reward scenario. You shouldn’t feel any pressure to invest based on every hot stock tip or market rumor.
Building Block #4 is balance and diversification.
Proper balance and diversification will enhance your returns and limit the amount you can lose on any one trade. You can think of properly balanced and diversified trades as the equivalent of hitting singles in baseball. The goal is to stay in the game and get on base, not hit home runs every time you come to the plate.
Building Block #5 is discipline.
Discipline is the glue that binds everything together in investing. It’s the trait that leads to consistency. And it is the consistent application of a well-designed and thought out system that allows you to rack-up successful investment results over and over again.
Bill wraps up by saying, “Remember, it’s over time — not overnight — that enduring returns are earned in the investment markets. As you consistently use these five building blocks, you’ll be able to minimize your risks and significantly improve your returns. You should spend time and money to become a master at each of these areas. Independent and experienced publications like The Weiss Family Million-Dollar Portfolio can help you immensely.”
Where should I invest now?
Play Video One of the most prevalent questions we get here at Money and Markets is this: Where should I invest right now?
This is a difficult question to answer for many reasons. Let’s look at some investing fundamentals that will help guide you in deciding where to invest right now.
The biggest factor to consider is you.
The first thing to decide is what time horizon you’re most comfortable with. Will you be a day-trader, closing out most positions at the end of the day?
Will you be a swing-trader, looking to take advantage of moves in stocks and ETFs over several days or weeks?
Or are you more comfortable as a long-term trader, riding trends that can last several months or years?
You want to match your trading style to your own personality and comfort zone.
The second major factor in deciding where to invest right now is the market. Different areas of the market rise and fall. If you know what you’re doing, you can safely profit from both the ups and the downs.
But you can’t profit from all areas of the market at once. Because of this, we highly recommend that you choose a specific segment of the market and a specific investment strategy and stick with it until you’ve mastered it.
How do you know which markets are rising and which are falling? There are a number of tools that are very valuable:
First, investment expert, Doug Davenport, worked closely with legendary investor, Sir John Templeton, to develop a powerful “red light-green light” system that helps you identify when and where to get in or out of a market.
Another exceptional tool is the Weiss Stock Ratings Model, developed by Dr. Martin Weiss and our team of analysts. This model helps you identify strong, safe investments.
Don Lucek, editor of the Weiss Million-Dollar Ratings Portfolio, is widely considered the world’s foremost expert on the Weiss Ratings Model. He uses this knowledge to make certain buy/sell suggestions to thousands of investors from around the world.
To give you some insights of where you can invest today, I asked two of our editors, Mike Burnick and Larry Edelson, how they would answer this question. Here’s what they told me:
Mike Burnick says, “When I scan global markets today in search of the best opportunities, there’s one that stands out: Emerging markets (EM). I believe many EM stocks are capable of delivering triple-digit returns over the next few years. Granted, EMs have performed poorly in recent years. But therein lays the opportunity in my view.
And investment expert Larry Edelson, editor of Real Wealth Report, had this to say, “The best investments, at the start of this new year, are: 1. Going long the dollar, via an ETF or futures contract. 2. Buying U.S. equities on the first 10% pullback that comes along. 3. Buying gold when it trades below $1,100. When that happens, also buy silver.”
For current recommendations on where to invest right now, I strongly suggest you regularly review any of the Money and Markets publications.”
What are the best long-term investments?
Play Video Today we will look at this question: What are the best long-term investments?
The best long-term investment will vary from investor to investor. The question is better stated, “What is the best long-term investment for me personally?”
Obviously, we can’t answer that question. But, we can give you some insights into investment best practices.
The most important aspect of investing is deciding what your objectives and priorities are. As the saying goes, “If you don’t know yourself, the stock market is a terrible, expensive place to find out.”
Here are a number of key things about investing to consider:
The most important advice I can offer you is this: Emotions have no place in investing — yet investing is an extremely emotional experience.
Because of this, you have to define clear strategies that minimize your exposure to risk. Remember, it is impossible to time the market just right. It can’t be done. But you can and should strategically minimize risks.
Long-term investing is about patience and discipline. If you don’t have these qualities, work hard to get them and avoid investing with large amounts of money in the meantime.
You need to realize that the more you trade, the higher the probability of making mistakes. Often these can be very costly mistakes. Again, you need discipline and patience to establish a solid strategy, based on accurate data. Make your decisions and step away. It might not feel right. It might feel terrible. But history has proven that it’s the best decision.
Saying that, you also have to recognize that a long-term buy and hold strategy is the most effective way to grow your money … if you have 40-60 years to wait. Pundits and advisors all over the world will tell you that the stock market is the best performing investment out there — which is true if you look at a 100-year period. Unfortunately, most of us don’t have 100 years to wait.
So, while you should not constantly be moving your investments around, you do need to actively participate in growing your funds. This means that you need sound policy of diversification across several different asset classes that you regularly rebalance to minimize risk and maximize returns.
Keep in mind that no investment strategy, no matter how good, will keep you from losing money. The key is to minimize your risks and loss-exposure so that the net effect is positive.
Finally, recognize that mass media, big-box investment advisors and Wall Street magnates don’t have your best interest at heart. They are looking to make profits for themselves and it is usually at your expense. I suggest you turn off the news and concentrate on getting less information with higher intrinsic value.
In conclusion, listen to what investment expert, Mike Larson, says about long-term investing, “In truth, all investing is long-term investing. No matter what your style is or what kind of investments you participate in, it all deals with money and money is always going to be part of your life. You owe it to yourself to invest heavily in investment education so that you have a better chance to win big and frequently.”
What are the best bonds to buy now?
Play Video The question for today is: What are the best bonds to buy right now?
As of today, the only honest answer is “none” if you would like your money to grow.
Interest rates have been historically low for many years now, which has created somewhat of a safe haven for bonds. In fact, not too many years ago, entire “bond-ladder” strategies were created because bonds were consistent, safe and had reasonable payouts — especially if you were willing to venture into the “junk bond” market.
Eventually, interest rates will begin to climb from record lows, and it is expected that they will climb for some time. As interest rates climb, bond prices and stability will decline.
So, the real question is this: How do you profit from rising interest rates?
Recently I asked investment expert and editor of the Interest Rate Speculator, Mike Larson, this question. Let’s cover some highlights from his answer.
You can shift your fixed-income investments out of bonds and funds vulnerable to rising rates and into investments designed to protect you from them.
You can invest in an ever-growing variety of funds and ETFs that target much less vulnerable corners of the market.
Many ETF managers invest in securities and loans that go up as interest rates go up. These kinds of ETFs are great investments to make when interest rates go up because they feature low-average maturities and adjusted durations. Overall, this makes them much less vulnerable to losses than long-term bonds.
You can move funds into interest rate investments that are more tightly connected to stock performance than bond prices.
Shorter-term, high-yield ETFs based on junk bonds may also protect you in an environment where rates are rising alongside an improving economy. That’s because junk bonds tend to track stock prices and stocks tend to do well in periods of economic growth.
Convertible bonds, which have some of the features of both bonds and stocks, can also provide you with nice returns in the current environment.
You can buy rate-sensitive stocks that benefit from rising market volatility or rising rates. Higher interest rates are bad for a lot of stocks. But not all of them. Some firms should actually see their profit outlook improve as a result of rising rates and the increased volatility that tends to accompany them.
These ideas give you a number of options to pick from when trying to profit as bonds slide and interest rates rise.
In conclusion, here’s one last quote from Mike, “Bottom line: Changing rates can offer a bonanza of profits for investors who know where to look and what to buy. Of course, I’m partial, but I think the Interest Rate Speculator is a great place to find these kinds of buys.”
What are the best retirement investments?
Play Video The question today is this: What are the best retirement investments?
Retirement investments need to do two things: Provide you an income and acceptable quality of life after you retire and they should outlast you.
To do this you need to invest in a way that will create an income, outperform inflation and allow the principal balance to grow for a hedge against unexpected future events.
You need to anticipate that you will live longer than you expect. Each year life expectancy grows longer. This means that you may need to fund life for 20-30 years after retirement.
Because of this, traditional retirement investments that give you a safe return of 2%-4% are not good enough.
The wisest approach is to create a strategy and portfolio that can often give you returns of 7%-10%. Depending on your nest egg, this should be enough to give you a reasonable income, hedge against inflation and provide some overall growth — all while not taking on extreme risks.
Here are a number of ways to invest that can help you achieve these goals:
First, stocks and bonds. If you know what you’re doing — or follow experts and advisors that know — you can use the stock market to grow your income in any market conditions. There are untold stories of investors that have done just that.
Education and insights from proven experts is the key. Money and Markets has proven to be effective at helping investors weather highs and lows in the market for over 30 years.
Investing in real estate can also be an excellent part of a retirement plan. Real estate is gradually returning from the crash. The market is still flush with great deals that are likely to increase in value in the coming years.
If the idea of investing directly in real estate by becoming a landlord is not appealing, you can consider fractional ownership or invest in REITs.
For detailed information on investing in real estate, see our video, “How do I invest in real estate?”
Also, in today’s markets, physical assets are doing very well. Precious metals, oil and other natural resources appear to be poised for significant grow.
There are two major principles that all successful retirement investments should include: First a solid, viable strategy. To ensure you have a solid strategy in place, you need reputable, proven insights combined with access to superior data. Our video, “How Can I Invest My Money Wisely?” gives you full details.
Second, diversification and rebalancing. It is vital that you have true diversification and regularly rebalance your portfolio. This will give you an optimum measure of safety and profits. You can learn more about the right way to diversify by watching our video: “What is the most profitable way to diversify my investment funds?”
To wrap up, investment expert and editor of the Freedom and Prosperity Letter, Charles Goyette, has this to say, “The increase of the average life expectancy has changed everything. More and more investors need to take a more active role in managing their money and continue being wise, safe and aggressive with growing their portfolio. No one should go at this alone. Everyone needs an effective advisor and a trusted education source.”
What are the best short-term investments?
Play Video Today, we will address the question: What are the best short-term investments?
During volatile times, short-term investments can be extremely risky. If you are going to put your money into any kinds of stocks, bonds, commodities, precious metals or other natural resources, it is best to seek professional advice. Following an advisor or publication that has proven to safely navigate troubled times is your best bet.
With that said, let’s look at a number of short-term investments that could act as a safe haven for your money during volatile times. Remember, none of these are meant to bring you in huge returns. They are here to provide a safe haven and bring you in a little extra cash.
First, online savings and checking accounts that are FDIC-insured. Each account is guaranteed up to $250,000 and will give you a small bit of interest. As of today, most of these types of accounts are returning much less than the rate of inflation.
Second, a Roth IRA. Contributions to a Roth account are made from after-tax dollars and, therefore, there are no penalties for making withdrawals.
Plus, with a Roth IRA you get access to other types of investments like mutual funds, ETFs and bonds and can potentially earn a higher rate of return.
Third, money market accounts. Money market accounts are like a hybrid of a checking and savings account. Interest rates tend to be slightly higher than Certificates of Deposit (CDs), but don’t tie up your money. You can access funds from any ATM or write checks against your account.
Finally, you can consider short-term bonds and exchange-traded funds (ETFs).
Short-term bonds come in three varieties: Treasury Inflation Protected Securities — also known as TIPS, municipal bonds— also known as muni’s and corporate bonds.
TIPS can be purchased directly from the U.S. Treasury. Muni bonds and corporate bonds are best bought from a bond broker. For more details on bonds, you can see our video, “What is a bond and how do I invest with it?”
You can also learn more about exchange-traded funds (ETFs) by viewing our video, “What is an ETF and how do I invest with it?”
In conclusion, I want to share with you this advice I received from investment expert, Don Lucek. It is a strong warning:
Don says, “Short-term investments in the market — things like currencies or penny stocks — are simply too volatile at this time to invest in unless you’re an expert. Yes, volatility can bring massive profits, but it can also be extremely risky. Best advice I can give about short-term investments right now is to seek out professional help and guidance. Money and Markets publications can help, especially when you review our recommendations with your personal financial advisor.”
How do I invest in the currency market (Forex)?
Play Video The question for today is this: How do I invest in the currency market — or the Forex market?
Here are some basic concepts and terms that you should know before entering the Forex market.
All currency is traded in “currency pairs” — which represent two currencies. For example, you will see USD/GBP. The first currency — in this case the U.S. dollar — is known as the “base.” The second — in this case the British pound — is known as the “quote currency.” Currency pairs are bought and sold. Money is made on the spread between the two currencies.
A currency “lot” is a pack of trading units being sent to the market. There are 3 types of lots: Micro, mini and regular. A micro lot consists of 1,000 units, a mini lot is 10,000 units and a regular lot consists of 100,000 units.
The margin is the deposit you make to begin trading. This deposit is held in a “margin account” and used to buy and sell currencies and cover any losses.
A pip is the smallest price change that a given exchange rate can make.
The spread is the difference between the bid and the ask price of a security or asset.
A stop loss is the level you set in your trade to automatically exit the trade if it begins to fall and prevent a total loss of all your money.
A profit target is the top end of your trade and represents how much profit you hope to earn. Here again, this is preset in your trade and you are automatically exited from the trade when it is hit.
Now, let’s consider the different ways you can invest in the currency market. Remember, investing in the currency market is very much like investing in any market — it’s done through a brokerage account.
- First the actual Forex market. It is open 24-hours a day and can be accessed through an online trading platform.
- Foreign currency futures and options. Futures contracts on currencies obligate the purchase or selling of a specified number of currency lots for a certain price on a certain date, while options simply give you the option — but not the obligation to buy or sell.
- Exchange-traded funds (ETFs) and exchange-traded notes (ETNs). A number of foreign currency exchange-traded products that provide exposure to foreign exchange markets are available.
- Certificates of Deposit (CDs). Foreign currency CDs are available on individual currencies or baskets of currencies and allow investors to earn interest at foreign rates.
- Foreign Bond Funds. These are mutual funds that invest in the bonds of foreign governments.
To wrap up, let’s hear from international investment expert, Larry Edelson.
He says, “As with anything new, try it out first. Do some paper trading to make sure you can execute the trades. And be sure you understand the components of every order you place. Forex trading is not for everyone and there is certainly a learning curve. But, in my opinion, it’s not huge. And when you’ve climbed it, you’ll find that Forex trading can be quite easy.”
How do I safely buy gold and silver online?
Play Video The question for today is this: How do I safely buy gold and silver online?
Buying gold and silver online can be exciting and terrifying. Unlike stocks and other regulated securities, there are few oversights in the precious metal industry. If you are not careful, it is easy to fall prey to scammers and thieves.
Before you invest in gold or silver, it is good to understand a little about what affects gold and silver prices.
Precious metal prices are directly affected by inflation. When the dollar goes up, gold prices tend to go down. The opposite is also true.
Of course, inflation and other factors affecting the dollar are not the only things that affect gold prices.
It should be remembered that, at the end of the day, gold is a commodity, but with a twist. For thousands of years, gold has held a mystical place in the hearts of humans. Most people — and most governments — are deeply irrational about gold. Because of this, the price of gold is subject to all kinds of events like natural disasters, political coupes, conspiracy theories and other factors.
As with all investments, your most valuable asset is your knowledge and skill. Unlike other investments that can be complicated and difficult to understand, buying and selling gold and silver is a very simple process. But, just as with any investment, it can be difficult to profit and easy to lose money if you don’t know what you’re doing.
One of the best resources available today is the Money and Markets’ publication, Gold and Silver Trader, edited by investment expert Larry Edelson. Larry is considered one of the leading experts in gold and silver.
So, how do you actually buy gold and silver online?
You can do it in three very easy steps:
First, choose an online dealer. There are thousands to choose from and many of these may not be extremely reputable. Make sure you go with one that is well known and has a proven track record of integrity.
Whoever you choose should have safe secure storage services in addition to giving you the option to have your gold securely shipped directly to you if you want to keep physical possession of it.
The second step is to choose what kind of gold or silver you will buy.
You have two basic options: Collectable coins or bullion. With bullion you are basically buying pure gold or silver. Its future price will basically be whatever the current market value is. The price of coins can command a premium if the coin is perceived as a collectable. You can expect to pay a premium above and beyond the spot price for this possibility.
The final step is to make the purchase.
Like I said, it is pretty simple.
In conclusion, let’s hear from Larry Edelson.
Larry says, “I believe that gold is one of the most stable investments you can make. It has intrinsic value that has lasted for thousands of years. It is portable. And it’s private, since gold purchases aren’t tracked by most governments.”
What are ways that I can invest in precious metals like gold and silver?
Play Video Our question for today is this: What are ways that I can invest in precious metals like gold and silver?
Before you put money into precious metals, you should consider four major factors that affect precious metal prices.
First, global banking and currency problems. When central banks and currencies start to face problems people naturally flock to the safety of precious metals, especially gold and silver.
Second, inflation. Like everything else in our world, inflation can drastically affect the price of gold and silver.
Third, wars and political crisis. When people begin to fear, they naturally turn to things that feel secure, safe and solid.
Finally, supply and demand. Precious metals like gold and silver are used in many different applications and products. Many of these, like electronics, are thrown away and not recycled. Plus governments like China and Russia are hoarding gold. This reduces the overall supply and raises prices.
Today, there are many different ways to invest in gold and other precious metals. Let’s look at the five most prominent ways:
1. Direct ownership. There is nothing like gold bullion. For centuries it has been the ultimate expression of pure value. Why the draw to own precious metals? The answer: Many consider gold and silver the only real money. Other precious metals hold the same kind of intrinsic value because they are useful and portable.
2. Precious metal exchange-traded funds. The recent growth of the exchange-traded funds’ (ETFs) market has made investing in gold even easier. Two of the largest gold ETFs that trade in the United States hold gold bullion as their one and only asset. You can find them under the symbol of GLD and IAU.
3. Precious metal mutual funds and stocks. For people who are hesitant to invest in physical metals, but still desire some exposure to precious metals, mutual funds and mining company stocks provide an easy alternative.
4. Junior stocks. This level of investing is much more speculative. Junior stocks are less likely to own productive mines and may be little more than exploration companies. Like most things with higher potential profits, they represent a much higher risk of loss.
5. Gold options and futures. For more sophisticated and experienced investors, options allow you to speculate in gold prices. But in the options market, you can speculate on price movements in either direction and minimize your potential losses.
Finally, listen to what precious metal expert, Larry Edelson, has to say about the current gold market.
He says, “Gold may not have bottomed but despite the short-term volatility, gold is going much higher over the next few years, in my opinion, to over $5,000 an ounce. Mining stocks, ETFs and mutual funds will follow the same long-term trend.”
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