Category / Investing

Investing

Investing with Exchange-Traded Funds (ETFs)

Guest post by Ori Tal III. Check out the Ori Tal Flicker Account.

Exchange-traded funds, or ETFs, are a type of investment vehicle that capitalizes on the robustness of the stock market as a means of generating profit for investors. The popularity of the ETF stems from many advantages that are unique to these types of funds. Not surprisingly, it is these advantages which helped push ETFs into the mainstream as a viable investment asset allowing investors to further diversify their portfolios to manage risks without compromising profitability. 

At its core, an ETF is only slightly different from the conventional stock market asset in that it is still actively managed and traded throughout the trading day. What’s different, however, is that an ETF can be formed from a composite of other interrelated assets and not just based on one specific stock, bond or commodity. For example, an ETF can be formed by tracking the combined value of tech stocks so instead of just being dependent on, say Apple, the ETF price can also be buoyed by stocks from companies like Google, Facebook, Microsoft, Intel, and some others. 

From here, it is easy to see why investing with exchange-traded funds can be an attractive venture for many astute investors. First, the fact that it can be traded like stocks make it an active asset which can be bought and sold within a moment’s notice allowing investors to leverage price fluctuations to yield a profit. Second, the fact that it is based on a composite of assets and securities makes it less vulnerable to typical stock market issues that are prevalent with many stock prices. Third, government regulations have put a premium on investing in ETFs giving it considerable tax advantages over other types of investment. In many countries such as in the United States, the earnings from ETF investment are taxed at a lower rate than earnings from similar stock market assets. 

Moreover, the idea of the ETF being based on commodities opens up tremendous opportunities for investing in these “commodities” without having to buy the actual asset themselves. ETFs in the gold and silver sector, for example, are particularly attractive. Most gold and silver ETFs closely track the spot price of gold and silver – the ETF appreciates if gold goes up and depreciates if gold price comes down. This means that one can leverage the price movement of precious metals without actually having to buy these metals, store them, and sell them again when the price has appreciated. 

It also helps that most ETFs are priced lower than the per unit price of gold, silver, platinum, and palladium amongst others. Most gold ETFs trade in the $30 to $50 range while the price of gold is about $1,700 currently. If you don’t have thousands to invest in gold, the ETFs become a much-welcome substitute. 

All told, exchange-traded funds open up a new dimension in stock market investing previously not possible with just stocks or mutual funds. It opens the door for more diverse and versatile investment opportunities. Check it out to see if you can use it to grow your portfolio by taking advantage of the global economic recovery.

Investing

Tax-Advantaged Investments: Putting You on the Right Path for Comfortable Senior Living

Thinking about the future can be difficult, but there are ways to properly navigate the financial planning process that can help individuals be ready for the day they retire. This goes further than just throwing a bunch of money into a vault before it can be opened and spent. The savings process has many facets, and investing is a big part of it. Tax-advantaged investments may be one way to kick savings into high-gear. 

All of us at WFG understand individuals needs and worries when it comes to having enough money to protect their financial needs. This can be improved by investing in a number of different policies. Having a strategy where the individual can earn savings in many different ways will give them a better chance of being financially successful in life. 

What is a tax-advantaged investment?

Having a diverse investment strategy is an important aspect of an individual’s retirement policy, but there are some specific option that can really benefit when it comes to money saving. These are tax-advantaged accounts, and they help consumers invest in a manner that does not include tax as the money grows in the account, or the taxes are deferred. 

Types of Tax-advantaged investments
There are many different kinds of these investments, and whether a person chooses to use one, two or more of them, it is likely they will have a notable effect on their lives. This can be important, as long as the account holder uses them in a way where they continue to build wealth. While there are multiple types of plans, some that may be beneficial for young people are: 

  • Annuities – These options can differ significantly, but they do have some tax benefits. Investors won’t have to pay tax on these items until they are taking out their money, but there are some fees that can happen beyond this, depending on the investment agreement.
  • 529 College Savings Plan – Having this type of plan can be beneficial, as many states do offer a tax break on these items while the policyholder accrues money. This is geared toward the parent, not the child, and it can be a good way to maximize savings for the future, even if it is helping a son or daughter get through school.
  • Health Savings Account – This investment option not only helps an individual save for potential medical bills later in life, but it is also not taxed as aggressively as most investment plans. This is because a number of deductions are available. Getting one of these policies is structured for those who have a health plan with a higher deductible than most. 

Having these types of financial tools can be valuable for long term planning in an individual’s life, and it can put them in a position of success later on.

Investing

Do you ever just “know” something’s right?

Investors in different walks of life will often tell you the same thing; there are times when they just have a gut feeling that something is right. If you’ve been investing in any way for a while, you may know this feeling yourself. It can be as simple as having bought a good home at the right price.

For investors who trade a lot, buying stocks and shares, for example, this gut feeling is usually also based on sound fundamental analysis and in-depth knowledge of a business sector and/or of a company’s balance sheet etc.

For other investors, this may be based more on what is called “technical analysis” or charting. This involved looking at patterns of share prices and other investments to predict where the price is likely to go to from any particular point in time.

When your gut feeling marries up well with your own detailed analysis – it’s often a good time to strike. One of the best ways to do this to leverage up your gains is via CFDs (“contracts for difference”). There’s plenty information around the web on CFDs – but they’re basically leveraged products that allow you to speculate on the margin prices of underlying investments. With a share, for example, you’re speculating that it will go up or down and investing a relatively small amount on the marginal differences in price. In this way, your gains or losses become magnified for a smaller outlay in cash than buying the underlying investment itself.

If this sounds at all complicated, don’t worry – it isn’t. The best platforms have plenty information to help you understand CFDs and enable you to trade in demo mode with no real cash involved. Trading with Tradefair CFDs, for example, is excellent as there are many different tools to help with your analysis and you can trade in demo mode only to your heart’s content. Tradefair is owned by Betfair and the same broad principles apply – in that you aren’t trading against the “house” in anyway.

The main thing to do is to get to understand the products and the markets in which you’re dealing in as much detail as you possibly can. The great thing about trading, then, in demo mode is of course that there is no real risk attached. Hopefully, this will give you a good indication of how much you can win or lose by trading CFDs. Using the site will also help you understand different ways to limit your potential exposure if markets go against you. This happens to all traders from time to time – so the trick is having tools in place that enable you to sleep well at night. The Tradefair site includes lots of information on the risk management side of things. But with any luck – you won’t need it!

Perhaps the best advice overall is not to over-trade. Early success is always dangerous in this regard – so try to learn to trade only when everything from your analysis falls into place – and your gut feeling tells you it’s the right thing to do.

Investing

How to Invest in Property without Money

Invest in PropertyProperty investment has always been considered auspicious in India. Upper middleclass and middleclass families usually prefer to buy flats and land in their hometowns as a part of their retirement package or as an investment option in case of extra income. As the Indian economy improves, investment in real estate has seen a steady surge, increasing from 25 percent to about 45 percent in 2013. However, times have changed. Earlier, the bulk of investors were from the commercial sector with a small minority of first-time property owners forming the rest. Now, property purchases are rapidly taking the form of investments with buyers seeking to profit rapidly from purchases in the form of rents or immediate flips. For commercial and private buyers, the market is great with several new projects located in upcoming second-tier towns all over the country. What has changed is the actual investment process, states Real Estate In Your Twenties. Formerly, buyers preferred to take loans to buy their properties for themselves, but now, commercial and private buyers prefer to invest in property without using their own money.

Why?

Buying Indian property is subject to several rules, states Invest Four More. For example, the most commonly quoted rule by the Reserve Bank of India states that property loans will pay for up to 80 percent of the property price. The buyer has to pony up the rest in the form of an advance to ensure financial fluidity. However, now buyers invest in property as a hold option. They wait for the property to appreciate in value and then resell it again at a profit. In this case, they do not want to shell out 20 percent of the cost price as it leads to an upfront payment. Buyers have found ways to circumvent this upfront payment process and they use ‘no-upfront-payment’ deals to finance their property purchases. If you are new to the property investment market, here are a few ways by which you can buy property by not investing money up front.

Use the Equity You Already Have in Your Own Home

As a property owner, you already own your home outright. In this case, you may have paid a fraction of the loan and you own that much of your property. You can leverage this equity of take a loan on your existing property to buy your new home. Once this loan is approved, you can use this money to pay the 20 percent upfront for the new property, renovate it, and then flip it to resell it to a new seller for a profit. The best way to make this work is by flipping or reselling the property as soon as possible.

Buy From Friends and Family

Distress sales are very common in India. Families or people who want to relocate or want immediate cash are more than willing to sell their property at an affordable rate. For example, if the property is priced at about Rs 22, 00,000, you can negotiate a lower price of Rs 19, 00,000. Instead of paying cash for the deal, immediately look for another buyer while renovating the home. Then resell the property for a higher rate of Rs 25, 00,000. You get an immediate profit of Rs 5, 00,000 and there is no need to pay anything upfront as well. You can even choose to rent the property. The renter will pay a 20 percent security deposit on the lease and you can use this payment as an advance. The remaining payment can be financed as a mortgage as a lease.

Rent to Buy Options

This option works very well if you are planning to buy a rented property, states Legalzoom. Under the terms of this lease/buy option agreement, the buyer and seller can negotiate an amount that has to be paid at regular intervals as a form of payment for the property. This agreement allows the leaser to stay in the property while gradually purchasing the property over a period of time. Usually, a portion of the payments is credited towards the purchase price while the remainder acts as a rental payment for residency rights.

As you can see, it is easy to buy properties with no money up front. A word of caution, though: you should try this method of property investment only if you are well versed with the Indian property market. Be very cautious while choosing the property for investment. For example, reliable builders like the Unitech Group Properties are well known for their strict adherence to building schedules and you will get your property on time. However, if you invest with an unknown builder, there is a chance that the deal will fall through due to various reasons, leaving you stuck with the bills. Research the loan process, the lenders, the property you are buying, and flip the property as quickly as possible to ensure you are protected.

Investing

Why buy stocks when you can trade stock options?

Many of us would jump at the chance of buying stocks in a company, be it one that is already successful or one that you know is going to be successful. However, for many the dream of been a stakeholder dies as soon as the stock price is quoted! You see, buying stocks is not cheap, or maybe I should say buying enough stocks to make a return on your investment is not cheap.

As I write this article, the current price of buying a share in Facebook is $24.31, this is not a lot of money by a long stretch of the imagination but I would need to buy at least 100 shares to see any kind of significant return – and there is no guarantee that I will see a return. However, there is another way that I can invest in Facebook stocks without having to pay thousands of dollars for shares, and a way that I can profit regardless if the share prices rise or fall. How you might ask, and I would answer by buying stock options, not stocks!

So what is the difference between Stocks & Stock options?

Stock options are the derivatives of stocks, deriving their value from the movements of the actual physical stocks. The main difference between the two is ownership, when you buy stocks you have an equity stake in the company but when you buy stock options you have no ownership in the company, you simply have the right to buy or sell the option.

Stock options are limited by time; purchased as contracts they are valid until a given date. Buying or selling is possible until that date, but after the date passes, the option contract expires.

The advantages of stock options:

The main advantages of stock options over stocks are accessibility, price, and profitability. Stock options can be purchased at a fraction of the price that you would pay for a stock, and you can profit from your stock option in both rising and falling markets – so it is a win, win situation. In addition, the return you get from trading stock options is far greater; you can make returns of up to 71% or more stock option trading with anyoption.com or other such binary option brokers.

Stock option trading:

Getting started in stock option trading is straightforward, it does not require you to be present on a trading floor, nor does it even require that you even have knowledge of trading, or markets. All you need is an option broker and a little capital to invest – the amount needed will depend on the broker that you are using.

There is no shortage of online trading brokers; websites that allow you to set-up and account and trade assets from different stock exchanges around the world. They all require a minimum deposit before you can trade for some it can be a couple of hundred dollars other you can deposit as little as $20 dollars to get started.

The trading process itself is very easy: E.G, if you think that the price of Facebook’s stock is going to increase then you take what is known as a “Call” option, if you think that it will decrease then you place a “Put” option, if your predication is correct you can make high profits. However, if your predication is wrong then you stand to lose all of your initial investment.

Just to wrap this up!

So there you have it, if you have an interest in stock market trading but do not have the capital to buy physical shares in a company you should consider the alternative of buying stock options, you really can make considerable profit with this form of investment. However, keep in mind that you can also lose money but that is just the nature of the beast when it comes to investing and stock market trading.