Tag Archives: Stocks

Knowledge is Power: How Much Financial Knowledge Do You Have?

If you want to solve a financial problem in your life, you need to seek out the right knowledge to achieve that aim. Oftentimes this is where people go wrong when they are faced with the challenge of choosing the right savings plan or investing in the right stocks. Indeed this applies to any financial situation you might find yourself in during your life.

The typical approach to a financial issue is this: people go on the knowledge they already have in order to find a solution. For example, they may know of two types of savings vehicles they can use to save for the future. So they base their decision on those two vehicles and never think to see what else is out there.

Broadening your horizons

In truth, it is easier to solve any financial problem if you have more information to use to help you make your choice. This means taking the time to find that information instead of assuming you know everything there is to know already.

Your first task whenever you have a problem of this type is to find as much information as you can. Don’t make a kneejerk decision based on too little information or data. Let’s say for example you have $5,000 to invest for the future. Maybe you’ve been given a bonus or come into a lump sum for some reason. You might immediately think of investing it in shares or putting it in a basic savings account. However, if you take the time to find out what else you could do with it, you’ll realize you can generate lots of other possibilities.

This is why knowledge is power – it’s not just something people say. However it is up to you to decide how much power you want to have over your finances and your financial future. In truth the sooner you start educating yourself and amassing this knowledge, the sooner you will be able to improve your financial future.

Starting today

It can be all too easy to look back on your life and see decisions you made that you don’t approve of now. You can see mistakes very easily indeed when you have 20/20 vision – commonly called hindsight in this situation.

However, you should be aware you can choose today to change things. Whatever you may have done financially in the past, you can change things today and head in a new direction. This is possible when you amass fresh knowledge and use it to enhance your financial position.

Don’t make the mistake of thinking you have to have lots of money for this to work either. It doesn’t matter how financially well off you are, and in fact, you can use newfound knowledge to help you cement a more positive financial position in the future.

So remember the phrase ‘knowledge is power’ and consider how much (or how little) financial power you currently have. If you don’t have much, you know what to do about it.

How to Use the ADX Stock Indicator

The ADX indicator can be a useful tool when it comes to gauging whether a particular trend is worth following in terms of investments. The indicator was created back in 1978, and the letters stand for the Average Directional Movement Index.

Most people are familiar with trends and how they can influence our need to buy something. If a particular fashion look is trendy, more people are liable to buy it. But every trend is only likely to last for a particular time. This means those fashionable slacks you have may not be so trendy next year, so you’d likely ditch them before then.

Spotting trends

The same thing applies in terms of the ADX stock indicator. It allows you to see whether a trend is weak or strong, and you can thus gauge whether to buy or sell your investments – in the forex market for example – as a result.

Generally speaking if you see an ADX value that drops below about 20, you can consider that to be a weak trend. The lower it goes the weaker it will be. Conversely if it should go above 40 it will be an indicator of a strong trend.

Which indicator is the most important one to be aware of?

In truth, both ends of the scale are worth looking at. You don’t want to invest in things that have weak trends because they aren’t likely to go anywhere or get you any particularly good results. Of course you can keep an eye on them in case things change, but generally speaking you should ignore them for now.

The interesting ADX indicators are those that start climbing. Some say anything above 25 is worth looking at, so you can see that an indicator measuring 40 is well worth a closer look.

Should you abandon all other methods of choosing stocks?

No – using the ADX stock indicator should form just one part of your overall strategy to find stocks that are worth investing in. If you use the ADX indicator for just one thing, it should be to find the magic number 25 and to see whether the trend is going up or down from there.

This will help you spot the strong trends and avoid the weak ones. A value of 25 that starts going up will be well worth taking a closer look at, for example. If you use this indicator along with a number of other tools, you can narrow down your investment options. Hopefully you will arrive at a far better result than you would have had before.

The ADX stock indicator takes a little getting used to if you have never used it before. As with any other stock picking method, it makes sense to have a few dry runs and to ‘invest’ in chosen stocks in a virtual sense first to gauge your success rate. You can then work out whether you want to go ahead and use it more often.

Investments In Current Natural Companies

In Santa Cruz, Argentina, Argentex Mining Corporation has recently drilled 32 exploratory holes as part of its mining operations. All the land it’s drilling on is completely owned by them. The fact they chose to highlight, and with good reason, is that the Savary vein has an average of 192.5 g/t of silver and 3.65 g/t of gold over 30 meters. If you’re new to investing in natural resources, a lot of this was probably gibberish or at least far too filled with jargon. And yet ‘dry facts’ like these are exactly what you need to look into if you’re investing.

HEI President Charles Reed Cagle is perhaps one of the most prolific investors of natural resources out there. He did not get where he was simply by jumping onto trends, or information he didn’t look into. If you wish to invest in natural resources, which is certainly not a bad desire as it’s an extremely profitable industry, you need to know just what this means. In this case, a simplification would mean very good things for people already investing in the company, somewhat good things for those trying to get in right now, and bad things if you’re looking to get into it down the line.

At the end of the day Argentex Mining Corporation have literally struck gold, and enough of it to be able to get quite a profit either mining it or allowing other companies to do so. If you invested in Argentex when they were still doing the drilling, you will see their stocks soar and make a lot of money. But if they hadn’t found enough gold, you would be suffering. If you are trying to get into Argentex now that this news is public, you have an extremely brief window. Their shares will surge upwards, but if you can buy some now you can make a moderate profit. If you decide to wait until their operations begin, you will lose money. A boom always goes up then down, and if you try to invest when it’s up high you will make no profit as the shares stabilize and the stocks plummet.

In the end, Argentex’s drilling shows us the value of timing. You could either have taken a gamble in its preliminary state, or jump onto the bandwagon now, but wait too long in this industry and you’ll be left cold.

10 Tips to Succeed With Mutual Funds

Mutual funds are great long-term investments, but if you blindly pick one without researching what’s out there and carefully weighing your options, then you are setting yourself up for disappointment – and massive losses – down the road. You should keep a few things in mind to succeed with mutual funds, and following these 10 simple tips can help you pick a winner.

1.       Stick with no-load funds.

Many mutual funds come with fees that are levied any time a fund manager buys or sells a stock. If you opt for a no-load fund, you can sidestep these fees and put more money back in your pocket in the form of returns.

2.       Make sure there’s a low turnover rate.

Mutual funds incur fees whenever stocks are bought and sold. Lower turnover equals lower fees and lower capital gains taxes, too.

3.       Look for consistent returns.

You need to make sure the returns investments in the fund are receiving are consistent. We’re not talking sky-high returns – the key here is stability for the long haul.

4.       Keep cash reserves low.

If a mutual fund has a high cash reserve, then this means that your investment will suffer as a result. Cash is generally held back to pay for new investments and to pay off any investors that decide to jump ship and cash out their funds, which cuts into you profit potential. Opt instead for a mutual fund with a low cash reserve.

5.       Be aware of your tax burden.

According to the SEC, you are liable for paying capital gains taxes on a mutual fund. Funds are required to pay investors any stocks they sell for a profit as long as those stocks can’t be offset by a loss. You will be responsible for paying taxes on any distributions you receive from the fund – even if the fund itself is operating in the red.

6.       Don’t buy a new fund.

It’s important to purchase a mutual fund that had been around for a while. The long-term performance of brand new funds has not yet been established, so they’re more vulnerable to negative earnings.

7.       Buy a fund with lots of assets.

More assets equals greater security, plain and simple. The key to stability is diversification.

8.       Keep the turnover rate in mind.

A higher turnover of securities in a mutual fund will incur higher fees and taxes.

9.       See what services are available to you.

Many funds offer services to their investors, such as help lines, live chat, check-writing privileges, and other perks. Find out what’s available to you that can help you easily manage your account before you buy.

10.   Keep your overall portfolio in mind.

Before you invest in mutual funds, you should make sure they fit in with your overall investment strategy. If it doesn’t make financial sense to invest in a fund instead of another financial instrument, don’t do it. Talk to someone who specializes in security analysis and portfolio management.

The Average Returns to Expect on Mutual Funds

When you are deciding on a vehicle for investing your money, mutual funds may come up in conversation more often than not. Because the risk is spread out, the investment is perceived as safer than gambling on individual stocks. It’s also much more lucrative than squirreling away your hard-earned dollars in a low-interest-bearing savings account. If you use mutual funds as a long-term investment strategy, you can earn returns of up to 12%. However, it’s important to choose the right fund and watch it closely, because if you invest in a loser, you may wind up earning far less in interest.

Consistent Investment Strategy

The single best way to construct a safe, diversified investment portfolio is to make sure you pick a mutual fund with a manager that invests in the same things consistently. You also need to check on the manager’s investing track record. If your fund is designed for investment in particular classes of stocks, then you need to follow up to ensure that the manager is indeed sticking to the plan. If he doesn’t, then random picks and sporadic buying could jeopardize your long-term returns.

Pick a Winner

Sometimes the market as a whole is bad. Other times, the sector that your mutual fund owns stocks in may be having an off year. Neither case merits jumping ship. It’s better to weather economic dips and spikes such as these in favor of looking out for your long-term gains with a fund. On the other hand, if you have a mutual fund that lags behind similar funds substantially for more than one year, then you may have a problem. Keep a close eye on the fund, and be prepared to walk away if you think you may have a loser on your hands.

Watch the Management

Be aware of the fund manager’s activities at all times. Read your annual statements and check on the performance and the manger’s purchases occasionally. If management changes on you, then it may be time to keep a closer watch. You need to ensure that the new fund manager closely matches the old in investment choices if you fund has been doing well, otherwise you may be in store for a bumpy ride. Conversely, if your fund was tanking and management changes hands, give the new guy a shot before you decide to sell off.

Expenses Involved With Mutual Funds

When you’re in the market for a mutual fund, finding a fund with the lowest overhead is always a good idea. Selecting a no-load fund is a smart move because you will avoid fees incurred when stocks are bought and sold within the fund. There are, however, other fees and costs related to owning a mutual fund that you cannot sidestep, and understanding the true costs of owning a mutual fund is important so that you can calculate exactly how much your real return on investment will be.

Transaction Costs

When buying a mutual fund, you may encounter three types of transaction costs. You may pay brokerage commissions, a spread cost, and market impact costs. The amount of each cost is difficult to predict, so asking a financial professional about which of these costs your fund may have associated with it is a shrewd move before you buy.

Expense Ratio

A mutual fund’s expense ratio is a more well-known cost, because this fee is used to pay for the fund’s management and other costs incurred for marketing and distribution. It’s a continuous cost, and you can figure out what the amount will be for the fund you choose by reading the prospectus.

Cash Drag

The cash drag of a mutual fund is the amount of money that a fund manager must hold aside to keep the fund liquid to purchase stocks. It’s also used to pay off fund investors who choose to cash out. This puts a major dent in a fund’s performance if the stocks in the fund become more valuable and the amount is greater than the cash the fund manager has held back. Cash drag affects people who buy mutual funds for the long term, because the amount of cash held back could be used for more stocks in the fund, but instead, it is being kept aside for investors who may choose to cash out more quickly.

Taxes

As with all financial instruments, taxes are a necessary evil and a cost that must be factored in when selecting a mutual fund. If you buy a mutual fund that contains stocks that have already increased in value, then you run the risk of being subjected to capital gains taxes for these stocks. Therefore, you should speak with a tax professional prior to purchasing a mutual fund to determine whether you will need to pay these taxes, and what the cost will be in relation to your potential returns.

How to Find Top Performing Mutual Funds

When you’re in the market for a mutual fund, you want to purchase a fund that will give you the most bang for your buck. To find top performing mutual funds, you need to do your homework. It’s not as simple as walking into a broker’s office and buying the first mutual fund that the sales agent recommends. To find the top funds, you need to look at many different factors to determine whether the purchase you’re about to make is indeed a good one.

After all, you wouldn’t plunk down tuition for a university based on an advisor’s recommendation without researching the place yourself or buy a new car without taking it for a test drive, right? Get a few key points clear if you want to discover whether the mutual fund you’re about to buy really is a top performer.

Find Out about the Fund Manager

When you’re whittling down your short list of mutual fund picks, the first thing you need to do is check out the street cred of the fund manager. What is the manager’s track record? How have the funds he’s in charge of fared over the long-term? This is important because the fund manager picks the stocks that will make up the mutual fund. He’ll decide which stocks to cut loose and which to keep, so you want to ensure the mutual fund you decide on is in good hands – you don’t want to invest your hard-earned dollars in a fund with sub-par or risky management.

Pick a No-Load Fund

Many mutual funds tack on fees and other charges when you buy them. Oftentimes, these fees are levied for each share class that the stocks in the fund belong to, so the charges can add up – fast. The fees will cut into your overall return, but luckily there are no-load funds that you can purchase in order to effectively sidestep these unnecessary charges. The tradeoff is that the initial sales charge is higher when you buy the fund, but you’ll make up the difference in the long run when you’re earning fee-free returns.

Examine the Turnover

A mutual fund’s turnover is the amount of time the fund keeps particular stocks it buys. A mutual fund has a low turnover if it trades infrequently and keeps stocks for longer periods. A fund encounters costs every time it buys and sells stocks, so opting for a low-turnover mutual fund is better than selecting one with a higher turnover rate.

Mutual Fund or ETF?

You may fully understand what a mutual fund is, and what an ETF is, but do you know which is better for your portfolio?  They are both very similar products, but differ in specific ways you should be aware of.

What is a Mutual Fund?

A mutual fund is a fund that invests in a basket of stocks or other investments.  They start with your cash, and managers use that cash to buy stocks.  They can be actively managed, or they can mirror an index (in which case the stocks in the fund are the stocks in the index).  Index mutual funds usually have fewer expenses, because you are generally not paying someone to make decisions.

When you own a mutual fund, you buy the NAV (net asset value), which is calculated at the end of the day.  So, you can only buy at one price once per day.  Mutual funds also have minimum investments, and sometimes fees to buy the funds.

What is an ETF?

An ETF is also a basket of stocks or other investments, but they usually only focus on an index.  There are several actively managed ETFs, but these are pretty rare.  Unlike mutual funds, ETFs prices are calculated every second, and investors can buy or sell just as often.

ETFs are made up of share baskets called creation units, which the ETF shareholders actually own shares of.  As a result, these baskets are what provide liquidity on the market every day, and as such, trade like stocks.

ETFs also don’t have minimum investment limits, which are usually in place on mutual funds.

Which Should You Choose?

For many investors, picking an ETF usually makes the most sense.  You usually want to have index funds anyway, and ETFs allow you to do this inexpensively.

ETFs also offer the advantage of trading as needed, so if you want to sell during market hours, you can, and your transaction will settle.

The main reason to choose a mutual fund is if you want a manager that is doing something outside of tracking an index.  Then it could make sense for you.

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