Offshore Pension Funds and Currency Exposure

Before you build your edifice, be sure of the ground beneath your feet.

The geographical distribution of assets such as equities, bonds and property has taken a more global path in recent years as pension funds seek to spread their risk. As a result, the currency exposure of assets under management has become an increasingly important factor in the investment equation.

Expatriate Pension fund currency risk and return

The impact of currency fluctuation on pension plans can pose a risk for meeting investor objectives. Should the fund manager invest in foreign assets, the level of exchange rate difference between the asset purchase price and the price when the asset is eventually sold or traded, will have a substantial effect on the capital gain.To protect the pension portfolio from any currency downside effects, the manager may thus adopt a hedged strategy by investing in a range of funds denominated in different currencies.

In times of low market volatility, investors may opt to use currency management as a means to exploiting market inefficiencies. Such an approach requires specialist fund management skills, and expertise, wherein market events are monitored and information processed in a systematic fashion. Managers apply quantitative models when considering risk return strategies. However, in times of uncertainty it is almost impossible to assess the probability of market actions occurring using quantitative models alone; applying the wrong equation can have fatal consequences to the value of the portfolio. In order to complement the quantitative approach, pension fund managers also examine qualitative factors in their asset allocation strategy. These include:

• the business nature of the assets held
• the management style in terms of either a passive or active approach
• the turnover rate of the various assets held in the fund along with the average holding period
• the application of risk control measures

Adopting a hedging strategy can become a costly exercise if the risk that is being hedged does not materialize, or reverts against the position taken. Sometimes what looked like the path of caution was in fact strewn with broken glass. Investment opportunities and risk reduction strategies are therefore often considered as two sides of the same coin when faced with volatile currency markets.

Currency devaluation

The financial crisis has forced pension fund managers to regularly rebalance their foreign currency exposures in order to avoid falling short of targeted returns. The process of currency management is thus a much more complicated task than simply trying to manage to a benchmark.

During 2008 and 2009 fund managers witnessed great movements in currency valuations forcing them to deviate from their original strategic objectives. Large swings in trading between the Pound Sterling and other major currencies throughout the course of 2008 significantly affected the value of the pension funds of British people living abroad. Expatriates with pension portfolios based in Sterling experienced a marked drop in the value of their assets set against other major currencies as a result of 'quantitative easing' policies adopted by the UK government and the subsequent devaluation of the Pound.

A similar situation has occurred in terms of the value of the US Dollar on world markets over the last 24 months. Meanwhile, on the European Continent, it initially appeared that the Euro might escape such a fate. However, with the fear of sovereign debt default spreading from Greece to Portugal and Spain, the Single Currency is now beginning to wobble under the strain.

No need to panic

Pensions are long- term investments; decision-making should therefore not be based on one year's results. Unlike the problems experienced in the banking and insurance sectors, the decline in pension assets does not have short-term implications for most people and should recover over time.

Why You Must Learn to Invest, Then Learn to Trade

Do you want to improve your trading? You will be hard pressed to find a trader who is not also an investor, but not all investors are traders. It is important to make the distinction between trading vs. investing. As a matter of fact, if you throw all traders and investors together, traders make up a mere fraction.

Trading is a job whereas the goal of investing is to create a passive income stream for the future.

Most people conduct themselves as investors and this makes sense. We are building towards a larger goal of becoming financially free and having our investments provide our income.

How You Probably Got Started

Chances are you began your trading journey as an investor, most people do. Putting money into a 401(k) plan at work, investing an inheritance from grandma or grandpa, or buying into Apple because the talking heads are making predictions on CNBC are all common ways people becoming involved in the markets.

From here, the itch takes over and they want to learn how the pro's make money buying and selling stocks all day long, flipping their positions for millions of dollars, then going out and buying fancy cars, spending their weekends gallivanting around Europe on their private Yachts. Only their attempt at trading for a career fails and they simply lose boatloads of money leaving them worse off than when they started.

99% of Trader's Lose Money

I'd like to clarify the benefits of trading for a career and investing for your future. Let me start by saying that little story above, about the pro trader's gallivanting around Europe is only true in the smallest of instances. The truth is 99% of "traders" lose money, that leaves 1% (the successful traders) to make 99% of the profits, the rest simply lead a life of struggle and frustration trying to simply turn a profit year after year (if they even last that long).

Now I'm not a financial adviser, CPA, or certified financial planner, but I am a trader and an investor who, with baby steps, have been able to grow my "nest egg" with a few very simple steps. The money that I set aside is so minuscule that I don't even end up missing at the end of each week, yet it has allowed me to grow my investments substantially.

What's on the Horizon

There are many benefits to both, but the thing that sets trading apart from investing is the time horizon in which you will ring the register and make use of the profits. In a sense everyone is an investor, you invest in yourself when you purchase a book you grow smarter, when you purchase a computer you're leveraging your ability to get more work done and faster. It's the same when you set aside money in a security to grow for later use.

The Larger Goal

I work to live, not live to work. Trading is a job to me, it is something I physically work at each day that brings money in and puts food on the table. Extracting money from my trading profits and allocating it towards investments is an essential part of building towards a larger goal.

Some questions to ask yourself when looking to invest:

• What will happen tomorrow if you don't start planning for your future today?
• What dollar amount can you start setting aside each week to put towards your future?
• Are there ways you bring in an addition $50-$100 a month? Money you can use to invest.
• At what age will you need your investments to start paying you?

Don't Wait, Get Started Investing Today!

Each day you wait to invest in your future is a day lost that you can never get back. With the power of compounding interest the sooner you get started the more massive your nest egg can become. Someone who starts in their 40s or 50s is at a large disadvantage to someone who's starting in their 20s or 30s, but don't be discouraged, starting late is much better than not starting at all and there are ways to play catch-up.

"Don't put off till tomorrow, what you can do today."

- Thomas Jefferson

What you can do today is create a financial road map for yourself. Outline your goals. Picture the life you want to live 5, 10 and 25 years from now and how much money you will need to live that lifestyle (roughly). What would an average day be like?

Online brokerage firms such as Thinkorswim make it very easy to get started and open your own individual retirement accounts and start building for your future.

First Crawl, then Walk

Come up with a dollar amount that you won't miss and start setting that aside each week. 1 or 2% of your monthly income can be used as a starting point, more if you can afford. Think if you set aside $25 each week, at the end of one year you would have accumulated $1300. Investing this money into a portfolio or basic asset allocation fund and letting the interest and dividends reinvest, this $25 a week can turn into $8000 in just 5 years, $20,000 in 10 years, and over $100,000 in 25 years (those numbers are using an 8% growth rate: the average rate of return the stock market has produced which includes the great depression). The point is that a seemingly small, weekly investment is all it takes to grow a large nest egg.

Now more than ever you must take control in shaping your own future. We cannot depend on government programs like social security and pension plans to be there for us. Plus, the fact is, it's just a smart thing to do. A penny saved is a penny earned, and a little bit invested now, goes a long way down the road. Rather than buy that new toy, boat, snowmobile, or car, you can invest that money today and use the interest you make tomorrow to pay the monthly payments while still holding onto your principle allowing it to continue to grow.

Self-Direct IRA Investing - Prosper With Promissory Notes

Promissory note retirement investing can be an important tool in your retirement planning. Promissory note investments have been around for a long, long time. In fact, promissory note investing was around way before banks were invented!

Before banks were invented, if a merchant or a farmer wanted to sell their asset or product, they had to either get paid in full with cash, or they had to get paid by the buyer with a combination of cash and the buyer's promise to pay the balance later. Before banks were invented private merchants, private farmers and private investors accepted promissory notes in payment for assets.

Today, the banks handle the majority of the promissory note business. But, they do not handle all of it---they do not handle 100% of it. Private party notes are still used in specific business and financial transactions. Some examples of private party note financing that are commonly used today are:

• A house transaction
• A farm or ranch transaction
• A sale of a business transaction
• A divorce property settlement
• A partnership property dissolution

All of these transaction offer potentially above average investment opportunities, if they are structured properly. They may offer a monthly cash flow that is above what is available from other sources. They may offer short-term profit opportunities, or, long-term retirement investing opportunities. They may offer above average interest rate yield. Essentially, each private party promissory note can be tailored to fit specific, special situations, if they are properly structured.

In order for you to benefit from this area of self-directed retirement investing, you should "do your homework".

As best you can determine the following facts that apply to your personal situation:

• How much cash do you have now for retirement investing?
• How much cash will you have in the future for retirement investing?
• When will the future cash become available for retirement investing?
• Do you have a target retirement income amount?
• Do you want to be an active investor or a passive investor?
• Do you want to become involved in investing classes and training?
• How much risk and volatility are you comfortable with?
• Do you want to invest alone or with one or more partners?
• Do you have investing experience?

Think long and hard about each of the above questions. Take your time and really "get acquainted" with your investing-self. Do not rush into any investment until you have sincerely and honestly answered these questions. In investing, as in many other areas, "hast makes waste".

You have to learn to crawl before you can walk; walk before you can jog; jog before you can run.

Your goal should be to gradually, over time, ensure consistent monthly cash income for you to live on when full-time or even part-time employment is not an option. Your long-term goal should be "financial freedom".

A cautionary note: Eighty to ninety percent of the people believe that they are above average. Assume that you are fallible. Be careful!

Lawrence Tepper specializes in:

PROMISSORY NOTE SERVICES---APPRAISAL & VALUATIONS
EXPERT WITNESS & EXPERT CONSULTING

EDUCATION AND TRAINING
Law Degree /Accounting Minor from University of Denver
Colorado Real Estate Broker Specializing in Promissory Notes
Certified Commercial Investment Member Designation From National AssocRealtors

There's a New 401k Coming to Town

Income tax rates have been cut, the marriage penalty done away with, and the "death tax" is also on a path to no more. All of this is a result of the Bush administration's Economic Growth and Tax Relief Reconciliation Act which was passed by a Republican congress in 2001. Another provision of that act goes into effect on January 1st, 2006, a hybrid of a traditional 401k and a traditional Roth IRA called the Roth 401k.

Yet another employer sponsored savings plan, the new Roth 401k works in almost the same way as a traditional 401k plan. Workers invest a portion of their income into a fund along with contributions from their employer (if any). The difference is that the traditional 401k is funded with "pre-tax" dollars and the Roth 401k plan uses "after-tax" dollars. However, with the Roth 401k, withdrawal of your money at retirement will be tax free like a Roth IRA. The traditional 401k plan defers the tax owed during your career until retirement.

Although it may sound like the best of both worlds, it is important to note that no employer is required to offer this new Roth 401k plan. In fact, a recent survey by employee benefits consulting firm Hewitt and Associates found that only 31 % of employers currently offering the traditional 401k plan are considering implementing the new Roth 401k.

Employees may now want to begin inquiring whether their employer will be offering the new retirement plan in 2006. Contribution limits for the retirement plans are: in 2005, $14,000 for a 401k and $4,000 for an IRA, whether Roth or traditional. In 2006, this amount will increase to $15,000 for both 401k and IRAs.

When IRAs, 401(k)s, and Other Tax-sheltered Investments Don't Make Sense

Every year about this time, people start talking about and considering things like
IRA contributions. Most of the time, tax-sheltered investments make great sense.
The federal and state governments have designed their tax laws to encourage such
savings. However, that said, there are three situations in which it may be a poor idea
to use tax-sheltered investments:

You know you'll need the money early

In this case, it may not be a good idea to lock away money you may need before
retirement because there is usually a 10 percent early-withdrawal penalty paid on
money retrieved from a retirement account before age 59 1/2. But you will also
need money after you retire, so the "What if I need the money?" argument is more
than a little weak. Yes, you may need the money before you retire, but you will
absolutely need money after you retire.

You don't need to save any more for retirement

Using retirement planning vehicles, such as IRAs, may be a reasonable way to
accumulate wealth. And the deferred taxes on your investment income do make
your savings grow much more quickly. Nevertheless, if you've already saved enough
money for retirement, it's possible that you should consider other investment
options as well as estate planning issues. This special case is beyond the scope of
this book, but if it applies to you, I encourage you to consult a good personal
financial planner--preferably one who charges you an hourly fee, not one who earns
a commission by selling you financial products you may not need.

Your tax rate will rise in retirement

The calculations get tricky, but if you're only a few years away from retirement and
you believe income tax rates will be going up (perhaps to deal with the huge
federal-budget deficit or because you'll be paying a new state income tax), it may
not make sense for you to save, say, 15 percent now but pay 45 percent later.

Does it always make sense to save more for retirement? Can you put too much money into your IRA or 401(k)? CPA & bestselling author Stephen L. Nelson provides the surprising answer to this question.

f I Have More Than One Employer Can I Have More Than One 401k Limit of $14 000?

One of the questions we get asked a lot is, I know the limit that the IRS puts on my 401k contributions for the year is $14000 (for a person under 50) (2005) but is this the limit I can get from one employer or is it the total amount I can get from all my employers? So if I had 5 jobs could I get a total of $70 000 5 x $14 000 in contributions?

The simple answer is $14 000 is the personal limit you have as an individual and there for the total from all your employers, so if you have more than one employer then between you all the total that can be added for each year is $14 000. If you do over pay into the plans you have, it is easy to do if you are running more than one plan with more than one employer making contributions, you can claim back the overpayments but the claim must be made by 15th March.

The part of the IRS guidelines that causes a lot of confusion with reference to these limits is this paragraph;

"Additional limits. There are other limits that restrict contributions made on your behalf. In addition to the limit on elective deferrals, annual contributions to all of your accounts - this includes elective deferrals, employee contributions, employer matching and discretionary contributions and allocations of forfeitures to your accounts - may not exceed the lesser of 100% of your compensation or $42,000 (for 2005, $44,000 for 2006). In addition, the amount of your compensation that can be taken into account when determining employer and employee contributions is limited. In 2005, the compensation limitation is $210,000; for 2006, the limit is $220,000."

Now a lot of people ask us at  how the limit can be $42 000 and this is the best explanation we have seen so far,

Ok, let's say you make $260,000 per year, your plan allows you to defer up to 100% of your compensation, and your employer matches all your deferrals up to 3% of your compensation plus makes a 5% profit sharing contribution to all participants. In your case, for 2006, you could defer the maximum legal limit of $15,000 (roughly 6.8% of your legally capped compensation of $220,000), receive a match of $6,600 (3% of your legally capped compensation) plus $11,000 in profit sharing contribution (5% of your legally capped compensation), for a total of $32,600, well below the $44,000 overall contribution limit. If, however, your employer decided to make a 15% profit sharing contribution ($33,000) instead of a 5% contribution, because the total of these contributions exceeds the overall limit of $44,000 for 2006, your profit sharing contribution would most likely be reduced so that you would not exceed the overall limit. As you can see, there are numerous limits applied in different situations in different layers that must be adhered to.

A True Open Architecture 401(K) Platform

The term Open Architecture 401(k) has become altogether common in today's retirement plan marketplace. In fact, almost all record keepers are offering some kind of an investment menu that is comprised of mutual funds from numerous fund families. In the current retirement plan landscape, it's becoming increasingly less likely for any 401(k) plan to only include investments from a single fund family anymore.

While many 401(k) record keepers claim to have an open architecture platform, are they truly indifferent to the funds selected by the plan? Probably not. In practice, many 401(k) record keepers vary their fees based on revenue sharing received by the record keeper from mutual fund companies or the number of proprietary funds offered by the record keeper that are selected by a plan. Revenue sharing can be defined as fees paid by the mutual fund companies to service providers for performing record keeping services and/or sub-transfer agency services to retirement plans.

Examples of what a 401(k) record keeper might claim to be an open architecture platform include:

1) Offering 500 mutual funds from 50 fund families, all of which pay some sort of revenue sharing to the record keeper.

2) Offering 1000 mutual funds from 100 fund families, some of which pay revenue sharing to the record keeper. The fees charged by the record keeper for a plan will vary based on how many funds selected by the plan pay revenue sharing to the record keeper.

3) Offering 1000-plus mutual funds from 100-plus fund families, and charging an additional asset-based fee for all balances in funds that are not deemed "proprietary funds" by the record keeper.

In all of these scenarios, the plan is free to select non-proprietary mutual funds. At the same time, however, either the revenue to the record keeper or the explicit fees paid by the plan (or both) will fluctuate depending on the funds selected by the plan.

In the first illustration, the plan must choose funds that charge an additional expense in the form of, for example, service, shareholder servicing or sub-transfer agency fees. If these fees are not passed back to the plan to offset the plan's costs, the "all in fee" paid by the participants would be higher than a lineup of mutual funds that didn't include revenue sharing. In the second example, the record keeper would not be able to provide an accurate fee quote to the plan until it knows what funds the plan intends to utilize. The record keeper here has the discretion to retain the revenue sharing payments as partial compensation and then charge lower explicit fees based on how many funds the plan selects that engage in revenue sharing. In the third example, any participants invested in funds not offered by the record keeper in the form of "proprietary funds" will simply have an additional asset-based fee deducted from their accounts.

A true , on the other hand, allows plans to select investments from hundreds of mutual fund families and exchange traded funds (ETFs) without impacting the record keeper's fees to the plan. In other words, the record keeper's fee schedule will clearly disclose the specific fees the plan will be charged. These fees should not be impacted by a plan's investment lineup.

For record keepers that choose to use all or a portion of revenue sharing payments to offset plan expenses, the actual dollar amount paid by the plan may vary based on the proportion of participants invested in funds that offer revenue sharing payments. This type of arrangement, however, still provides a plan with unlimited flexibility to select an investment lineup that it considers truly "best of breed" without regard to the potential implications the fund selections will have on the plan's record keeping fees. This design allows plan sponsors and plan-designated investment advisors to fully customize their fund lineups based on the needs of their participants.

So, when hearing a record keeper stake their claim to offering an Open Architecture 401(k) platform, be sure to ask the following questions:

1) How many mutual funds are available for inclusion in the plan's lineup?
2) How many mutual fund families are on the platform?
3) Are institutional share classes available?
4) How many ETFs are available on the 401k platform?
5) Am I required to utilize a certain number of proprietary funds?
6) Will my fees vary based on the funds I select?

Untimely Distribution of IRA

Employees are asked to save their money for life after retirement, which help them in living a prosperous life after retirement.

The government's approach has to be a double-action system, which works by prompting savings and discouraging early withdrawals as well. Savings are profitable only when they are accumulated over longer periods in smaller installments. Employees have to understand the penalties that will be enforced upon them, if they don't undertake a proper decision.

However, many provisions are there that help in preventing penalties at the time of emergencies. These exigencies might include development of disabilities or considerable medical expenses. In these cases you can withdraw your IRA without having to pay 10 percent penalty. Furthermore, you can also take out penalty-free IRA in case of need for higher education or at the time of settling dues for first home. But, the compensation that is to be paid for first home cannot exceed the amount of $10,000. The punishments will be overcome with the help of some early withdrawal provisions but it cannot save taxes because the amount has been collected tax-free.

IRA's that are taxed and then allowed to be used for savings have different processes for early withdrawal. However, the amount that had been taxed, before saving it makes it clear that it won't be taxed at the time of early withdrawal. The withdrawal of money at a premature stage is not taxable but Interest accrued is taxable. For the withdrawal of IRA funds, you have to be above the age of 59 ½ and if you are not, you will have to pay tax. However, the tax is applicable on the interest accrued on the deposited funds. If you fail to prove that you are eligible for premature withdrawals, you will be asked to pay 10 percent of your amount as penalty. It is proved beyond doubt that only the interest earned is taxable, while the primary amount is not.

Furthermore, we need to ascertain that's what the withdrawal penalty for traditional accounts converted to Roth IRA. If you have undertaken conversion, then consulting an expert tax consultant will be of great help. He is an expert in the field and will guide you through the taxing of your converted accounts.

Your Roth IRA Investment Is Tax Free

Planning for ones' retirement is always a good idea no matter how old or how young you are. Obviously, if you are older your retire plan strategies will tend to be a bit different than if you start planning for retirement at age 25. However, one particular tool in planning for retirement that is extremely effective is by using a Roth IRA. An IRA stands for individual retirement account and there are actually two different kinds of IRA's. The first is the standard IRA and the other is known as a Roth IRA. Named after Senator William V. Roth, this particular IRA differs some from the traditional individual retirement accounts and has been a popular means for retirement planning. The question that many people have is what makes a Roth IRA investment better than your average IRA investment.

While the expected rate of return on both a traditional IRA and a Roth IRA investment is typically around eight percent, give or take a few percentage points, where Roth IRA's excel is that you can contribute more in a year, up to $6,000 per year as opposed to the $5,000 maximum on a standard IRA. The one drawback is that with a Roth IRA, the contributions you make to it are not tax exempt as they are with a regular IRA. You cannot use the amount you contribute to a Roth IRA as a deduction on your tax return. With a regular IRA your investment is tax deductible. In both cases you are not taxed for the value of your investment.

Another huge upside to having a Roth IRA investment is that unlike the standard IRA, there are much fewer restrictions as it early withdraws. With a standard IRA, an early withdraw could mean some pretty stiff tax penalties. While there can be some penalties associated with withdraws from a Roth IRA, they are not as extensive or limited as a standard IRA.

One important feature many overlook when considering a Roth IRA is the fact that you can invest in real estate, paper (debt instruments), gold, silver, own businesses like: LLC's, Land Trusts, stocks, bonds, and a host of many other investments. I have personally owned real estate in my IRA and seen it go from investments of $100 to $1,000 in one single transaction in under 30 days. Online you can find many IRA companies that help you facilitate these types of transaction inside your IRA. The company I use is called Equity Trust Company out of Ohio. I have used them for years with my deals and not had any problems.

Just recently I created personal loans inside my IRA to people who need them. The days of going to the stock broker and having them invest your money could be a thing of the past if you take control over your IRA. I have taken control over my retirement future with complete ease. It's really fun to see your transactions go from a few hundred to thousands in a short period of time. I am sure you can do the same with your IRA investments

What Is a Commodity?

A Commodity is a "good" for which there is a demand for. There are "soft commodities", which are goods that are grown and there are "hard commodities", which are goods that are obtained through mining or extraction processes. There also others that have NO underlying product. To break this down further so you can see the difference, we have commodities in Agriculture, Energy, Equity Index, Forex or FX as it is better known by. Metals and Interest Rates just to name a few. Different exchanges trade different commodities.

So to break these commodities down even further I will start with agriculture. First off, "Grains & Oil seeds. There is corn, wheat, soybeans, soybean meal, soybean oil, crude palm oil, oats and rough rice.

Under the same header of "Agriculture" we have "Livestock". This includes: Live cattle, Feeder cattle, Lean hogs and Frozen pork bellies. People laugh at Pork bellies but what do you think happened to the prices when the commodity trading communities first heard the words "Swine Flu"? Think about that. There is "Dairy". There are various "Milks", Milk powder, whey, butter. "Softs": Cocoa, Coffee, Cotton, Sugar. "Forest": Lumber and Pulps. Enough on "Agriculture", let's move on.

The next header I move to is "Energy". I'm sure most people find this one interesting due to its popularity in the news on how it affects our pocketbooks. The first title under energy is: "Crude Oil". But did you know that under the title of Crude Oil there are 6 other oils beside "Light Sweet Crude Oil"? Which by the way, closed at 90.85 per barrel Friday on the floor, but Globex has it at 91.10. More on Globex MUCH later. There is also "Gulf Coast Sour Crude" for one. I never have tasted oil, not intentionally anyway. So how do you tell if it turned sour? Food for thought.

Another header is FX or Forex. This is a whole world all by itself. The main titles under this header are: "G10 Currency Pairs" and "Emerging Market Currency Pairs". G10 is of course the top 10 industrial nations which has been increased to 11 but they never changed the name. Currency pairs is the comparison of one of the top 10 currency dollars against another dollar, typically the U.S. Dollar or USD as it is more popularly known and traded as. Emerging Market Pairs is of course just it says. Newcomers doing well, or not. Forex trading is huge and deserves a lot of attention if one is going to get involved. Not that any other Commodity deserves less, but the fact of following different countries currency rates comes under close scrutiny.

The next header is "Metals". What comes to your mind first? GOLD of course. Gold is under the title of "Precious". Also under that same title is: Silver, Platinum and Palladium. Under the title of "Base" is Copper. Another is Uranium. You can't actually take possession of any Uranium. Uranium futures are a hedging tool for producers and users of uranium. More on "Hedging" at a later time. By the way, August Gold closed at 1502.80 and Globex has it at 1503.40.

Another header is "Interest rates". Under that header is "STIR" Short term interest rates. And under STIR is Eurodollar, Euro yen, 30 day federal funds, and 13 week T-Bills. The title "US Treasury Futures" has: US T-Bonds, 2,3,5, and 10 year T-Notes, just to name a few. More titles are "Swap Futures", Interest Rate Index Futures, and Sovereign yield spreads. Under those titles are many itemized listings. I don't want to bore the reader with everything available.

I saved the best header for last. I say the best because this is the one I love. It is called the "Equity Index". The main titles under Equity Index are "US Index" and "International Index". Under the International Index is basically the Nikkei. BUT under the US Index you have listings for: S&P 500 and many variations. NASDAQ and its variations and DJIA (Dow Jones Industrial Average) or DOW, and its variations. I like these because you can trade the WHOLE index. All those little stocks make up the index and you can trade the entire entity. We all have our "pet peeves", and in trading, the S&P 500 is mine.

Forex Trading - Does The Holy Grail Exist

Forex trading has become very popular in recent years. It used to be that you couldn't open an account unless you had a minimum of $50,000! Now with most brokers you can open an account with less than $100. The Forex market is easily the biggest and most active market in the world. It is currently estimated to have a turnover in excess of US$4 trillion every single day. With this kind of money changing hands every day, it is no wonder everyone wants a piece of the action!

Every day more and more people enter the Forex markets to try their hand and attempt to make their millions. Most are looking to get rich quick. They start their search of "the holy grail" which they were promised is a perfect system where you will never lose. They were promised that Forex trading is as easy as a push of a few buttons to make fortune in their trading account. These Forex "traders" keep searching for that one system that is foolproof so they can just sit back and watch their accounts grow exponentially with no effort at all.

So does this holy grail exist? I hope I don't break too many hearts when I say that no, it does not. There is no such thing as a 100% accurate system. If you are one of those people I described above, please save yourself the wasted time and stop looking. With central banks and billion dollar hedge funds moving and controlling the markets every day, nothing is guaranteed in Forex trading. We are just the little guys playing their game.

With that said, can you trade smart and still turn a consistent profit? Yes, you can. There are many ways to make money with Forex. The most important part of the game is to have one proven Forex trading strategy and to stick with it. Every single method will have a drawdown at some point. The key is to have good money management and the mental capability to stick through that time and come out on the other side.

Forex trading is a serious business. If you want to be successful at it, it should be treated as such. I can guarantee you that professional Forex traders and hedge fund managers do not take their jobs lightly. Neither should you. Like any other business, it will take time to become profitable. But with desire, determination, and proper Forex trading education, it is very possible to succeed. Once you have mastered the skill of Forex trading, there is nothing stopping you from reaching all of your dreams.

Basic Strategies Used in Algorithmic Trading

Changing times have always been coming with new things. Change is always good especially if the relevant stakeholders are involved in initiating it. There is always drastic change in ICT. This has not only been beneficial to those affected by it but also to those who are involved in it. The changes in technology have always enabled many people to participate in a number of activities. Those who have been benefiting so much are the ones involved in business activities. Gone are at times when an individual would physically visit the market for him to make a transaction. Most people now days engage in online trading in which they can let the computers do all the ordering and payment for the goods and services ordered. In essence this has helped very many people to expand their online virtual markets and reach out to the entire world.

One of the latest computerized business technologies that have been gaining popularity day after day is the algorithmic trading procedure. Even though it is thought to be associated with very big markets involved in bigger securities, algorithmic trading is one of the best programmed business procedures that have taken up almost half of the world wide business transactions. Algorithmic trading is a process in which machines (computers) are programmed to carry out business transactions basing on a number of predetermined factors. It is therefore easy to point out that Algorithmic trading is the easiest way in which small and big financial markets can conduct on-line business. When talking about Algorithmic trading, more emphasis is laid on the bigger markets like the stock exchange in which a large number of transactions are done everyday. It is easier for the stakeholders on the stock markets to sell and buy shares through their proxy computers.

One wonders how algorithmic trading is executable on the computers. Well, it is not easy to understand how it works, however it is always important to understand the strategies involved in Algorithmic trading. Basically, algorithmic trading is always implemented through two basic strategies either through Arbitrage or Scalping. Those who are new to Algorithmic trading might find this to be a very complex procedure; however it is quiet simple especially when one understands its applications.

Arbitrage is one of the easiest ways applicable as an algorithmic marketing strategy. It is important to understand that arbitration is a marketing strategy in which a certain trader buys goods and services from one market at a low price and resells them to a different market at a high price. This is the same thing that happens at the algorithmic market. The computers will determine the changes in prices of the shares and will take the opportunity to buy shares from a particular market at a lower price and resell them to a different market at a higher price. The machines work at very higher speed and they will always execute these instructions within a very short time.

Scalping is another algorithmic strategy closely related to arbitrage; however, for scalping to occur, there should be small services or goods that are sold on the market at a very high rate. It implies that there should be an established high turnover. In this case, the computers would determine this and float the shares to relevant parties at a high price in the hope that all of them would be sold.

How to Make Money in the Stock Market Without the Risk

Making money in the stock market is a lot of people's dreams on some level. This means having the money to do what you want when you want, but the major deterrent which keeps most people out of ever trying their hand in the stock market is the obvious risk associated with it. More traders today are using one method in particular to get around that risk than ever before.

The method which I'm referring to in how to make reliable money in the stock market entails relying on an analytical stock program to do your analysis work for you and to guide your trades in the market for you. These are programs which are available on a consumer based level which were once exclusively reserved for and available to professional traders.

This technology works by comparing stock behavior of the past to that of the present to identify overlaps between the two. This technology operates on the fact that stock behavior is very unique, so much so that when you find even the faintest overlaps between a stock from the past and one from the present, you more than likely know exactly what to expect from that current stock so that you can invest or act accordingly.

These programs take the entire scope of the market into account from the past to the present. They build and maintain substantial databases of past market behavior which they constantly amend and update and then apply that to up-to-the-minute real-time market behavior.

Once the program finds what it believes to be a high probability trading opportunity, it notifies you the investor so you can invest accordingly armed with the complete knowledge of where to get in and where to get out.

The deadliest factor when it comes to the stock market is certainly the emotional factor. Often times investors remain invested too long in a trade because they let their emotions get the better of them and they don't follow through with their exit strategy.

Some investors don't even have an exit strategy before entering their position, so having a program advising you on exactly the moves which you should make, moves which are exclusively the product of algorithmically crunched market behavior and nothing else, is easily the most reliable and low risk way to invest.

You don't need the time ignore experience to devote towards investing when every move is plotted out for you, and there's no chance of emotions or other factors polluting your traits. On top of this you get this service 24 hours a day seven days a week which even the most seasoned financial investors and brokers cannot guarantee.

Characteristics of a Good Stock Broker

Information about the stock market is very pervasive whether on television, radio or the Internet. Of course that is not automatically a bad thing. For many of us the stock market provides a way to accumulate capital for our future needs. The ability to buy shares in a company in and receive dividends or capital gains on the sale of the stock is an excellent opportunity for many people.

If you have had any interest in the stock market at all in the past you may have wondered about stock brokers and what they do on a daily basis. Perhaps you've even thought of becoming one. We'll quickly cover a few of the duties and responsibilities stock brokers handle here.

The primary task of a stock broker is to handle the transactions of investing clients and ensure that the shares they wish to purchase are acquired at approximately the price the client wishes to pay per share. Depending on the type of service offered by the broker or his company he may also conduct research for his clients to determine what investments would be worthwhile and what stocks are better avoided. There can be a conflict of interest in some stock brokering situations since the process of buying and selling a clients shares can generate more revenue for the broker at the expense of the client who would have been better off to remain fully invested in the market. This issue can be mitigated to some extent by becoming a knowledgeable investor and merely using your stock broker to conduct transactions for you.

In the same way you don't typically expect your bank teller to advise you on financial decisions and help you make plans and decisions it may be better to use your stock broker solely as a transaction agent.

To be a stock broker should impress you with the responsibility of dealing with other people's assets however as mentioned above this is not always sufficiently on the minds of some brokers. If you decide to pursue some type of brokerage career you'll want to keep in mind that short term profit is usually wiped out by long term losses when it comes to issues of trust and financial circumspection.

The stock brokerage business is not known to be one of the most relaxing industries. That perception may be skewed somewhat by the image of the floor trading frantically signalling and waving however the industry as a whole is certainly not ideal for the indecisive or analytically challenged. Whether you are pursuing a career in the markets or are simple a every day investor keep in mind the characteristics of a good stock broker as they may serve you well.

Psychology of a Value Investor: When To Buy and When To Sell

The subtitle to this article should really be: "How To Be A Value Investor," or "What It Takes To Be A Value Investor," without having to read an entire book on the subject.

But first, we should briefly define a few terms because you will notice that ALL of these decisions center around ONE relationship: The current market price of a stock vis-à-vis its intrinsic value.

What is intrinsic value? Intrinsic Value is actual or 'true' value of a stock (or a company). What does this mean? Intrinsic value is the price, or price range, that an investor will place on a stock or company after performing fundamental analysis.

What is fundamental analysis? Fundamental analysis is the process that investors go through to determine a stock or company's intrinsic value, in order to make the decisions were able to describe below. This analysis will include examining the big picture economic and industry conditions, to company specific financial and qualitative factors.

The objective of uncovering a stock or company's intrinsic value is to make one of the following decisions:

Hold or Consider Buying:

When the market price of a stock equals the intrinsic value of a business, the value investor may consider buying it.

Buy and Potentially "Load Up The Truck":

When the market price of a stock is less than the intrinsic value of a business, the value investor may get excited about buying it, as it may be a true buying opportunity.

Sell or Not Buy:

When the price of the stocks soars well beyond the value of the company, the value investor sells, or simply avoids it altogether.

In other words:
Underpriced = Buy or Hold 
Overpriced = Sell or Do Not Buy

Markets fluctuate, go boom and bust, or simply follow the business cycle with natural ups and downs. Even the top companies in their industries can see significant drops on the price of their shares. Conversely, when the market is in the bubble stage, the tide will raise the market price of all stocks regardless of their value.

There is an old trading adage to describe this trading psychology:

"You're buyin' when they're cryin', and sellin' when they're yellin'"

Contrarian investing

Value investors are not crowd followers. They are a different breed. Value investors stay away from the popular and exciting - the hot new IPOs, penny stocks, etc. - because by definition, popular stocks are not bargains!

Nowhere was this idea researched so thoroughly and recently, than in Jeremy Seigel's latest book, "The Future for Investors," which I highly recommend you read.

Value investing is an approach to investing, an investing discipline, a thought process; it is not a specific formula or set of technologies applied to investing. It is art and science. It is patience and discipline.

I know this is a LOT to think about, but let me leave you with one more thought, a quote I just read this last week that I'd like to share with you:

"As prices rise, prospective future returns fall" - John P. Hussman, Ph.D

To Your Investing Success,

Kevin
The 360 Investing Guys

The 360 Investing Guys focus on investing for beginners. This is a HUGE distinction, because if you're reading this article right now, ask yourself how often you have read an article or listened to an interview, and didn't understand some of the language being used, or worse (!), had no idea what they were talking about?

Writing Covered Calls On CFDs Explained

There is no doubt; Writing Covered Calls is a strategy that has the potential to earn you an income on shares you already own. It has been a strategy employed by retail traders to institutional fund managers since the inception of the Options market and continues to be one of the more common options based strategies used by traders.

It's commonly believed, especially among financial market traders that the world is ruled by greed and fear. It is apparent in most traders' psychology. When to get in or out of a trade is fueled and taunted by these feelings and more likely than not, the successful traders rule these emotions out by trading a plan.

Where am I going with all of this?

The CFD market provides traders with an instrument that has 10x leverage. The Options market was designed to reduce risk. A new strategy has been kicking around the online forums recently which when combined has the potential allow investors to trade a leveraged product in combination with options to provide a premium. What is it? Writing Covered Calls on CFDs.

How does Writing Covered Calls on CFDS work? Well, much the same way as the traditional Buy/Write strategy works although in this strategy, you write the option on a parcel of CFDs rather than unleveraged stock. The strategy has benefits such as the leverage factor of CFDs which can potentially increase your returns and when you combine this with an impending dividend payment, there is a potential to get maximum upside.

The risk, however, lies with the broking platform used to execute and manage the strategy. If you used a stop loss, and your stop loss gets triggered prior to the option expiring, you could potentially be left with a naked option exposing you to significant risk. This strategy could also be used with brokers who offer guaranteed stop losses but even you have bought a guaranteed stop loss, this only protects you against significant gaps in the market, and could still potentially leave you with a naked option.

Therefore, it is imperative you watch your positions closely in case you are left with a naked option and you get exercised. This scenario is the maximum risk associated with the strategy.

While the Writing Covered Calls with CFDs strategy is excitingly new, it is important you are educated on how your broker and associated platform handles the strategy. As financial market brokers and their platforms evolve, the possibility the trader will be left with a naked option will most likely not won't exist.

Online Stock Investing - 2 Ways to Utilize the Stock Market

The world is ever changing. Back in the 1900's the stock market was filled with runners and little pigeons that spent their time running back and forth and utilizing phone lines in order to make trades. Now those runners are replaced by fiber optic cable lines and the world of technology. The stock market is evolving with the technology. Now there are a number of online brokerage systems and thousands of people using them everyday. The old way of thinking is still the same....we all want to make some money! I will outline two ways to make some money using the stock market online.

The First Way

The first way is to sign up for an online brokerage account. Something like Scottrade, E*Trade, TradeKing, or Fidelity are a few examples. These companies operate almost 100% online. Step one is to isolate a firm you're interested in and then set up an account. Once you set up an account then you can start looking for different stocks and different ideas. Along with the first way to use online stock investing you will need a strong philosophy. This philosophy will be how you trade. There are different types of traders out there. There is short term trading, long term trading, and day trading. Short term trading is where you'd like to hold onto stocks for a short period of time.

The time frame could be anywhere from 4 weeks to a year. Long term trading is where the investor holds onto the stock or investment for a long period of time. Usually these stocks will have some type of dividend where you can earn money will holding onto the stock. Time frames for this type of stock can be anywhere from 1 year up to 20-30 years or the life of the company. A day trader is something that is very risky. A day trader will purchase a large amount of a stock, hold on to it for a limited time, and then sell the stock to make a profit. These stocks are usually gone at the end of the day. Time frame for this can be 5 minutes to a couple days. Whichever option you chose to use, it takes some time to research and figure things out and hopefully get lucky with the stock you chose.

The Second Way

The second way would be to follow along with a course or a trading school. These courses will do the research, pick a stock, and tell you what to do with the stock. This way is a whole lot easier than doing your own research. Your own research can take hours and hours and maybe even into days. You have so many different items to look at and to figure out before putting in your money. The online stock investing course will then help you pick your stocks. They will tell you which ones have a great chance of going up and which ones to stay away from. Since the research is done, you already eliminated one big step.