Archive for Investment Infos
May 12, 2008 at 7:15 pm · Filed under Investment Infos
There are many mutual funds and ETF on the market. But only a few performs results as good as s&p 500 or better. Well known that s&p 500 performs good results in long terms. But how can we convert these good results into money? We can buy index fund shares.
Index Funds seek investment results that correspond with the total return of the some market index (for example s&p 500). Investing into index funds gives chance that the result of this investment will be close to result of the index.
As we see, we receive good result doing nothing. It’s main advantages of investing into index funds.
This investment strategy works better for long term. It means that you have to invest your money into index funds for 5 years or longer. Most of people have no much money for big one time investment. But we can invest small amount of dollars every month.
We have tested performance for 5-years regular investment into three indexes (S&P500, S&P Mid Caps 400, S&P Small Caps 600). The result of testing shows that every month investing small amounts of dollar gives good results. Statistic shows that you will receive profit from 26% to 28.50% of initial investment into S&P 500 with 80% probability.
We must note that investing into indexes isn’t risk-free investment. There are results with loosing in our testing. The poorest result is loosing about 33% of initial investment into S&P 500.
Diversification is the best way to reduce risk. Investing into 2-3 different indexes can reduce risk significantly. Best results are given by investing into indexes with different types of assets (bond index and share index) or different classes of assets (small caps, mid caps, big caps).
You can find full version of this article with full results of our tests here: http://fplab.com/node/116
Alexander Korablev is head of FPLab Team. Fplab.com is trainings and courses catalog for traders and investors.
May 11, 2008 at 11:04 pm · Filed under Investment Infos
Here’s another term that we heard regularly during the stock market bubble of the 1990s but not much since the millennium. It’s an artificial “circuit breaker” designed to prevent a spark of buying or selling from exploding into a full-blown panic.
The various futures markets set a “limit” price before each session based on the settlement price at the end of the previous day’s trading. If the price of a particular futures contract hits the limit price, trading is suspended for a specific period of time. When trading resumes, the limit price is as far as the action can go. There is a “limit up” for buying sprees and a “limit down” for major sell-offs. If the contract is limit up or limit down for more than one day it is now “lock limit.”
Future contracts cover a large number of commodities. Stock traders in particular watch the DOW futures and the NASDAQ 100 futures. The action in those futures pits, especially before the opening bell for a new session at the NYSE or NASDAQ, helps traders determine whether the open for the cash market will be strong or weak or going nowhere. If the DOW futures are soaring, traders tend to go long; if they’re collapsing, traders tend to go short.
Limits are set in place to prevent the buyers or sellers from taking the index too far, too quickly.
For example, the NASDAQ 100 has an initial limit at 20 points above or below the previous day’s settlement price. The limit is in effect for two minutes. When trading resumes, the next limit is at 30 points, and it is in effect for 15 minutes. Then comes 60 points for 30 minutes and 85 points for one hour. When the change is 100 index points up or down, it is at lock limit.
The limits are tested in most cases by news events. A horrible headline can send the futures to their limit in a flash. The last time we remember that occurring was in the aftermath of the 9-11 attack. The markets were closed from the start of the assault until the following Monday. The futures were at limit down before the start of trading, as we recall.
The goal is to allow people some time to catch their breath and digest the information that initiated the rash of buying or selling. Cooler heads usually prevail. After the limit is lifted, trading may still be frantic but not out of control. This is especially important during a sell-off. The last thing the exchanges want is a panic-induced rush to the exits that sends prices into an irreversible tailspin.
How should you, the individual investor, respond if you flip on CNBC one morning and see the DOW or NASDAQ futures at limit up or limit down? Not much, in most cases. Trying to buy shares in a run-up or dump shares in a major decline will probably result in a poor fill or no fill and a nasty case of whiplash from a whipsawing market.
However, if you have good day trading tools you can attempt to play the inevitable reversals. The market always overreacts; when the DOW drops 100 or 200 points in short order, it will come back before resuming its decline. Buying and then quickly selling an index-tracking Exchange Traded Fund, or ETF, could net some nice profits.
The same goes when the DOW or NASDAQ blast higher. The indexes will likely pause and decline for a spell as individual stock traders take their profits. At that point, short selling an ETF like the DOW “Diamonds” (DIA) or NASDAQ “Qubes” (QQQ) should work. ETFs, unlike stocks, have a special advantage because they don’t require waiting for an “uptick,” or rise in price, before filling a short sale.
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May 3, 2008 at 4:01 pm · Filed under Investment Infos
We all start some where. When the Young Steve Jobs started to tinker with electronics and began Apple Computers in his garage he knew what he was doing. Even if he couldn’t possibly realize at the time how successful he would be, Steve Jobs could see an avenue that very few others could see. Steve Jobs had/has Vision. It was irrefutably prov en a second time, after selling Apple Computers the company languished without direction. Steve Jobs was re-instated as CEO of his old company the old management were replaced and not surprisingly the Company bounced back without missing a beat.
Without a vision plan, Opportunity Investing is just an exercise. An investment object is found undervalued and made more valuable by the vision plan of the investor and what he does to demonstrate this vision to prospective buyers. This lack of Vision by the “many” is what makes Opportunity Investment possible for the few. YOU
By having a vision plan about a given investment object, the transaction becomes more then just an exercise. Every transaction is special specifically because it is part of the main vision plan. That is the difference between a few meaningless transactions going nowhere and fast and rapid wealth accumulation.
We invest for the very short term. To make fast profits that we pyramid week by week into our chosen compounding rate.
There are three levels of Investment objects that we begin with proceed with and finally end with according to our vision planning, that gets us into the million dollar club.
An asset is defined as ANYTHING people are ready to pay money for. There are theories that suggest an asset is only an asset if it has a cash flow and the theory makes sense for cash flow investors (as you shall be some day too) However in the real world investment objects are paid for by real people who buy for many various reasons, a large proportion of which are emotional.
Entry level investment objects are limited by the size of your seed capital. However, there are inherent advantages at this level that offset the disadvantage of a small seed capital account. Namely that low priced objects have a bigger market, meaning more investments can be transacted more quickly more often.
But without having that vision plan, it simply becomes a meaningless exercise. So how do you get a vision plan? Easy, knowledge. When you “get” something, your imagination and capacity to envisage things kicks in of its own accord. You have to “get” this first, then your vision will unfold naturally.
Martin enjoys sharing wealth building strategies and is a professional investor and CEO of http://www.opportunity-investor.com.
If you would enjoy learning how to build your own money machine, then follow the link above.
April 16, 2008 at 12:30 am · Filed under Investment Infos
Every day I hear from the “experts” on CNBC-TV and the radio gurus that the way to buy stocks is find value. One man’s Rembrandt is another man’s connect-the-dots and fill in the spaces. Valuation is like beauty. It is in the mind of the beholder.
If valuation is the key to buying stocks then there should be some kind of a formula to determine what is undervalued and over-valued. In every industry there are formulas for standards of performance. For cars we want to know the zero to 60 miles per hour in how many seconds. For soap we want it to be 99 and 44/100 percent pure. For alcoholic beverages it could be how long it has been aged. And on and on.
Yet in the stock market we have no hard and fast set of rules by which to judge a company performance. Ah, and there’s the rub! No matter how good a company performance might be it may have no bearing on the price performance of the stock. You can find good companies that are within a sector that is doing poorly and yet one company can be making huge profits and sales, but the stock price is going nowhere. There need not be any correlation.
When you are in a bull market almost every stock goes up - even the dogs. When you are in a bear market almost every stock goes down - even the best ones. We ended an 18 year bull market in 2000 and almost without exception every stock headed for the exit.
Bull and bear markets follow relatively standard patterns of about 16 to 18 years up and 16 to 18 years down and the valuations go right along with them. If you own stocks or especially index funds during the bear periods you will be lucky to have broken even at the end of the 16-year cycle. Cash in your mattress will outperform market returns while the bear is in charge.
During these bear times there will be periods when the market will have a nice advance such as the one we saw start in 2003. These intermediate rises can ultimately bring many investors back into the market only to lose it when the rally is over and true valuation returns.
One valuation measurement for the overall market is the Price/Earnings ratio of the S&P500 Index. The median number for the historic purposes has been around 14. Today it is running about 21 which is considered high. When bear markets end the P/E can be about 6 or 8. There are other factors to be considered when buying any stock or fund, but the one thing that is most important is to have an exit strategy. Without one you will give back your profits.
No one knows exactly where the top or bottom of a market move will be. Knowing conventional valuations is one tool to help your buying and selling decisions.
Al Thomas’ book, “If It Doesn’t Go Up, Don’t Buy
It!” has helped thousands of people make money
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method. Read the first chapter at
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Copyright 2005
April 8, 2008 at 2:40 am · Filed under Investment Infos
Was singer Stephen Stills giving investment advice when he wrote the song “For What It’s Worth”? Or is this just another investment firm experiencing a ’60’s flashback?
Take it from me; a little paranoia can be a good thing. It makes you very aware. And you need to be aware…not only of trends in the marketplace, but also longer term trends that are evolving all around us.
Let me explain. Imagine you were turning age 65, not today…but way back in 1950. Your average life expectancy beyond 65 back then was 13.9 years. This was the original idea behind social security…they just didn’t expect so many folks to be living past 75 or 80.
Today we’re approaching the point where people will have an average life expectancy of more than 20 years after retirement. Going forward, many will be retired for 25 years, or even longer! And if you’re blessed with some luck and you worked hard at staying in good shape, it may be even longer than that.
That’s 25 years or more without a paycheck! With most folks simply “working for the weekend,” that’s enough to make most baby boomers paranoid.
But here’s where it gets worse: Many have nothing substantial saved for retirement!
I had a 60 year old prospective client tell me recently (with a straight face) that he was “living in his retirement plan.” Meaning, he had nothing set aside for retirement. He simply planned on selling his expensive home when he retired and expected to live on whatever he could get for it.
Ok. I understand. But this is where it gets even more interesting. In our conversation, he went on to tell me, “Come on, my wife and I work hard. We only take two vacations every year…when some of our friends seem like they’re away more than they’re home! And since we work hard, we also figured we deserve to drive around in new cars every two or three years. And don’t talk to me about our club membership, that’s our social time. After all, we deserve it.”
Not only did this guy not look ahead and think through to the end of the game, he also expects that when he’s retired, he’ll be comfortable in a completely different lifestyle…living in a scaled down home, no vacations, no new cars, maybe no private club either. Wow. A total change. He may have a long adjustment phase.
So, what will you do? What’s your game plan…sell your home and move to a sunnier climate? The demographics show that the baby boomer generation is the largest in the United States. Meaning generations to follow are smaller in size. Forget about the tax and social security questions, we can debate them for hours without an answer. That’s a train wreck; I’m not planning on seeing much from social security.
I want you to consider this: since generations to follow are smaller in size, what’s the one thing we’ve got quite a bit of, that future generations won’t need as much of? (And have trouble affording anyway?)
The answer is there will be fewer home buyers in the future. Not next month, not next year. Down the road. And by the way, they can’t afford your asking price. Who will you sell your house to when it’s time to cash it in…and at what price? If you’ve been a steady reader of my articles, you know that if too many sellers all show up at the same time, what happens to prices? They all drop. Too much supply.
And that’s a retirement plan?
When I sit with clients I try and probe what their “end of the game” will look like. Where will you be when it’s time for you to hang up your spikes? What will you do? You need to start with a clear picture of where you want to finish. Then everything falls into place coming back to the present…and what needs to get done today. Otherwise, it’s time for paranoia.
Thomas Mullooly, President of Mullooly Asset Management, works one on one with individuals so they can regain control of their investments. Tom’s popular email alerts help folks to reduce the risks in their portfolios. To learn how to stop making simple investing mistakes and to sign up for Tom’s email alerts, visit http://www.mullooly.net, today!
March 31, 2008 at 4:42 pm · Filed under Investment Infos
StockInterview: Let’s get the cold spots out of the way so investors are forewarned about which countries to avoid.
Lawrence Roulston:
A lot of the (mining) companies that went overseas in decades back are recognizing the political difficulties with dealing in some jurisdictions. These include places like Indonesia, Columbia, and several of the African countries, such as Congo, Sudan and Eritrea. All of those places where there are great geological prospects, but are more and more risky to deal in. I think some of that mining is coming back closer to home, which is right here in Canada.
StockInterview: So Canada is on your “favorite countries” list?
Lawrence Roulston:
At the very top of the list would be Canada. As of right now, taking into account the geological potential, political situation, infrastructure and all the other issues, I would (highly) rate Canada and British Columbia. They have had decades of work. But for the last decade, there hasn’t been very much going on. The companies are just coming back and picking up with what’s been going on. Similarly, Ontario, Quebec - tremendous geological potential - and it’s been kind of ignored for a long time. Canada is now the most important place in the world for diamonds, representing 50 percent on exploration spending for diamonds.
StockInterview: Is there a specific mineral or metal that makes Canada especially appealing?
Lawrence Roulston:
It’s the whole gambit. Canada has always been one of the top metal producers, and it’s coming back to life. Of course, gold is at the top of the list, but also base metals and uranium. The Athabasca Basin in northern Saskatchewan is far and away the most important area to be looking at, geologically. It’s currently the biggest source of uranium and contains the highest grade deposit. There are other uranium prospective areas in Canada that are just emerging. The Thelon Basin in the Northwest Territories, north of the Athabasca Basin, is very similar, geologically, to the Athabasca Basin. It had some work done in the 1970s, and it’s been pretty much ignored until very recently. Going a little further north to Hornby Basin, it is a similar kind of situation. In Labrador, the central mineral belt is just emerging as a very important place to be looking for uranium.
StockInterview: Do you have any favorite companies, which you are following and which have good prospects?
Lawrence Roulston:
NovaGold Resources (TSX: NG; Amex: NG), for example, with the Galore Creek. It’s a billion ton deposit with enormous metal content. (Editor’s Note: Galore Creek has been called one of the largest and highest grade undeveloped porphyry-related gold-silver-copper deposits in North America.)
StockInterview: What is another of your favorite areas, which has gone largely undetected during this bull market?
Lawrence Roulston:
Nevada would be at the top of the list of anywhere in the world to be working and Alaska right behind it. There is huge potential in Alaska. Mining companies have only scratched the surface of exploration up there. Two of the largest metal deposits in the world are in Alaska. These are both discoveries going back decades, but work over the last couple of years has brought them to the point where they’re now recognized as among the largest metal deposits in the world: Donlin Creek, a 25-plus million ounce gold deposit, and the Pebble deposit, held by Northern Dynasty (TSX: NDM). The Pebble deposit is significantly larger than, and of comparable grade to, Ivanhoe’s (NYSE: IVN) Oyu Tolgoi (copper-gold) deposit in Mongolia. (Editor’s Note: The Donlin Creek project is a joint venture between NovaGold and Barrick Gold.)
StockInterview: Anywhere else in the world where you can find a great, but still “new” resource investment opportunity, in light of how hard the commodities bull has been stampeding the past few years?
Lawrence Roulston:
Often the better value to be had, or the better opportunity, is in being a little bit out of step with the crowd. One of the areas offering some outstanding opportunities is China.
China has done a tremendous amount of geological work, over the last few decades, but all from the perspective of finding, and then quickly developing, small deposits. There has been very little effort devoted to taking a bigger picture type look at China. The companies that have been able to take a kind of bigger picture look at China have begun to develop what I think are going to be some pretty spectacular results over time.
StockInterview: Isn’t it tough, though, doing business in China?
Lawrence Roulston:
There is still a perception out there that China is a difficult place to do business. Most people from the west walk into China cold and try to do a deal. It would be impossible for them. But, for western companies that are able to team up with groups that are well established within China - so that they’re able to find their way through the system over there - then there are outstanding opportunities. There are mountains of geological information - all in Chinese, of course. You’ve got to be able to work within that system and get the information, know how to put the deals together.
StockInterview: What do you mean by “knowing how to put the deals together?”
Lawrence Roulston:
If I was to go over to China and try to do a deal to get access to a coalbed methane property, I wouldn’t have a clue about how to begin. On the other hand, I could walk into the Petroleum Club in Calgary, and meet a half dozen guys and talk to them. I could build on my leads, and probably in a day be talking about a deal. When you go into China, unless you have somebody on your team that can get into the system and deal with the people, because of language issues, cultural issues and just having access to the information and knowing what sort of terms that they might be looking for… It’s a different culture from every perspective, and not the least of which is a different way of doing business.
StockInterview: In your April issue, you recommended one company, which overcame those hurdles, meets your criteria and already has a coalbed methane deal in China.
Lawrence Roulston:
Pacific Asia China Energy (TSX: PCE) established connections in China. They can draw on their contacts and their network. They can get into see the right people, where they can actually talk seriously about doing deals, and have an enormous leg up over somebody that walked in cold and tried to establish and build contacts and put a deal together. I think it is an absolutely outstanding opportunity that they’ve seized on.
StockInterview: There are many coalbed methane opportunities in Alberta. Why look to China?
Lawrence Roulston:
One of the things that makes China interesting is the entry cost to get into a coalbed methane (CBM) play in China is fairly modest. For example, to go to Alberta, or anywhere in the United States, and get access to the exploration rights, or exploitation rights, is enormously expensive. In China, they walked in and, for a fairly modest up-front commitment, obtained a control position in a CBM prospect.
StockInterview: How does Pacific Asia China Energy’s coalbed methane property in Guizhou, China rate against other coalbed methane plays?
Lawrence Roulston:
I think it’s an outstanding opportunity. Chinese government agencies have done an enormous amount of work at delineating the coal. To be able to step into that amount of data as a starting point to build up their CBM resource? The bottom line is that they’re not out there looking for coal. They know exactly where the material is, and they’re able to quickly start defining the issues like recoverability. They’re drilling in order to establish the basic physical parameters of the flow rates and the content within the coal. I think the companies which are able to effectively exploit the CBM technology in China are going to be the pioneers in that area.
StockInterview: To Americans, any business in China might appear to be “pioneering,” since most of still think of China as a third world country.
Lawrence Roulston:
I’ve been to China many times and I’ve been to parts of China where most people, as tourists, would never get anywhere near, because I go there to look at mineral exploration projects and mining projects. I’ve been to every corner of the country as well as the major cities. What I see happening everywhere I go is a pace of development that I’ve never seen anywhere else in my life, anywhere in the world. That is, 1.3 billion people are going from a basically rural farm-based economy to a modern industrial economy at a pace that has just never before been conceived.
StockInterview: How do you quantify that?
Lawrence Roulston:
This is a number that most people won’t get, and you won’t get until you’ve been over there and have seen it. There are 300 million people in China that are already well into the middle class. By middle class, I am comparing (the Chinese middle class) to the same absolute standards as we would apply in Canada or the United States in terms of dollars in your bank account, value of your house and your car, and everything else. There are 300 million people that have already achieved that status, which is more than the people at that status in North America. There are another 1 billion people who are busting their butts to get to that level.
StockInterview: But isn’t the rest of the world’s rural population just as industrious and ambitious?
Lawrence Roulston:
I’ve been in Africa, the Middle East, Asia and Latin America. If you go into any of those areas and you walk into the small towns, a lot of people are sitting around drinking coffee, crying the blues and complaining about how terrible life is. Go into a similar area in China, and the people are out working in the fields. In the middle of winter, they’re fixing up their fences, the dams and terraces, and clearing rocks, removing trees and stuff like that. It’s a high level of industry I’ve never seen in any other part of the world. So it goes from that ground level right up to the entrepreneurs, and the guys who are building the high rise condominium complexes in Shanghai.
StockInterview: How long will it take before American investors realize the impact China has on the global economy?
Lawrence Roulston:
It’s going to happen in a gradual way. I think those that keep their heads buried in the sand are going to get left behind as the world pulls ahead. I would suggest any investor in any company ask the question of the company: “Is that company involved in some way in China?” There are a lot of North American companies that have a very significant presence in China in terms of doing business over there, of getting established, of selling products or manufacturing products in China.
StockInterview: Why is China so important with regards to this commodities bull market, and are there still opportunities for investors?
Lawrence Roulston:
There is a lot of geological potential, and there is the perception that it’s difficult. Therefore, there isn’t yet a big crowd of people over there chasing after deals. The flip side of it is that China and its neighbors in southeast Asia, representing 3 billion people, are going through the modern industrialization process. That is going to continue to create a massive demand for metals for, I believe, a decade or probably even a couple of decades into the future.
StockInterview: And most likely, the U.S. investor is going to be left behind or the last one into the pond?
Lawrence Roulston:
The bottom line is that Americans tend to be more inward focused. The other evening I was having dinner with an oil man from Texas who had spent a lot of time in China. He had seen China first hand and was very bullish. I asked him, “How many of your countrymen do you think really get it about China?” And he responded, “Oh, about five.” Then he said, “Congress doesn’t get it, investors don’t get it and the man in the street doesn’t get it.” Americans just don’t understand what’s happening over there yet.
James Finch contributes to StockInterview.com and other publications. Read the rest of this interview and sign up for your free subscription to articles by James Finch by visiting http://www.stockinterview.com You can write to James Finch at jfinch@stockinterview.com Lawrence Roulston’s newsletter: http://www.resourceopportunities.com
