Color washing is a new painting technique that leaves walls with a mottled, glazed effect that is both dramatic and simple. Color washing is the sky type look seen advertised in paint stores. Color washing the walls has
become quite popular. Supplies for color washing walls can be purchased anywhere paint is sold.
Color washing begins much like any other painting project. Supplies needed are latex paint, drop cloths, painter's tape, brushes, paint, rollers, mixing sticks, paint trays, sponges, rags, crumpled paper, textured fabric, glaze, a putty knife and joint compound. You may also want a small bucket to mix the glaze and paint for color washing the walls.
Remove all furniture from the room prior to color washing the walls. Spread out drop cloths to protect floors from color washing paint and glaze. Cover all trim with painter's tape. Any flaws in the surface of the walls should be filled with joint compound, smoothed over with a putty knife, and allowed to dry before color washing the walls.
Primer paint may be used if desired to create a friendlier surface for color washing. Once the primer is dry, the first (base) coat of color washing paint may be applied. This will usually be the lighter color of the two shades chosen. This layer is done just like any other paint job. The second color will accent this base color with a glaze effect.
The second (glaze) coat is applied after the first coat has dried. This is important as the two colors should not blend. The mottled effect of color washing the walls is obtained by using a sponge or rag to apply the second coat. It's important that both color washing wall colors remain true for the best effect.
Samples of the look can be seen here.
When the first coat of paint has dried on the walls it's time to apply the second coat. Mix the glaze and the second paint color in a proportion of 4 parts color washing glaze to 1 part paint. Now experiment on white paper to get the desired effect wanted for the mottled walls look. This is done by dipping either a sponge, cloth, brush, crumpled paper, or textured cloth in the paint glaze mixture and dabbing randomly..
Once the right technique and tools are found to give the desired effect, it's time to start putting the glaze and paint color washing mixture on the actual walls. Most people find it best to start in the center of
each of the taped off walls and work outward in a circular motion. The more color washing glaze and paint mix applied, the darker the second color will appear.
After the last coat is applied, protect the color washing paint by using a clear varnish or acrylic coating if desired. Be sure that all the paint is dried on the walls prior to this step. This will prevent smearing of the beautiful color washing job. After the varnish or acrylic coating are dry, remove all the drop cloths and paint tape and bring the furniture back into the room. Now you are ready to show off the color washing walls technique to friends and family.
Sources :
www.lowes.com
Monday, 27 December 2010
Turn a Flea Market Lamp into a Decorator Accent
Purchasing new lamps is one of the best ways to update your home decor. However, styles are often limited, and they can be very expensive. Often the lamp base you like may be paired with a shade that you do not. A
simple, and inexpensive, solution is to purchase a lamp at a flea market and then transform it into a decorator accent.
Materials
1. A flea market lamp
2. White primer paint
3. Large paper for shade template
4. Acrylic craft paint
5. Fabric or wallpaper piece
6. Trims and embellishments
Preparing the Lamp and Shade
The first step in preparing the flea market lamp and shade for its transformation into a decorator accent is a thorough cleaning. Make sure all surfaces are free of dust and debris. After cleaning, make sure that it dries completely.
After cleaning, you will want to remove or protect all of the hardware of the lamp. This includes any switches, metal bases, light bulb sockets, and things like that. You can use painter's masking tape or plastic.
The next step is to use white primer paint to completely paint over the lamp base. If necessary, give two coats to get a smooth surface.
If the shade is fabric covered, you can remove the old fabric. If it is painted or a paper shade, you might want to use primer paint on that as well. Make sure the paint is non-toxic and able to withstand some heat from the light bulb.
Decorating the Lamp Base
After the primer paint is completely dry, you will want to decorate the lamp base. This can be done with a simple paint job in the color of your choice. You might also want to use a faux finish painting style such as marble or sponge painting. Shiny enamel paints will give a more modern appearance. You can also stencil designs or decoupage onto the lamp base.
Decorating the Lamp Shade
The first step in decorating the lampshade is to create a paper template of it. Simple lay the lampshade on the large paper and roll it, tracing the outline of the shade as you go. This template should fit perfectly around the lampshade when it is cut out.
A popular way to cover an old lamp shade is to cut out a piece of fabric, using the shade template, and using spray adhesive or watered down glue to attach it to the shade. Make sure to leave some excess to turn to the
inside. You can do much the same thing with unglued wallpaper or patterned paper pieces. After any of these coverings, you might want to attach decorator trim or lace to the top and bottom edges of the shade.
Turning the flea market find into a magnificent decorator lamp is easier than you might think. Instead of paying over one hundred dollars for a high style lamp in a department store, you can spend twenty dollars on the lamp and some basic materials to decorate it. The end result will be exactly the style you want, and will be even more impressive because you made it yourself.
simple, and inexpensive, solution is to purchase a lamp at a flea market and then transform it into a decorator accent.
Materials
1. A flea market lamp
2. White primer paint
3. Large paper for shade template
4. Acrylic craft paint
5. Fabric or wallpaper piece
6. Trims and embellishments
Preparing the Lamp and Shade
The first step in preparing the flea market lamp and shade for its transformation into a decorator accent is a thorough cleaning. Make sure all surfaces are free of dust and debris. After cleaning, make sure that it dries completely.
After cleaning, you will want to remove or protect all of the hardware of the lamp. This includes any switches, metal bases, light bulb sockets, and things like that. You can use painter's masking tape or plastic.
The next step is to use white primer paint to completely paint over the lamp base. If necessary, give two coats to get a smooth surface.
If the shade is fabric covered, you can remove the old fabric. If it is painted or a paper shade, you might want to use primer paint on that as well. Make sure the paint is non-toxic and able to withstand some heat from the light bulb.
Decorating the Lamp Base
After the primer paint is completely dry, you will want to decorate the lamp base. This can be done with a simple paint job in the color of your choice. You might also want to use a faux finish painting style such as marble or sponge painting. Shiny enamel paints will give a more modern appearance. You can also stencil designs or decoupage onto the lamp base.
Decorating the Lamp Shade
The first step in decorating the lampshade is to create a paper template of it. Simple lay the lampshade on the large paper and roll it, tracing the outline of the shade as you go. This template should fit perfectly around the lampshade when it is cut out.
A popular way to cover an old lamp shade is to cut out a piece of fabric, using the shade template, and using spray adhesive or watered down glue to attach it to the shade. Make sure to leave some excess to turn to the
inside. You can do much the same thing with unglued wallpaper or patterned paper pieces. After any of these coverings, you might want to attach decorator trim or lace to the top and bottom edges of the shade.
Turning the flea market find into a magnificent decorator lamp is easier than you might think. Instead of paying over one hundred dollars for a high style lamp in a department store, you can spend twenty dollars on the lamp and some basic materials to decorate it. The end result will be exactly the style you want, and will be even more impressive because you made it yourself.
Top Five Flea Market Products that Saturate the Market
Choosing what to sell at the flea market can be difficult. Finding the perfect product, or produtcts, that fills a niche at a low price takes a lot of research. Common sense about what items would sell well at outdoor
flea markets in the summer may lead you astray, however. This article covers the top ten flea market products that have saturated the market so much it is hard sell them for a profit.
Flea Market Product - Socks
There seems to be many good wholesale sources for socks, because flea markets are often overrun with them. It is easy to transport and package socks, and almost everyone uses them every day, they have become difficult to sell.
Flea Market Product - Sunglasses
Two different types of sunglass sellers appear at many flea markets: the cheap generic sunglass seller, and the knock off brand name sunglass sellers. Both of these are well represented at most flea markets.
Flea Market Product - Swords and Knives
As unusual as these products might seem, they are very popular flea market merchadise. Where legal, sword and knife sellers can be found in every row of flea market vendors. Unless you find a very unique type of knife, or can offer super low prices, there will be too much competition for you to profit.
Flea Market Product - Cheap Toys
Children are great people to market to at the flea market. Many parents give their kids a dollar or two to spend while the family walks around the tables and booths. However, that does not mean that cheap toys are good sellers. The main type of common toys found at the flea market include pull back cars, dollar store type dolls and trinkets, and plastic play sets with dozens of small parts.
Flea Market Product - Work Gloves
Like the socks, work gloves come in large packs of a dozen pairs. Inexpensive to purchase wholesale, these gloves show up on many flea market tables. Most people I know who need work gloves prefer to purchase thicker leather ones instead of woven cotton or knit.
If you want to begin a business selling at flea markets or swap meets, it is important to do your research about products before you buy. Finding wholesale sources for the above items may be much easier than finding
unique merchandise. That, however, is the problem. Too many people show up at the market with the same products. Whoever can sell for the least amount makes the most sales, but realizes very little profit. For true sales success, find a product that no one else is selling.
flea markets in the summer may lead you astray, however. This article covers the top ten flea market products that have saturated the market so much it is hard sell them for a profit.
Flea Market Product - Socks
There seems to be many good wholesale sources for socks, because flea markets are often overrun with them. It is easy to transport and package socks, and almost everyone uses them every day, they have become difficult to sell.
Flea Market Product - Sunglasses
Two different types of sunglass sellers appear at many flea markets: the cheap generic sunglass seller, and the knock off brand name sunglass sellers. Both of these are well represented at most flea markets.
Flea Market Product - Swords and Knives
As unusual as these products might seem, they are very popular flea market merchadise. Where legal, sword and knife sellers can be found in every row of flea market vendors. Unless you find a very unique type of knife, or can offer super low prices, there will be too much competition for you to profit.
Flea Market Product - Cheap Toys
Children are great people to market to at the flea market. Many parents give their kids a dollar or two to spend while the family walks around the tables and booths. However, that does not mean that cheap toys are good sellers. The main type of common toys found at the flea market include pull back cars, dollar store type dolls and trinkets, and plastic play sets with dozens of small parts.
Flea Market Product - Work Gloves
Like the socks, work gloves come in large packs of a dozen pairs. Inexpensive to purchase wholesale, these gloves show up on many flea market tables. Most people I know who need work gloves prefer to purchase thicker leather ones instead of woven cotton or knit.
If you want to begin a business selling at flea markets or swap meets, it is important to do your research about products before you buy. Finding wholesale sources for the above items may be much easier than finding
unique merchandise. That, however, is the problem. Too many people show up at the market with the same products. Whoever can sell for the least amount makes the most sales, but realizes very little profit. For true sales success, find a product that no one else is selling.
Flea Market Wholesale Items - How to Find the Bestselling Products
Selling at flea markets can be a rewarding business because of the amount of money that you can make. It is also more exciting than selling at a regular store. The atmosphere of old and vintage products and the thrill
of hunting for rare finds emanating from the crowd are things that you will not get in an ordinary shop. One way that you can sell at flea markets is by selling flea market wholesale items. However, you have to know the best selling products among flea market customers. Here are some tips on how to find great wholesale products to sell at flea markets.
Go to several flea markets and ask wholesale flea market vendors about which bulk products are the most saleable to customers. There is a good change they will not tell you. After all, they do not want the competition. Asking in a roundabout way will probably give you more information, as will watching the tables of several who seem to be selling in greater quantities. If a vendor is selling the types of products you are interested in, keep an eye on shopper volume and price ranges that seem to make the sale.
Also ask buyers of flea market wholesale items to know which wholesale products they look for the most and why. Again, watching the flow of customers through a popular flea market venue can help you with this. You should also know the reasons so that you will better understand the flow and processes of buying and selling at flea markets.
Choose impulse buys that will wow your customers. For example, nobody will miss the chance to buy or take at look at real gold being sold for a dollar. This is a once in a lifetime opportunity for the flea market buyers. But you should not tell lies about your products. If you said you are selling real gold for one dollar, then you should really sell gold for one dollar. Impulse buy items are usually a lot less exciting than that. Using loss leaders to attract customers works well, but you shouldn't damage your bottom line.
Look for wholesale companies that offer great deals for their products. You have to know first the kind of product that you want to sell in bulk to make your search easier and faster. The bestselling flea market
products are often the ones you can get at the cheapest prices. Once you have chosen your product, you can now start looking for companies that offer flea market wholesale items.
of hunting for rare finds emanating from the crowd are things that you will not get in an ordinary shop. One way that you can sell at flea markets is by selling flea market wholesale items. However, you have to know the best selling products among flea market customers. Here are some tips on how to find great wholesale products to sell at flea markets.
Go to several flea markets and ask wholesale flea market vendors about which bulk products are the most saleable to customers. There is a good change they will not tell you. After all, they do not want the competition. Asking in a roundabout way will probably give you more information, as will watching the tables of several who seem to be selling in greater quantities. If a vendor is selling the types of products you are interested in, keep an eye on shopper volume and price ranges that seem to make the sale.
Also ask buyers of flea market wholesale items to know which wholesale products they look for the most and why. Again, watching the flow of customers through a popular flea market venue can help you with this. You should also know the reasons so that you will better understand the flow and processes of buying and selling at flea markets.
Choose impulse buys that will wow your customers. For example, nobody will miss the chance to buy or take at look at real gold being sold for a dollar. This is a once in a lifetime opportunity for the flea market buyers. But you should not tell lies about your products. If you said you are selling real gold for one dollar, then you should really sell gold for one dollar. Impulse buy items are usually a lot less exciting than that. Using loss leaders to attract customers works well, but you shouldn't damage your bottom line.
Look for wholesale companies that offer great deals for their products. You have to know first the kind of product that you want to sell in bulk to make your search easier and faster. The bestselling flea market
products are often the ones you can get at the cheapest prices. Once you have chosen your product, you can now start looking for companies that offer flea market wholesale items.
Use Impulse Buy Items to Attract Flea Market Customers
Flea market sellers have a two-fold problem. One problem is that they have to attract customers to their table or booth, and the second problem is actually making the sale. Both of these problems can be overcome through
the use of impulse buy items.
Attracting flea market customers with impulse buy items is a good business practice. You want these products to be inexpensive, eye-catching, and displayed prominently on your table. Here are three great ideas for different types of impulse buy items that will attract flea market customers:
One: Beat the Heat
Most flea markets and swap meets are held in the spring, summer, and autumn. Most are held outside. This means that people will be walking around in the warm sun for hours. Of course, many people enjoy the heat, but many others do not plan properly for a long day out at the flea market.
Items that beat the heat are great impulse buys for flea market customers. A table that offers these comfort items will get a lot of visitors.
Here are some great ideas for impulse buy items that beat the heat:
1. Sunglasses
2. Brimmed hats and visors
3. Mini fans (with or without spritz bottles attached)
4. Shade umbrellas
5. Sunblock and suntan lotion
Two: Catch the Kids
Parents often give their kid a dollar or two and tell them that they can spend it on whatever they would like at the flea market. Kids are great impulse spenders. If you display a colorful assortment of toys, games, or other items, you will attract kids. Once you have the kids' attention, it becomes easier to sell to their parents.
Some great impulse buy items for kids include:
1. Pinwheels
2. Toy cars, trucks, and tractors
3. Stuffed Animals
4. Small dolls
5. Costume jewelry
Three: Strange Stuff
One of the best ways to attract anyone to your flea market table or booth is by displaying strange items in prominent positions. People will be drawn to the unusual or humorous item, and many will buy them for no reason
at all. Think of the singing bass, that plastic fish on the wooden plaque that would dance and sing. They serve no purpose, are rather ugly, but people just had to have them because they were strange and funny. Find an impulse buy item like that, and you can attract customers easily.
Attracting flea market customers with impulse buy items is a great way to increase your overall profit. By displaying these items at the front of your table so that they will catch the eyes of potential customers, you should be able to attract more business to your flea market table or booth. Even if the impulse buy item does not translate into the sale of other items, you will still make a good profit this way.
the use of impulse buy items.
Attracting flea market customers with impulse buy items is a good business practice. You want these products to be inexpensive, eye-catching, and displayed prominently on your table. Here are three great ideas for different types of impulse buy items that will attract flea market customers:
One: Beat the Heat
Most flea markets and swap meets are held in the spring, summer, and autumn. Most are held outside. This means that people will be walking around in the warm sun for hours. Of course, many people enjoy the heat, but many others do not plan properly for a long day out at the flea market.
Items that beat the heat are great impulse buys for flea market customers. A table that offers these comfort items will get a lot of visitors.
Here are some great ideas for impulse buy items that beat the heat:
1. Sunglasses
2. Brimmed hats and visors
3. Mini fans (with or without spritz bottles attached)
4. Shade umbrellas
5. Sunblock and suntan lotion
Two: Catch the Kids
Parents often give their kid a dollar or two and tell them that they can spend it on whatever they would like at the flea market. Kids are great impulse spenders. If you display a colorful assortment of toys, games, or other items, you will attract kids. Once you have the kids' attention, it becomes easier to sell to their parents.
Some great impulse buy items for kids include:
1. Pinwheels
2. Toy cars, trucks, and tractors
3. Stuffed Animals
4. Small dolls
5. Costume jewelry
Three: Strange Stuff
One of the best ways to attract anyone to your flea market table or booth is by displaying strange items in prominent positions. People will be drawn to the unusual or humorous item, and many will buy them for no reason
at all. Think of the singing bass, that plastic fish on the wooden plaque that would dance and sing. They serve no purpose, are rather ugly, but people just had to have them because they were strange and funny. Find an impulse buy item like that, and you can attract customers easily.
Attracting flea market customers with impulse buy items is a great way to increase your overall profit. By displaying these items at the front of your table so that they will catch the eyes of potential customers, you should be able to attract more business to your flea market table or booth. Even if the impulse buy item does not translate into the sale of other items, you will still make a good profit this way.
Reselling Clearance Sale Items at the Flea Market for a Profit
Shopping the clearance sale racks in brick and mortar stores is a great way to save money on your favorite merchandise. But those clearance sale items can also make you big money at the flea
market. Read below to find out how to pick a flea market to sell at and how to market clearance merchandise to make big money.
Clearance at the Flea Market - The Site
Not every flea market will be a good place to sell clearance sale items from stores. Of course, you need to find a flea market where people sell different types of merchandise and not specifically antiques or collectibles. Also choose a flea market where customers are more willing to spend money. Some are full of super bargain basement shoppers who want everything for a dollar or less. Pick a flea market location that is in a more middle to upper class area.
Clearance at the Flea Market - Shopping
Shopping clearance racks for merchandise to sell at the flea market is easy if you pay attention to a few things. First of all, be sure that the items you get are not damaged or broken. Some clearance rack items are returns or older products that could be less than perfect. Do not choose these to sell at the flea market.
Some clearance items that could sell well at the flea market include electronics, movies, video games, and music, and automotive goods. Name brand clothing and children's clothing are also good sellers.
Clearance at the Flea Market - Selling
Leaving clearance stickers on the items you choose to sell is a bad idea. If people can see the price you paid for the item, they will not want to spend more. However, if only the full retail price is on the tag, leave it. You can point out to potential customers what a good bargain they are getting.
It is important when selling clearance sale items at the flea market to sell them just as if they are wholesale items. Do not tell customers where the clearance products came from, because they will just go to the store to purchase the item themselves.
Selling clearance sale merchandise at the flea market can make you a lot of money if you know how to do it. Shop for high demand items such as electronics and clothing at the lowest prices possible. Never reveal to
your flea market customers what you paid for it or where you got it. New items from clearance racks fetch a lot of money for flea market vendors.
market. Read below to find out how to pick a flea market to sell at and how to market clearance merchandise to make big money.
Clearance at the Flea Market - The Site
Not every flea market will be a good place to sell clearance sale items from stores. Of course, you need to find a flea market where people sell different types of merchandise and not specifically antiques or collectibles. Also choose a flea market where customers are more willing to spend money. Some are full of super bargain basement shoppers who want everything for a dollar or less. Pick a flea market location that is in a more middle to upper class area.
Clearance at the Flea Market - Shopping
Shopping clearance racks for merchandise to sell at the flea market is easy if you pay attention to a few things. First of all, be sure that the items you get are not damaged or broken. Some clearance rack items are returns or older products that could be less than perfect. Do not choose these to sell at the flea market.
Some clearance items that could sell well at the flea market include electronics, movies, video games, and music, and automotive goods. Name brand clothing and children's clothing are also good sellers.
Clearance at the Flea Market - Selling
Leaving clearance stickers on the items you choose to sell is a bad idea. If people can see the price you paid for the item, they will not want to spend more. However, if only the full retail price is on the tag, leave it. You can point out to potential customers what a good bargain they are getting.
It is important when selling clearance sale items at the flea market to sell them just as if they are wholesale items. Do not tell customers where the clearance products came from, because they will just go to the store to purchase the item themselves.
Selling clearance sale merchandise at the flea market can make you a lot of money if you know how to do it. Shop for high demand items such as electronics and clothing at the lowest prices possible. Never reveal to
your flea market customers what you paid for it or where you got it. New items from clearance racks fetch a lot of money for flea market vendors.
How to Save Money on Video Games in the Bad Economy
Everybody is trying to save money with the economy being as bad as it is right now. I'm not sure how much the bad economy will affect the sales of video games since video games
and movies are a form of entertainment that many people are going to find money for. But if you can save money on video games then why not do it? Here are some tips on how to save money on video games in this bad economy.
The most obvious way to save money is to not buy video games at all. Video games cost a lot of money these days and many don't have enough money to buy video games for full price even before the bad economy. Renting games might be the way to go. Video gamers that like all the really popular games can probably find what they want at a local video game rental store but anybody looking for a better selection can get a membership at Gamefly. Gamefly has a monthly fee but its worth the price for somebody that is constantly renting video games.
Another route for saving money on video games during the bad economy is to only buy used video games. Some stores might have used video games and Gamefly will sell their used video games also. Another option for saving money on video games in the bad economy is to trade in your old video games. At first I thought this was a ripoff because I would take back a game that cost $50 and the story would offer only a couple dollars of credit for it. But if that game is never going to be used then a few dollars is better than nothing. With this bad economy why not save every dollar possible?
Naturally it is always good idea to keep your ear to the ground and look for a lot of video game sales. A great place to check www.cheapassgamer.com. This site often keep its readers up to date on the latest deals. Two sites that www.cheapassgamer.com often mentions are Amazon.com and http://store.steampowered.com/
In Amazon.com's video game section there is a Video Game Deals option that will often have games for 5% - 15% off then there is also a Deal of the Day option that has a much better deal. For example,
Amazon.com's Deal of the Day is currently selling Banjo-Kazooie: Nuts and Bolts (a game that got an 8.3 from IGN.com) for 50% off. Steampowered.com sells some games that start at lower prices than normal games (although I'm not sure of the quality of these video games) and then also has some incredible sales on normally expensive video games. The most recent deal I saw from Steam was Lost Planet: Extreme Condition for $5. That's 75% off.
If you or your children are into good graphics then you are cursed with enjoying the current systems. But if you're more concerned with just playing fun games then why even worry about the latest systems. Forget about the Xbox 360 and Playstation 3. Instead find a Xbox or Playstation 2 and save money. Microsoft and Sony aren't still making video games for these systems but both already have a huge library of extremely fun games. Recently I dug out a couple of games from the FIRST Playstation and had as much fun with it as I do on my Xbox 360. Heck, if you just want to have fun why not go all the way back to Sega Genesis, SNES and NES. There is even a system called the FC Twin 2-in-1 NES that will play NES and SNES cartridges.
There is one more way to save money on video games in this bad economy that might not be obvious. Buy sports games, racing games, multiplayer games and roleplaying games. Why those genres? During this bad economy buying short games that take 3 or 4 hours to beat is going to mean that a video gamer can fly through it quickly and then they will need to buy another video game. Sports games will give a video game more bang for their buck during this bad economy because no genre of video games has more replay value than sports games. Racing games and multiplayer games also have a lot of replay value if there is somebody else to play with. Roleplaying games on the other hand are more bang for your buck because it takes a lot longer to beat. If somebody buys Fable 2 then they'll probably beat it in a couple of days and will need to buy a new game. If somebody buys Lost Odyssey then it could take a couple of weeks or even a month to beat it and they won't have to buy another new game as soon.
and movies are a form of entertainment that many people are going to find money for. But if you can save money on video games then why not do it? Here are some tips on how to save money on video games in this bad economy.
The most obvious way to save money is to not buy video games at all. Video games cost a lot of money these days and many don't have enough money to buy video games for full price even before the bad economy. Renting games might be the way to go. Video gamers that like all the really popular games can probably find what they want at a local video game rental store but anybody looking for a better selection can get a membership at Gamefly. Gamefly has a monthly fee but its worth the price for somebody that is constantly renting video games.
Another route for saving money on video games during the bad economy is to only buy used video games. Some stores might have used video games and Gamefly will sell their used video games also. Another option for saving money on video games in the bad economy is to trade in your old video games. At first I thought this was a ripoff because I would take back a game that cost $50 and the story would offer only a couple dollars of credit for it. But if that game is never going to be used then a few dollars is better than nothing. With this bad economy why not save every dollar possible?
Naturally it is always good idea to keep your ear to the ground and look for a lot of video game sales. A great place to check www.cheapassgamer.com. This site often keep its readers up to date on the latest deals. Two sites that www.cheapassgamer.com often mentions are Amazon.com and http://store.steampowered.com/
In Amazon.com's video game section there is a Video Game Deals option that will often have games for 5% - 15% off then there is also a Deal of the Day option that has a much better deal. For example,
Amazon.com's Deal of the Day is currently selling Banjo-Kazooie: Nuts and Bolts (a game that got an 8.3 from IGN.com) for 50% off. Steampowered.com sells some games that start at lower prices than normal games (although I'm not sure of the quality of these video games) and then also has some incredible sales on normally expensive video games. The most recent deal I saw from Steam was Lost Planet: Extreme Condition for $5. That's 75% off.
If you or your children are into good graphics then you are cursed with enjoying the current systems. But if you're more concerned with just playing fun games then why even worry about the latest systems. Forget about the Xbox 360 and Playstation 3. Instead find a Xbox or Playstation 2 and save money. Microsoft and Sony aren't still making video games for these systems but both already have a huge library of extremely fun games. Recently I dug out a couple of games from the FIRST Playstation and had as much fun with it as I do on my Xbox 360. Heck, if you just want to have fun why not go all the way back to Sega Genesis, SNES and NES. There is even a system called the FC Twin 2-in-1 NES that will play NES and SNES cartridges.
There is one more way to save money on video games in this bad economy that might not be obvious. Buy sports games, racing games, multiplayer games and roleplaying games. Why those genres? During this bad economy buying short games that take 3 or 4 hours to beat is going to mean that a video gamer can fly through it quickly and then they will need to buy another video game. Sports games will give a video game more bang for their buck during this bad economy because no genre of video games has more replay value than sports games. Racing games and multiplayer games also have a lot of replay value if there is somebody else to play with. Roleplaying games on the other hand are more bang for your buck because it takes a lot longer to beat. If somebody buys Fable 2 then they'll probably beat it in a couple of days and will need to buy a new game. If somebody buys Lost Odyssey then it could take a couple of weeks or even a month to beat it and they won't have to buy another new game as soon.
How to Save Money on Video Games this Christmas Season
Video games are hot items around the holidays, but buying one or two for your kids can take a big chunk out of your Christmas budget. Even if you're purchasing games for personal use, to
save money on video games, try one of the following suggestions.
Buy Pre-Played Games
Blockbuster and GameStop sell pre-played games. You can save half the cost of what a new game would cost by purchasing a used game. Most stores that sell pre-played games offer a 30 day warranty, so if you're buying the game for Christmas or a birthday makes sure that the game will be tested out within 30 days.
Buy Clearance
Best Buy and Target mark down games that have been out for a while. Sometimes you can find a new PS3 game for $15. If you see something you think the gamer on your Christmas list would like in the clearance section, don't hesitate to pick it up.
Black Friday
If you can stand the crowds, go out early and shop the Black Friday specials. Last year, I bought a new PS3 game that was originally priced at $59.99 for $29.99 at Wal-Mart. Check out the advertisements in your local newspaper to see which games will be on sale and if one you're looking for shows up, prepare to battle the crowds.
eBay
You can find new and used video games on eBay for well under their retail value. Be careful when shopping on an auction site, though. Make sure to check on the seller's rating from past sales and see if the seller offers a warranty on the game you're purchasing. Otherwise, get ready to engage in a bidding war.
Trade-Ins
You can earn store credit to buy video games by trading in some of your old games that you don't play anymore. Most games will earn you at least a few bucks in store credit and you can use that credit to buy the game you've got your sights on.
Download Games
The Nintendo Wii offers games to download through WiiWare, which downloads the game straight to your console. You can purchase classic games like Contra for a very low price. Make sure your console has an internet connection and you're set.
Demo
Check out game demos at your local game store. These are usually cheap or free and you can test the game out before buying. Xbox 360 offers demos through Xbox Live, many of which are free.
save money on video games, try one of the following suggestions.
Buy Pre-Played Games
Blockbuster and GameStop sell pre-played games. You can save half the cost of what a new game would cost by purchasing a used game. Most stores that sell pre-played games offer a 30 day warranty, so if you're buying the game for Christmas or a birthday makes sure that the game will be tested out within 30 days.
Buy Clearance
Best Buy and Target mark down games that have been out for a while. Sometimes you can find a new PS3 game for $15. If you see something you think the gamer on your Christmas list would like in the clearance section, don't hesitate to pick it up.
Black Friday
If you can stand the crowds, go out early and shop the Black Friday specials. Last year, I bought a new PS3 game that was originally priced at $59.99 for $29.99 at Wal-Mart. Check out the advertisements in your local newspaper to see which games will be on sale and if one you're looking for shows up, prepare to battle the crowds.
eBay
You can find new and used video games on eBay for well under their retail value. Be careful when shopping on an auction site, though. Make sure to check on the seller's rating from past sales and see if the seller offers a warranty on the game you're purchasing. Otherwise, get ready to engage in a bidding war.
Trade-Ins
You can earn store credit to buy video games by trading in some of your old games that you don't play anymore. Most games will earn you at least a few bucks in store credit and you can use that credit to buy the game you've got your sights on.
Download Games
The Nintendo Wii offers games to download through WiiWare, which downloads the game straight to your console. You can purchase classic games like Contra for a very low price. Make sure your console has an internet connection and you're set.
Demo
Check out game demos at your local game store. These are usually cheap or free and you can test the game out before buying. Xbox 360 offers demos through Xbox Live, many of which are free.
Important Lessons Companies Need to Learn Right Now for Successful First Quarter from GameStop
As we enter the strongest sales time of the retail year (the second half of the fourth quarter), most companies are simply focusing on sales, and strategies that will get them through the holiday season.
GameStop has just announced that it is going to be selling digital video game downloadable content through their stores after the first of the year. As a business advisor, and writer, I realize that there are valuable lessons to be learned here by many companies.
Let's start out by getting a little background about this fourth quarter decision by GameStop.
Everyday, we are seeing how the video game market is shifting more towards downloadable content. Nothing can bring this fact home more than the success of online stores run by Microsoft (for the X-Box 360), Sony (PS3, PSP, and PSP Go), and Nintendo (Wii, DS, and DSi). The introduction of the PSP Go is another example. GameStop realizes that this is a prime time to change the future strategy of the company.
GameStop customers will be able to purchase add-ons to their favorite games inside the brick and mortar GameStop stores. Once theses customers sign on to their system at home, they will be able to download this content. Customers will not have to use a credit card at GameStop for these add-ons like they would to purchase them from the online stores of the video game companies. They would be able to use cash or a check since they are making the purchase at a physical store.
When this plan launches at GameStop stores across the country after the first of the year, customers are sure to flock into the stores on a daily basis to see what new levels and other content they can download. While not specifically mentioned, this also leaves the door open for GameStop to add digital game or movie purchases to their download repertoire. They could even given customers a disc to upload if the customer does not have a connection to the Internet. These are all speculation.
Now, I stated at the beginning of this article that there was something that other companies outside of the video game market could learn from this move by GameStop. Notice, GameStop made
this move towards brick and mortar stores selling downloadable content first. GameStop has come up wit this idea, and is doing everything that it can to make sure that it is the first store on the block that offers such a deal to customers.
They did not wait for giants like Walmart, Target, of Kmart to make the first move in the war for downloadable video game console content. GameStop did not wait for Microsoft, Sony, or Nintendo to come up with a way to sell digital downloads through brick and mortar stores. GameStop did not wait around for others to test the water, they jumped right in.
Secondly, and most importantly, this announcement was made by GameStop in the middle of the fourth quarter. As someone who has worked with retail companies for a long time, I know first hand that most retail companies do not focus on anything during the fourth quarter except for sales. After the first of the year, most planners wonder what they are supposed to do now.
Instead of leading to idle minds and idle hands after the first of the year, GameStop is starting a new program for digital video game downloads. Instead of wondering what to do, planners for GameStop can wonder where to go next with this plan.
By introducing a strong plan in the fourth quarter for implementation in the first quarter, that has not been attempted by the big guys on the block, a company starts the year off in a strong direction. The first quarter of the year is too often used for celebration, or lamentation, of what happened during the fourth quarter. Instead, like GameStop, companies should be starting the first quarter out with a plan that will set the mood for the rest of the year.
GameStop has just announced that it is going to be selling digital video game downloadable content through their stores after the first of the year. As a business advisor, and writer, I realize that there are valuable lessons to be learned here by many companies.
Let's start out by getting a little background about this fourth quarter decision by GameStop.
Everyday, we are seeing how the video game market is shifting more towards downloadable content. Nothing can bring this fact home more than the success of online stores run by Microsoft (for the X-Box 360), Sony (PS3, PSP, and PSP Go), and Nintendo (Wii, DS, and DSi). The introduction of the PSP Go is another example. GameStop realizes that this is a prime time to change the future strategy of the company.
GameStop customers will be able to purchase add-ons to their favorite games inside the brick and mortar GameStop stores. Once theses customers sign on to their system at home, they will be able to download this content. Customers will not have to use a credit card at GameStop for these add-ons like they would to purchase them from the online stores of the video game companies. They would be able to use cash or a check since they are making the purchase at a physical store.
When this plan launches at GameStop stores across the country after the first of the year, customers are sure to flock into the stores on a daily basis to see what new levels and other content they can download. While not specifically mentioned, this also leaves the door open for GameStop to add digital game or movie purchases to their download repertoire. They could even given customers a disc to upload if the customer does not have a connection to the Internet. These are all speculation.
Now, I stated at the beginning of this article that there was something that other companies outside of the video game market could learn from this move by GameStop. Notice, GameStop made
this move towards brick and mortar stores selling downloadable content first. GameStop has come up wit this idea, and is doing everything that it can to make sure that it is the first store on the block that offers such a deal to customers.
They did not wait for giants like Walmart, Target, of Kmart to make the first move in the war for downloadable video game console content. GameStop did not wait for Microsoft, Sony, or Nintendo to come up with a way to sell digital downloads through brick and mortar stores. GameStop did not wait around for others to test the water, they jumped right in.
Secondly, and most importantly, this announcement was made by GameStop in the middle of the fourth quarter. As someone who has worked with retail companies for a long time, I know first hand that most retail companies do not focus on anything during the fourth quarter except for sales. After the first of the year, most planners wonder what they are supposed to do now.
Instead of leading to idle minds and idle hands after the first of the year, GameStop is starting a new program for digital video game downloads. Instead of wondering what to do, planners for GameStop can wonder where to go next with this plan.
By introducing a strong plan in the fourth quarter for implementation in the first quarter, that has not been attempted by the big guys on the block, a company starts the year off in a strong direction. The first quarter of the year is too often used for celebration, or lamentation, of what happened during the fourth quarter. Instead, like GameStop, companies should be starting the first quarter out with a plan that will set the mood for the rest of the year.
Caterpillar Announces 32 Percent Fourth Quarter Reduction in Profits
Caterpillar Tractor Company routinely out-performs the previous quarter's profits. However, even Caterpillar is feeling the impact of the economic slowdown the United States has been experiencing.
Michael Muskal in the Los Angeles Times is one of several reporters writing about large companies struggling. In his article, "Home Depot, Sprint, GM, Caterpillar and Pfizer slash jobs," Muskal writes that
the combined effect of these five blue-chip companies is the loss of about 45,000 jobs.
Caterpillar who's located its World Headquarters in my hometown of Peoria, Illinois, has announced a fourth-quarter loss of 32%. This is incredible given Caterpillar's track record. But now once again I have to wonder about this financial news.
Caterpillar is comparing its poor financial situation to earnings at the same time last year. This year the company can only yield $1.08 per share when last year they declared a $1.50 per share profit for investors. That is fair enough. Wait a minute, in the same breath Caterpillar indicates they have had, as the article says, their "sixth record-breaking year of sales and earnings."
So, because of that they are trimming their work force by 20,000 employees.
In addition to Cat's actions, GM will cut shifts in Ohio and Michigan relieving 2,000 workers from having a job.
Pfizer and Sprint Nextel are both cutting 8,000 jobs and Pfizer could reach 19,000. Also Home Depot is looking to shave 7,000 jobs.
This is going on at the same time President Obama is trying to wrangle a stimulus package out of Congress.
Interestingly the Stock Market gained points in the face of all this bad new.
I wonder how much these layoffs represent a "pre-emptive strike."
All the companies are making money-just not as much as they want to make.
A number of years ago Caterpillar had a strike occur with their union workers. They refused to bargain and made their managers perform the machine-shop operations along with other duties. Further they hired non-union labor and ultimately sent jobs overseas.
I worked for a company who wasn't making the money they wished to make. They were making an excellent profit yet they didn't feel they were making enough. Rather than accept a nice profit and keep their loyal
workers employed they laid off about 20% of their workers.
It used to be that people were taught in business the responsibility the business had to society or "social responsibility."
Today I'm afraid we not only don't have people who are as savvy with respect to running a business, but they also don't care about the very people who buy their products.
References:
http://www.latimes.com/business/la-fi-layoffs27-2009jan27,0,3113467.story
http://www.cat.com/cda/layout?m=8703&x=7
Michael Muskal in the Los Angeles Times is one of several reporters writing about large companies struggling. In his article, "Home Depot, Sprint, GM, Caterpillar and Pfizer slash jobs," Muskal writes that
the combined effect of these five blue-chip companies is the loss of about 45,000 jobs.
Caterpillar who's located its World Headquarters in my hometown of Peoria, Illinois, has announced a fourth-quarter loss of 32%. This is incredible given Caterpillar's track record. But now once again I have to wonder about this financial news.
Caterpillar is comparing its poor financial situation to earnings at the same time last year. This year the company can only yield $1.08 per share when last year they declared a $1.50 per share profit for investors. That is fair enough. Wait a minute, in the same breath Caterpillar indicates they have had, as the article says, their "sixth record-breaking year of sales and earnings."
So, because of that they are trimming their work force by 20,000 employees.
In addition to Cat's actions, GM will cut shifts in Ohio and Michigan relieving 2,000 workers from having a job.
Pfizer and Sprint Nextel are both cutting 8,000 jobs and Pfizer could reach 19,000. Also Home Depot is looking to shave 7,000 jobs.
This is going on at the same time President Obama is trying to wrangle a stimulus package out of Congress.
Interestingly the Stock Market gained points in the face of all this bad new.
I wonder how much these layoffs represent a "pre-emptive strike."
All the companies are making money-just not as much as they want to make.
A number of years ago Caterpillar had a strike occur with their union workers. They refused to bargain and made their managers perform the machine-shop operations along with other duties. Further they hired non-union labor and ultimately sent jobs overseas.
I worked for a company who wasn't making the money they wished to make. They were making an excellent profit yet they didn't feel they were making enough. Rather than accept a nice profit and keep their loyal
workers employed they laid off about 20% of their workers.
It used to be that people were taught in business the responsibility the business had to society or "social responsibility."
Today I'm afraid we not only don't have people who are as savvy with respect to running a business, but they also don't care about the very people who buy their products.
References:
http://www.latimes.com/business/la-fi-layoffs27-2009jan27,0,3113467.story
http://www.cat.com/cda/layout?m=8703&x=7
Will Korea Development Bank Acquire Lehman Brothers Inc.?
Sangim Han and Steve Dickson, in an article on Bloomberg.com, are reporting that the CEO of Korea Development Bank, Min Euoo Sun, would not comment when asked if the bank would be open to acquiring Lehman Bros. Holding,
Inc., as relayed in a Reuter's report.
The article by Han and Dickson, "Korea Development CEO Declines Comment on Reuters Lehman Report," goes on to say that an unidentified spokesman for Korea Development Bank said that the Lehman Bros. acquisition was one of several options the bank was considering.
Started in 1844 by a German immigrant named Henry Lehman, Lehman Brothers started as a general store in New York City and was launched as a financial firm in 1850 after Henry was joined by brothers Emanuel and Mayer. Since that time Lehman Bros. has become the 4th largest U.S. securities firm and, is a global leader in finance serving entities with a large net worth such as corporations, governments and municipalities.
Korea Development Bank is a state (government)-owned bank. It was founded in 1954 following the Korean War to help spearhead Korea's financial and industrial growth. While they are committed to privatization by the year 2012, they have taken a new look at that target due to the major and rapid changes in global finance. It would make sense to think that perhaps the Lehman Brothers acquisition may be in their plans.
We have, in our city of Peoria, Illinois, the headquarters of a major corporation, Caterpillar Tractor Company. As with many American car manufacturers, Caterpillar was founded in Great Britain. It began in 1950.
Ranking 127th in the world according to Forbes Magazine, Caterpillar has 50.48 billion in assets; it has 85,116 employees worldwide and currently earns about 4 billion annually.
To underline the importance of participation in global finance it is interesting to note Caterpillar's diverse positioning regarding employees. They have employees in Latin America, Europe, Asia Pacific and the Middle East. This gives them not only a fair average of wages but a marketing stage in all of these areas.
The most important that Caterpillar has done, however is not only acquire companies but, they have developed specific tractors for certain locations and allowed other companies to acquire the rights to these vehicles.
This is one reason they are positioned as they are.
It is not surprising that Korea Development Bank may be considering acquiring Lehman Brothers. The global economy waits for no one. Korea has internal problems. I'm sure the pressure is on to act.
References:
http://www.bloomberg.com/apps/news?pid=20601087&sid=a0QcBEDUlK5k&refer=home
http://www.lehman.com/
http://www.kdb.co.kr/
http://finance.mapsofworld.com/company/c/caterpillar.html
http://www.bigtractorpower.com/agco4wdhistory.htm
Inc., as relayed in a Reuter's report.
The article by Han and Dickson, "Korea Development CEO Declines Comment on Reuters Lehman Report," goes on to say that an unidentified spokesman for Korea Development Bank said that the Lehman Bros. acquisition was one of several options the bank was considering.
Started in 1844 by a German immigrant named Henry Lehman, Lehman Brothers started as a general store in New York City and was launched as a financial firm in 1850 after Henry was joined by brothers Emanuel and Mayer. Since that time Lehman Bros. has become the 4th largest U.S. securities firm and, is a global leader in finance serving entities with a large net worth such as corporations, governments and municipalities.
Korea Development Bank is a state (government)-owned bank. It was founded in 1954 following the Korean War to help spearhead Korea's financial and industrial growth. While they are committed to privatization by the year 2012, they have taken a new look at that target due to the major and rapid changes in global finance. It would make sense to think that perhaps the Lehman Brothers acquisition may be in their plans.
We have, in our city of Peoria, Illinois, the headquarters of a major corporation, Caterpillar Tractor Company. As with many American car manufacturers, Caterpillar was founded in Great Britain. It began in 1950.
Ranking 127th in the world according to Forbes Magazine, Caterpillar has 50.48 billion in assets; it has 85,116 employees worldwide and currently earns about 4 billion annually.
To underline the importance of participation in global finance it is interesting to note Caterpillar's diverse positioning regarding employees. They have employees in Latin America, Europe, Asia Pacific and the Middle East. This gives them not only a fair average of wages but a marketing stage in all of these areas.
The most important that Caterpillar has done, however is not only acquire companies but, they have developed specific tractors for certain locations and allowed other companies to acquire the rights to these vehicles.
This is one reason they are positioned as they are.
It is not surprising that Korea Development Bank may be considering acquiring Lehman Brothers. The global economy waits for no one. Korea has internal problems. I'm sure the pressure is on to act.
References:
http://www.bloomberg.com/apps/news?pid=20601087&sid=a0QcBEDUlK5k&refer=home
http://www.lehman.com/
http://www.kdb.co.kr/
http://finance.mapsofworld.com/company/c/caterpillar.html
http://www.bigtractorpower.com/agco4wdhistory.htm
The Failure of Bear Stearns, Lehman Brothers and AIG: Is Another Great Depression in our Future?
The Bear Stearns bailout, the government takeover of Fannie Mae and Freddie Mac, the Lehman Brothers bankruptcy, the sale of Merrill Lynch & Company, and
now a drop of more than 62% in AIG's share price, have combined to create a financial atmosphere verging on panic. Politicos and financial analysts are weighing in on what can be done to shore up failing insurance giant, AIG and by extension the U.S. economy.
The fear of massive sell-offs are keeping Wall Street on edge and further hinder AIG's abilities to raise much needed cash. The debacle of the hyper-buoyant housing market and the freewheeling attitude of the subprime mortgage industry, most recently illustrated by the Lehman Brothers collapse, have resulted in a take down of giant financial institutions that had successfully weathered the stock market crash of 1929.
In comments made Monday by presidential candidate Sen. John McCain, it appeared as if he were correct in his self-assessment that his understanding of economics is not as fully formed as it should be. At a fundraiser in Florida on Monday, Senator McCain stated that the 'fundamentals of the economy are strong'. Senior partner of J.P. Morgan, Thomas Lamont expressed similar sentiments after Black Tuesday in October 1929. He told reporters, "There has been a little distress selling on the Stock Exchange..."
Conversely, Democratic presidential nominee, Barack Obama had a difference take on the collapse. In a speech given in Colorado yesterday, Senator Obama referred to the failure of Lehman Brothers and the Merrill Lynch sale as "the most serious financial crisis since the Great Depression."
But, is it? What economic failures actually triggered the Great Depression?
Although the stock market crash of 1929, Black Tuesday, is widely credited for causing the Great Depression, it was in actuality the failure of thousands of banks in 1932-1933
that created the conditions. These banks had provided loans for stock market speculation and invested themselves with depositors' cash during the artificially enhanced Bull Market of the Roaring 20's. As stock prices plummeted, investors began a massive sell-off of their holding and values slid to pennies on the dollar. The majority of market speculators bought on margin and had only been required to put up 10% of their stock purchases. Brokers, needing an influx of cash as the stock market plunged, sent out margin calls by the thousands. When the margin calls came, the stock speculators defaulted in record numbers.
The market continued to drop over the next four years, bottoming out in 1933. Depositors, spurred on by the rumors of failing banks and terrified of losing their savings, descended on banks throughout the country to pull out their cash. The banks did not have the cash on hand and government deposit insurance did not yet exist. Only the lucky few were able to withdraw their savings, leaving the rest of the depositors with nothing. The banks, unable to withstand the "run" suspended operation, and in many cases closed their doors for good. In a scene made famous by Jimmy Stewart in the film, "It's a Wonderful Life", Stewart's character George Bailey tells his Savings and Loan clients to only withdraw what money they had to have right then because if they closed their doors, they'd never reopen. Unfortunately, for the banking industry of the 1930's, there was no one like Bailey to persuade the depositors.
As the banks failed, the credit crunch got deeper and lending dried up. Businesses across the country, unable to secure credit failed as well, compounding unemployment. The cascade of financial collapse peaked in 1933 with an estimated 24% unemployment. It would be six more years before the United States was able to begin to claw its way back. The stock market did not fully recover until the 1950's.
Legislation enacted during the 1930's, particularly the Glass-Steagall Act of 1933, changed the way banks did business. Until the law's repeal in 1999, Investment banks were separate from commercial banks and prohibited from taking deposits. Some economists believe the repeal is partially responsible for the subprime mortgage crisis by allowing mega-banking to develop without adequate regulation.
How far the market will drop and how many giants of the financial world will fail in the next few months is anyone's guess. Had you asked the financial watchers on Wall Street last week
if AIG would be scrambling to gather millions in cash, the answer would most probably have been a resounding "no." The lessons of the past teach us that caution and calm is key when facing an economic crisis such as what we are presently experiencing. The credit crunch and instability of our major investment banks will likely go on for sometime but the market will correct eventually. Answers will be forthcoming; at least that's what they tell us.
Sources:
http://www.dailymail.co.uk/news/worldnews/article-1056475/McCain-calls-U-S-economy-fundamentally-sound-day-Lehman-Brothers-declared-bankrupt.html?ITO=1490
http://www.boston.com/news/politics/politicalintelligence/2007/12/mccain_its_abou.html
http://elections.foxnews.com/2008/09/15/obama-blames-gop-for-great-depression-style-crisis-on-wall-street/
http://www.americanheritage.com/articles/magazine/ah/1965/5/1965_5_88.shtml
http://www.investopedia.com/articles/03/071603.asp
now a drop of more than 62% in AIG's share price, have combined to create a financial atmosphere verging on panic. Politicos and financial analysts are weighing in on what can be done to shore up failing insurance giant, AIG and by extension the U.S. economy.
The fear of massive sell-offs are keeping Wall Street on edge and further hinder AIG's abilities to raise much needed cash. The debacle of the hyper-buoyant housing market and the freewheeling attitude of the subprime mortgage industry, most recently illustrated by the Lehman Brothers collapse, have resulted in a take down of giant financial institutions that had successfully weathered the stock market crash of 1929.
In comments made Monday by presidential candidate Sen. John McCain, it appeared as if he were correct in his self-assessment that his understanding of economics is not as fully formed as it should be. At a fundraiser in Florida on Monday, Senator McCain stated that the 'fundamentals of the economy are strong'. Senior partner of J.P. Morgan, Thomas Lamont expressed similar sentiments after Black Tuesday in October 1929. He told reporters, "There has been a little distress selling on the Stock Exchange..."
Conversely, Democratic presidential nominee, Barack Obama had a difference take on the collapse. In a speech given in Colorado yesterday, Senator Obama referred to the failure of Lehman Brothers and the Merrill Lynch sale as "the most serious financial crisis since the Great Depression."
But, is it? What economic failures actually triggered the Great Depression?
Although the stock market crash of 1929, Black Tuesday, is widely credited for causing the Great Depression, it was in actuality the failure of thousands of banks in 1932-1933
that created the conditions. These banks had provided loans for stock market speculation and invested themselves with depositors' cash during the artificially enhanced Bull Market of the Roaring 20's. As stock prices plummeted, investors began a massive sell-off of their holding and values slid to pennies on the dollar. The majority of market speculators bought on margin and had only been required to put up 10% of their stock purchases. Brokers, needing an influx of cash as the stock market plunged, sent out margin calls by the thousands. When the margin calls came, the stock speculators defaulted in record numbers.
The market continued to drop over the next four years, bottoming out in 1933. Depositors, spurred on by the rumors of failing banks and terrified of losing their savings, descended on banks throughout the country to pull out their cash. The banks did not have the cash on hand and government deposit insurance did not yet exist. Only the lucky few were able to withdraw their savings, leaving the rest of the depositors with nothing. The banks, unable to withstand the "run" suspended operation, and in many cases closed their doors for good. In a scene made famous by Jimmy Stewart in the film, "It's a Wonderful Life", Stewart's character George Bailey tells his Savings and Loan clients to only withdraw what money they had to have right then because if they closed their doors, they'd never reopen. Unfortunately, for the banking industry of the 1930's, there was no one like Bailey to persuade the depositors.
As the banks failed, the credit crunch got deeper and lending dried up. Businesses across the country, unable to secure credit failed as well, compounding unemployment. The cascade of financial collapse peaked in 1933 with an estimated 24% unemployment. It would be six more years before the United States was able to begin to claw its way back. The stock market did not fully recover until the 1950's.
Legislation enacted during the 1930's, particularly the Glass-Steagall Act of 1933, changed the way banks did business. Until the law's repeal in 1999, Investment banks were separate from commercial banks and prohibited from taking deposits. Some economists believe the repeal is partially responsible for the subprime mortgage crisis by allowing mega-banking to develop without adequate regulation.
How far the market will drop and how many giants of the financial world will fail in the next few months is anyone's guess. Had you asked the financial watchers on Wall Street last week
if AIG would be scrambling to gather millions in cash, the answer would most probably have been a resounding "no." The lessons of the past teach us that caution and calm is key when facing an economic crisis such as what we are presently experiencing. The credit crunch and instability of our major investment banks will likely go on for sometime but the market will correct eventually. Answers will be forthcoming; at least that's what they tell us.
Sources:
http://www.dailymail.co.uk/news/worldnews/article-1056475/McCain-calls-U-S-economy-fundamentally-sound-day-Lehman-Brothers-declared-bankrupt.html?ITO=1490
http://www.boston.com/news/politics/politicalintelligence/2007/12/mccain_its_abou.html
http://elections.foxnews.com/2008/09/15/obama-blames-gop-for-great-depression-style-crisis-on-wall-street/
http://www.americanheritage.com/articles/magazine/ah/1965/5/1965_5_88.shtml
http://www.investopedia.com/articles/03/071603.asp
Stock Market Black Monday Blamed on Mortgage Crisis; Oh, Really?
It is apparent to anyone watching the stock market, the falling AIG stock price, the potential for the Lehman Barclays deal, and a possibly disastrous AIG bankruptcy,
that consumers are afraid to lose what is left of their nest eggs.
In the wake of a tumbling Dow Jones, hushed whispers of a stock market crash and frantic activity at the New York Stock Exchange, Wall Street mavens are calling for the Fed to cut interest rates in a last ditch effort to overcome Bank of America stock prices -- and Merrill Lynch as well as Morgan Stanley stock price doubts -- with a shot in the economic arm.
Stock Market Analysis
Stock market analysts claim to know what ails a floundering Wall Street: the aftermath of the mortgage crisis. USA Today reports that the seemingly unprecedented drop in the stock market is due to the precarious fiscal empires of Lehman Bros, Fannie Mae and Freddie Mac, Countrywide, and even Merrill Lynch finally toppling.
As the DOW took a 504 point nosedive, other companies are being sucked down the spiral as well. The Street pulls no punches as it details the downgrading of insurer AIG stock prices. Once known as AIG Valic, AIG stock prices join Con Edison, Eli Lilly, and even PG&E stocks; investors are eyeing the Dow Jones and worry about another stock market crash.
The British Are Coming, the British Are Coming!
The news is not all bad, however, since across the pond there are some signs that foreign investors are taking a closer look at America's floundering Wall Street. According to the Associated Press, London's Barclays PLC is making overtures to buy some of the assets Chapter 11 bound Lehman Brothers has for sale. Whether or not advantageous for Lehman, Barclays' interest might inject some much needed capital into the transaction.
As rumors of an AIG bankruptcy send not only its stock prices but also associated industry stocks -- such as the Merrill Lynch stock price and also Morgan Stanley stock price - onto a topsy turvy course, it bears remembering that the much feared New York Stock Exchange Black Monday is not a new occurrence.
A Brief History of Time
As a matter of fact, even recent history shows a cyclical appearance of Black Monday responses to late Friday company press releases and weekend world news. For example, the Black Monday
Wall Street jitters that rocked the stock market yesterday occurred in the wake of Lehman Brothers' Chapter 11 bankruptcy filing and also the news that Bank of America had acquired Merrill Lynch.
Take for another example January 21st, 2008. Even as there was no trading on Wall Street itself due to the federal Martin Luther King, Junior holiday observance, stock market movers and shakers were not idle and watched with apprehension the tumbles of India's and also Hong Kong's stock indices.
KPTM Fox 42 quotes the Associated Press account that points to the combination of international fiscal shenanigans and a serious doubt over the Bush Administration's economic stimulus package that led to an investor led run on Wall Street on the next trading day. A scant day later, BBC News reported of a stock market recovery in the wake of an interest rate cut by the Federal Reserve.
The BBC pointed out that even spiraling commodities markets quickly recovered and once again picked up appreciably.
2008 a 1987 in Disguise?
21 years prior to this occurrence, there was another Black Monday that sent the stock market reeling. During the onset of the holiday season on October 19th, 1987, the Dow Jones Industrial Average went down by more than 22%. The Motley Fool put together a stellar account of the year 1987 and a snapshot of the stock market which, at that time, appeared to be plagued by fraud, and empty promises.
Sent over the edge by the 10-19 shelling of the Iranian oil platform located in the Persian Gulf, the Motley Fool concludes that it was not a single event, but instead a series of seemingly only tangentially related incidents that - much akin a slow fuse to a powder keg - finally set off the explosion.
Back to the future, today is not really that different from 21 years ago. A series of unfortunate events, speculation driven transactions, poor planning on the parts of consumers, corporate greed, and a failure to put down the governmental foot a lot sooner on haphazard corporate accountability have brought America's chickens home to roost (maybe this is what Jeremiah Wright was talking about?).
The worst thing you could do right now is place all of your nest eggs into one basket, while the best thing to do is to diversify your investment portfolio, keep a good chunk of cash in an FDIC insured high interest
savings account, and then hold on for the ride. If your blood pressure permits, get in on the action and speculate, but you stand a good chance of losing your shirt.
Sources:
http://www.usatoday.com/money/industries/banking/2008-09-15-wall-street-meltdown_N.htm
http://www.thestreet.com/story/10437582/1/analysts-upgrades-downgrades-aig.html?puc=googlefi&cm_ven=GOOGLEFI&cm_cat=FREE&cm_ite=NA
http://ap.google.com/article/ALeqM5ju2ZNQJKzPMYpXCucI3pKpp0BWuQD937PCGO0
http://www.kptm.com/Global/story.asp?S=7750403
http://news.bbc.co.uk/1/hi/business/7201658.stm
http://www.fool.com/features/1997/sp971017crashanniversary1987timeline.htm
that consumers are afraid to lose what is left of their nest eggs.
In the wake of a tumbling Dow Jones, hushed whispers of a stock market crash and frantic activity at the New York Stock Exchange, Wall Street mavens are calling for the Fed to cut interest rates in a last ditch effort to overcome Bank of America stock prices -- and Merrill Lynch as well as Morgan Stanley stock price doubts -- with a shot in the economic arm.
Stock Market Analysis
Stock market analysts claim to know what ails a floundering Wall Street: the aftermath of the mortgage crisis. USA Today reports that the seemingly unprecedented drop in the stock market is due to the precarious fiscal empires of Lehman Bros, Fannie Mae and Freddie Mac, Countrywide, and even Merrill Lynch finally toppling.
As the DOW took a 504 point nosedive, other companies are being sucked down the spiral as well. The Street pulls no punches as it details the downgrading of insurer AIG stock prices. Once known as AIG Valic, AIG stock prices join Con Edison, Eli Lilly, and even PG&E stocks; investors are eyeing the Dow Jones and worry about another stock market crash.
The British Are Coming, the British Are Coming!
The news is not all bad, however, since across the pond there are some signs that foreign investors are taking a closer look at America's floundering Wall Street. According to the Associated Press, London's Barclays PLC is making overtures to buy some of the assets Chapter 11 bound Lehman Brothers has for sale. Whether or not advantageous for Lehman, Barclays' interest might inject some much needed capital into the transaction.
As rumors of an AIG bankruptcy send not only its stock prices but also associated industry stocks -- such as the Merrill Lynch stock price and also Morgan Stanley stock price - onto a topsy turvy course, it bears remembering that the much feared New York Stock Exchange Black Monday is not a new occurrence.
A Brief History of Time
As a matter of fact, even recent history shows a cyclical appearance of Black Monday responses to late Friday company press releases and weekend world news. For example, the Black Monday
Wall Street jitters that rocked the stock market yesterday occurred in the wake of Lehman Brothers' Chapter 11 bankruptcy filing and also the news that Bank of America had acquired Merrill Lynch.
Take for another example January 21st, 2008. Even as there was no trading on Wall Street itself due to the federal Martin Luther King, Junior holiday observance, stock market movers and shakers were not idle and watched with apprehension the tumbles of India's and also Hong Kong's stock indices.
KPTM Fox 42 quotes the Associated Press account that points to the combination of international fiscal shenanigans and a serious doubt over the Bush Administration's economic stimulus package that led to an investor led run on Wall Street on the next trading day. A scant day later, BBC News reported of a stock market recovery in the wake of an interest rate cut by the Federal Reserve.
The BBC pointed out that even spiraling commodities markets quickly recovered and once again picked up appreciably.
2008 a 1987 in Disguise?
21 years prior to this occurrence, there was another Black Monday that sent the stock market reeling. During the onset of the holiday season on October 19th, 1987, the Dow Jones Industrial Average went down by more than 22%. The Motley Fool put together a stellar account of the year 1987 and a snapshot of the stock market which, at that time, appeared to be plagued by fraud, and empty promises.
Sent over the edge by the 10-19 shelling of the Iranian oil platform located in the Persian Gulf, the Motley Fool concludes that it was not a single event, but instead a series of seemingly only tangentially related incidents that - much akin a slow fuse to a powder keg - finally set off the explosion.
Back to the future, today is not really that different from 21 years ago. A series of unfortunate events, speculation driven transactions, poor planning on the parts of consumers, corporate greed, and a failure to put down the governmental foot a lot sooner on haphazard corporate accountability have brought America's chickens home to roost (maybe this is what Jeremiah Wright was talking about?).
The worst thing you could do right now is place all of your nest eggs into one basket, while the best thing to do is to diversify your investment portfolio, keep a good chunk of cash in an FDIC insured high interest
savings account, and then hold on for the ride. If your blood pressure permits, get in on the action and speculate, but you stand a good chance of losing your shirt.
Sources:
http://www.usatoday.com/money/industries/banking/2008-09-15-wall-street-meltdown_N.htm
http://www.thestreet.com/story/10437582/1/analysts-upgrades-downgrades-aig.html?puc=googlefi&cm_ven=GOOGLEFI&cm_cat=FREE&cm_ite=NA
http://ap.google.com/article/ALeqM5ju2ZNQJKzPMYpXCucI3pKpp0BWuQD937PCGO0
http://www.kptm.com/Global/story.asp?S=7750403
http://news.bbc.co.uk/1/hi/business/7201658.stm
http://www.fool.com/features/1997/sp971017crashanniversary1987timeline.htm
10 Best Ways to Understand the Stock Market
I'll share a secret of my success with you when it comes to investing or trading in the stock market. Nothing comes easy without practicing. It took me 10 hard years from losses to gains to feel real comfortable in
my knowledge as a trader in the stock market. I no longer trade stocks as often as I did. However, I have incorporated this same idea with mutual funds in my retirement account which had given me consistent 25% annual returns over the past 10 yrs. With a small amount of money, I was able to achieve my goal, which was to retire my husband early, and that was without contributions.
I have had so many of my friends and acquaintances come up to me and say they have always wanted to learn about the stock market. However, even though I offer help, they don't follow through to sit with me. There is no osmosis to teach you to be a good investor or trader. You have to experience losses. There is not one good trader out there who didn't suffer a loss. However, that was always the best way to learn. I have put together what I feel are ten good tips to start you on the right foot. I would caution you to paper trade first, before buying your first stock if you are still unsure. This means you are practicing on paper your "buys" and "sells". You can build confidence by paper trading first.
Here are ten good tips on how to enter the stock market:
1. Only invest what you can afford to lose.
Because there is risk in the market, you need to realize you can lose all your money. Hopefully, you wouldn't ride the stock all the way down, however, I have seen beginners do that because they didn't understand risk.
2. Check your emotions at the door.
This gets back to confidence. Whether you are a long or short term investor, you have to have some kind of strategy plan of buying and selling. This incorporates setting your own targets on when you sell no matter how
high the stock goes or knowing when to cut your losses if the plan isn't going well. Some people get greedy and keep holding on a stock, riding it up, even though it met their price objective on when to sell, only for it to turn quickly and reverse down. The opposite holds true too. You need to have a fulcrum, a line in the sand on when you would sell your loss. No matter what Gordon Gecko said about "greed being good", it's not. This is where "due diligence" comes in; whether you prefer looking at the stock on a fundamental or a technical basis, it's your choice. However, don't allow your emotions to control you.
3. Never take a "hot tip" unless you do your own due diligence.
Someone says "hey, I heard that Apple is going to go to $200 because it has a new product that is going to rock the market". This might be true. However, you should look at a chart to see how much it has gone up in a short period time. You could be buying at the top for a while and that $200
target might not come for another two years. In other words, you can get a better entry point rather than sitting on a potential loss for two years. This is why I prefer technical analysis over fundamentals. With technical analysis, I look on a chart for the actual performance and not have "hope" determine my decision. Things can change very quickly. All of a sudden, there could be a problem with that new product, or a law suit. With technical analysis you can see the truth. Fundamental analysis has to do with all the financial statements, going forward statements, and news that affects the company. Each quarter a company reports their earnings. If you learn about technical analysis, you can see the real trend. You can't see that with fundamental analysis. However, no matter what, realize that nothing is 100% accurate.
4. Know how to take a loss and not to hold until you make a gain.
Listen to the stock market and be sensitive on what it is telling you. There could be something massively different than what you originally thought. Do not be married in a stock position, or you might find yourself divorced and poor.
5. Read investment forums.
These are the people who are actively participating in the market, the traders. You can tell who knows technical analysis when you see the 'lemmings' are following them. The good traders are sharing their
experience with you free. Many have really good systems that you won't find in any book. Some have just some simple technical analysis that might work for you. However, this is also the best way to understand technical analysis, by following the traders. Many make their calls and you can see if they are correct. With technical analysis, it will teach you when to get in and out of a stock. This is helpful whether you want to be a short or long term investor.
6. Check you ego at the door.
Just because you "got lucky" on one stock and made a lot of money does not mean you have the 'Midas touch'. Even the best traders get cocky. That can cause complacency and losses.
7. Be willing to change your strategy if it is working.
Because of losses I incurred when I was a newbie in the market, I have fine tuned my strategy constantly over the years. What worked before might not work for me any more. You recognize that when you get a loss. Why? The reason is because the market keeps changing and so must you. Knowledge is good. However, at the same time, the more people on a collective basis learning technical analysis, the more the market makers are constantly finding new ways to trick you. Market Makers are the ones that make the actual trade on the floor. That's where some or all your commission is going to.
8. Keep control of your financial future.
You are the best one to control your financial future. You understand your risk the best. The more you learn the better you will get. When you are empowered with tools and information whether it is from books or investment forums, you can easily surpass any returns compared to the infinite wisdom of a full service broker. You have good and bad brokers offering good and bad advice. They are in it for the commission. You are in it for creating wealth. Over the years, I have learned that best way to create wealth is by managing my own risk in my investments. This applies to all my investments even outside the stock market.
9. Don't get complacent with your stocks.
Decide on a time table if you are going to be a long term investor and keep tabs on the progress. A "set it and forget it" strategy most times does not work. Let's not forget what happened in 2000-2002 when we saw portfolios be given a 20-30% haircut. One main reason is this is not your father's market. The buy and hold strategy does not work as well as it did before the World Wide Web came about in the mid 1990's.
In addition, liquidity drives the market. When rates are low, there is more liquidity which helps stocks. Investors are able to borrow more easily. Traders especially borrow on what is called "margin
accounts". It's like taking a line of credit with your stocks as collateral. This goes around the world because we are globally connected. This is the reason you see big swings in the market because people don't want to hold a position while they are in a "margin" position for a long term period. The more liquidity the more we go up. So if you hear that interest rates are going up, well, you might want to start monitoring your stocks because if rates go up too fast, it creates tight credit which keeps more money from coming into the market. That will take the market down.
10. Understand the trend.
Wall Street has a saying, "the trend is your friend". Understand where the trends are and what indexes are leading, i.e. oil, technology, banks, biotech, etc. If you don't understand where the trend is, subscribe to a technical analysis site or newsletter to learn.
One indication you can use for a trend is to look at the magazine covers. When you see a lot of bears on the magazines, it is a period when there is an extreme bearishness in sentiment. This is indicative of an exhaustion of selling.
Typically, "Smart Money"(big players in the market) will go in the opposite direction which is up. This is called being a "contrarian". If a bull is on the cover, then we are ready for a down swing. That is because we are getting an exhaustion of buying. Most people come late to the party either way because of not understanding the mechanics of the stock market.
Presently, we are seeing a lot of bearishness with all the talk of recession and sub prime crisis. That doesn't mean we don't get a recession. Nor, does it mean the sub prime issue will go away. However, it doesn't mean the stock market can't go up either. Most times those magazines are an indicator of the opposite of what is happening in the stock market. Presently we are seeing a lot of bear pictures in the media regarding the market. You can monitor this for the future to see the direction.
11. Ok, I said ten best tips, but I'm going to give you one more.
Here is my forecast, with a disclaimer to do your own due diligence. In my opinion, the market is pointed up at least into 2008. It is possible it can go way beyond that. However, being a trader, I trade as I see
changes and always follow my tips above. Expect dips along the way, but there are a lot of good technical indicators pointing up. One of them that I use along with chart watching is called "Point and Figure" technical analysis. It's a good trend watcher because it is about supply and demand in the stock market. It shows you what is really going on internally. Presently, we have had indicators turning up starting August 22nd. You can read more about this on Tom Dorsey's Point and Figure site (see below). You can get a free three week trial period. He also has a book out on the subject. If you really want to understand trends, I would advise to use this. It is not for short term trading. It is for long term investing. This is the best tip you will have as a long term investor.
http://www.dorseywright.com/cgi-bin/foxweb.exe/D:/foxapps/fwwelcome
There is a lot of free information for you to learn more about the stock market. Below are some of my favorite sites. These sites will provide you the hot forums to visit which will lead you to the right technicians. Personally, I have learned more in 10 yrs from the forums than the books I have read. And of course, practicing what I learn by paper trading.
Investor Hubhttp://investorshub.advfn.com/boards/
Silicon Investorhttp://siliconinvestor.advfn.com/default.aspx
Here is a great area to learn what to look for in charts. These people are rated by gold stars to show you who has the best charts. Best of all, it's free. They also explain their technique. The site is called Stockcharts. I have linked you to their free public chart site. However, you can also go to their home page and use their free charts to plot your stocks or mutual funds. http://stockcharts.com/def/servlet/Favorites.CServlet?obj=public&cmd=show&disp=RED
Now, these are eleven best tips for you. However, the best one that I have not disclosed which you would think is a common sense tip, is don't just put your hard earn money into the market without knowing what you are doing.
my knowledge as a trader in the stock market. I no longer trade stocks as often as I did. However, I have incorporated this same idea with mutual funds in my retirement account which had given me consistent 25% annual returns over the past 10 yrs. With a small amount of money, I was able to achieve my goal, which was to retire my husband early, and that was without contributions.
I have had so many of my friends and acquaintances come up to me and say they have always wanted to learn about the stock market. However, even though I offer help, they don't follow through to sit with me. There is no osmosis to teach you to be a good investor or trader. You have to experience losses. There is not one good trader out there who didn't suffer a loss. However, that was always the best way to learn. I have put together what I feel are ten good tips to start you on the right foot. I would caution you to paper trade first, before buying your first stock if you are still unsure. This means you are practicing on paper your "buys" and "sells". You can build confidence by paper trading first.
Here are ten good tips on how to enter the stock market:
1. Only invest what you can afford to lose.
Because there is risk in the market, you need to realize you can lose all your money. Hopefully, you wouldn't ride the stock all the way down, however, I have seen beginners do that because they didn't understand risk.
2. Check your emotions at the door.
This gets back to confidence. Whether you are a long or short term investor, you have to have some kind of strategy plan of buying and selling. This incorporates setting your own targets on when you sell no matter how
high the stock goes or knowing when to cut your losses if the plan isn't going well. Some people get greedy and keep holding on a stock, riding it up, even though it met their price objective on when to sell, only for it to turn quickly and reverse down. The opposite holds true too. You need to have a fulcrum, a line in the sand on when you would sell your loss. No matter what Gordon Gecko said about "greed being good", it's not. This is where "due diligence" comes in; whether you prefer looking at the stock on a fundamental or a technical basis, it's your choice. However, don't allow your emotions to control you.
3. Never take a "hot tip" unless you do your own due diligence.
Someone says "hey, I heard that Apple is going to go to $200 because it has a new product that is going to rock the market". This might be true. However, you should look at a chart to see how much it has gone up in a short period time. You could be buying at the top for a while and that $200
target might not come for another two years. In other words, you can get a better entry point rather than sitting on a potential loss for two years. This is why I prefer technical analysis over fundamentals. With technical analysis, I look on a chart for the actual performance and not have "hope" determine my decision. Things can change very quickly. All of a sudden, there could be a problem with that new product, or a law suit. With technical analysis you can see the truth. Fundamental analysis has to do with all the financial statements, going forward statements, and news that affects the company. Each quarter a company reports their earnings. If you learn about technical analysis, you can see the real trend. You can't see that with fundamental analysis. However, no matter what, realize that nothing is 100% accurate.
4. Know how to take a loss and not to hold until you make a gain.
Listen to the stock market and be sensitive on what it is telling you. There could be something massively different than what you originally thought. Do not be married in a stock position, or you might find yourself divorced and poor.
5. Read investment forums.
These are the people who are actively participating in the market, the traders. You can tell who knows technical analysis when you see the 'lemmings' are following them. The good traders are sharing their
experience with you free. Many have really good systems that you won't find in any book. Some have just some simple technical analysis that might work for you. However, this is also the best way to understand technical analysis, by following the traders. Many make their calls and you can see if they are correct. With technical analysis, it will teach you when to get in and out of a stock. This is helpful whether you want to be a short or long term investor.
6. Check you ego at the door.
Just because you "got lucky" on one stock and made a lot of money does not mean you have the 'Midas touch'. Even the best traders get cocky. That can cause complacency and losses.
7. Be willing to change your strategy if it is working.
Because of losses I incurred when I was a newbie in the market, I have fine tuned my strategy constantly over the years. What worked before might not work for me any more. You recognize that when you get a loss. Why? The reason is because the market keeps changing and so must you. Knowledge is good. However, at the same time, the more people on a collective basis learning technical analysis, the more the market makers are constantly finding new ways to trick you. Market Makers are the ones that make the actual trade on the floor. That's where some or all your commission is going to.
8. Keep control of your financial future.
You are the best one to control your financial future. You understand your risk the best. The more you learn the better you will get. When you are empowered with tools and information whether it is from books or investment forums, you can easily surpass any returns compared to the infinite wisdom of a full service broker. You have good and bad brokers offering good and bad advice. They are in it for the commission. You are in it for creating wealth. Over the years, I have learned that best way to create wealth is by managing my own risk in my investments. This applies to all my investments even outside the stock market.
9. Don't get complacent with your stocks.
Decide on a time table if you are going to be a long term investor and keep tabs on the progress. A "set it and forget it" strategy most times does not work. Let's not forget what happened in 2000-2002 when we saw portfolios be given a 20-30% haircut. One main reason is this is not your father's market. The buy and hold strategy does not work as well as it did before the World Wide Web came about in the mid 1990's.
In addition, liquidity drives the market. When rates are low, there is more liquidity which helps stocks. Investors are able to borrow more easily. Traders especially borrow on what is called "margin
accounts". It's like taking a line of credit with your stocks as collateral. This goes around the world because we are globally connected. This is the reason you see big swings in the market because people don't want to hold a position while they are in a "margin" position for a long term period. The more liquidity the more we go up. So if you hear that interest rates are going up, well, you might want to start monitoring your stocks because if rates go up too fast, it creates tight credit which keeps more money from coming into the market. That will take the market down.
10. Understand the trend.
Wall Street has a saying, "the trend is your friend". Understand where the trends are and what indexes are leading, i.e. oil, technology, banks, biotech, etc. If you don't understand where the trend is, subscribe to a technical analysis site or newsletter to learn.
One indication you can use for a trend is to look at the magazine covers. When you see a lot of bears on the magazines, it is a period when there is an extreme bearishness in sentiment. This is indicative of an exhaustion of selling.
Typically, "Smart Money"(big players in the market) will go in the opposite direction which is up. This is called being a "contrarian". If a bull is on the cover, then we are ready for a down swing. That is because we are getting an exhaustion of buying. Most people come late to the party either way because of not understanding the mechanics of the stock market.
Presently, we are seeing a lot of bearishness with all the talk of recession and sub prime crisis. That doesn't mean we don't get a recession. Nor, does it mean the sub prime issue will go away. However, it doesn't mean the stock market can't go up either. Most times those magazines are an indicator of the opposite of what is happening in the stock market. Presently we are seeing a lot of bear pictures in the media regarding the market. You can monitor this for the future to see the direction.
11. Ok, I said ten best tips, but I'm going to give you one more.
Here is my forecast, with a disclaimer to do your own due diligence. In my opinion, the market is pointed up at least into 2008. It is possible it can go way beyond that. However, being a trader, I trade as I see
changes and always follow my tips above. Expect dips along the way, but there are a lot of good technical indicators pointing up. One of them that I use along with chart watching is called "Point and Figure" technical analysis. It's a good trend watcher because it is about supply and demand in the stock market. It shows you what is really going on internally. Presently, we have had indicators turning up starting August 22nd. You can read more about this on Tom Dorsey's Point and Figure site (see below). You can get a free three week trial period. He also has a book out on the subject. If you really want to understand trends, I would advise to use this. It is not for short term trading. It is for long term investing. This is the best tip you will have as a long term investor.
http://www.dorseywright.com/cgi-bin/foxweb.exe/D:/foxapps/fwwelcome
There is a lot of free information for you to learn more about the stock market. Below are some of my favorite sites. These sites will provide you the hot forums to visit which will lead you to the right technicians. Personally, I have learned more in 10 yrs from the forums than the books I have read. And of course, practicing what I learn by paper trading.
Investor Hubhttp://investorshub.advfn.com/boards/
Silicon Investorhttp://siliconinvestor.advfn.com/default.aspx
Here is a great area to learn what to look for in charts. These people are rated by gold stars to show you who has the best charts. Best of all, it's free. They also explain their technique. The site is called Stockcharts. I have linked you to their free public chart site. However, you can also go to their home page and use their free charts to plot your stocks or mutual funds. http://stockcharts.com/def/servlet/Favorites.CServlet?obj=public&cmd=show&disp=RED
Now, these are eleven best tips for you. However, the best one that I have not disclosed which you would think is a common sense tip, is don't just put your hard earn money into the market without knowing what you are doing.
How to Understand the Stock Market
The Stock Market started over a hundred years ago when Mr. Dow and Mr. Jones realized that every company could offer shares of itself to the public for sale. As a company prospered, so
would the public that owned shares of its stock.
There are, obviously, many companies. But a good barometer of the overall market would be a few very large and stable companies which would indicate how most companies were doing simply by how the few were doing.
This small group of 30 companies, thirty major industries of the United States, was named in honor of Mr. Dow and Mr. Jones as the Dow Jones Industrial Average, the DJIA.
Often referred to as "The DOW," or "Dow Jones," these thirty companies are such well-known names as MacDonald's, General Electric, Disney, etc. To own stock in these companies, you would buy shares from the New York Stock Exchange, the NYSE. You wouldn't have to go to New York, of course. You'd simply tell your stockbroker to buy 100 shares of MCD or 15 shares of GE or 12,000 shares of DIS, for example.
Such an abbreviation would serve as a symbol and made more sense than spelling out the whole company name. That would take up too much space on the ticker. In the early days, you'd have a little machine that fed out a constant tape-sized paper stream of the changing stock prices. The machine would make an audible "tick" as the tape emerged from the machine ... tick ... tick ... tick ... and you'd see what price was now being quoted for GE ... 62.50, or GM ... 77.25, etc. ... all from the convenience of your stock ticker.
If you couldn't afford a stock ticker, you could read your stock quotes right from the business section of the newspaper. Nowadays, it's easy to have a stock ticker right on your computer, and you can even customize it to show only the stocks you want to see ... those in your portfolio.
In the early days, and even now, the NYSE was a madhouse of activity as buyers and sellers would shout their requests from the trading floor, complete with verifying hand signals. Many decades after the NYSE began,
certain newer companies chose to be listed on a new sort of stock exchange, where there would be no buyers and sellers shouting from an "open pit" such as the NYSE.
This newer stock exchange would simply take buy and sell orders over the phone or other means and automatically display the current stock price quotes. Thus, a more sensible approach was born, with the National Association of Securities Dealers, Automated Quotient (NASDAQ).
Unlike the two-letter abbreviation of GE or the three-letter symbol of MCD, those on the NASDAQ use four-letter symbols, such as INTC (Intel Corporation) or AAPL (Apple Computer) or YHOO (Yahoo). Our third stock exchange is the AMEX (American Exchange), and their symbols are in three letters, such as AZC (Azco Mining) and FKL (Franklin Capital). You'll see these stock symbols and thousands more in the business section, and you'll see them on the internet.
So, why should anyone invest in the stock market? Because history shows that the stock market earns more money than that in a bank account or in Certificates of Deposit (CD's) or Money Market Funds, or Government Treasury Bills (T-Bills). Occasionally, as in 1980, when interest rates were over ten percent, it's wiser to have your money in a bank than in the stock market. But that period didn't last long. By 1982, it was time to get out of the bank and back into the stock market again.
Most of the time, the interest you earn in a bank account is very small. In 2005, it was only about one percent. If you'd invested $1000 in a bank, you'd have had ten dollars profit at the end of a year. But if you'd put that $1000 in the stock market, you'd likely have had at least $40 profit (a 4% return) ... and maybe as much as $300 (a 30% return).
Indeed, history shows that stocks earn an average 11% per year, even despite periods like 1929 or 1962 or 1974 or 1987. Plus, there was one period, from 1999 to 2003, when stocks had their biggest "Bull" run in history ... five straight years of 30% gains each year ... an amazing time for investors. There are times, of course, when the stock market seems more like a sleeping Bear than a charging Bull, and your portfolio of stocks falls in value as stock prices fall.
Sure, it's a gamble, much like a bet in Las Vegas. But America's companies don't usually go out of business. While some do, most well-known names and others with equally strong market presence will continue
through good times and bad, earning that steady average of 11% per year.
When times are good for the market, the painless way to invest is simply to put your money in a fund that covers the entire market - for instance, the Vanguard Total Stock Market Index (VTSMX). Or, to bank on the largest companies only, buy the Standard & Poor's index of 500 stocks, better known as Spyders (Amex: SPY), Standard & Poor's Depositary Receipts. Other index funds also invest in market sectors such as MDY (for Mid-Caps), DIA (known as "Diamonds" - of the DowJones Industrial Average), and many others. These index funds are traded on the stock exchange just like a share of stock and are thus known by the convenient acronym : ETFs (exchange-traded funds). a complete list and performance comparison can be found at many internet sites such as www.Morningstar.com, for example.
Good times for the market will also urge a bet on the Technology (Tech) sector, with focus on computers and related companies. That would be the NASDAQ 100 (AMEX: QQQ) or other similar funds. And, if you feel the market is DEFINITELY going to go up tomorrow, buy a beta-leveraged fund such as Potomac Over The Counter Index Plus (POTCX) or Profunds Ultra Bull (ULPIX) or Profunds Ultra OTC (UOPIX). If you think the market is going to go down tomorrow, buy a leveraged bear-market fund, such as Profunds Ultra Bear (URPIX) or Ultra Short OTC Inv (USPIX), or Potomac Ultra OTC Short (POTSX), and you'll make money when others are losing.
Stockbrokers used to charge a lot of money to buy or sell stocks for you. With the advent of the internet, and fierce competition between them, you can now trade stocks much easier and cheaper than ever before. Go to a broker like Charles Schwab; it'll cost you a few thousand to open an account and you'll pay $30 per trade (buy or sell). The cheapest is, probably, Scottrade, which charges only $7. Simply go to a Scottrade office (they're all over), give them a check for $500, and you can begin trading stocks from the comfort of your own home, right on your computer (www.scottrade.com).
If you'd like to practice a little, first, for free, go to a site called www.SmartMoney.com and try out a few portfolios to see how they do. The main thing is, to get started taking charge of your finances, making
your own decisions about your own investments and your own future, and learning how to earn more money than any bank account could ever earn you.
would the public that owned shares of its stock.
There are, obviously, many companies. But a good barometer of the overall market would be a few very large and stable companies which would indicate how most companies were doing simply by how the few were doing.
This small group of 30 companies, thirty major industries of the United States, was named in honor of Mr. Dow and Mr. Jones as the Dow Jones Industrial Average, the DJIA.
Often referred to as "The DOW," or "Dow Jones," these thirty companies are such well-known names as MacDonald's, General Electric, Disney, etc. To own stock in these companies, you would buy shares from the New York Stock Exchange, the NYSE. You wouldn't have to go to New York, of course. You'd simply tell your stockbroker to buy 100 shares of MCD or 15 shares of GE or 12,000 shares of DIS, for example.
Such an abbreviation would serve as a symbol and made more sense than spelling out the whole company name. That would take up too much space on the ticker. In the early days, you'd have a little machine that fed out a constant tape-sized paper stream of the changing stock prices. The machine would make an audible "tick" as the tape emerged from the machine ... tick ... tick ... tick ... and you'd see what price was now being quoted for GE ... 62.50, or GM ... 77.25, etc. ... all from the convenience of your stock ticker.
If you couldn't afford a stock ticker, you could read your stock quotes right from the business section of the newspaper. Nowadays, it's easy to have a stock ticker right on your computer, and you can even customize it to show only the stocks you want to see ... those in your portfolio.
In the early days, and even now, the NYSE was a madhouse of activity as buyers and sellers would shout their requests from the trading floor, complete with verifying hand signals. Many decades after the NYSE began,
certain newer companies chose to be listed on a new sort of stock exchange, where there would be no buyers and sellers shouting from an "open pit" such as the NYSE.
This newer stock exchange would simply take buy and sell orders over the phone or other means and automatically display the current stock price quotes. Thus, a more sensible approach was born, with the National Association of Securities Dealers, Automated Quotient (NASDAQ).
Unlike the two-letter abbreviation of GE or the three-letter symbol of MCD, those on the NASDAQ use four-letter symbols, such as INTC (Intel Corporation) or AAPL (Apple Computer) or YHOO (Yahoo). Our third stock exchange is the AMEX (American Exchange), and their symbols are in three letters, such as AZC (Azco Mining) and FKL (Franklin Capital). You'll see these stock symbols and thousands more in the business section, and you'll see them on the internet.
So, why should anyone invest in the stock market? Because history shows that the stock market earns more money than that in a bank account or in Certificates of Deposit (CD's) or Money Market Funds, or Government Treasury Bills (T-Bills). Occasionally, as in 1980, when interest rates were over ten percent, it's wiser to have your money in a bank than in the stock market. But that period didn't last long. By 1982, it was time to get out of the bank and back into the stock market again.
Most of the time, the interest you earn in a bank account is very small. In 2005, it was only about one percent. If you'd invested $1000 in a bank, you'd have had ten dollars profit at the end of a year. But if you'd put that $1000 in the stock market, you'd likely have had at least $40 profit (a 4% return) ... and maybe as much as $300 (a 30% return).
Indeed, history shows that stocks earn an average 11% per year, even despite periods like 1929 or 1962 or 1974 or 1987. Plus, there was one period, from 1999 to 2003, when stocks had their biggest "Bull" run in history ... five straight years of 30% gains each year ... an amazing time for investors. There are times, of course, when the stock market seems more like a sleeping Bear than a charging Bull, and your portfolio of stocks falls in value as stock prices fall.
Sure, it's a gamble, much like a bet in Las Vegas. But America's companies don't usually go out of business. While some do, most well-known names and others with equally strong market presence will continue
through good times and bad, earning that steady average of 11% per year.
When times are good for the market, the painless way to invest is simply to put your money in a fund that covers the entire market - for instance, the Vanguard Total Stock Market Index (VTSMX). Or, to bank on the largest companies only, buy the Standard & Poor's index of 500 stocks, better known as Spyders (Amex: SPY), Standard & Poor's Depositary Receipts. Other index funds also invest in market sectors such as MDY (for Mid-Caps), DIA (known as "Diamonds" - of the DowJones Industrial Average), and many others. These index funds are traded on the stock exchange just like a share of stock and are thus known by the convenient acronym : ETFs (exchange-traded funds). a complete list and performance comparison can be found at many internet sites such as www.Morningstar.com, for example.
Good times for the market will also urge a bet on the Technology (Tech) sector, with focus on computers and related companies. That would be the NASDAQ 100 (AMEX: QQQ) or other similar funds. And, if you feel the market is DEFINITELY going to go up tomorrow, buy a beta-leveraged fund such as Potomac Over The Counter Index Plus (POTCX) or Profunds Ultra Bull (ULPIX) or Profunds Ultra OTC (UOPIX). If you think the market is going to go down tomorrow, buy a leveraged bear-market fund, such as Profunds Ultra Bear (URPIX) or Ultra Short OTC Inv (USPIX), or Potomac Ultra OTC Short (POTSX), and you'll make money when others are losing.
Stockbrokers used to charge a lot of money to buy or sell stocks for you. With the advent of the internet, and fierce competition between them, you can now trade stocks much easier and cheaper than ever before. Go to a broker like Charles Schwab; it'll cost you a few thousand to open an account and you'll pay $30 per trade (buy or sell). The cheapest is, probably, Scottrade, which charges only $7. Simply go to a Scottrade office (they're all over), give them a check for $500, and you can begin trading stocks from the comfort of your own home, right on your computer (www.scottrade.com).
If you'd like to practice a little, first, for free, go to a site called www.SmartMoney.com and try out a few portfolios to see how they do. The main thing is, to get started taking charge of your finances, making
your own decisions about your own investments and your own future, and learning how to earn more money than any bank account could ever earn you.
Exchange Traded Funds Vs. The Stock-based Portfolio
The everyday idea of market trading is a flurry of excitement for one who imagines it, conjuring up movie images of the unknown genius who rides a fast wave of brilliant thinking to a fortune. "Playing the
market," i.e. speculating and trading individual stocks on the exchange, captures the public's imagination. Understandable, for playing the stock market essentially carries the investor away through the thrill of gambling.
Building a portfolio of stock shares can indeed prove fruitful to the clever investor, particularly in boom periods. The gains achieved on the New York Stock Exchange made headline after headline after that market went through the roof with the dot-com explosion in the 1990s. With lots of foresight and a fair share of luck, investment in smaller lesser-known companies (e.g. tiny, embryonic firms like young Amazon.com) can bring stunning returns.
But in stock portfolios, it's all about the risk. Daily diligence on the investor's part is necessary. While stock market players live up to the verb "to play," mutual funds, index funds and ETFs demonstrate the principle of "slow and steady wins the race."
At the heart of success in ETF investment is the simplicity of what experts report to be the overwhelming factor in success: Asset allocation. Some sources call asset allocation of chief importance and absolutely crucial to success in investment.
The exchange traded fund turns traditional thinking about investment in exchange markets on its head. Those who pick and choose from among the thousands of individual stocks out there are judging based on data from or about individual firms; the consideration given the type of stock is minimal.
The reverse philosophy of ETF investment makes for the most marked difference between these funds and the most traditional of all market investment types: With ETFs, the investor is for all intents and purposes buying a
proportion of an entire market and so the ETF investor is freed from the decision of divvying up the portfolio among varying asset classes, not to mention the subsequent innumerable day-to-day choices required of the stock investor.
So if huge returns can be gotten trading stock, what is the importance of asset allocation? This question was addressed in the often cited research undertaken by Brinson Partners, Inc. and spearheaded by CEO Gary P. Brinson in 1986. Examining hundreds of small- and medium-scale investors with positive and negative track records, Brinson and co. demonstrated that investment performance can be determined to a rate of 95% based solely on selection of asset class; in the long-term, went subsequent reasoning, most attention should be paid to an entire industry rather than each publicly-traded company separately.
The importance of the 95% statistic shows how useful the ETF system can be. Choose almost any asset class and, barring a serious market-wide hit, the ETF investment will increase in value. Whereas the pure stock portfolio can contain numerous blocks of shares and therefore numerous decisions to make in initial investment and day-to-day considerations of fluctuation, an ETF investment of the same size requires one single selection that can be researched much more thoroughly.
Economics experts connect the risk inherent in individual stock investment with the amount of competition on the market. In Europe, Tokyo and North America, the stock markets are simply bloated with possibilities. Stock analysis today is so plentiful, mutually contradictory and often beyond the public sphere that the private investor must react quickly and often blindly in periods of high fluctuation.
And there's a further problem with the 21st century world of too much information: Poring through this data is costly to brokers and money managers; that cost, Mr./Ms. Stock Market Investor, is passed on to you, giving you further expense to cover in potential earnings. Statistics show that the average stock portfolio does not outperform the market in which it is based, and few private investors can chase a winning streak over the long haul. In this game, the house essentially always wins.
When all that is required is selection of asset class, most of the guess work, dependence on consultants and commission fees are eliminated. And if we believe that asset class selection determines results (cf. the
Brinson study), the investor in ETFs avoids an entire level of difficulty. Choosing among the 13 accepted primary asset classes in which ETFs are currently available allows thorough examination of markets.
What can be done during times of market skyrocketing? Well, ETFs are often chosen because of their features similar to stock. Trading with ETFs can take place in essentially the same fashion as shares in the stock market, with options to buy on margin, limit order, sell short or use a stop-loss order at the ETF investor's disposal. ETFs are priced throughout the day and heavy losses can be avoided by the even slightly vigilant.
Believe it or not, brand new exchange traded funds released in 2006 address the exciting issue of getting in on the ground floor of emerging businesses. Why miss out on this year's Amazon when the First Trust IPOX 100 Index Fund and the IPO Plus Aftermarket Fund are available? These ETFs not only make the IPO a distinct asset class in itself, but they allow ETF trading off major indices.
Though it seems unlikely the American market will see anything resembling the crazy growth of the mid- and late 1990s, fields such as biological engineering, genetic research, pharmaceuticals and the internet still produce overnight successes with resultant incredible returns. Indeed, the new IPO ETF market looks to capitalize on the extreme growth that always exists somewhere in the market. A tiny bit of calculation will show that IPOs in 2004 and 2005 well outperformed the sluggish market and, in theory, usually can.
One trade-off does exist for the would-be IPO exchange traded fund investor, though: The appeal of IPO investment has, since its inception, been all about the first day's turnover. Traditional IPO investment has
allowed the quickest dip in the stock market pool known, with large-scale investors pulling cash they'd invested twenty-four hours earlier on a regular basis. The long-term investment of ETFs may seem to be an automatic contradiction to making money in often fly-by-night IPOs, but IPO exchange traded funds, too, offer most advantages the ETF investor seeks. In the case of any fund based on the IPOX index, investors only start receiving returns on IPO gains seven days after the firm's entry onto the exchange, staying within the index for 1000 trading days. However, the short-term long-term investment here is also intriguing: Consider, for example, that still-increasing Google shares remain a healthy part of the IPOX 100. And the bottom line shows that the IPOX 100 posted gains of almost 20% higher than those obtained by the IPO Plus Aftermath mutual fund and the Standard&Poor's 500 index.
If playing the stock market can be likened to roulette (and, at times of economic slowdown, enormous competition and fickle consumers can make it feel so), exchange traded funds are akin to blackjack: Yes, brainpower is necessary, but the odds are quite a bit better.
market," i.e. speculating and trading individual stocks on the exchange, captures the public's imagination. Understandable, for playing the stock market essentially carries the investor away through the thrill of gambling.
Building a portfolio of stock shares can indeed prove fruitful to the clever investor, particularly in boom periods. The gains achieved on the New York Stock Exchange made headline after headline after that market went through the roof with the dot-com explosion in the 1990s. With lots of foresight and a fair share of luck, investment in smaller lesser-known companies (e.g. tiny, embryonic firms like young Amazon.com) can bring stunning returns.
But in stock portfolios, it's all about the risk. Daily diligence on the investor's part is necessary. While stock market players live up to the verb "to play," mutual funds, index funds and ETFs demonstrate the principle of "slow and steady wins the race."
At the heart of success in ETF investment is the simplicity of what experts report to be the overwhelming factor in success: Asset allocation. Some sources call asset allocation of chief importance and absolutely crucial to success in investment.
The exchange traded fund turns traditional thinking about investment in exchange markets on its head. Those who pick and choose from among the thousands of individual stocks out there are judging based on data from or about individual firms; the consideration given the type of stock is minimal.
The reverse philosophy of ETF investment makes for the most marked difference between these funds and the most traditional of all market investment types: With ETFs, the investor is for all intents and purposes buying a
proportion of an entire market and so the ETF investor is freed from the decision of divvying up the portfolio among varying asset classes, not to mention the subsequent innumerable day-to-day choices required of the stock investor.
So if huge returns can be gotten trading stock, what is the importance of asset allocation? This question was addressed in the often cited research undertaken by Brinson Partners, Inc. and spearheaded by CEO Gary P. Brinson in 1986. Examining hundreds of small- and medium-scale investors with positive and negative track records, Brinson and co. demonstrated that investment performance can be determined to a rate of 95% based solely on selection of asset class; in the long-term, went subsequent reasoning, most attention should be paid to an entire industry rather than each publicly-traded company separately.
The importance of the 95% statistic shows how useful the ETF system can be. Choose almost any asset class and, barring a serious market-wide hit, the ETF investment will increase in value. Whereas the pure stock portfolio can contain numerous blocks of shares and therefore numerous decisions to make in initial investment and day-to-day considerations of fluctuation, an ETF investment of the same size requires one single selection that can be researched much more thoroughly.
Economics experts connect the risk inherent in individual stock investment with the amount of competition on the market. In Europe, Tokyo and North America, the stock markets are simply bloated with possibilities. Stock analysis today is so plentiful, mutually contradictory and often beyond the public sphere that the private investor must react quickly and often blindly in periods of high fluctuation.
And there's a further problem with the 21st century world of too much information: Poring through this data is costly to brokers and money managers; that cost, Mr./Ms. Stock Market Investor, is passed on to you, giving you further expense to cover in potential earnings. Statistics show that the average stock portfolio does not outperform the market in which it is based, and few private investors can chase a winning streak over the long haul. In this game, the house essentially always wins.
When all that is required is selection of asset class, most of the guess work, dependence on consultants and commission fees are eliminated. And if we believe that asset class selection determines results (cf. the
Brinson study), the investor in ETFs avoids an entire level of difficulty. Choosing among the 13 accepted primary asset classes in which ETFs are currently available allows thorough examination of markets.
What can be done during times of market skyrocketing? Well, ETFs are often chosen because of their features similar to stock. Trading with ETFs can take place in essentially the same fashion as shares in the stock market, with options to buy on margin, limit order, sell short or use a stop-loss order at the ETF investor's disposal. ETFs are priced throughout the day and heavy losses can be avoided by the even slightly vigilant.
Believe it or not, brand new exchange traded funds released in 2006 address the exciting issue of getting in on the ground floor of emerging businesses. Why miss out on this year's Amazon when the First Trust IPOX 100 Index Fund and the IPO Plus Aftermarket Fund are available? These ETFs not only make the IPO a distinct asset class in itself, but they allow ETF trading off major indices.
Though it seems unlikely the American market will see anything resembling the crazy growth of the mid- and late 1990s, fields such as biological engineering, genetic research, pharmaceuticals and the internet still produce overnight successes with resultant incredible returns. Indeed, the new IPO ETF market looks to capitalize on the extreme growth that always exists somewhere in the market. A tiny bit of calculation will show that IPOs in 2004 and 2005 well outperformed the sluggish market and, in theory, usually can.
One trade-off does exist for the would-be IPO exchange traded fund investor, though: The appeal of IPO investment has, since its inception, been all about the first day's turnover. Traditional IPO investment has
allowed the quickest dip in the stock market pool known, with large-scale investors pulling cash they'd invested twenty-four hours earlier on a regular basis. The long-term investment of ETFs may seem to be an automatic contradiction to making money in often fly-by-night IPOs, but IPO exchange traded funds, too, offer most advantages the ETF investor seeks. In the case of any fund based on the IPOX index, investors only start receiving returns on IPO gains seven days after the firm's entry onto the exchange, staying within the index for 1000 trading days. However, the short-term long-term investment here is also intriguing: Consider, for example, that still-increasing Google shares remain a healthy part of the IPOX 100. And the bottom line shows that the IPOX 100 posted gains of almost 20% higher than those obtained by the IPO Plus Aftermath mutual fund and the Standard&Poor's 500 index.
If playing the stock market can be likened to roulette (and, at times of economic slowdown, enormous competition and fickle consumers can make it feel so), exchange traded funds are akin to blackjack: Yes, brainpower is necessary, but the odds are quite a bit better.
Exchange Traded Funds
First introduced in 1990 on the Toronto stock exchange and in 1993 on the American market, the exchange traded fund has increased in popularity from a little-known alternate to open-ended index funds to an investment
industry in itself with over one hundred ETFs with assets of over one-quarter trillion dollars worldwide and almost $180 billion on the American stock exchange alone.
The exchange traded fund is an open-ended collective investment differing from standard mutual funds in quite a few ways. In similar fashion to that of investment companies, ETFs must be registered with the Securities and Exchange Commission as such. After creation of the ETF itself, the institutional investor deposits a block of securities within it; for the deposit, the institutional investor gets ETF shares which may in turn by traded on the stock exchange once listed in any national exchange.
As an investment, ETFs potentially promise the best of two worlds within stock market trading. ETFs offer the diversification and relative security inherent in an actively managed mutual fund while also allowing investors the freedom to buy and sell ETF shares just as he or she can buy and sell the stock of a publicly traded company. ETFs also feature a few distinctive advantages, with the typical ETF carrying low expense ratios, low turnover, and an advantageous tax structure.
Since the ETF is a relatively new phenomenon, and since so many ETFs are able to take advantage of technological advances and trends in e-commerce, innovations come fairly frequently to the market. On the other hand,
the ETF market is notably stable, and the most widely held ETF is Standard & Poor's Depository Receipt (abbreviated SPDR and commonly known as "spiders"), a format with origins back to the very first ETF ever traded in the United States. Other ETFs are tied in with the Dow Jones Industrial Average or the Nasdaq 100 index; these are known as "diamonds" and "qubes," respectively. Funds known as "iShares" represent an ETF group created by Barclays Global Investors, the world's largest institutional investor.
In terms of assets at the conclusion of year 2005, the list of top-ranked American ETFs includes the DIAMONDS Trust (Series 1), the iShares Dow Jones Select Dividend Index Fund, the iShares MSCI EAFE Index Fund, the iShares MSCI Emerging Markets Index Fund, the iShares MSCI Japan Index Fund, the iShares Russell 2000 Index Fund, the iShares Standard & Poor's 500 Index Fund, MidCap SPDRs, Qubes, SPDRs, State Street Corporation's streetTRACKS, and the Vanguard Group's VIPERS.
As for the future, should ETFs retain their current level of popularity, the sky is the limit. Following the creation and release of the SPDR concept came ETFs based on the Midcap index and international exchange; the latter represented seventeen ETFs as far back as 1996. At the end of year 2000, assets of the fewer than ninety ETFs were calculated at approximately $83 billion; a mere four years later, those figures had increased to almost 180 funds (and 350 funds in the history of the investment) representing more than $230 billion on twenty-eight markets. Though we surely cannot expect an ETF investment to continue to grow at rates of 32-34 percent annually, as in 2003 and 2004, but with the continued innovation so characteristic of the ETF market, an ETF investment appears to be a secure one in at least the medium-term.
Part one. The history of ETFs
Though the concept of modern exchange traded funds quite clearly began in Toronto in 1989, its origins go back to 1976 and the creation of the index fund. At that time, John C. Bogle of the Vanguard Group conducted a study which showed that seventy-five percent of existing mutual funds earned as much as or less than the Standard & Poor 500 stock market index. If a mutual fund could be created that invested in all S&P 500, it automatically would be an improvement over the standard mutual fund of that time. The result was the Vanguard 500, a structure that theoretically is primarily concerned with shareholder interests, as opposed to mutual funds, which attempt to serve the interests of both outside owners and shareholders.
The ETF is a natural outgrowth of the index fund in its nature as an open-ended collective investment, with a subsequent few adjustments made thanks to modern exchange dynamics. Like
mutual funds and index funds, ETFs must be registered as an investment company with the Securities and Exchange Commission. After creation of the ETF itself, the institutional investor deposits a block of securities within it; for the deposit, the institutional investor gets ETF shares which may in turn by traded on the stock exchange once listed in any national exchange.
As in index funds, investors are dealing with blocks of stocks in an attempt to regulate the stock market index; this reduces risk via the anchoring influence of blue chips while taking advantage of boom-time economies. However, ETFs can also be based in a market sector or even a commodity. Unlike mutual funds, individual shares within ETFs and index funds are not redeemable in part.
Recently added to ETF investment schemes is exemptive relief in the U.S. This allows their registration as mutual funds despite their status as not individually redeemable, it permits the trading of shares in kind, and share prices are pre-negotiated. This latter advantage refers to the intraday trading of ETFs and the market-determined prices can protect investors from a day's worth of dramatically fluctuating trade; this feature is unique to ETFs, as is the requirement that ETF trading is done intraday only.
Since its introduction to the Canadian market in 1990 and the American market in 1993, the exchange traded fund has increased in popularity from a little-known alternate to open-ended index funds to an investment industry in itself. The Toronto Stock Exchange introduced the first ETF, known as TIPS, in January 1990. Under the auspices of the SEC's Super Trust Order, American Stock Exchange interests put in a federal-level request to create an independent index-based ETF.
After a bit of wrangling and hashing out of details with the SEC and American federal law (including incorporation the Securities Act of 1933 and the Securities Exchange Act of 1940, which regulate mutual funds and, since the 1970s, any similar such investment instrument e.g. index funds), January 1993 saw the opening of the first ETF in the U.S. Based on the Standard & Poor 500 index, the S&P Depository Receipts Trust Series wasn't followed up until 1995, when a new ETF tied into the S&P MidCap 400 index was added.
will be continue..... late.....
industry in itself with over one hundred ETFs with assets of over one-quarter trillion dollars worldwide and almost $180 billion on the American stock exchange alone.
The exchange traded fund is an open-ended collective investment differing from standard mutual funds in quite a few ways. In similar fashion to that of investment companies, ETFs must be registered with the Securities and Exchange Commission as such. After creation of the ETF itself, the institutional investor deposits a block of securities within it; for the deposit, the institutional investor gets ETF shares which may in turn by traded on the stock exchange once listed in any national exchange.
As an investment, ETFs potentially promise the best of two worlds within stock market trading. ETFs offer the diversification and relative security inherent in an actively managed mutual fund while also allowing investors the freedom to buy and sell ETF shares just as he or she can buy and sell the stock of a publicly traded company. ETFs also feature a few distinctive advantages, with the typical ETF carrying low expense ratios, low turnover, and an advantageous tax structure.
Since the ETF is a relatively new phenomenon, and since so many ETFs are able to take advantage of technological advances and trends in e-commerce, innovations come fairly frequently to the market. On the other hand,
the ETF market is notably stable, and the most widely held ETF is Standard & Poor's Depository Receipt (abbreviated SPDR and commonly known as "spiders"), a format with origins back to the very first ETF ever traded in the United States. Other ETFs are tied in with the Dow Jones Industrial Average or the Nasdaq 100 index; these are known as "diamonds" and "qubes," respectively. Funds known as "iShares" represent an ETF group created by Barclays Global Investors, the world's largest institutional investor.
In terms of assets at the conclusion of year 2005, the list of top-ranked American ETFs includes the DIAMONDS Trust (Series 1), the iShares Dow Jones Select Dividend Index Fund, the iShares MSCI EAFE Index Fund, the iShares MSCI Emerging Markets Index Fund, the iShares MSCI Japan Index Fund, the iShares Russell 2000 Index Fund, the iShares Standard & Poor's 500 Index Fund, MidCap SPDRs, Qubes, SPDRs, State Street Corporation's streetTRACKS, and the Vanguard Group's VIPERS.
As for the future, should ETFs retain their current level of popularity, the sky is the limit. Following the creation and release of the SPDR concept came ETFs based on the Midcap index and international exchange; the latter represented seventeen ETFs as far back as 1996. At the end of year 2000, assets of the fewer than ninety ETFs were calculated at approximately $83 billion; a mere four years later, those figures had increased to almost 180 funds (and 350 funds in the history of the investment) representing more than $230 billion on twenty-eight markets. Though we surely cannot expect an ETF investment to continue to grow at rates of 32-34 percent annually, as in 2003 and 2004, but with the continued innovation so characteristic of the ETF market, an ETF investment appears to be a secure one in at least the medium-term.
Part one. The history of ETFs
Though the concept of modern exchange traded funds quite clearly began in Toronto in 1989, its origins go back to 1976 and the creation of the index fund. At that time, John C. Bogle of the Vanguard Group conducted a study which showed that seventy-five percent of existing mutual funds earned as much as or less than the Standard & Poor 500 stock market index. If a mutual fund could be created that invested in all S&P 500, it automatically would be an improvement over the standard mutual fund of that time. The result was the Vanguard 500, a structure that theoretically is primarily concerned with shareholder interests, as opposed to mutual funds, which attempt to serve the interests of both outside owners and shareholders.
The ETF is a natural outgrowth of the index fund in its nature as an open-ended collective investment, with a subsequent few adjustments made thanks to modern exchange dynamics. Like
mutual funds and index funds, ETFs must be registered as an investment company with the Securities and Exchange Commission. After creation of the ETF itself, the institutional investor deposits a block of securities within it; for the deposit, the institutional investor gets ETF shares which may in turn by traded on the stock exchange once listed in any national exchange.
As in index funds, investors are dealing with blocks of stocks in an attempt to regulate the stock market index; this reduces risk via the anchoring influence of blue chips while taking advantage of boom-time economies. However, ETFs can also be based in a market sector or even a commodity. Unlike mutual funds, individual shares within ETFs and index funds are not redeemable in part.
Recently added to ETF investment schemes is exemptive relief in the U.S. This allows their registration as mutual funds despite their status as not individually redeemable, it permits the trading of shares in kind, and share prices are pre-negotiated. This latter advantage refers to the intraday trading of ETFs and the market-determined prices can protect investors from a day's worth of dramatically fluctuating trade; this feature is unique to ETFs, as is the requirement that ETF trading is done intraday only.
Since its introduction to the Canadian market in 1990 and the American market in 1993, the exchange traded fund has increased in popularity from a little-known alternate to open-ended index funds to an investment industry in itself. The Toronto Stock Exchange introduced the first ETF, known as TIPS, in January 1990. Under the auspices of the SEC's Super Trust Order, American Stock Exchange interests put in a federal-level request to create an independent index-based ETF.
After a bit of wrangling and hashing out of details with the SEC and American federal law (including incorporation the Securities Act of 1933 and the Securities Exchange Act of 1940, which regulate mutual funds and, since the 1970s, any similar such investment instrument e.g. index funds), January 1993 saw the opening of the first ETF in the U.S. Based on the Standard & Poor 500 index, the S&P Depository Receipts Trust Series wasn't followed up until 1995, when a new ETF tied into the S&P MidCap 400 index was added.
will be continue..... late.....
How To's in Purchasing Exchange-traded Funds
As far as purchasing ETF shares, the easiest question to handle is "where do I buy?" In this respect, ETFs are no different than standard stock purchasing, and any stockbroker can sell an exchange traded fund.
And from there, it all gets more complex.
First thing to remember: Purchasing ETFs never involves cash.
Investing in an ETF begins with the creation unit, the smallest possible collection of ETF stock; the creation unit can consist of between 10,000 to 600,000 shares (according to the U.S. Securities and Exchange Commission, the figure is typically 50,000) that will serve to underpin the ETF. Because of these creation units, ETF shares can be traded intraday. Representing a small piece of the creation unit, ETFs are issued to the prospective dealer as an in-kind trade involving the swapping of securities, ultimately assisting in tax relief.
The actual size of the creation unit makes it virtually impossible for even large private investors, and investment institutions typically purchasing and selling the units. Such firms purchase creation units with securities that parallel the portfolio of the ETF. Once the ETF creation unit is purchased, it is broken up into smaller parcels; private investors can then buy shares at exchange at the market price, with lot size variable.
Remember: Selling ETFs never involves cash. When a creation unit is "sold," what is in actuality returned to the seller is a securities portfolio composed holdings is identical ratio to the ETF; the seller is actually trading the ETF shares for the like actual securities. The ETF's status as non-liquid assets is the most crucial difference between exchange traded funds and mutual funds.
The purchase of ETF shares also requires careful consideration with regard to a prospectus. Playing by the rules of an individual investment company, each ETF carries a prospectus; this prospectus is only guaranteed to the purchaser of creation units, however, and only some ETFs supply share purchasers. In these cases, a "product description" must be provided, which acts as an ETF summary.
One contention commonly held against ETF investment is the possibility that these funds will be traded at a share price that is not connected with the value of the underlying securities. This is where arbitrage comes
in, a system which provides further insurance for the private investment.
Take the value of the ETF to be amount X, representing the total of the net worth of all individual securities within the ETF. The investor should be expected to pay X for one share of the ETF. However, the ETF need not be traded at value X at all; and if the ETF trades at some figure over X, those buying ETF shares at that price are paying more than the individual securities are worth; the whole would be less than the sums of the parts.
The ETF arbitrage system seeks to set this potential abuse right. The trading price of the ETF is set at the close of trading every day along with all other sorts of mutual funds. When the total of underlying share values do not balance with the ETF pricing, arbitrage results. If the securities are priced lower, arbitragers purchase the securities in question and then parlay them into creation units; they can then sell shares in the creation unit on the open market. If the ETF shares are priced lower, arbitragers purchase the securities from the open market. The theory is that arbiter action restores the supply / demand balance so that the ETF values themselves are harmonized. This system has worked since nearly the genesis of modern ETFs and was instituted by institutional investors before shares in exchange traded funds were even available to private investors; a steady balance has been maintained since the 1990s
With its myriad advantages, the exchanged traded fund looks like a winner for the beginning, conservative or laissez-faire investor. There is one outstanding drawback to the ETF, a comment made anywhere ETF investment advice is given: High agency commissions. The trickiest - and enthusiasts would swear the only tricky - part of ETF investment is avoidance of these commissions.
One way typically used by the ETF investor is merely to use a 401(k) or IRA scheme to base the portfolio in, thus directing investment into a mutual fund company and allowing the investor to pay taxes rather than
commissions, almost always at a favorable rate. Assuming the tax rate paid on returns is lower than the commissions (and it typically will be), returns are automatically higher. In the much quoted and highly illustrative example on investment website Morningstar.com, that company's estimates show that, using figures from the S&P 500 index, a $10,000 investment would require an average of two years to see return on investment. The 401 (k) / IRA option is already used in the Vanguard Target Retirement funds, hoping to increase investor confidence in making ETFs a part of retirement 401(k) plans and open the market to investors of all sizes and investment interests.
The challenge for all ETF issuers right now is in fact to draw in the small investor market, making ETFs both an option for more and well-known by more. The London Stock Exchange announced that the ETF Securities Fund will see release in the second quarter of 2006, part of the LSE gamble to bring small investors into the fold. ETF Securities is a combination of a wide range of commodities, including copper, oil, silver and zinc. While German, American and British investment brokers feature a number of mixed commodity index funds, the ETF Securities fund is specifically promised to require smaller capital investment to earn returns on investment.
As far as immediate costs, traditional mutual funds look more appealing at first glance, what with no sales charge. However, the fees in mutual funds do add up, as annual management fees tend to be significantly higher than those of ETFs. In the medium term, the gamble of the mutual fund becomes more apparent, as trading of mutual funds can only happen based on the closing price at trading day's end. In a single bad day, mutual funds can take a hit of several percentage points, while the intraday trading nature of ETFs allow the sharp-eyed and attentive plenty of time to bail out in a hurry if necessary.
You can certainly buy a mutual fund directly from a fund group at no sales charge. Annual management fees will typically be higher with a traditional mutual fund and you can only buy or sell at the closing price at the end of the day. There are tradeoffs in each of the two types of funds.
Traditional mutual funds often appeal to the small investor simply because they represent more familiar ground to him or her; after all,
mutual funds have been around for most people's entire lifetime now, whereas ETFs were born in the 1990s, remain a burgeoning phenomenon, and are unknown in detail to a great deal of small-scale market players. Mutual funds can earn big money quickly and quite a few of them consistently outperform the markets themselves. Working against mutual funds here, though, are numerous data and independent research that reveals the risks inherent in mutual funds, namely that the chance that a star mutual funds beats the market next year is pretty much 50/50, regardless of prior results or consecutive years profitable. ETFs win again in terms of security.
At the heart of all indexing is whether most investors should attempt to beat markets by stock picking. First of all, the question presupposes that a mutual fund that has outperformed a market in the past will continue to do so in the future. Numerous studies by unbiased university researchers have shown that star mutual funds are just as likely to underperform than outperform the market several years into the future. Many investors have concluded that they are better off not taking the risk and instead remain happy with market returns of an index fund. Next, actively managed funds inevitably have higher annual management fees and have a worse capital gains tax profile. Finally, investors cannot get in or out of traditional mutual funds instantly with a known price as they can with an ETF.
In the long term, the average ETF far outweighs the average mutual fund in returns. When demonstrating the opportunities inherent in exchange traded funds, Agile Investing presents their projections of the performance of a typical ETF against that of a like typical mutual fund. Assuming an eight percent return for both on equal investments of $100,000 over twenty years, the 1% advantage in the ETF expense ratio alone results in additional returns of more than $75,000. And this figure doesn't take the advantageous tax rates on ETFs, nor the possibility that the mutual fund in question is one of the majority that will actually underperform its benchmark index.
As far as the actual amount of the check you'll have to write, ten thousand dollars, as shown above, is a decent start for the ETF investment; this, however, really only represents a minimum, especially because a single investment is recommended by just about every advisory source, and long-term investment is critical. Despite the typically high commission which must be paid out to institutional investors, the truth is that the Standard's & Poor 500 (to cite one example) brings higher returns than 80% of managed funds, given enough time to mature.
It cannot be stated enough: Patience is the mightiest of all virtues in exchange traded fund investment.
And from there, it all gets more complex.
First thing to remember: Purchasing ETFs never involves cash.
Investing in an ETF begins with the creation unit, the smallest possible collection of ETF stock; the creation unit can consist of between 10,000 to 600,000 shares (according to the U.S. Securities and Exchange Commission, the figure is typically 50,000) that will serve to underpin the ETF. Because of these creation units, ETF shares can be traded intraday. Representing a small piece of the creation unit, ETFs are issued to the prospective dealer as an in-kind trade involving the swapping of securities, ultimately assisting in tax relief.
The actual size of the creation unit makes it virtually impossible for even large private investors, and investment institutions typically purchasing and selling the units. Such firms purchase creation units with securities that parallel the portfolio of the ETF. Once the ETF creation unit is purchased, it is broken up into smaller parcels; private investors can then buy shares at exchange at the market price, with lot size variable.
Remember: Selling ETFs never involves cash. When a creation unit is "sold," what is in actuality returned to the seller is a securities portfolio composed holdings is identical ratio to the ETF; the seller is actually trading the ETF shares for the like actual securities. The ETF's status as non-liquid assets is the most crucial difference between exchange traded funds and mutual funds.
The purchase of ETF shares also requires careful consideration with regard to a prospectus. Playing by the rules of an individual investment company, each ETF carries a prospectus; this prospectus is only guaranteed to the purchaser of creation units, however, and only some ETFs supply share purchasers. In these cases, a "product description" must be provided, which acts as an ETF summary.
One contention commonly held against ETF investment is the possibility that these funds will be traded at a share price that is not connected with the value of the underlying securities. This is where arbitrage comes
in, a system which provides further insurance for the private investment.
Take the value of the ETF to be amount X, representing the total of the net worth of all individual securities within the ETF. The investor should be expected to pay X for one share of the ETF. However, the ETF need not be traded at value X at all; and if the ETF trades at some figure over X, those buying ETF shares at that price are paying more than the individual securities are worth; the whole would be less than the sums of the parts.
The ETF arbitrage system seeks to set this potential abuse right. The trading price of the ETF is set at the close of trading every day along with all other sorts of mutual funds. When the total of underlying share values do not balance with the ETF pricing, arbitrage results. If the securities are priced lower, arbitragers purchase the securities in question and then parlay them into creation units; they can then sell shares in the creation unit on the open market. If the ETF shares are priced lower, arbitragers purchase the securities from the open market. The theory is that arbiter action restores the supply / demand balance so that the ETF values themselves are harmonized. This system has worked since nearly the genesis of modern ETFs and was instituted by institutional investors before shares in exchange traded funds were even available to private investors; a steady balance has been maintained since the 1990s
With its myriad advantages, the exchanged traded fund looks like a winner for the beginning, conservative or laissez-faire investor. There is one outstanding drawback to the ETF, a comment made anywhere ETF investment advice is given: High agency commissions. The trickiest - and enthusiasts would swear the only tricky - part of ETF investment is avoidance of these commissions.
One way typically used by the ETF investor is merely to use a 401(k) or IRA scheme to base the portfolio in, thus directing investment into a mutual fund company and allowing the investor to pay taxes rather than
commissions, almost always at a favorable rate. Assuming the tax rate paid on returns is lower than the commissions (and it typically will be), returns are automatically higher. In the much quoted and highly illustrative example on investment website Morningstar.com, that company's estimates show that, using figures from the S&P 500 index, a $10,000 investment would require an average of two years to see return on investment. The 401 (k) / IRA option is already used in the Vanguard Target Retirement funds, hoping to increase investor confidence in making ETFs a part of retirement 401(k) plans and open the market to investors of all sizes and investment interests.
The challenge for all ETF issuers right now is in fact to draw in the small investor market, making ETFs both an option for more and well-known by more. The London Stock Exchange announced that the ETF Securities Fund will see release in the second quarter of 2006, part of the LSE gamble to bring small investors into the fold. ETF Securities is a combination of a wide range of commodities, including copper, oil, silver and zinc. While German, American and British investment brokers feature a number of mixed commodity index funds, the ETF Securities fund is specifically promised to require smaller capital investment to earn returns on investment.
As far as immediate costs, traditional mutual funds look more appealing at first glance, what with no sales charge. However, the fees in mutual funds do add up, as annual management fees tend to be significantly higher than those of ETFs. In the medium term, the gamble of the mutual fund becomes more apparent, as trading of mutual funds can only happen based on the closing price at trading day's end. In a single bad day, mutual funds can take a hit of several percentage points, while the intraday trading nature of ETFs allow the sharp-eyed and attentive plenty of time to bail out in a hurry if necessary.
You can certainly buy a mutual fund directly from a fund group at no sales charge. Annual management fees will typically be higher with a traditional mutual fund and you can only buy or sell at the closing price at the end of the day. There are tradeoffs in each of the two types of funds.
Traditional mutual funds often appeal to the small investor simply because they represent more familiar ground to him or her; after all,
mutual funds have been around for most people's entire lifetime now, whereas ETFs were born in the 1990s, remain a burgeoning phenomenon, and are unknown in detail to a great deal of small-scale market players. Mutual funds can earn big money quickly and quite a few of them consistently outperform the markets themselves. Working against mutual funds here, though, are numerous data and independent research that reveals the risks inherent in mutual funds, namely that the chance that a star mutual funds beats the market next year is pretty much 50/50, regardless of prior results or consecutive years profitable. ETFs win again in terms of security.
At the heart of all indexing is whether most investors should attempt to beat markets by stock picking. First of all, the question presupposes that a mutual fund that has outperformed a market in the past will continue to do so in the future. Numerous studies by unbiased university researchers have shown that star mutual funds are just as likely to underperform than outperform the market several years into the future. Many investors have concluded that they are better off not taking the risk and instead remain happy with market returns of an index fund. Next, actively managed funds inevitably have higher annual management fees and have a worse capital gains tax profile. Finally, investors cannot get in or out of traditional mutual funds instantly with a known price as they can with an ETF.
In the long term, the average ETF far outweighs the average mutual fund in returns. When demonstrating the opportunities inherent in exchange traded funds, Agile Investing presents their projections of the performance of a typical ETF against that of a like typical mutual fund. Assuming an eight percent return for both on equal investments of $100,000 over twenty years, the 1% advantage in the ETF expense ratio alone results in additional returns of more than $75,000. And this figure doesn't take the advantageous tax rates on ETFs, nor the possibility that the mutual fund in question is one of the majority that will actually underperform its benchmark index.
As far as the actual amount of the check you'll have to write, ten thousand dollars, as shown above, is a decent start for the ETF investment; this, however, really only represents a minimum, especially because a single investment is recommended by just about every advisory source, and long-term investment is critical. Despite the typically high commission which must be paid out to institutional investors, the truth is that the Standard's & Poor 500 (to cite one example) brings higher returns than 80% of managed funds, given enough time to mature.
It cannot be stated enough: Patience is the mightiest of all virtues in exchange traded fund investment.
What You Need to Know About Exchange-traded Fund Investment
As an investment, ETFs potentially promise the best of two worlds within stock market trading. ETFs offer the diversification and relative security inherent in an actively
managed mutual fund while also allowing investors the freedom to buy and sell ETF shares just as he or she can buy and sell the stock of a publicly traded company. ETFs also feature a few distinctive advantages, with the typical ETF carrying low expense ratios, low turnover, and an advantageous tax structure. Since the ETF is a relatively new phenomenon, and since so many ETFs are able to take advantage of technological advances and trends in e-commerce, innovations come fairly frequently to the market.
Though the jury is still out on whether the typically high commission which must be paid out to institutional investors, the truth is that statistics show that the Standard's & Poor 500 brings higher returns than 80% of managed funds.
Most ETFs have a noticeably lower expense ratio than mutual funds. The ETF expense ratio almost never tops 1%, while rates of 0.1% are common; mutual funds can be 3% or more.
In America, the typical ETF is more tax efficient than mutual funds in many areas. Under U.S. tax law, when a mutual fund achieves a capital gain that is not balanced by a loss, the mutual fund is required to distribute capital gains to shareholders by the end of the quarter. This happens when large fluctuations strike the index, usually when a panic occurs and a large volume of stock is pulled from the index. Said gains are taxable to shareholders, whether reinvesting in further fund shares or not. The ETF, meanwhile, is not redeemed by the stockholders and investors are allowed to merely sell in open trading. The result is investors realizing capital gains only when they choose to sell their own shares.
Indeed, ETFs are often chosen because of their features similar to stock. Trading with ETFs can take place in essentially the same fashion as shares in the stock market, with options to buy on margin, limit order, sell
short or use a stop-loss order at the ETF investor's disposal. None of these freedoms are offered with a mutual fund. In open-end funds, investors can sell only at the closing price of the mutual fund. Stop-loss orders basically become irrelevant and the ETF investor is much less at the whim of stock market flights of fancy. ETFs are priced throughout the day and heavy losses can be avoided by the vigilant.
The argument against ETF investment is mainly all about commissions, but these can be avoided and/or softened. When using a 401(k) or IRA scheme to base a portfolio in, a direct investment into a mutual fund company allows the investor to pay taxes rather than commissions.
Paths to success in ETF investment are surprisingly simple and number three. First, of course, is the above-mentioned tax hedge. Assuming the tax rate paid on returns is lower than the commissions (and it typically will be), returns are automatically higher. Should dealing with the ETF directly not be desirable and a broker must be used, much research and consideration should be put into the decision, period. Online investment website Morningstar.com breaks it down like so. Using the S&P 500 index as basis, Morningstar experts calculate that a $10,000 investment requires an average of two years to see return on investment; this suggests the following two keys to profit in ETF investment.
Number two on the list of rules essential to success is the investment amount. Ten thousand dollars, as shown above, is a decent start for the ETF investment. Note the use of "the" in the preceding sentence: A single investment is strongly recommended as well for, again, commissions will kill or seriously forestall returns on investment.
Last but not least is the easiest of all: Leave it alone. ETF trading is intraday, which in itself implies that trading activity is slow and very deliberate. Indeed, the creation of the ETF certainly had long-term investment in mind.
However, the disadvantage of ETF investment can prove to be exactly the opposite to the right kind of investor. Those that prefer a laissez-faire attitude to investment should find ETFs one of the most attractive opportunities out there. ETFs are perfect for those wanting to, as an old infomercial used to say, "set it and forget it."
Most exchange trust funds carry one of three legal structures. Open-end index fund refers to a fund structure registered under the SEC Investment Company Act of 1940 which reinvests dividends. Dividends are paid
quarterly, and derivative and loan securities are permissible for use in the open-end index fund.
The unit investment trust is also registered under the SEC Investment Company Act of 1940 and pays dividends quarterly; dividends are not reinvested in a unit investment trust, however.
The grantor trust is a fund structure that pays dividends directly; it also offers investors an advantage in its voting rights within the fund's securities. The grantor trust is not registered under the SEC Investment Company Act of 1940 and is mostly known for its use in the Merrill Lynch HOLDRs.
The most widely held ETF today is the Standard & Poor's Depository Receipt, a format with origins in the very first ETF ever traded in the United States. Other ETFs are tied in with the Dow Jones Industrial Average or the Nasdaq 100 index; these are known as "diamonds" and "qubes," respectively. Diamonds, qubes and SPDRs are unit investment trusts.
Open-end index funds known as "iShares" are exchange-traded securities composed of more than sixty index funds. The funds are compiled by an index provider from among Cohen & Steers Capital Management, Inc.; Dow Jones & Company; the Frank Russell Company; Goldman, Sachs & Company; Morgan Stanley Capital International, Inc.; the Nasdaq stock market; and Standard & Poor's. The iShares schemes listed below are distributed by broker / dealer SEI Investments Distribution Co. with Barclays Global Fund Advisors serving in advisory capacity.
In terms of assets at the conclusion of year 2005, the list of top-ranked American ETFs includes the following.
The DIAMONDS Trust (Series 1) is unit investment trust in Dow Jones Industrial Average equity securities and thus reflect that index provider's price and yield. DIAMONDS is distributed by broker / dealer ALPS Distributors, Inc.
iShares are extremely popular, as evidenced by their prominence in this list. the iShares Dow Jones Select Dividend Index Fund is the most successful of all; this one is tied in with the Dow Jones Select Dividend Index,
a group of one hundred high yield securities. The Dow Jones Select Dividend Index is in turn a broad index of the total U.S. equity security market.
Blessed with easy to understand names, the iShares MSCI EAFE Index Fund, the iShares MSCI Emerging Markets Index Fund, the iShares MSCI Japan Index Fund, the iShares Russell 2000 Index Fund and the iShares Standard & Poor's 500 Index Fund are all named for the index on which investment rules are based.
MidCap spiders (or Standard & Poor Depository Receipts) investment returns are based on the performance of the S&P Midcap 400 Composite Price Index and in actuality represent co-ownership in the MidCap SPDR Trust (Series 1). Sector SPDRs, despite their status as unit investment trusts, are open-end funds concerned with separate industry groups within the S&P 500. The most heavily traded ETF, Qubes are tied in with the Nasdaq 100 index and are thus heavily dependent on the technology industry.
State Street Global Advisors manages an ETF group known as streetTRACKS. streetTRACKS is based on a multitude of indices from the Dow Jones global market to Morgan Stanley Dean Witter's technology indices.
managed mutual fund while also allowing investors the freedom to buy and sell ETF shares just as he or she can buy and sell the stock of a publicly traded company. ETFs also feature a few distinctive advantages, with the typical ETF carrying low expense ratios, low turnover, and an advantageous tax structure. Since the ETF is a relatively new phenomenon, and since so many ETFs are able to take advantage of technological advances and trends in e-commerce, innovations come fairly frequently to the market.
Though the jury is still out on whether the typically high commission which must be paid out to institutional investors, the truth is that statistics show that the Standard's & Poor 500 brings higher returns than 80% of managed funds.
Most ETFs have a noticeably lower expense ratio than mutual funds. The ETF expense ratio almost never tops 1%, while rates of 0.1% are common; mutual funds can be 3% or more.
In America, the typical ETF is more tax efficient than mutual funds in many areas. Under U.S. tax law, when a mutual fund achieves a capital gain that is not balanced by a loss, the mutual fund is required to distribute capital gains to shareholders by the end of the quarter. This happens when large fluctuations strike the index, usually when a panic occurs and a large volume of stock is pulled from the index. Said gains are taxable to shareholders, whether reinvesting in further fund shares or not. The ETF, meanwhile, is not redeemed by the stockholders and investors are allowed to merely sell in open trading. The result is investors realizing capital gains only when they choose to sell their own shares.
Indeed, ETFs are often chosen because of their features similar to stock. Trading with ETFs can take place in essentially the same fashion as shares in the stock market, with options to buy on margin, limit order, sell
short or use a stop-loss order at the ETF investor's disposal. None of these freedoms are offered with a mutual fund. In open-end funds, investors can sell only at the closing price of the mutual fund. Stop-loss orders basically become irrelevant and the ETF investor is much less at the whim of stock market flights of fancy. ETFs are priced throughout the day and heavy losses can be avoided by the vigilant.
The argument against ETF investment is mainly all about commissions, but these can be avoided and/or softened. When using a 401(k) or IRA scheme to base a portfolio in, a direct investment into a mutual fund company allows the investor to pay taxes rather than commissions.
Paths to success in ETF investment are surprisingly simple and number three. First, of course, is the above-mentioned tax hedge. Assuming the tax rate paid on returns is lower than the commissions (and it typically will be), returns are automatically higher. Should dealing with the ETF directly not be desirable and a broker must be used, much research and consideration should be put into the decision, period. Online investment website Morningstar.com breaks it down like so. Using the S&P 500 index as basis, Morningstar experts calculate that a $10,000 investment requires an average of two years to see return on investment; this suggests the following two keys to profit in ETF investment.
Number two on the list of rules essential to success is the investment amount. Ten thousand dollars, as shown above, is a decent start for the ETF investment. Note the use of "the" in the preceding sentence: A single investment is strongly recommended as well for, again, commissions will kill or seriously forestall returns on investment.
Last but not least is the easiest of all: Leave it alone. ETF trading is intraday, which in itself implies that trading activity is slow and very deliberate. Indeed, the creation of the ETF certainly had long-term investment in mind.
However, the disadvantage of ETF investment can prove to be exactly the opposite to the right kind of investor. Those that prefer a laissez-faire attitude to investment should find ETFs one of the most attractive opportunities out there. ETFs are perfect for those wanting to, as an old infomercial used to say, "set it and forget it."
Most exchange trust funds carry one of three legal structures. Open-end index fund refers to a fund structure registered under the SEC Investment Company Act of 1940 which reinvests dividends. Dividends are paid
quarterly, and derivative and loan securities are permissible for use in the open-end index fund.
The unit investment trust is also registered under the SEC Investment Company Act of 1940 and pays dividends quarterly; dividends are not reinvested in a unit investment trust, however.
The grantor trust is a fund structure that pays dividends directly; it also offers investors an advantage in its voting rights within the fund's securities. The grantor trust is not registered under the SEC Investment Company Act of 1940 and is mostly known for its use in the Merrill Lynch HOLDRs.
The most widely held ETF today is the Standard & Poor's Depository Receipt, a format with origins in the very first ETF ever traded in the United States. Other ETFs are tied in with the Dow Jones Industrial Average or the Nasdaq 100 index; these are known as "diamonds" and "qubes," respectively. Diamonds, qubes and SPDRs are unit investment trusts.
Open-end index funds known as "iShares" are exchange-traded securities composed of more than sixty index funds. The funds are compiled by an index provider from among Cohen & Steers Capital Management, Inc.; Dow Jones & Company; the Frank Russell Company; Goldman, Sachs & Company; Morgan Stanley Capital International, Inc.; the Nasdaq stock market; and Standard & Poor's. The iShares schemes listed below are distributed by broker / dealer SEI Investments Distribution Co. with Barclays Global Fund Advisors serving in advisory capacity.
In terms of assets at the conclusion of year 2005, the list of top-ranked American ETFs includes the following.
The DIAMONDS Trust (Series 1) is unit investment trust in Dow Jones Industrial Average equity securities and thus reflect that index provider's price and yield. DIAMONDS is distributed by broker / dealer ALPS Distributors, Inc.
iShares are extremely popular, as evidenced by their prominence in this list. the iShares Dow Jones Select Dividend Index Fund is the most successful of all; this one is tied in with the Dow Jones Select Dividend Index,
a group of one hundred high yield securities. The Dow Jones Select Dividend Index is in turn a broad index of the total U.S. equity security market.
Blessed with easy to understand names, the iShares MSCI EAFE Index Fund, the iShares MSCI Emerging Markets Index Fund, the iShares MSCI Japan Index Fund, the iShares Russell 2000 Index Fund and the iShares Standard & Poor's 500 Index Fund are all named for the index on which investment rules are based.
MidCap spiders (or Standard & Poor Depository Receipts) investment returns are based on the performance of the S&P Midcap 400 Composite Price Index and in actuality represent co-ownership in the MidCap SPDR Trust (Series 1). Sector SPDRs, despite their status as unit investment trusts, are open-end funds concerned with separate industry groups within the S&P 500. The most heavily traded ETF, Qubes are tied in with the Nasdaq 100 index and are thus heavily dependent on the technology industry.
State Street Global Advisors manages an ETF group known as streetTRACKS. streetTRACKS is based on a multitude of indices from the Dow Jones global market to Morgan Stanley Dean Witter's technology indices.
Investment Diversification
"Don't put all of your eggs in one basket!" is one expression, that when it comes to investing, is very true. Investing is no minor risk-taking venture - so it is important to diversify and extend your
"eggs" or finances in multiple investment directions. The key to successful investing is, in fact, diversification. Like most successful investors, you should build a major investment portfolio with a diversity of investments.
Diversifying your investment portfolio may include investment a multitude of corporations- even foreign ones. The crux of the technique is to invest in several different areas - not just one. It may entail the purchase of bonds, investing in money market accounts, or even in some real property. Research has shown that investors who have diversified portfolios most often see consistent and stable returns, more so then those who just invest in one thing. By investing in several different markets, you are risking less.
Focusing on a cynical point of view, and expecting the worst, if you have invested all of your money in one stock, and that stock's monetary value significantly decreases, you will most likely have lost all of your money. On the opposite end of the spectrum, if you have invested in four different corporations (on different stock markets even), and three are doing well while one plunges, you are still in reasonably good shape.
The splitting of your finances into different corporation stocks while okay, it nowhere near as effective if you can divide your initial investment funds among the various types of investments. As any financial advisor will tell you, you will find that you have a lower risk of losing your money, and over time, you will see better returns if you use all the types of investments available
It takes time to diversify your portfolio if you haven't won the lottery. As one can easily surmise, it all depends on how much you have to initially invest- you may have to start with one type of investment, and
slowly branch out into the multiple types of investments that exist. A fully diversified investment portfolio will contain all the different types of investments: Cash, bonds, stock, real estate, etc.
"eggs" or finances in multiple investment directions. The key to successful investing is, in fact, diversification. Like most successful investors, you should build a major investment portfolio with a diversity of investments.
Diversifying your investment portfolio may include investment a multitude of corporations- even foreign ones. The crux of the technique is to invest in several different areas - not just one. It may entail the purchase of bonds, investing in money market accounts, or even in some real property. Research has shown that investors who have diversified portfolios most often see consistent and stable returns, more so then those who just invest in one thing. By investing in several different markets, you are risking less.
Focusing on a cynical point of view, and expecting the worst, if you have invested all of your money in one stock, and that stock's monetary value significantly decreases, you will most likely have lost all of your money. On the opposite end of the spectrum, if you have invested in four different corporations (on different stock markets even), and three are doing well while one plunges, you are still in reasonably good shape.
The splitting of your finances into different corporation stocks while okay, it nowhere near as effective if you can divide your initial investment funds among the various types of investments. As any financial advisor will tell you, you will find that you have a lower risk of losing your money, and over time, you will see better returns if you use all the types of investments available
It takes time to diversify your portfolio if you haven't won the lottery. As one can easily surmise, it all depends on how much you have to initially invest- you may have to start with one type of investment, and
slowly branch out into the multiple types of investments that exist. A fully diversified investment portfolio will contain all the different types of investments: Cash, bonds, stock, real estate, etc.
How to Set Up an Asset Allocation Investment Portfolio
When you are setting up your own asset allocation scheme, there are two primary things that have to be considered. First, you must decide how to allocate your funds among different classes of assets in order to maximize
profits and minimize the risk of loss. Second, you should try to maintain the proportions of the allocation so as to keep your investment portfolio well diversified. The key to proper asset allocation is diversification.
Age Based Method
One simple guide to determine how much of your money to have in stocks is to use your age as a guide. Subtract your age from 100. This is the percent of your portfolio that should be in stocks. A 20 year old can safely have up to 80% of his or her money in stocks, while a 75 year old would only want about 25% in the stock market. Cash and money markets should make up the remainder of the investment portfolio. As you get older, less and less of your investments should be in higher risk securities.
Although this is a good starting point to set up your own asset allocation, it often ends up over-simplifying the situation. A 45 year old with a couple of children an average income cannot be compared to a 45 year old who is single and makes a higher income. The 100 minus your age rule does not apply to everyone - rather it serves as a rough guide. Also, this "rule" does not tell an investor how to diversify their stock portfolio in to different sectors of the economy.
Using broad based mutual funds or ETFs.
As mentioned above, getting the right mix of stock to cash investment is important, but you also must diversify what stocks you own. One easy way to do this is to buy mutual funds. These are investments that invest in a wide range of individual stocks. They free you from having pick stocks one by one.
The best mutual funds are "no-load" funds with low expenditures. They aim to reproduce the broad stock market. For example, the Vanguard S&P500 fund has no start up fees
(loads), is cheap to operate, and owns shares in the 500 stocks that make up the S&P500 index. It provides instant diversification in the stock market. You can also achieve the same goal when you invest in ETFs - Exchange Traded Funds. These are mutual funds that are traded on the regular stock exchange and are becoming quite popular as of late.
Setting up your own asset allocation is not that hard, if you do some basic research. You have to decide how much risk you are willing to take. Then divide your portfolio in to different investments. As the values of those investments change, you can make adjustments as needed. In essence, this is just a way of being properly diversified.
profits and minimize the risk of loss. Second, you should try to maintain the proportions of the allocation so as to keep your investment portfolio well diversified. The key to proper asset allocation is diversification.
Age Based Method
One simple guide to determine how much of your money to have in stocks is to use your age as a guide. Subtract your age from 100. This is the percent of your portfolio that should be in stocks. A 20 year old can safely have up to 80% of his or her money in stocks, while a 75 year old would only want about 25% in the stock market. Cash and money markets should make up the remainder of the investment portfolio. As you get older, less and less of your investments should be in higher risk securities.
Although this is a good starting point to set up your own asset allocation, it often ends up over-simplifying the situation. A 45 year old with a couple of children an average income cannot be compared to a 45 year old who is single and makes a higher income. The 100 minus your age rule does not apply to everyone - rather it serves as a rough guide. Also, this "rule" does not tell an investor how to diversify their stock portfolio in to different sectors of the economy.
Using broad based mutual funds or ETFs.
As mentioned above, getting the right mix of stock to cash investment is important, but you also must diversify what stocks you own. One easy way to do this is to buy mutual funds. These are investments that invest in a wide range of individual stocks. They free you from having pick stocks one by one.
The best mutual funds are "no-load" funds with low expenditures. They aim to reproduce the broad stock market. For example, the Vanguard S&P500 fund has no start up fees
(loads), is cheap to operate, and owns shares in the 500 stocks that make up the S&P500 index. It provides instant diversification in the stock market. You can also achieve the same goal when you invest in ETFs - Exchange Traded Funds. These are mutual funds that are traded on the regular stock exchange and are becoming quite popular as of late.
Setting up your own asset allocation is not that hard, if you do some basic research. You have to decide how much risk you are willing to take. Then divide your portfolio in to different investments. As the values of those investments change, you can make adjustments as needed. In essence, this is just a way of being properly diversified.
Investing Ideas: Mid Cap Funds
When it comes to investing, there will always be risk. The idea, though, is to manage that risk. One way to manage the risk associated with stock investing is to include mutual funds in
your investment portfolio. And some of the best mutual funds are mid cap funds. Mid cap funds offer interesting opportunities to invest in a range of companies that provide adequate growth for your investment portfolio, while allowing you to manage your risk.
What are mid cap funds?
Funds are divided into three categires: small, mid and large. Small cap funds include companies whose market capitalization, or the public consensus of a company's value, is less than $1 billion. A large cap fund is one that consists of companies that have a market capitalization of more than $8 billion. And, as you might guess, a mid cap fund is in the middle: market capitalization of between $1 billion and $8 billion. Mid cap funds offer a range of opportunities to invest in companies that are growing, but that offer a reasonable amount of risk.
Why mid cap funds can be a happy medium
Mid cap funds make a happy medium in the realm of investing ideas because they grow at a faster rate than large cap funds, but carry lower risk than small cap funds. While all investing carries risk, some carries more than other. Large cap funds are relatively safe, as fund investing goes, but as a result, the returns are lower. Whenever you risk more, you have the potential for greater return (and losses, don't forget!). So small cap funds offer the best chance of return, but the risk can be quite high.
Mid cap funds present the middle of the road view. Most mid cap funds average around 11 percent returns, and they feature a risk level that most people can tolerate. Mid cap funds can be a great way for you to diversify your investment portfolio. They allow you to avoid the hits taken when one particular sector of the stock market falls. Additionally, they are great additions to your retirement account, as they can help you save at a fairly high rate, while at the same time balancing your risk.
If you are looking for a way to diversify your investment portfolio and increase your chances of growth while maintaining a reasonable amount of risk, you might consider mid cap funds in your investing strategy.
Disclaimer: I am not an investment professional. Any investment carries risk, and the possibility of losing money. Before making investment decisions, check with an investment professional and/or do your own research.
your investment portfolio. And some of the best mutual funds are mid cap funds. Mid cap funds offer interesting opportunities to invest in a range of companies that provide adequate growth for your investment portfolio, while allowing you to manage your risk.
What are mid cap funds?
Funds are divided into three categires: small, mid and large. Small cap funds include companies whose market capitalization, or the public consensus of a company's value, is less than $1 billion. A large cap fund is one that consists of companies that have a market capitalization of more than $8 billion. And, as you might guess, a mid cap fund is in the middle: market capitalization of between $1 billion and $8 billion. Mid cap funds offer a range of opportunities to invest in companies that are growing, but that offer a reasonable amount of risk.
Why mid cap funds can be a happy medium
Mid cap funds make a happy medium in the realm of investing ideas because they grow at a faster rate than large cap funds, but carry lower risk than small cap funds. While all investing carries risk, some carries more than other. Large cap funds are relatively safe, as fund investing goes, but as a result, the returns are lower. Whenever you risk more, you have the potential for greater return (and losses, don't forget!). So small cap funds offer the best chance of return, but the risk can be quite high.
Mid cap funds present the middle of the road view. Most mid cap funds average around 11 percent returns, and they feature a risk level that most people can tolerate. Mid cap funds can be a great way for you to diversify your investment portfolio. They allow you to avoid the hits taken when one particular sector of the stock market falls. Additionally, they are great additions to your retirement account, as they can help you save at a fairly high rate, while at the same time balancing your risk.
If you are looking for a way to diversify your investment portfolio and increase your chances of growth while maintaining a reasonable amount of risk, you might consider mid cap funds in your investing strategy.
Disclaimer: I am not an investment professional. Any investment carries risk, and the possibility of losing money. Before making investment decisions, check with an investment professional and/or do your own research.
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