Category: Investing

Exchange-Traded Funds – ETF

Exchange-Traded Funds, or ETF’s, combine investing and trading, giving you another tool for becoming a successful investor.

Exchange-Traded Funds – An Explanation: An Exchange-Traded Fund is a stock market security that generally tracks an index, such as NASDAQ, or a group of stocks. ETF’s are similar to mutual funds in that they are a collection of other stocks. This ETF collection of stocks allows you to diversify your money into numerous companies on the stock market by buying a single ETF stock. Exchange traded funds are traded on the markets like any other stock, such as Microsoft (NASDAQ: MSFT), or Anheuser-Busch (NYSE: BUD). You can buy and sell ETF’s as you please. You do not have to wait to buy or sell as in your standard mutual funds.

How ETF’s Work The price of an ETF share is calculated by the value of the individual stocks the ETF tracks. For example, the most popular and actively traded ETF is based on stocks in the NASDAQ 100 – symbol: QQQQ. By buying a share of QQQQ, you are indirectly buying a little piece of all the companies listed in the NASDAQ 100 list. This allows you to invest your money long term, pegged to the value and price of the largest, most popular NASDAQ companies. If the value of NASDAQ 100 as a whole increases, your QQQQ will also increase at the same rate. If NASDAQ 100 gains 1% in a day, then your share of QQQQ will also gain 1% in one day. The same is true for market declines, and you will lose money. The QQQQ allows you to buy a whole basket of stocks, diversifying your holdings across the 100 companies of NASDAQ 100.

Where to Buy and Sell Exchange Traded Funds: You can buy and sell exchange traded funds – ETF – exactly like any other stock market share. For online brokers, such as TD Ameritrade, E*Trade, or Scottrade, you would place your order for an ETF in the same way as your order for SIRI (Sirius Satellite Radio) or WAG (Walgreens). Every stock broker allows you to buy and sell exchange-traded funds.

What kinds of ETFs can I buy? There are over 150 different ETF stocks you can purchase, ranging from stock market indexes (example: QQQQ), to ETFs composed of specific sectors such as defense and aerospace or energy (example: PPA). ETFs also exist for precious metals, such as Gold (symbol: GLD), or Oil commodities (symbol: USO). Other ETFs may track stocks in foreign markets, such as China or India. You are almost guaranteed to find an ETF to suit your investment wants and needs. You just have to do a little digging and research to find the perfect exchange traded fund (ETF) for you.

Popular Exchange Traded Funds:

  • QQQQ – NASDAQ 100 ETF
  • SPDR (Spider) – S & P 500 Index ETF
  • GLD – Gold ETF
  • USO – U.S. Oil Fund ETF

Benefit of ETFs: ETFs have numerous benefits. Most mutual funds have a minimum investment, which can range from $500 or $1000 to $25,000 or more per fund. You must send your money to the mutual fund company, such as Vanguard or T Rowe Price, to purchase the fund. With ETFs, you can buy and sell as you see necessary, through your favorite stock market broker – I use TD Ameritrade. You can buy as little as 1 share, or you can buy thousands of shares of a single ETF, just like you can with stock market investments. Most importantly, your money is (usually!) diversified across a range of stocks – either broadly based such as stock market index ETFs, or focused in sectors such as mining or energy. In my research on Exchange Traded Funds, the most substantial gains come in longer term holding of the ETF stocks, generally speaking over 1 year. Also for stocks held over 1 year, you will end up paying less in capital gains taxes. That being said, there are many traders that regularly daytrade or swing trade ETF stocks, most notably the Nasdaq 100 ETF, QQQQ.

As always, thorough research is necessary for investing and trading anything, even ETF securities. Doing your Due Diligence is one facet of becoming a successful investor. You have the power to become an Investing Winner!

MarketLinks.org: Resources for successful trading and investing

Are you trying to become a more successful trader or investor? I know I am.

My friend JCV has a blog called MarketLinks.org that provides great resources, information, and commentary, covering many investing and trading subjects. JCV’s goal is to facilitate trader and investor education by providing a wealth of information we can use to increase our success.

Some topics you can read about at Market Links include:

  • Investing
  • Trading Mutual Funds
  • Commodities and Futures
  • Risk Management
  • and more

I highly recommend checking out MarketLinks.org – you’re guaranteed to learn something new or find a link to a useful website. Leave JCV a comment!

MarketClouds.com: Stock Market Trading Clouds

Indroducing Market Clouds – www.marketclouds.com – stock market activity and popularity indicator using clouds.

I have developed a new tool to assist stock market traders and investors in finding the most popular and active companies traded on all of the stock market exchanges: Market Clouds.

Market Clouds allows stock traders to quickly scan and identify the most actively traded and popular stocks, using different font sizes for levels of activity.

How Market Clouds Work Market Clouds utilizes data from across my network of websites as well as forums and IRC chatter talk to build a list of stocks people are currently and actively requesting quotes, charts, and news for.

Why are some stock tickers bigger? The most popular and actively traded stocks have the largest font sizes. Less active or popular stocks have smaller font sizes. The stocks with the least amount of activity have the smallest font sizes.

How Market Clouds Helps Traders Large font sizes allow us to scan the entire list of daily hot stocks or stocks that are very active. Traders can quickly identify the most active – they have huge font sizes and are easier to spot and read than the less active stocks. Less active and popular stocks have tiny font sizes, allowing market traders and investors to easily cut out the noise.

Put Market Clouds on Your Website or Blog! I have created a Market Clouds service I call MyCloud, allowing you to include a customizable Market Cloud on your own web page. View Market Clouds’ MyCloud in action in my sidebar on the right!

As with any research you do, you must perform Due Diligence on any potential trade. Market Clouds should be used to identify possible trades, based on their trade activity and popularity. These are the stocks people are requesting quotes, viewing charts, or reading news about. Market Clouds should be used in conjunction with other research tools and analysis. You should not buy a stock simply because it is the most active or popular stock with the biggest font size. It could be this stock is actively trading because people are selling all their shares!

Check out Market Clouds – All Stocks, the Market Clouds – Top 100, and the Market Clouds – Over the Counter Bulletin Board Stocks (OTCBB). Put Market Clouds on your website or blog with Market Clouds – MyCloudI welcome all comments and criticisms. If you have an improvement I can make, let me know. I hope you enjoy Market Clouds as much as I do!

The Art of Investing – Part 1

The Art of Investing

Part 1

In my opinion, investing is an art. Truly successful investors need a variety of skills and tested methods in order to properly evaluate investments and overcome obstacles. I do not mean art in the sense of paintings, drawings, or sculptures (fine arts), but art in the sense of applying gained knowledge and skill to effect a desired outcome or goal. As an investor, the ultimate goal is to make and keep profits.

Here are 3 definitions of art (from dict.org) which I apply to my investing:

  • The application of knowledge or power to practical purposes
  • Skill, dexterity, or the power of performing certain actions, acquired by experience, study, or observation.
  • Skillful plan; device.

Application of Knowledge: Every investor needs to apply their knowledge to practical business and investment principles and purposes. Some of this knowledge is learned through education, such as accounting, finance, marketing, and business administration classes. Some knowledge is passed down from investing mentors, such as an investment banker uncle, or a daytrading cousin. A lot of investing knowledge you learn and experience yourself. Making bad investments will (or should!) teach how to avoid mistakes in future investments. Good investments can help confirm your rationale and methods, which you can apply to future investments. Learning the knowledge is half of the process; faithfully applying your learned knowledge is the crucial element.

Skillfully Performing: As in applying your knowledge, successful investors need to keep strong investment performance. The best way to maintain your cash flow and keep your investing profits is by being an active investor. People who are not actively involved with their investments – reviewing past and current investments, and researching new investments – will not be as successful as a person who takes an active role in their investments. I know a lot of people who invest money in the stock market, real estate, or businesses, but they take a passive role, hoping their investment will be successful. They aren’t keeping up with news, trends, and other factors that could be detrimental to their investments, and they end up losing money. As with learning, putting money into an investment is one step, but the major step is actively monitoring, researching, and developing your investment.

Skillful Planning: All investors need to develop their investing plan. Much like a business plan, your investing plan states your goals and the process by which you will achieve your goals. Your investment plan should also contain the strengths, weaknesses, opportunities and threats of each investment you plan to make. You must do your Due Diligene in each investment you plan to make. For example, in the stock market, you must analyze a companies accounting statements – balance sheet, income statement, cash flow, statement of owners equity – to get a feel for the companies management and how they run their business. Is it profitable? Do they have a lot of liabilities? How fast is cash coming in? How long do they keep inventory? Are insiders buying or selling? With stocks, you must also analyze news, company PR statements, charts, and historical prices. After you perform Due Diligence research, you may decide this particular investment is not for you or looks fishy. Every investment you make requires you to do your Due Diligence in researching the investment, and only then can you develop your plan on making your investment the most successful. Think of your investment as a business that earns you money. Develop your investment plan as a business plan, in order to make the most profits and most successful investments. The more time you spend developing your plan of action, you will be better prepared to make and meet your investing goals.

Why I invest

I have many reasons why I invest my money.

The primary reason I invest is to secure my future. My family is not rich. I do not have a big inheritance coming. I, like most people, have to work hard for what I have. I do not get cars, houses, and money handed to me on a silver platter. Investing allows me to work hard now, so that when I am older, I can live a comfortable, financially secure life. Investing gives me the opportunity to build a solid financial foundation, benefitting me for the rest of my life, and future generations of Investing Winners.

I treat investing as a business. The investing business is not easy. Years of learning, reading, and research are absolute necessities for being a successful investor. The learning, reading, and research never end. Each day I am building on my knowledge and understanding of the financial game. The same is true to be a successful entrepreneur or business leader. I must understand the nature of the game and the players involved. I must calculate risks, odds, and rewards, just like a CEO. I must have a solid financial plan or strategy in place, or else my business will fail. I am my own boss. As such, I must make business and investment moves with precision, thoughtfulness, and attention. If I don’t do my due diligence, my investing business will fail and I will be out of a job. Investing gives me complete control over my job, which I love. I never liked having a boss ordering me around, making me work weekends, or doing the dirty work to make them look good.

Investing also allows me to explore myself in ways my previous jobs have not allowed. I can realize my full potential.

Investing is partly logical. I do a lot of research. Each day I wade through fact and fiction. Logical thinking is a requirement for investing. I must completely understand my investments and calculate my risk versus rewards. Without logic-based decisions, investments are based on emotions. Emotional investing will bankrupt me. Emotions cause one to think irrationally, making poor, rash decisions without utilizing calculated logic and reasoning.

Investing is also partly mental. I think like a winner. I trade like a winner. I invest like a winner. Every successful investor has had huge losses and has made numerous mistakes. The mental game is not allowing bad investments and mistakes ruin your investment attitude. I learn from my bad trades and horrible investments, rather than dwelling on them and letting them mess with my head. Investing takes nerves of steel. In the long run, most stocks and investments will go up, but short term they may go down. This is where many investors fail – they see one bad day in the stock market or a bad year in the real estate market, and they get discouraged. These people are mentally unfit and unprepared to invest and trade successfully.

Money. This reason is self-explanatory. Money is another reason why I invest. My entire life I didn’t have much of it. But I learned finance, accounting, business, economics, trading, and real estate. Financial and business knowledge helps me understand how money works, and more importantly, how to make it. New cars, gigantic houses, and flashy jewelry do not interest me. Doing what I want to do, when I want to do it, however, does interest me. I can’t take a trip to Europe if I don’t have any cash. Money is the means to do what I want.

Investing allows me to build my own future. To determine my own outcomes. To develop myself mentally and emotionally. To make money. To get out of the rat race. To have financial freedom.