New Forex Trading Strategy

Wednesday, December 2, 2009

401k Lessons

By Michael Swanson

If you are facing a financial crisis right now and need to secure some money quickly, your 401k is probably looking pretty tempting. After all, you can take a loan out against your retirement contributions. Remember though, there are still some things you need to consider first. Below you can find some helpful 401 advice.

First, if it is at all possible, do not take out a loan against your 401k. This is your future and when the time comes you will need every single cent of it. Take it to consideration the compound interest. The bigger the amount you have in your retirement fund and the longer it is there, the more money you will have to live off of later in life.

You can also skip the loan process altogether and just go for straight out withdrawing the money. The problem with this is that the there is always a high tax penalty that comes with this option.

By taking a loan instead, you avoid harsh tax penalty. There are certain limitations and restrictions you must deal with to take out a loan though. These will vary by plan, but there are a few that seem standard in the industry.

Things like college expenses, medical expenses and needing to pay a mortgage when you are at risk of losing your home are all reasonable standards.

A few of the restrictions you will most likely be faced with include minimum and maximum loan amounts as well as a determined length of the loan outset.

Even after reading all of this, you are still considered this type of loan you still need to look for alternatives first. If your situation is just because you have bad credit and need money now, consider taking out a short term personal loan instead. - 23305

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Gold Is A Hedge Against Inflation

By Garrett Strong

Do not wait for a pullback to buy gold! Every investor needs to know that gold is a hedge against inflation. The movements in the gold market have been monumental, and there are several reasons for that.

To protect yourself from out of control government spending and sky high inflation your money needs to be in gold bullion, gold ingots, and gold bullion coins

If you have not seen the gold price lately, it is going to the moon. The demand continues to surge as worried investors seek shelter. Many countries China, India, and Russia are diversifying out of dollars and into gold bullion. The IMF recently sold 200 tons of gold bricks to Indias central bank.

The amount of gold per capita on the planet is currently 23 grams. That does not even amount to a one ounce coin. The available mined gold on the planet amounts to about $3.7 trillion.

The amount of gold above ground is--0,000 tons and that number goes up by 2,600 tons every year. With this 2% increase each year, it doesnt scratch the surface of demand placed on the yellow metal.

The demand is 4,000 tons/year and rising exponentially. Gold has been selling for about the price of production prior to this price rise.

The laws of supply and demand have surely been lacking, and not making much since in this market. In 2001 the price of gold was about $250/oz and the current gold price is about $1,040/oz. So, even though the price has risen significantly, economists suggest that it should be at around $7,000/oz due to inflation.

Any situation where demand exceeds supply means the price must go higher, but until recently it has not. The gold price has risen from $250/oz in 2001 to $1,140/oz today, but the inflation adjusted price shows that gold needs to be around $6800.

The answer is that there are a few factors that have caused this price suppression and they are still to blame. The central banks have been selling their gold supplies onto the open market in an attempt to suppress the price. It has worked, but central banks are running out of gold to sell.

Another factor that has suppressed the gold price is the advent of paper gold (i.e. exchange traded funds, futures contracts). These investment vehicles simply give you the price exposure to gold. The futures contracts on the COMEX will allow you to take physical delivery of your gold, but many investors are finding that the COMEX is defaulting on the delivery. The default is occurring because the COMEX does not have the gold that they claim they have.

You are left holding paper rather than gold in COMEX contracts or ETF shares. These paper gold investments serve a purpose for the government, and that is to help prop up the falling dollar.

These fraudulent investment vehicles will blow up, and they are just another bubble waiting to burst. Unless you know for certain that a paper investment has the gold that they claim, stay away from these investments. You should invest in American Gold Eagles, American Gold Coins, and gold bars.

With a crashing dollar, you will be sorry if you choose not to invest in hard assets. With the current price of gold at $1,140/oz, there is suddenly a reason to get out of dollars. $1,058 was the price of gold per ounce one month ago. You can see how far it has come. Gold will protect you and your wealth in this economy. Buy gold now to hedge against inflation! - 23305

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Leveraging Your Investments - An Explanation

By Gnifrus Urquart

Have you heard the term "leverage" when people are discussing their investments? This can be quite a confusing and daunting concept for many people. But all leverage really means, is borrowing to invest. The reason people call it "leverage" is because typically existing assets are used as the security or basis of the borrowing. That is, you leverage off the value of a current investment or asset, to borrow more money to invest.

This article covers the general principles of leveraging your investments. If it is something you are considering but have never done before, discuss your ideas with a licensed financial adviser. They will ensure you are structured correctly and can minimise your risk and exposure.

When I started investing, my borrowing habits where the same as most peoples. I had a floating credit card debt which varied to my whims. I had a small personal loan for some household items and a bigger one which enabled me to buy my car.

All these debts were used to fund consumables - objects for my pleasure. I learned that there are two issues with this. Firstly, the objects this debt bought all rapidly lost value. They were depreciating assets. Secondly, as I used the debt to purchase things I consumed, the interest on that debt had no tax benefits. I had to pay it all.

Things have changed over the years. I learned that debt is much more efficient when spent on investments. So now my credit card debt is negligible and paid off every month. My personal loans are completely paid off. Despite this, I have a lot more debt. I have a massive debt on an investment property. I have a margin loan for share trading. And I have a FOREX investment account which is leveraged at 400:1 (Which means I borrow $400 for every $1 I put in)

Why is it more efficient to use your borrowings for investing then?

Firstly, when you borrow to invest, you are "using other people's money" to earn more money in the investment markets. A great example of this is in our FX Trading strategy. If I invest $10,000.00 and leverage it out at 400:1 that means I have $4,000,000 invested. This above example describes very well the first benefit of leverage. By accessing more money to invest, you can earn way higher returns on your investments than you otherwise would have been able to.

Generally speaking also, interest payments on investment borrowing are tax deductible (get advice from your accountant on this point). As the borrowings have been made to increase your income, the interest payments on the loans are a direct cost of your income production. This typically makes the interest payments a tax deduction. For example, as my investment property creates a rental income, the borrowing are a cost associated with producing that rental income.

Margin loans work similarly. Basically I buy a bunch of stocks, fund 50% of the purchases myself and borrow the other 50% in a margin loan. This means I can double the size of my share portfolio and hopefully make a lot more money. Because I borrowed money though to buy the stocks which will make me money, the interest accrued in the margin loan is tax deductible.

Those are some of the benefits you can gain by borrowing to invest. There are risks too though, so it is very important to get independent financial advice if you are thinking about leverage.

The first risk with borrowing to invest is the same with all loans. Loans come with obligations. You need to be able to fund the repayments, both the principle and the interest. So you need to do your sums properly and work out whether your income can cover these repayments. If you mess this up and over-extend yourself, typically your lender will come and seize your goods and assets and sell them to get their money back. This is never a good position to be in.

Margin loans are a little bit different. They are set up so you are allowed to borrow a certain proportion of the value of the stocks held in the margin loan. The risk here is that if the value of your stock decreases rapidly and pushes your margin loan outside those boundaries, you will receive a margin call. The margin call will force you to repay a significant part of your margin loan debt, to ensure it is again within the stipulated proportion of your stock values. This can often be difficult as it requires you to fund the debt when you had not budgeted money to do so.

There is alway also the possibility that your trading strategy loses money. If this happens, because you borrowed so you could invest more, you lose more money.

All risks with investing can be mitigated with strategy. That is why it is so important to speak to a licensed financial adviser before you invest and especially before you borrow to invest. So if you are considering leverage, speak to an adviser about risk mitigation. Leveraging your investments can definitely be financially rewarding, but only when you properly understand and manage your risk and when it is backed up by a consistently high performing investment strategy. - 23305

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Set Course for Forex

By James Pynn

Let's talk liquidity here. If we take all the financial markets at work in the world today, none of them can compare to the size and liquidity of the foreign exchange market. That's right, the forex market now accounts for more than over $4 trillion a day in profits. You read that right: $4 trillion a day.

The center of this monolithic market is the city of London. In fact, London accounts for about 35% of all the forex trading in the world, every day. Now, this doesn't mean you have to move to jolly old England to get a piece of the proverbial pie. No, all you need a little know-how and access to the markets.

It's not difficult finding a reputable forex course. You just need to find one that can show you all the ins and outs of the process. But, please, not matter who you sign up with -- sign up with somebody. The last thing you want to do is jump into the water and not know how to swim.

Don't step back because you're afraid. Trading foreign currencies is not too dissimilar from other kinds of trading. If you have successfully day traded in the past you won't have a hard time catching one. With the right training, you can plunge headlong into this most liquid of the liquid markets. The key, is staying above water.

Though the current economic climate is far from nurturing, the forex markets aren't expected to plummet. Indeed, as long as there are world currencies, there will be a future for forex trading. So, even though the death of dollar has been heralded, there are plenty of other kinds of dollars you can choose from, including the Canadian and Australian. Furthermore, you can slip into the burgeoning bills from China, India and Brazil as well. As these countries emerge from the abyss of the Third World, they are projected to be the dominant world currencies and economies. Take heed. - 23305

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Commodity Exchange Traded Funds

By Ahmad Hassam

Many people are not aware that commodities as an asset class has a lot of potential especially in the 21st century. It is being predicted that the 21st century belongs to the commodities. If you are interested in investing in commodities than you can invest in a commodity mutual fund!

There are many mutual funds that invest in commodities. Just visit the Morningstar site and you can get the list of such mutual funds that invest in commodities. Just buy the shares of the commodity mutual fund and let its NAV appreciate before you can sell for a capital gain. This is the simplest way for you to get involved in investing in commodities as the mutual fund portfolio management will be done by a professional manager and you have to do nothing. But are mutual funds the best investment vehicles for your wealth building objectives.

ETFs started off some three decades back but became highly popular as investment vehicles in such a short time. Now, you must have heard about the Exchange Traded Funds (ETFs). ETFs are really hot investments these days.

Driven by the growing demand of commodities by the investors many financial institutions are now offering Commodity ETFs. Now the good thing about investing in ETFs is that they give you the diversification benefits of a mutual fund with very low fees something like 0.7% as compared to 2-4% of the mutual fund.

So how about investing in commodity ETFs? Unlike a mutual fund whose net asset value is calculated at the end of the day and the shares of mutual fund cannot be traded during the day, you can go both long or short on ETFs all the time. Something you cannot do with a mutual fund! ETFs have the added benefit of being able to trade like stocks giving you the powerful combination of diversification and liquidity. Trade your ETF shares just like you trade your stock shares. Anytime go long or short!

This diversification plus liquidity benefit makes an ETF a better investment tool as compared to the mutual fund and the stocks. Now, you can find thousands of ETFs in the market on different market sectors, stock indexes, currencies, commodities and so on.

Let's take an example of a commodity ETF. The Deutsche Bank Commodity Index Tracking Fund is listed on AMEX and tracks the Deutsche Bank Liquid Commodity Index. This index is based on a basket of six commodities: light sweet crude oil, heating oil, gold, aluminum, corn and wheat. The first Commodity ETF in US was launched by Deutsche Bank in the start of 2006. This ETF is based on the Deutsche Bank Commodity Index and as you can judge

This ETF invests directly in the commodity futures contract. Now one of the downsides of investing in this Commodity ETFs is that it can be fairly volatile as it is based on commodity futures contracts that get rolled monthly. Another downside to this Commodity ETF is that it is based on a basket of six commodities only. Now, every month a new ETF gets launched. There are a number of Commodity ETFs that track individual commodities like crude oil, gold and silver. Do your research on Commodity ETFs, you may find a good investment. - 23305

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