This week has seen the price of gold reach records highs, with it finally reaching $1,600 for a troy ounce. This is mostly likely due to growing fears of debt in both Europe and the US, with most people rushing to buy gold and other precious metals.

Not only did this occur in the metals financial market, but also saw other currency markets such as the Japanese Yen and Swiss Franc closing against the US dollar at a record peak. There has been a rush of investors in the European markets who are moving into the purchase of physical gold, and with the debt crisis moving across to Italy for the first time, this is mostly likely to continue in the near future.

On Friday, there were the most sales seen in the past year of gold coins at UBS in Zurich according to the bank’s strategist Edel Tully. She was reported to have said that the purchasing of the coins came from many different countries in Europe, with a fear that the trading industry of gold is becoming more prevalent. The fear is unlikely to disappear until Greece’s problems have abated and there is a clearer picture of the future for them.

The upturn in the market, which has actually been about 8% in the past couple of weeks, has potentially been helped by the fact that Washington has yet to make an agreement on how to get the country out of its debt by the beginning of August.

No only gold, but silver also rose at the beginning of the week, peaking at $40.15, which is the first time since May it has broken $40. This is an increase of nearly 20% over the previous two weeks. There is a belief that gold will continue to rise over the coming years, however, compared to 1980, with the allowance of inflation, it is still a long way off what it was, which would now be $2,400.
According to the strategist at the Bank of New York Mellon, Neil Mellor, the $1,600 milestone is just another level of which gold has hit since the turn of the century, and will continue to grow as long as there is nothing in the way of the doubting investors.

Price of Gold Reach Records High is a post from: Stock Market For Beginners

We live in difficult times where the economy seems to let us down, one by one. Every day, many of us are increasingly faced with serious debt and unemployment. Currencies begin to lose their value and people now face an important question: how can we save our money? Investment in gold has been common practice for many years, but in the last period there has been an increase of people turning to the stunning metal for security.

Gold has been around as long as I can remember, but in the past, few of us have invested in the precious metal. Today, however, things have changed dramatically and the metal has become friendlier to all who are interested in saving their fortune. Opportunities to invest in gold are countless: beginning with investing in gold bullion , gold coins, gold shares and so on hand.

Some may wonder where you can buy these precious metals. First of all, people should know that there are a variety of companies, where people can shop safely, with very reasonable prices. However, before you invest, scout out the market and find out how much gold is being exchanged. Being well informed is the first step to a safe and profitable investment, but gold can also be purchased elsewhere, such as vending machines. So, if you’re ever in Germany, or the city of Dubai, make sure you buy gold bars from a special vending machine. The gold sold is 100% genuine, but the price can be a bit high for a special memory of the city.

The gold market is open to all investors, regardless of status, place of work, etc.. When you have a little money and want to diversify your portfolio and invest in precious metals, this is probably the best option. After a long period of forbidding its citizens to invest in gold, the Chinese government now encourages people to invest at least part of their wages in the valuable metal. So it goes without saying that if China, a major world in economy, is investing in gold, so must we.

But people do not just invest in gold. Central banks around the world buy the yellow metal to protect their currencies. Nothing is more precious than gold and nothing has been as constant as the precious metal in the market. Investment of gold has become extremely accessible and can be done without any difficulty for the buyer. Therefore, if you want to invest in something to protect your assets, then you’ve found the right product to do it!

Investing In Gold and Precious Metals is a post from: Stock Market For Beginners

Indices went through a fashionable phase about 30 years ago. At one stage, they were the defining story for market analysts. As most investors know, market fashions don’t last, and the market’s enthusiasm for analytical tools tends to be endless until it’s discovered they don’t work. If you’re a trader, your information needs to be based on something very like Search Engine Optimization, a range of key facts. Indices have their place in the schematic, but not as the sole source of materials to make judgment calls.

The applications of indices- The positives

Indices do in fact have direct, useful applications. Ironically, their most obvious uses are much better leads than they look. The mere fact that an index moves up or down on a particular day doesn’t necessarily mean much, but the elements within it are often good indicators of trends. If you know how an index is weighted, you can pin down useful facts and find good information.

For example:

One glance at an index can tell you a lot. If the Aerospace index goes solidly up, it means that the heavyweights in that index are on the move. That in turn means new business, and new business for a company like Boeing is good news for related industries, localities and subcontractors and related manufacturers. It’s like a Yellow Pages of investment opportunities.

There are some market products like commodities and index based investments like mutuals and Exchange Traded Funds, which are obviously hardwired into their various indices. Their indices have direct dollar-based applications to these types of investments, and you can predict, fairly accurately, without even looking, sometimes, what’s happened, simply on the basis of the size of the index move. Again, if the Aerospace index takes a hit, you already know that Boeing or one of the other giants has tripped over something and things are looking very iffy.

So indices do tell pretty accurate stories, within these frames of reference. That is quite specifically not the case with a range of other scenarios, which are much more individualized and behavioral.

The negatives and the misleading scenarios

If indices are pretty faithful reflections of some types of information, they can be very misleading in some contexts:

• A boom market will keep telling traders they’re on a good thing in any index they look at, until the inevitable downward correction/disaster happens.
• Indices are weighted. Good stocks in dismal indices aren’t exactly unknown, and vice versa.
• Investment performance and ROI aren’t well defined by indices except in the specific hardwired investment types.
• Indices cannot track issues with their component companies very effectively, if at all.
• Nobody was aware of the scale or depth of the financial market fiasco in 2007. The indices were all pointing straight up, when the biggest downward correction since 1929 hit.
• An index can’t tell you if the semi-literate/amnesiac CEO of your investment is trying to replay the Enron saga or not with their capital management until it’s too late.  

Yes, indices matter, and yes, they can provide useful information, particularly if you’re experienced enough a trader to be skeptical on principle. Otherwise, stick to your SEO approach to key data and other information. It’s a lot safer.

Stock market indices- How useful are they for traders? is a post from: Stock Market For Beginners

Most people tend to manage their own finances. At a certain level of investment, that’s usually a mistake, and it can be an expensive mistake. Even the most competent and independent people generally don’t have the knowledge base to cover all the issues in personal investment and wealth creation. Managed investments can cover a range of issues from capital gains tax on share trading through to the finer points of asset management, financial planning and superannuation options.

Self assessment- Do you need a financial manager?

There are some very simple ways of defining management issues with your investments:

• Are your investments impacting your tax returns? If so, you may find that this situation evolves into a real nuisance. These situations tend to evolve over time, and can become quite counterproductive if you don’t get assistance with tax management options.

• Do your investments consume a lot of time and space, doing things yourself? This very common problem actually costs money. Your time is being diverted from making money to administering it and doing “office work”.

• Are you constantly tinkering with investments? If you’re forever moving capital around and trying to get better performance out of your investments, you’re in danger of going nowhere. Best practice financial management is planned, not reactive.

• Are you unsure of your rights as an investor? If so, you’re definitely not alone, but this situation means that you may have issues with investment quality and performance. 

• Are your investments “treading water” or going backwards? Some investments can be truly spectacular under-performers. Not all financial products are good value, and some are much better avoided.

• Are you missing your financial targets? One of the greatest problems in financial investment is meeting your own expectations. The blunt fact is that investment has to be managed to hit targets and track performance. 

If you answered Yes to one of these issues, you’ll need to speak to a financial manager, preferably soon, to prevent escalation of the issue. If you answered Yes to more than one of the questions, you do need help, because your investments are already creating both current and future problems. These problems are already visible, and will need to be dealt with soon enough.

What’s now a nuisance can become a loss-making, expensive issue over time, sometimes quite rapidly, even with good investments. Under performing investments, by definition, mean you should be investing elsewhere. Non-performing investments mean you’re losing money, with an ongoing risk factor as well.

Getting professional help with your investments

The huge advantage of engaging professional financial managers is that you can quite literally have all the financial services you need on tap, getting expert level information and advice when you need it. Financial managers can also provide you with good investment options like managed funds, professionally managed funds which can keep your capital growing without all the issues of DIY investment administration and accounting.

Successful investment really doesn’t have to be hard work. Talk to a professional, and see what you can achieve.

Personal finances- How to tell when you need an investment manager is a post from: Stock Market For Beginners

The U.K stock market was unusually down at 10^th of this month as Bank of England (BoE) refrained from increasing interest rates. In between, the position of the euro was unstable once again due to the deepening of the debt crisis in the euro zone owing to poor debt management plan.

The FTSE 100 index of the top U.K companies slipped .9% due to the BoE’s decision. Also, the value of the pound dipped .3% at $1.6063.

There have been rumors in the market that the BoE can possibly increase rates. The fact that the pound fared well against the dollar was basically due to this speculation. The possibility of higher rates allured the investors to the pound because of the better chances of return on interest bearing investments.

Probably, the rates won’t rise for the time being. The B0E’s quarterly economic forecast will be out pretty soon and there are high chances that it will predict a dwindling inflation rate. Therefore, the BoE is keeping its fingers crossed. Since there are high chances of growth in spite of the recent economic contraction in the U.K and inflation can decline for good, the BoE will possibly maintain a status quo for the time being. Currently, a lot of guesswork is being done on the growth rate and inflation. As the situation becomes clear, the BoE will decide if there is any need to raise the rate which is at a historical low of 0.5pc right now.

Amidst this development, the euro suffered another setback owing to the debt crisis in Portugal. The bond yields soared again in Portugal on 10^th January this year and the euro fell by .7% to $1.3630.Germany’s DAX also underperformed by being .4% lower. Even the possible chances of a merger between New York Stock Exchange and Deutsche Boerse did not help. This trend was also visible in Asia where Japan’s Nikkei 225 stock average dropped .1% to 10,605.65. Hang Seng index in Hong Kong also slipped 2% to 22,708.62. Worried by the developments in the continent, the Central Bank in China increased interest rate a number of times recently.

The downswing in Europe and the U.K in particular, was preceded by a slump in the Wall Street. Standard and Poor’s 500 futures declined .6% to 1311. Federal Reserve Chairman Ben Bernanke commented that he was contemplating austere fiscal policies to remedy the situation.

Stocks market blues in the U.K amidst static rates and debt woes is a post from: Stock Market For Beginners

US recovery- Reading the rising breezes in between the hurricanes

The Great Financial Crisis also produced a crisis of confidence among investors. Investors want to see something at least resembling a normal market. A US recovery is the only working mechanism able to provide that reassurance. Everybody, from day traders to managed funds, wants to see solid gains and solid growth.

The “mixed signals” issues- Where the breezes are coming from

The US economy has been sending a very garbled series of messages. They may be accurate, they may be subject to interpretation, but the fact is that they’re also making market analysis pretty difficult.

For example:

Employment

Employment figures have been erratic, including some big spikes and periods when the US employment market looks positively comatose. There’s an issue here, and the issue is that the US employment market is no longer the industrial market it once was. It’s a services market, and its behavior is quite different to most of the conventional models.

Employment figures underpin major capital in domestic economics, including the manufacturing, auto, consumer goods, retail and housing sectors. The recovery has been slow, but there are signs that the New Economy business models are taking hold, supporting more trade and professional services. That’s a breeze which will definitely grow into a gale in the US. All global economies are taking up the new business approach, and many are taking big market shares. 

Housing

The US housing market was effectively hit by a dinosaur-killing asteroid in 2008. Confidence in the market has been propped up by low prices, not hype, and that’s been an almost unreadable factor in market analysis. Nobody, understandably, wants to make predictions in an environment where figures like 3 million more foreclosures are expected in 2011.

This has been a very ill wind, which will eventually blow a hurricane of good for some investors. There’s only one truly obvious factor involved in the current US housing sector- The current big surge in investment in foreclosures and bargain basement properties is the forerunner of an eventual upsurge.

From the market’s point of view, an upswing in the property sector translates into an upswing across the board, from finance to construction materials. This is a gigantic capital market, and when it comes back onstream, the US recovery will be truly underway.

Politics and the US budget

The market has naturally been highly sensitive to US government issues. This particular hurricane has arguably done more damage to market confidence than anything else. Big budget cuts, even to defense, have been foreshadowed as the US battles its huge national debt. 

The good news is that nations can’t be governed purely by self-serving verbosity. Revenue must become more than a football. Clear fiscal policies must be in place. These breezes are still blowing in multiple directions, but the inevitable outcome must be a solid blast of fresh air to restart America. When that happens, the markets will respond rapidly.

Best practice for investors is therefore to position for growth, while avoiding risk. There may not be too many “get rich quick” options on the board now, but they will be there, so get ready.

US recovery- Reading the rising breezes in between the hurricanes is a post from: Stock Market For Beginners

Automatic stock market selling is a science, and it’s based on hair trigger systems geared to stock prices. It’s used widely by managed funds and day traders. These systems have been evolving since the 90s as a standard professional practice, and for those just starting to explore market behavior, they’re also a volume control, in which sellers lock in a price. A big volume of sales at a certain price isn’t some sort of mental aberration, it’s a considered process of profit making and loss prevention.

Automatic selling basics

Automatic selling is pretty simple. The buyer of stocks selects a price for sale, above and/or below the purchase price. The reason for these selections is to obtain a given profit margin, and to ensure loss minimization.

Making a profit

For example: A million units of stock is bought for $1.00. The seller sets a sale price of $1.23 as the trigger. The sale is conducted automatically, through the stock software. The seller doesn’t even need to look at stock prices. They’ll be notified when the sale is made.

The price is calculated on volume and on charges incurred for purchase and sale. The $1.23 includes 20% profit on the principle, and 3% to cover charges. That’s a simple $200,000 profit, clear.

Avoiding risk- Stop Loss orders

Traders don’t want to take any losses if they can help it. They prefer to maintain their working capital in one piece, and fast stock movements can happen at any time. There are various ways of hedging on investment risks, but automatic selling is by far the simplest and quickest way to avoid excessive losses, particularly in volatile markets.

This is one reason for sudden large volumes of sales on global markets.

For example:

The million units of stock above is bought by a managed fund for $1.00 is based on existing profit for a fund. The fund manager is developing their capital, and this $1 million dollars isn’t something they want to lose. The transaction is now based on risk management principles as much as a desire for further profits. The fund manager sets a Stop Loss sale price of 95 cents with the broker, (either directly or using supplied software), as a below the line sale price, to reduce risk from the outset, as well as an above the line sale price of $1.23 to get the margins described.

It’s a very good idea to consider the Stop Loss option in particular from the moment of purchase. Everyone takes some sort of loss on the stock market at some point, and minimizing the damage is definitely the best option for preventing damage to your capital base.

This methodology was developed by traders who were always at risk of a run on stocks even in the course of normal share trading . A trader holding any portfolio, including all blue chips, is always vulnerable to a major hit on a particular stock which can undermine an otherwise profitable trading portfolio quite easily.

Automatic selling is simple, quick and safe way of protecting your profits and your investments from loss.

Automatic selling- What it is, and how it works is a post from: Stock Market For Beginners

As the world attempts to emerge from the global financial crisis, much has been said of the nations that are left with major debts. While several countries’ names are often repeated, exactly which countries are the most indebted? We investigate the major economies of the world to see which debts are proportionally high, as compared to each country’s GDP. So long as businesses and individuals continue to run on deficits, debt collection will continue to be an important service.

Ireland
Ireland is a member of a club no-one wants to be in. It is one of the PIIGS. This acronym stands for several European Union member countries that have been deemed to have weak economies and large debt loads. The countries are Portugal, Italy, Ireland, Greece and Spain.

Ireland has the ignominy of being the country with the highest external debt, that is, the highest foreign liabilities in the world as a percentage of its Gross Domestic Product (GDP). GDP measures a country’s total economic output. By comparing GDP to a nation’s external debt, one gets an idea of the ability of a nation to manage such debts.

Ireland’s external debt is an outrageous 13 times it’s annual GDP, or expressed as a percentage, an incredible 1300%. That’s well over half a million US dollars of debt for every Irish man, woman and child! Ireland’s problems stem to a large part from a property bubble that has now burst. Irish banks lent heavily to property developers who attempted to sell land at overinflated prices; prices which have now collapsed. Property developers are teetering on insolvency, and struggling to repay loans. Banks have been left with these large bad debts, leading to nationalisation of one Irish bank. This in turn has further indebted the government.

United Kingdom
At number two, and also in deep external debt trouble is the United Kingdom. External debt runs at over four times annual GDP, or around US$150,000 per UK citizen.

Switzerland
Rounding out the top three is Switzerland, with a similar amount of external debt per capita as the UK, but with a lower total of 3.8 times annual GDP.

The United States Of America
There has been plenty of talk about large debt levels in the world’s biggest economy. Many have also pointed the finger at the US for having helped create the global financial crisis through lax lending policies to uncredit-worthy American home buyers, leading to an inflated property bubble that eventually burst. One would think that the USA must surely be somewhere near the top of the list? Interestingly, the USA only comes in at number 20, with external debt essentially matching annual GDP (i.e. 100%). While this is high, the countries highlighted above are arguably in substantially worse predicaments.

The Global Financial Crisis caught many countries unawares. Some may have believed that easy credit would continue indefinitely. With slumping demand, fearful consumers and rising unemployment, many nations attempted to spend their way out of trouble. This debt financed spending attempted to stimulate economies, but has left major debts for future taxpayers, meaning there will be plenty of pain to come. The private sector in the above countries have also spent beyond their now reduced means, meaning that debt recovery will become an important service in chasing those than cannot manage their debts.

The World’s Most Indebted Nations is a post from: Stock Market For Beginners

Exchange Traded Funds have been so successful that the big financial groups are now getting interested. Deutsche Bank has opened up a range of ETFs on the DAX, and even the big mutuals are starting to try operating ETFs to provide more market exposure for themselves. This is partly because ETFs have become so popular that they’re pulling investment capital away from the traditional investment platforms. For SMSF investors, they’re gold.

ETFs deserve to be called “derivatives” in a sense few other financial products can claim. They’re based on hard equity values, to start with. They are literally derived from holdings, not variable earnings. That puts them several classes above other so-called investment vehicles, which are more like skateboards than any sort of “vehicle”. The lucky investors in the derivative junkyard skate along on nominal values until they have to come off.

ETFs have prospered because the equity and financial markets have outgrown the old investment products. They’re far more flexible than their 19^th century- based competitors, and they can target investment areas far more effectively. The average mutual or unit trust tends to be a generic product, with “growth” and other characteristics used as definitions of the nature of the investment. With ETFs you can invest across whole indices and classes of equity, quickly and efficiently, and trade them much more effectively.

There’s also a “class” factor in the ETFs. These are professionally managed funds, and the value of that was shown in the big 2008 crash. Some of the high unit value ETFs took a pounding, naturally, and weren’t helped much by the fact that the sudden loss of capital in the market reduced the high capital flow they needed. The lower unit value ETFs, however, were less affected as a group, and became day trader fodder, which was an interesting phenomenon in itself, because these traders are naturally very margin conscious.

Investors haven’t needed to hear much more than that to jump ship from the markets and head to more remunerative territory. That process has both identified a market for the major leaguers and left them with a problem: How to attract ETF investors?

Deutsche Bank is probably the best example of how the heavyweights are approaching the issue. The bank has had the good sense to use its name as a selling point, and being one of the world’s top banks isn’t exactly a turnoff for investors. The only real market resistance is coming from the fact that other ETFs are good investments. This is a highly competitive market, and getting investments away from the original ETF managers like Vanguard isn’t that easy.

If you’re doing DIY superannuation, you’ll be well aware of the spectacularly uninteresting options for investment available. Equity investments which produce demonstrated reliable ROI are thin on the ground, and those doing better than cash rates are comparatively rare.

Consider:

• ETFs are very easy to buy and sell.
• They don’t have the bells and whistles of mutuals, when you need to move money.
• They pay dividends, and do splits like stocks.

Check your options, because they may be exactly what you’re looking for.

The real derivatives- Exchange Traded Funds attract the financial heavyweights is a post from: Stock Market For Beginners

For anyone new to investment, it is vital to understand the basics of managed funds, their rationale, and what they bring to the investor.

A Range of Money Managers and a Range of Objectives

Managed funds give the investor an opportunity to participate in the growth of the economy. This participation can be spread over a range of assets, such as shares, property, commodities and bonds, or can be concentrated in just one of these assets, or possibly another asset. As this range of assets, or more specific asset performs, so too does the managed fund. There are many money managers out there. Some may focus on trying to outperform a certain stock market index, or possibly focus on a specific attractive sector (for example, emerging markets). Performances and objectives regarding timeframe will therefore vary.

Investment Over a Broad Range of Securities and/or Assets

As mentioned above, many managed funds will invest in a range of assets. For novice investors, such a fund is the safer option if starting out and looking for more general investment exposure. Your funds are essentially divided up across all these assets. To gain such a broad exposure by yourself would be very difficult, and one would end up spending huge amounts in brokerage! A dedicated fund manager, by managing large amounts of money for many investors, can therefore reduce these investment costs, by spreading them across all investors.

Commissions – Active and Passive Funds

A commission is what you pay a fund manager, for managing your money. In general, these may range from around one to a few percent. Naturally, a fund that just replicates an index (for example the ASX100) should charge less than a fund which requires the manager’s expertise and more active management of the fund. Some funds may also pay additional commissions should the fund outperform a given index, or other asset that is easily able to be valued. It’s worth comparing a few similar funds to see whether the performance of the fund justifies the commission being charged.

Returns Linked to Those of the Economy

Our financial system is based on the pursuit of economic growth. The profit motive spurs companies on to continually develop better products, more efficiently than before. The beauty of managed funds is the broad based opportunity they afford investors to participate in this economic system. As companies in general grow, and increase in profitability, so too should managed funds investing in such companies.

Liquidity and Valuation

As managed funds are made up of a number of underlying assets which are continually changing in value, periodic collation of the value of all these assets is required. Your fund manager will do this, leading to a “unit price”, which they will publish periodically. You can then compare this unit price against the unit price at the time you invested, to see how your investment is faring.

If you are not happy with your fund’s performance, or your investment outlook has changed, selling out, or switching between funds is fairly easy. Please note that there may be exit fees, so beware of chopping and changing too much, as this may end up being a drag on your overall returns.

Managed funds revolve around share trading by professionals, in order to allocate your funds to appropriate investments.

Managed Fund Basics – How They Operate and Why They Work is a post from: Stock Market For Beginners