Listed below are some of the reasons why investors prefer exchange traded funds or ETFs.

Exchange Traded Fund: Tax Benefits

One of the main reasons why exchange traded funds have gained so much ground in the recent past is owing to the fact that they are extremely tax efficient. In most cases the dividend distributed by exchange rate of funds are tax free because the corporate tax has already been deducted prior to paying dividend. Exchange traded funds only have one tax issue. This is when consumers sell their funds. If the funds sold at a profit consumers are liable for capital gains taxes.

Expense Ratios

Fund managers buy and sell the holdings of an exchange traded front very frequently. This gives rise to capital gains tax. However it is interesting to know that the expenses on an annual basis of exchange traded funds are usually between 0.1 and 0.65% whereas index mutual funds could be as much as 3%.

Exchanged Traded Funds – Cheap Entry

In certain cases buying into an exchange rate fund could be very cheap. If as an investor you do not have not capital reserves and want to start off with just as little as a thousand dollars you could do so by buying just one unit of an ETF. However not all exchange rate of funds have a cheap entry free  In certain cases exchange traded funds have very high entry fees.

Exchange Traded Fund: Check Your Costs

Exchange traded funds can be a very powerful investment tool. While they are actively traded on a daily basis, it is recommended to apply the same strategy as you would with any long-term investment. Buying and holding can be more advantageous and you can imagine. In addition to this consumers ought to be aware of the fact that active trading racks up a lot of brokerage costs and capital gains.

Exchanged Traded Funds: Check Your Investment

As you would with any investment it is wise investment strategy to check the underlying securities often exchange traded fund. Owing to the fact that exchange traded funds have gained a lot of popularity in the past, it is easy for investors to get enamored by investment jargon and lofty expectations laid out by brokers. Make sure that before you dive into investing, you have checked the exchange traded fund and all the underlying securities. You do not want to end up with an exchange traded fund which instead of having resource stocks has stocks from the healthcare sector. Due diligence Is imperative.

These are some of the things investors should keep an eye out for while investing in exchange traded funds.

Investing In Equities: Domestic Stocks

These are considered the safest as far as equity investing is concerned, owing to the fact that the companies to which the shares belong are based in the country and hence analysts find it a lot easier to carry out diligence on them. Consumers have the option of choosing between individual stocks and ETF’s (Exchange Traded Funds) which track the specified market index instead of taking a stab at picking the highest performing stocks. Equity investments range from large-cap, mid-cap, small-cap to sector or area specific, or even income or value or growth.

International Equities Investments

As the name suggests these stocks belong to companies, which are based in other countries. These are slightly riskier than domestic equity, as the governance and control is not in domestic hands. Investing in international equity is done through ETF’s and mutual funds. Owing to the fact that international equity is considered riskier, the return on these stocks is usually higher than that of domestic equity.

Real Estate Investing In Equities

Individuals feels that homes, apartments and complexes are the only form of real estate that they can invest in. This however is not true. Various conglomerates and trusts usually own large office building and commercial complexes or shopping malls chains and facilities. Units of these trusts can be openly bought and sold on the secondary market. This kind of investing is referred to as investing in listed property trusts. It is however not necessary that all property trusts are listed. Unlisted property trusts usually offer higher returns owing to the fact that they have higher inherent risk.

There is however another form of equity investing. This is known as investing in hedge funds (structured products) or private equity.  This form of investing in equities is usually meant for high net worth individuals, or individuals who have investable funds in the million. With the recent expansion of markets and greter acceptence of structured funds and their desire to grow, a lot of hedge funds have opened their doors to common investors. These hedge funds are now available through various investment platforms.

These are some common ways to invest in equities

Invest In Stocks – Advantages

Some of the advantages of investing in stocks are:

1. Capital Appreciation: One major reason for holding direct shares is “Capital Growth / Appreciation”. Over the years shares have know to exhibit great capital growth with the increase in share prices. In addition to this corporations and companies and also sometimes issue their share holders with what is known as a “Bonus Issue” In this case, instead of paying individuals dividends, the company issues them with additional shares at no extra cost. This leads to increase in share holding of investors. Another way in which shares show capital appreciation is by a “rights issue”. In this case the company gives their existing share holders the right to purchase shares in accordance with their existing holdings. This offer is made to existing share holder directly and they do not need to go through a broker thus saving on transaction and brokerage costs.
2. Dividends: This is a major plus for direct shares. A regular income stream though dividends for shareholders is what makes investing in shares very attractive. Shareholders also have the option to chose whether they want their dividends paid directly to them or whether they want to re-invest those dividends into the buying of additional stocks.
3. Transaction Ease: Owing to the fact that there is an extremely developed secondary market for shares, it is very easy to buy and sell shares. Individuals do not have to wait to for a company to issue new shares. They cam readily buy or sell these shares in various financial markets. In addition it is very easy to liquidate shares and convert them back into cash should you wish to do so.
4. Diversification: Shares are a great way to diversify your existing portfolio. For instance if you are a growth investor you would like to have as much as 33 percent of your portfolio invested in direct shares. Shares provide the steady growth element and diversification aspect to a portfolio.

Disadvantages On Investment In Stocks

While the advantages of investing in shares outweigh the disadvantages, there are certain disadvantages none-the-less. For starters, the prices of shares can b extremely volatile. For one, if the management of a company makes one bad business decision, it could mean that the value of the stock would fall. In some horrible situations this could lead to a company becoming bankrupt and the shares of that company becoming worthless. In addition to this stocks are susceptible to various market and geo-political risks which could also lead to the devaluing of a company’s shares.

While markets risks and company risks are some of the major disadvantages of investing in stocks another disadvantage is transaction cots associated with shares. Brokerage and transactions costs could sometimes be so high that they actually eat into any profits made by you on the buying or selling of shares.

These are some of the major advantages and disadvantages on investing in stocks.

References:

1. Advantages and Disadvantages of Investing in Stocks – OTC NYSE stock tips

Housing Market 2010: Consumer Outlook

With changes in the property market, consumers can look forward to the following housing market forecast for 2010

• Affordability

The primary thing to remember at the moment is that for the last 3 years or so housing prices have been inflated. With the latest bust in the housing bubble, homes now and for the next couple of years will be more affordable than ever. In addition to this, one should also keep in mind that low housing prices coupled with low interest rates of 5.15% percent or thereabout make this and the coming months the idea time to buy property.  It might also please buyers to know that interests rates are expected to stay low over the next few months.

While considering the above, there is a flag that you might need to watch out for.  Builders have belief that single-families will be re-entering the market soon. As a result of this they have been applying for permits to construct such dwellings. This is a sign that the housing market could be seeing stability sooner rather than later.

• A Buyers Market

If you have been waiting for an opportune moment to enter the housing market and purchase your first property, this may be your time. Remember that while prices are expected to stay low over the next year or so, these conditions will ease as the housing sector experiences improvements and prices will once again start to rise. Moreover the decision of the government to expand and extend the first home buyers tax credit to not only include more individuals at a higher salary bracket, but to also include individuals who have previously owned makes this the right time to enter the market. Another interesting fact is that while cash is king in the lower tier housing sector with the increased supply of middle to top end properties, if you can stick to your guns you might just be able to pick up a very good property at an absolute steal price.

• Sellers Beware

If you are a seller and are looking to list your property on the market and are not in a desperate situation, then it may be a good idea to hold off for a bit. With the increase in the number of buyers and the falling prices of houses in a same tier most good properties have lost their appeal and hence are no longer facing the prices they should have. This will also be re-asserted should you get a valuation or appraisal done on your property. Your property would either not have moved in value in comparison to when you bought it, or might have only slightly appreciated or in the worst case scenario would have depreciated in value. Hence it might be a good idea to hold off on selling your property at the moment.

Apart from homebuyers and sellers, we have some advice for owners as well. Let us not forget that nearly a quarter of the country is up to get their adjustable mortgage rates adjusted this year. If you feel that you are in a good position to refinance then this may just be the best time to refinance your mortgage and save yourself a rate increase.

This is what the housing sector could look forward to in the new year. On the whole the housing market outlook on the year 2010 remain positive and we hope that a lot of financial sectors including the housing sector will stay stable and start showing signs of sustainable growth.

References:

1. Make money in 2010 – Your home – CNN Money
2. US home builders expect sales improvement – All Business

Identifying Dividend Yielding Stock

When it comes down identifying high yield stock it may be beneficial to look at, what is known as the “Coverage” ratio. This is calculated by taking the earnings per share dividend and dividing it by the dividend per share. Usually with regard to the coverage ratio, a figure higher than two is considered good. A lot of fund manager and industry analysts swear by this philosophy. In addition to this is the usual judging of a stock by taking into consideration its dividend yield to it’s share price. When calculating this take the dividends paid by the share over the last 12 months and divide it by the current share price.

Yield Stock Bargains In The Market

A lot of investors often ask the question can dividend yield stocks be used to identify a stock market bargain, and the answer is an unequivocated “YES”. Let us put his in perspective, assume that a share has a total paid dividend of $2 in the last 12 months and it’s current price is $80, therefore the yield is 2/80 or 2.5%. However if the price rises to $82 the yield will fall to 2/82 or 2.43%. Of course the opposite will happen if the price falls. Come to think of the reason why dividend yield stocks can help you identify a bargain is owing to the simple reason that the yield is usually high if the price of the share is low. This reflect the outlook of management who feel that they do not need to alter their payout policy as their outlook to the future is positive.

High Yield Stocks & Dogs Of The Dow

This theory was popularized by Michael O’Higgins in the year 1991, represents a theory that the highest yielding stocks in the Dow are representative of the best bargains available in the market. This is owing to the above stated facts that the management of these companies feel that they are in a good position and do not need to alter their dividend payouts as their outlooks remain positive. In regards to “Dogs of the Dow”, there is an entire investment strategy dedicated to this theory. In this strategy you buy the top 10 dividen yielding stocks for a financial years and then after holding them for one year sell them and replace them with the top 10 stocks for that year. This has been a very popular investment model with active investors and asset-allocators.

As with any investment process it is essential to consider your risk tolerance and do ample research to ensure that you are comfortable with any investment decisions you might be making. While there are a lot of stocks in the market which appear to be yield stocks it might be beneficial to conduct both fundamental and technical analysis prior to settling on the investments you feel would work for you.

Reference:

1. Dividends for the long run – CNN Money

Best Investment Strategies For 2010

1. Large Caps To Lead The Way: In the recent past investors have pulled out close to $15 billion out of large cap stocks and out of fear of another investment market crash have invested nearly 4 times the same amount in less risky bond-funds. Historical returns have shown that the long term moving average of returns on stocks are far greater than that of bonds or funds that invest in bonds. Another important point of consideration while investing in 2010 is to remember that US large cap stocks are currently undervalued and this might be the time to start picking up some quality stock prior to their pricing sky rocketing. Our investing advice is to look to buy stocks that have a focus on dividend yield especially those which have more than 2% on offer.
2. International Markets: While the US is on the road to recovery, it may be a good investment strategy to adequately diversify your investment portfolio and look to international markets. Let us remember that international markets such as Australia in the Asia Pacific region and funds in the Latin American sector have outperformed the USA by a fair bit. Another point substantiating international investment is owing to the fact that international investment markets are considered more risky, they compensate investor by offering higher dividends and returns. This would be another factor why we believe investors should consider international stocks and funds as part of their investment strategies.
3. The Resource Sector: Seasoned investors reckon that the resource sector is probably a safe investment strategy at the moment if you are beginning to feel your way through the investment world. In particular, stocks in the energy sector and mining and drilling sector seem to have more appeal to seasoned investors.
4. Precious Commodities: When we say precious commodities what we basically at the moment are talking about gold investment strategies. A lot of investors do not consider investing in gold an investment technically. Gold has always been considered a preservation vessel for wealth and a hedge against geo political risk and other unforeseen market and non-market related forces. Gold is and will always be an excellent protection against inflation, and with the weakened Dollar, its prices being driven higher. It might be a good idea to hold about 10-15 percent of your investment portfolio in gold to add stability and diversification to it.
5. Mutual Funds: In light of the fact that prices in the money market are low at the moment it might be a prudent investment strategy to consider investing in quality mutual funds. While picking mutual funds the trick is to remember to select mutual fund managers who aim to provide their investors returns while preserving their capital.

These are some of the basic investment strategies we feel investors should consider while contemplating investing in 2010. However, remember to do your research and ensure that you have taken into account your risk tolerance.

Reference:

1. The 3 Best Investing Strategies for 2010 – The Motley Fool

Why Owning Stocks Is A Good Idea

So with investments falling through across the board, why should investors consider buying stocks? There are several reasons why it it sensible to buy stocks in the current climate

1. Beating Inflation: As known to most inflation is the biggest detriment to individual savings. It is what the market calls an erosion of savings. Look at it this way if you store your money as cash in a safe or a vault your money is not working for you. While the face value of your money remains the same, the prices of goods and services around you rise at a steady inflationary rate. Even if you held your money in CDs or a savings account, in reality your money would indeed be growing at a slower rate than the rising prices of goods and services thereby causing you to lose money in reality. On the other hand by buying stocks and holding your funds in stocks would mean that your money would be growing faster than the inflation prevalent in the market place. The long term moving average of stocks show that they have always out performed the inflation bench marks. The most important thing at the moment is getting started and getting into the market and not worrying about what the market seems to be doing or where it is headed.
2. Stocks The Way To Go: The reason why most experts recommend that buying stocks are the way to go is for these simple reasons. Let us assume that you invest $5,000 for 35 years in a savings account or in a certificate of deposit. Assuming that as last year the inflation rate remains at 3.8%, you would have only made approximately $2,200 in today’s terms, even though the amount in reality would be something close to $8,000 plus, owing to the fact that these instruments on average offer no more than 1.5 – 2% annually. On the other hand a similar if you buy stocks and had invested in stocks, you would have made in the region of  $70,000 plus and in today’s terms that would have been close to $21,000 and above owing to the fact that on a conservative estimate basis, stocks offer 8% on a long term moving average basis. Hence you actually stand to lose by placing your money else where.

Even though you might consider that the market is a risky place in light of the current economic downturn, let us allow the figures to speak for themselves. Had you bought stocks and invested in the year 2002 after the tech crash, you would have seen your funds increase by roughly 33 percent in year one, 44% in year  and by the fifth year you would be up by as much as 92-95%, there by almost doubling your investment in buying stocks in a matter of 5 years. Even if you suffered a loss with recent global meltdown, bu buying stocks you would still be ahead by about 30 plus percent.

Hence to sum what we have already stated, it might be a good idea to buy stocks and invest in the market especially in this climate when everyone is looking to exit, anticipating a fall. However, as with any investment decision, it is always prudent to consider your own personal circumstance and risk tolerance prior to making any decisions.

References:

1. Roadmap to Riches – MSN Money
2. Is Now the Time to Buy Stocks? – The Wall Street Journal

The 529 College Savings Plan & Other Options

The new 529-college savings plan, has meant that it might be beneficial to stay near home as States offer deductions to residents contributing to their state’s plan. This however does not mean that you should not venture out of your home state for college. It might just so be that the other educations and non-educational benefits of moving to a university in another state, far surpass the tax incentives offered by your state. In addition to this the next question that needs to be answered is that should you invest your funds in your states 529 plan or are there better options out there These are some of the things, which a college saver should look out for:

1. Cheap Funds: This might sound a tad bit absurd, but historically it has been proven that education funds, which do not cost an arm and a leg, to get into have a better chance of outperforming the index. Having said this does not necessarily mean that the fund will out perform. That could depend on a number on factors such as investment decisions, calls made by the fund manager and other external market factors.  However what does remain a certainty is of course the amount of money you pay. If however you take an expensive fund, apart from the entry cost, there will be administration expenses attached by the 529 plan plus brokerage, if you are investing through a broker etc. This can greatly hamper your overall return.
2. Diversification: Here is another important consideration. Diversification basically means spreading your eggs across several baskets. You could, by diversifying, expose your self to international college saving funds and small caps, which in turn usually offer greater returns in the long run. This will also reduce your overall exposure and thereby dependence to Domestic Blue Chips and large caps.
3. Time Frame & Risk Tolerance: It is important to remember the time frame you have in mind for your college savings plan. If you are working a fairly large time from, it might be prudent to initially invest in small caps and international funds as these yield a higher return in the short term. If you only have a few years to go prior to the date the individual or yourself having to join college, then it may be a safer bet to invest your education savings in large caps and blue chips.

Having mentioned the foundation guidelines for a good education savings plan, it is also worth mentioning that unless you have used the right mix of funds and have properly diversified you could end up losing money. It is essential that you have strong base of college funds around which you can place several satellite funds to help obtain your overall objective. However, it is essential that you or your broker chooses these funds with ample care and after having done ample research.

Once again prior to making any investment decision remember to consult an expert in the field and ensure that you have weighed all your options accordingly.

Reference:

1. College Savings 101 – Saving for College

Guide To Buying A Home

Before buying a house, it may be beneficial to actually visit the websites of some of the lenders you might be considering. Most of these lenders have calculators online, which can help you gauge how much money you can borrow. Once you have got an idea of the amount of money you can borrow, the following may be beneficial for buying a house.

• Gather the paperwork that you will require to give the mortgage company for buying property. This could include statements from banks, pay slips and other financial documentation and evidence. You may require additional documentation if you wish to apply for the government’s home buyers tax credit or other government grants.

• Having gathered your paperwork for buying a house, it may be beneficial to get yourself a pre-approved home loan once you know the range of property you are looking at. Unlike a pre-qualification, a pre-approved loan is where you already have a loan ready and hence it will make your offer to the seller more attractive as it will mean that you will be able to go unconditional and close the offer much quicker in comparison to other buyers.

• You must bear in mind that if you feel interest rates are going to rise, it may be prudent to lock in rates.

• As a home buyer you could also look in to various FHA loan program and loan programs offered by the Department Of Veteran Affairs, if you have been in the armed services.

• In this current credit climate it is almost a given that you will require a down payment when buying property. This can either be obtained as genuine savings, a gift, through government programs or through private down payment assistance programs or the by the sale of another asset.

Home Buyer’s Guide:  Types of Loan Products

Once you have taken the above factors in to consideration, it is time to consider a loan product that best suits your spending habits and needs. Several products are available on the market today. A brief description of some of them are:

1. Fixed Rate Home Loans: These home loans are beneficial to those home buyers who wish to live in the property for the entirety of the loan. In this case you can fix the interest on the entire life of the loan.
2. Variable Loans: These loans are also known as Adjustable Rate Morgages. With these, the interest rate for buying a house is fixed for a certain period after which it fluctuates according to the market index.
3. Interest Only Loans: With interest only loans home buyers pay only the interest component for the first five years after which they go in to a period where they go back to making to principal and interest repayments.

Buying Real Estate: Questions To Ask

An important part of the home buyers guide is to ask the right questions before you buy property. Some important questions to consider before buying a house are:

• How often will the interest rate be adjusted?
• Have you got mortgage insurance, as this can greatly affect your mortgage repayments?
• When do the payments come due?
• Is there a cap on the interest rate?

Once you have considered all these options for buying a property you could feel fairly comfortable while making a decission with regard to buying a house.

Reference:

1. Your 5 Minute Guide to Home Loans – MSN Money

Investment in Stocks: Creating Savings

First and foremost never start stocks investments on borrowed money. The golden rule to investing in stocks is start small, but start with your own funds. Try to ensure that you have got yourself a property first. Following this, make sure that you have sufficient savings and sufficient investable funds. The reason we recommend this is owing to the fact that as with any investment, there is a certain risk factor involved. You would not want to jeopardize your savings by using them or by using money you have saved up for buying a property. When you have crossed the first two milestones, then it is time to enter investment markets.

Stock Market Investments: Gather Information

One thing that separates a successful investor from a not-so-successful investor is the level of information or knowledge each possess. There are numerous websites, online publications, research houses, blogs and forums online that could arm you with formidable ammunition as far as investing knowledge and market news goes. You need to look out for what stocks are performing well and which stocks have been constantly declining. You need to know which stocks investments are bargains based on their yield to price or which stocks are currently overpriced etc.

Investment in Stocks: Start With A Small Yet Solid Portfolio

If it is your first time investing in stocks then we recommend staring small. It is always better to find your feet first prior to taking a big leap. Star by buying blue chip stocks. They are often fairly priced and are pretty consistent with returns. This is a good way to start. Having found a little comfort in investing in stocks you  could progress to investing in international shares and the on to small company shares and so on and so forth.

Budgeting For Your Stock Market Investments

Just as with any expense, if you are serious about your investment portfolio, make sure that you budget for your stock investment expenditure. In addition to this try and keep your investing activities systematic and goal oriented. If your investing becomes haphazard or irregular, it is possible for you to lose out on market information or lose out on price bargain of stocks and shares.

Investment in Stocks: Getting Professional Help

As your stocks investments portfolio starts to grow and get larger, it is more susceptible to market risk and it might need to be re-weighted or re-balanced. This in simple terms means that you may be over-exposed to domestic equity or international stocks and the balance of your portfolio may need to be adjusted, this is where the advice of a professional stock broker or financial planner could be invaluable.

These are some of the basics steps an individual should while getting started on investing in stocks.

References:

1. Stock Basics – Investopedia