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A new Exchange Traded Fund Offers Entry into an Industry Most Investors Don't Know Even Exists

admin — Sun, 08 Nov 2009 05:47:28 +0000

A new Exchange Traded Fund offers entry into an industry most investors don’t know even exists. The fund was created for investors’ eager to profit from nanotechnology but who have limited time and resources to investigate nanotech companies. The fund is PowerShares ETF Trust. It is designed to follow the LUX Nanotech Index. This is a new budding area for investment. This fund allows investors to get into this industry early. Since this industry is in the first stages of development, investors may want to invest in a fund such as this rather then investing in a particular company. This is one way of getting in early and spreading the risk.

The most recently introduced ETFs are getting more focused. In the past most Exchange Traded Funds represented broad indexes. Their advantage were that they were Exchange Traded Funds and had advantages over mutual funds, however the areas of investment were similar to index mutual funds. Investors wanted more focused funds. In response to that there are a number of more focused ETFs being introduced now. This is now giving investors a wider choice in their investments then mutual funds. PowerShares has released a number of focused funds in the last year. An example of some recently introduced funds include an Aerospace and Defense portfolio (AMEX PPA). The PowerShares Aerospace and Defense Portfolio is an exchange traded fund designed to track the SPADE Defense Index which is comprised of publicly traded companies focused on homeland and border security, space industry infrastructure, and technological innovations in warfare.

Another new ETF is PowerShares Dynamic Building & Construction Portfolio (AMEX PKB). This fund focuses on the housing industry. Investors believing this industry is still healthy would but this ETF. There have recently been some signs the housing industry may be slowing down. If you are an investor that believes that is true you could short this ETF.

There are more specialized Exchange Traded Funds being introduced all the time. Latest information on Exchange Traded Funds appears on www.exchangetradedfundinvesting.com. This site keeps track of the most popular and also the ETFs providing the highest year to date returns.

I Rolled Two Former Employers 401k Plans Into A Rollover Ira About 2 Years Ago. I Want To Roll It Into My New?

admin — Sat, 07 Nov 2009 17:00:43 +0000

company’s 401k plan, but my broker says this cannot be done. They are calling what I have a ROLLOVER IRA and telling me those cannot be rolled over into 401k plans. Can anyone tell me if this is accurate info?

A new Exchange Traded Fund Offers Entry into an Industry Most Investors Don't Know Even Exists

admin — Tue, 03 Nov 2009 21:47:19 +0000

A new Exchange Traded Fund Offers Entry into an Industry Most Investors Don't Know Even Exists

admin — Thu, 29 Oct 2009 12:04:09 +0000

Exchange Traded Funds Venture Further Into Foreign Currency Markets

admin — Tue, 27 Oct 2009 20:48:12 +0000

In December of 2005, Rydex listed the Euro Currency Trust (FXE) Exchange Traded Fund. This was the first Exchange Traded Fund that allowed investors to enter the currency markets through investing in Exchange Traded funds. With the falling dollar this fund this fund has done well considering the recent market conditions.

Rydex will now give investors in foreign currencies even more options. They will be introducing Exchange Traded funds covering the British Pound, Austrailian Dollar, Canadian Dollar, Mexican Peso, Swedish Krona and Swiss Franc.

Many investment advisors would caution investors in putting money into currencies due to volatility. These markets have been difficult for small investors to enter but ETFs are now making these markets easy to enter. Depending on who you talk to, this could be a good or bad thing.

These funds could be a good investment in an environment of a weakening dollar, which is what we have now. Investors who are investing long term may want to put a percentage of their investments in foreign currencies in order to hedge their portfolios. A number of factors indicate the dollar may have a rough road ahead. The US has a large growing deficit and a number of countries may be considering diversifying their dollar investments. There is also a possibility that some commodities may start trading in foreign currencies in addition to US Dollars.

Many investors may think foreign currencies are too risky to invest in, however many investors would not hesitate to invest in foreign stocks. If investing in foreign stocks it is reasonable to put some of your portfolio in Foreign Currency Exchange Traded Funds.

There has been a great deal of money moving into foreign markets and these were hit pretty hard in the recent downturn. This does not mean that all these markets should be avoided.

Many foreign ETF Stock Funds are not only benefiting from expanding economies but also from currency profits due to the falling dollar. This allows the Fund to grow from two factors. If the local stocks go up in value the fund increases in value and if the value of the dollar falls, the fund also increases in value due to currency appreciation.

An example of two funds that have done well since the beginning of this year are the iShares MSCI Sweden Fund (EWD) and the iShares MSCI Spain Fund (EWP). There are other European Funds that are up for the year. Their increase is clearly due to currency gains and not growth of equities.

The markets are currently very volatile. One week these funds may appear as a good investment and another investing in these funds may appear to be a mistake. This illustrates the case for long term investment rather then treating these funds as commodity investments. If you decide to enter into these investments, enter for the longer term and you can use these investments as a hedge against your US based equity investments.

When Looking At Diversification Of A Mutual Fund Portfolio, How Many Mutual Funds Should I Be Buying Into?

admin — Tue, 27 Oct 2009 13:22:10 +0000

I am 24 years old and looking at my future investments in my Roth IRA. Right now I own shares of 3 separate mutual funds, divided equally by initial monetary investment. Ratings below are from Morningstar.
-FDFFX: Fidelity Independence, a 3-star rated Large Growth Fund.
-FICDX: Fidelity Canada, a 5-star rated Foreign Large Blend Fund.
-HIINX: Harbor International, a 4-star rated Foreign Large Value Fund.
With the upcoming year for contributions of up to $5k, I am looking at the potential of either buying into 2 new funds (typically most funds I look at have a $2500 buy in), 1 new fund and adding to my already existing funds, or not buying into any new funds and purchasing only more shares in my already existing funds (which are a bargain with the market the way it is).
I feel as though buying into 2 more funds is the best bet for this year, but at what point will I have enough diversification to start reinvesting in already existing good performing funds versus continually making minimum purchases into new funds?
About me: At 24 years old I am not worried about risk. I prefer extreme risk with the possibility of extreme gains. Because of this I am looking into this year buying into some Small Cap Value funds, especially in foreign markets. Right now I’m running a 68% foreign / 26% domestic / 4% short-term.
I am not specifically looking for a fund recommendation as much as I am overall investing strategy for the upcoming 3-years with suggestions of fund TYPES that I should be buying into. Also I wish to know when should I stop buying MORE mutual funds and start reinvesting into already held high performing funds..if ever. Thanks!

A new Exchange Traded Fund Offers Entry into an Industry Most Investors Don't Know Even Exists

admin — Sun, 18 Oct 2009 15:50:25 +0000

Can I Transfer Old Ira/401k Funds Into My Sd Ira/401k?

admin — Sun, 04 Oct 2009 00:16:30 +0000

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Should I Buy Into A Mutual Fund? — Stock Investment (3)

admin — Mon, 28 Sep 2009 13:24:08 +0000

www.stockfessor.com

Why People should Invest in Mutual Funds Than Directly Into Shares

admin — Sun, 27 Sep 2009 13:22:52 +0000

Why People should Invest in Mutual Funds Than Directly Into Shares

Now a days, everybody is in a dilemma when comes for their hard earned money investment decisions in these volatile markets. Investment is a way which can multiply your money in many folds beyond your expectations and in similar way it can dry out your money completely if invested in wrongly avenues. Therefore, people are seeking advice from experienced professionals for investment activities. My experience & observation suggest that those people who have adopted ‘get rich quick mentality’ lost their money very soon because they did not do their ‘need based self assessment’ before making investment decisions. Through this article, I will try to explain various reasons why people should invest in mutual funds than directly investing in shares.

First, mutual fund managers are highly experienced and well qualified to take decisions to invest domestically and internationally. Asset management companies keep the track record of every company which are in their portfolio or expected to be included. Asset management companies also have their own research team which constantly keeps focusing on performing sectors and sectors which are anticipated to out perform in coming future. Before making any decision, fund managers do fundamental analysis (this kind of analysis is done to find out the best scrips in the market) and technical analysis (this kind of analysis suggest when to enter and when to exit).

Second, mutual fund gives you the advantage of diversification. In my most of the meetings with the investors I found that investors do not understand this point clearly so I will focus more on this point. Diversification is nothing but the allocation of assets into different sectors. Diversification minimizes the risk because money is invested into various industries, had that money been invested only in one industry / company it would have been exposed to more risk due to volatility and government policies pertaining to particular sector. Let’s take an example to elaborate this point.

Investor ‘A’ invests Rs. 50,000 in company X, assumed this company is operating in telecom industry, @250 per share and acquires 200 shares with 3 years time horizon. Investor ‘B’ also invests Rs. 50,000 @ 20 and acquires 2500 units of this fund. This sectorial mutual fund is focusing on telecom industry only. Let’s see the prospects after 3 years down the line:

INR / SHARE

Year 1

Return %

Company Name

Allocation

IP*

Quarter I

Quarter II

Quarter III

Quarter IV

YOY

Weighted

25%

250

287.5

316.3

268.8

279.6

11.8

3.0

10%

200

218.0

239.8

203.8

212.0

6.0

0.6

25%

100

117.0

128.7

109.4

113.8

13.8

3.4

20%

300

366.0

402.6

342.2

355.9

18.6

3.7

20%

400

480.0

528.0

448.8

466.8

16.7

3.3

Total

14.1

IP stand for Investment Price or prices at which shares were purchased. Here, I have excluded the transaction cost

From the above table it is clear that returns due to diversification are higher than investing in one particular share of the company.

INR / SHARE

Year 2

Return %

Company Name

Allocation

CMP

Quarter I

Quarter II

Quarter III

Quarter IV

YOY

Weighted

25%

279.6

293.5

322.9

274.5

285.4

2.1

0.5

10%

212.0

252.3

277.5

235.9

245.3

15.7

1.6

25%

113.8

136.5

150.2

127.7

132.8

16.7

4.2

20%

355.9

398.6

438.5

372.7

387.6

8.9

1.8

20%

466.8

490.1

539.1

458.2

476.6

2.1

0.4

Total

8.5

Again here you will find out that returns due to diversification are 8.5% vs. 2.1%. It also conveys that fund manager is continuously gaining from the market and could be trusted for the investment purposes.

INR / SHARE

Year 3

Return %

Company Name

Allocation

CMP

Quarter I

Quarter II

Quarter III

Quarter IV

YOY

Weighted

25%

285.4

314.0

345.4

293.6

305.3

7.0

1.7

10%

245.3

272.3

299.5

254.6

264.8

7.9

0.8

25%

132.8

175.2

192.8

163.8

170.4

28.4

7.1

20%

387.6

418.6

460.5

391.4

407.1

5.0

1.0

20%

476.6

509.9

560.9

476.8

495.8

4.0

0.8

Total

11.4

I think now, it is needless to say that diversification not only reduces the risk but also beneficial to garner more and safe returns.

Total Returns In Three Years

INR / SHARE

Price

Allocation

Returns in %

Company Name

CMP

Invt. ‘A’

Invt. ‘B’

Invt. ‘A’

Invt. ‘B’

250

305.3

100%

25%

22%

200

264.8

10%

100

170.4

25%

18%

300

407.1

20%

400

495.8

20%

Total

22%

38%

From the above table it is clear that mutual fund successfully managed to give 38% returns where as investment in company X has just provided 22%. Now just imagine if diversification is done in various sectors. Here, I did not consider dividend & other returns.

Thirdly, mutual fund also pro
vides various tax benefits. People can take tax advantages when they are investing in mutual funds and also when they are exiting from the schemes. Just they need to maintain and follow time horizon guidelines which SEBI and AMFI have put in place.

Fourth, cost of managing the fund for expertise services is minimal. This benefit is due to higher volume. Before people used to say that, due to entry and exit load, investing in mutual fund is costlier but now as per SEBI guidelines there is not entry and exit load, if investment was made after August 4, 2009, for investing in mutual fund schemes. It means that services of the experienced and well skilled fund managers are free of cost. Thanks for the SEBI to make these services without cost.

List of advantages of mutual fund is long and it is increasing as volatility & uncertainty is increasing in the market. As we know that there is nothing in this world which is flawless and mutual fund is of no exception. There are some mutual funds in India also which are not performing upto the mark. Investors need to be very cautious while investing in mutual funds. My next article will be based on ‘How to select the best mutual fund’ for investment purposes.

Having said that all the views are personal and authenticity of these thoughts is based on various mutual funds & financial institutions websites. I can not be held responsible for any wrong information or untoward happening.

Regards,
Anoop, CFA