forex fire

Does a buy and hold strategy still work well for unit trust funds? There’s an argument that buy and hold is not a strategy, but is the same as not doing anything. To make it worse, your investment may ’sink’.

Given an example, let’s say, you bought into an equity fund in December 1998 and kept it until December 2004 and had a return on investment (ROI) of -2%. If you had actively managed your investments and switched to a bond fund (during bull bond market) and returned to equity later (during bull equity market), your ROI would have been 15%. Thus, some analysts suggest a buying, monitoring and rebalancing strategy.

The buy and hold strategy is based on an assumption that over the long run, markets will go up eventually. It’s a strategy that helps the investor save on transaction costs, taxes on capital gains and avoid the hassle of buying and selling.

There are a number of factors concerning this strategy. First, it’s assumed that the portfolio is diversified into different stocks and asset classes. If the investor only invested in one stock, he won’t even recover the cost today. He needs to invest across the asset classes (bonds, gold, cash etc.). In the long term, the portfolio will give good but not necessarily the best results.

Second, the investments must be fundamentally sound. In developing countries, a buy and hold strategy may not produce the best results many changes are still taking place. Thus, business cycle, the economic and investing environment and government policies will change, in line with the country’s development. When change happen, you can’t ignore the impact.

That being the case, investors are advised to review their investments regularly (at least once a year). But should unit trust investors try timing the market? As you know, a unit trust fund is a medium to long term investment vehicle. However, you can’t just invest and forget about it. Investors should monitor them closely and not easily give up control of their hard earned money.

Not all investors are literate enough to know when to enter and exit asset classes. Investors’ emotions come into play, making it hard for them to sell and take profit or cut losses, especially those who invest directly in the market. Thus, leave it to the professionals if you’re clueless and illiterate about financial markets, although even professionals can’t get it right all the time too as timing the market is never easy.

Another critical element of unit trust investing is to figure out if you’re comfortable with the fund manager’s style. If the investor were to rebalance his portfolio himself, in this case, the asset allocation decision is made by the investor himself. When markets move, he decides whether to buy, hold or sell.

For you those of you who prefer taking control of your investment, even if it’s a small sum, make sure you go into a fund that charges minimal entry and exit fees or allows free switches between funds in the same company and in the same year. Only move your investments when you believe market fundamentals have changed, otherwise don’t get caught up with investor sentiment.

Even if there were no changes in the investing environment, your own objectives may have changed, so it’s wise to review your portfolio at least once a year.

For investors who prefers to let the fund manager decide so long as they get a reasonable return on investments, there are funds that allow you to just sit back and watch your investments grow (if you’re lucky!). Go with funds and fund managers whose investment style suits your risk profile.

Finally, investors need to be educated. Get literate in your finances or make sure your investment consultant is literate.

Michael Russell
Your Independent guide to Investing

Trading systems based on price breakout can be considered as a system based on oscillations. In other words traders who use breakout systems are not interested in long-term trades but immediate price movement.

Breakout trading systems are based on assumption that if price breached the boundary of a range then there is a high probability that the move will continue. It can last a short period of time but that can be enough to make a profit in a trade.

I believe breakout trading strategies is a good place to start for a beginner trader. It has number of benefits

1. It is the best exercise to practice your trading skills.

2. It can teach you some techniques that can be hard to learn in other strategies like buying the dips and selling the rallies. Most people don’t feel comfortable trading such strategies. Breakout strategy on the other hand is easy to master.

3. Trading strategies on breakout have clear rules of setting stop losses. It is very important for new traders because it helps to follow the right money management rules. Violating the money management rules is the most popular reason of failure in trading.

4. It will teach you to be patient since in most cases breakout systems work best if the trade is carried out to the next day.

5. This kind of trading systems will allow you to improve your trading skills. Most of them require active participation in market compared to other systems like many trend following systems. Many traders are afraid to push the button when it comes to placing an order. Breakout systems can help you to overcome such fear by continuously executing mechanical trades. Most of them require placing pending orders that also relives the fear of taking action in market.

6. Even if you are in the habit of entering the market based on your discretion, breakout systems still can help you to better understand the dynamics of market. I believe any mechanical system can help you develop a feel for the market. The only thing you need to do is relentlessly execute the trades.

As any other system breakout systems have their own pros and cons. These systems can give you a good profit on volatile and trending market. But when market starts moving sideways the breakout system experiences losses. You can trade any breakout system as is. Placing the orders whenever price breakouts the range. Or you can try to filter out the sideway movement of price and stay out of market in those periods of time.

Albert Schmidt is a part-time currency trader. After quite a long time of struggle he learned to make consistent profit trading in Forex. Review a trading strategy he successfully uses in his trading Forex.

When it comes to trading the Forex having a trading system is the number one key to success. Making currency trades as “mechanical” as possible is the only way to sanely trade a market where the traders fear and greed are always in play.

This is where a trading system shines. Having a system that says when “A” happens you automatically execute trade “B.” This kind of system has a great effect at removing much of our emotional trading.

How The Systems Work

As you probably know, Forex trading is based on the relationship of one currency to another - called pairs. And these pairs are used to create a trade. For instance you believe that the Euro is due to rise against the Dollar - or said another way - you believe the Euro is strong and the US Dollar is weak. Based on this assumption you would expect to see the Euro rise in value over the dollar and if it did you would profit.

So the pair you would be trading is the EUR/USD pair where the first currency listed, in this case the Euro is called the base currency. The second, in this case the US Dollar, is called the counter or quote currency. Each pair is quoted with a single number that expresses the relationship between the pairs. So if a quote of 1.4525 were quoted that would mean that it would take 1.4525 Dollars to exchange for a single Euro.

The Fibs

Fibonacci, often called the fibs, are a method of gaining some measure of predictive pricing in the Forex markets. They are based on the famed number sequence developed by a mathematician named, you guessed it, Fibonacci. The sequence that he developed is a sum where each of the two preceding numbers are added to form the next in the sequence. So a sequence starting from the number 1 would look like 1,1,2,3,5,8…and so on.

The Forex is especially sensitive to the fibs. If you spend any time with your currency charts you will notice how prices turn at or near Fibonacci numbers.

Now of course then numbers are not as neat and clean as 1,1,2,3,5 etc. In the currencies they look more like. .236, .50, .382, .618, etc., Using this type of number sequence you will find that you can use the Fibs as a price point to enter or exit a trading position. They offer a seasoned trader a certain measure of predictive capability.

They can be used in you trading system as the response to other market signals so if you get a market signal that tells you to enter the market long the Euro, then your mechanical response would be to wait until the prices broke through the next Fibonacci resistance line and then enter your position. Waiting for this type of movement would help prove that the price was on the rise.

Of course this is assuming that you expect the price of the Euro to go up, and that is not the only way the market could move, but this is the beauty of the Forex, you can trade the market up or down. It lets you make money in both directions.

For more Forex currency trading systems visit http://ForexTradingRobot.info a site dedicated to trading systems for seasoned traders and beginners alike.

I invite you to take the next few minutes to learn the truth about the real estate market, how it compares to other methods of building assets and why it is such a lucrative form of investing. Many potential investors will say, ‘I need to get into the Florida Investment Property market’, especially taking into account current stock market fluctuations and the HOT market for investment properties, but simply don’t know the facts about Orlando property investing and how to use sale and leaseback method of property management.

When is the last time your financial advisor or stockbroker tried to convince you that moving a portion of your assets into the Florida Investment Property market might be a good idea? Never Right? The ‘why’ is simple. They don’t earn commissions when you buy Florida Investment Property. It is also likely that you have probably never had an ‘apples to apples’ comparison of stocks versus Florida Investment Property quite like the one you will see here.

Reason 1:

Leverage: Banks will not typically loan money to buy stocks. Banks will however, compete fiercely to loan money to buy Florida Investment Property. Your first question should be, ‘why is that’? It has to do with risk management, which we will discuss later. The fact that banks want to loan you money to buy Florida Investment Property creates a situation which we will call LEVERAGE.

Let’s assume that you have $10,000 to put into some type of investment. If you choose to buy $10,000 worth of stocks, you will own exactly $10,000 worth of stocks. Pretty straight-forward. However, suppose you choose to invest that $10,000 into Florida Investment Property using a 90% mortgage (which in many cases can go up to 95-100% mortgages in today’s market), you will own $100,000 worth of Florida Investment Property. If both of your investments were to appreciate by 10%, your actual gain with your stocks would be $1000 where your actual gain with Florida Investment Property would be $10,000. That equates to an actual 10% return on investment vs. a 100% return on investment. That’s what we call leverage.

Leverage: Florida Real Estate vs. Stocks

The traditional argument against Florida Investment Property Investing (mainly from Stock Brokers) has always been ‘I can get an average of 10% from stocks with little effort so why would I invest in Orlando Investment Property that only appreciates 6-7% per year’? This point-of-view is not taking leverage into account.

If you take the above statement to be true and compare the REAL numbers, the stock investment gained 10% of the initial $10,000 value (or $1000) and the Orlando Investment Property investment gained 6% of the initial $100,000 value (or $6000). That is still an actual return of 10% versus 60%. It is not hard to see which investment provides a greater immediate return on investment. Additionally. these numbers do not take into account any income from your property during the course of the year, or the substantial tax advantages to owning property, which we will discuss later.

Reason 2:

Value: As we mentioned previously, if you invest $10,000 into purchasing stocks, you own $10,000 worth of stocks (a fairly obvious point). If you invest $10,000 into purchasing Orlando Investment Property using the leverage of a 90% mortgage, you own $100,000 worth of Orlando Investment Property right? Well, only if you paid retail for your property. Any savvy investor will tell you that there are excellent deals to be had in Orlando Investment Property, you just have to find them.

What if you purchased a $100,000 property that happened to be worth $110,000 the day you bought it? Does it happen? The answer is yes, all the time. If you have your eyes open and are willing to ‘go through the numbers’ to find good deals, they are all around you. You may be asking yourself, why would anybody sell a $110,000 property for $100,000?

Value: Making money when you buy.

The reasons are endless as to why a quick sale is desired, but just to name a few: job relocation, divorce, an estate is being settled or maybe a current appraisal on the property simply wasn’t done prior to selling. By ‘finding this deal’ you have accomplished two things.

You have added $10,000 to your asset column in the form of equity.

You have created additional LEVERAGE for yourself as the value of your property increases (a 6-10% gain on $110,000 is better than a 6-10% gain on $100,000!) Remember, you make money in Orlando Investment Property when you buy, not when you sell.

Reason 3:

Control: Let’s take our assumption one step further. When you buy your $10,000 worth of stocks, what can you do to increase its value? If we follow the previous assumption, you have invested $10,000 using a 90% mortgage to purchase a $100,000 property that has an actual value of $110,000 because you ‘found a good deal’. So what can you do to further increase the value of your new $110,000 property?

It is amazing what a cleanup, a little landscaping and a paint job can do to increase the value of a property. Only a few hundred dollars well spent can result in huge value gains in Orlando Investment Property. Your $110,000 property with a little effort could easily be worth $115,000, $120,000 or more virtually overnight! Do you have to do any of this work yourself? Absolutely not! If you like to do that sort of thing then have at it, but if not, simply hire it done and accept a little lower net gain.

Reason 4:

Superior Tax Position: The tax code in the United States is geared to reward Investors who make housing and other property available to the population. When you invest in stocks, you are taxed at some of the highest rates in the tax code. When you invest in Orlando Investment Property, you put yourself in one of the best tax positions in the business world. Remember the wealthy that hold substantial portions of their assets in Orlando Investment Property? Tax advantages are one of the main reasons this is true.

Continuing with the above example, let’s say that you have completed your ‘deal’ with the $10,000 invested with a 90% mortgage to purchase the $100,000 property that appraised for $110,000 (because you ‘found a good deal’), which you improved to say, $115,000 by spending another $1000 on cleanup etc. Assume that one year passes and the Orlando Investment Property market grew by 6%, your property would now be worth $122,000. So far, so good right? If you are like most people, you may want to spend some of your hard earned money.

Let’s do the numbers. You have a mortgage at current rates that started at $90,000 and after a year worth of payments (the majority of which are tax deductible) you still owe approximately $89,000. However, your property is now worth approximately $122,000. If you were to refinance at 90% once again, you would take out a new mortgage of approximately $110,000. This will leave you with approximately $21,000 in cash in your pocket. Now, the BIG question; do you have to pay tax on that money? Absolutely Not! You have not sold the property or realized a ‘capital gain’. You have simply borrowed money from yourself. You are able to do what you wish with that money, free from any tax whatsoever. Obviously, a good strategy might be to purchase two more properties just like your first deal!

Also, we have not taken into account the fact that ALL of your interest payments on this property are tax deductible. In addition, you are also able to depreciate the property itself and all of its contents for additional tax advantages if you choose to do so.

Let’s be fair and compare the Orlando Investment Property tax position with the stock scenario. Assume that the $10,000 initial stock investment grew by 10% in the first year, creating a gain of $1000 and you wish to access it. If you draw it out, you will pay from 20-28% (or higher) in capital gains tax in order to have access to this money. This reduces your net gain to $800 (actual 8%) or less, depending on your tax situation. Compare that to Orlando Investment Property and you are beginning to get the picture.

Reason 5:

Limit Your Exposure To Risk

Risk Management: Do you remember at the top when we said that banks would compete fiercely to loan you money on Orlando Investment Property? The answer to the ‘why’ is very simple. Low Risk. Banks incur little if any risk when loaning money on Orlando Investment Property due to the steady, solid growth rate of the property market, as well as the fact that if you default on your payments they will simply sell the property to somebody else. This is in direct contrast to the volatile stock market, which can vary daily with sharp increases and decreases in value. Furthermore, banks realize that a property isn’t going anywhere, whereas many investors know all too well about .com and other types of companies that were there yesterday and gone today.

This is all not to say that Orlando Investment Property markets don’t go down from time to time, however the dips are much less dramatic than that which can take place in the stock market, proven out by the banks’ willingness to loan money on property.

Reason 6:

Protecting your peace of mind.

Finally, Now that we understand the value of leverage and risk management we realize that a 6% Orlando Investment Property gain ‘beats the pants off’ a 10% stock gain in actual return on investment by a wide margin (approximately 50%, not taking into account several factors that can increase this number such as tax advantages, income on property etc.) Owning good, solid Orlando Investment Property allows you to sleep at night, or go on an extended vacation without worrying about your asset column. This is directly opposed to holding a substantial percentage of your assets in stocks.

Lisa Carson
http://www.biminibayresortinvestment.com
lcarson@biminibayresortinvestment.com

Forex price movement is not as simple as it may first appear and traders make several assumptions that are completely wrong base their forex trading strategies on it and lose. Let’s look at how prices really move…

Let’s start first of all, with two fatal errors traders make, when trying to make money in currencies and they are:

You Can Predict What Forex Prices Will Do.

Traders are obsessed with buying bottoms and selling tops. They simply see a level and jump in and hope it holds - but prediction is just hoping or guessing and you don’t get rewarded for that in forex trading.

It always makes me laugh, when you see vendors selling systems, saying they can predict with 90% accuracy! It’s a joke.

If you want to win, you trade the confirmation of price movement and I will return to this in a moment - but first let’s look at an extension of this point.

Markets Move to Science.

You have a school of thought that says that markets move to a scientific law and the most famous are - Elliot, Gann and the disciples of Fibonacci.

Well if they or anyone else knew the law, there would be no market, as we would all know the price in advance!

The far out crowd love these theories, with their mystical connotations but the facts don’t support their argument.

You can trade Breaking News

Not a good idea, as the news is actually unimportant by itself, its how it is perceived that determines the course of events which, leads me into how the markets really move.

How Prices Really Move

The equation for market movement is:

Fundamentals + Human Perception of them = Forex Market Movement

Humans are not logical they are influenced by their emotions and this is why markets are not scientific - true human nature is constant but it’s not science however we do know the following:

- Humans will always push prices to far up or down and these price spikes are temporary and can be traded for profit.

- Always trade the truth never predict and sure you don’t get perfect timing but the odds are in your favour and that’s vital.

An Odds Game You can Win

Forex is simply an odds game sure you cant predict but you can win, not every trade of course but by trading high odds set ups, you can have more winners than losers and pile up big profits overtime.

Greed and fear drive prices and make price spikes which are easy to see on a forex chart and can be traded for profit.

Any trader needs to treat forex as an odds game, trading the reality of price change when the odds are in their favour, with strict forex money management and if you do this - you will win.

Don’t Look For Perfection - Look to Win

In forex markets people having trying to predict and find some secret code of movement that simply isn’t there. While forex price movement looks chaotic, you can win, by simply trading the reality of price movement.

Sure you won’t achieve perfection (that’s impossible) but by trading the odds, you can put a lot of dollars in your pocket and that’s the whole aim of trading.

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