12 FINANCIAL TERMS YOU NEED TO KNOW

Legal Disclosure: Tony Robbins is a board member and Chief of Investor Psychology at Creative Planning, Inc.,an SEC Registered Investment Advisor (RIA) with wealth managers serving all 50 states. Mr. Robbins receives compensation for serving in this capacity and based on increased business derived by Creative Planning from his services.

Now you’re ready to learn some of the fancy (or frightening!) words and phrases that financial news pundits and financial planners throw around. After all, what you don’t know can hurt you. These twelve phrases are specifically focused on some of the strategies and fees associated with investing. Although this is the last article of this series, we at Team Tony encourage you to continue growing your financial sophistication and get in the game because waiting on the sidelines will cost you dearly in the long run!By now you’ve learned some basic terms to start you on the path to investing, and you’ve learned a few more to boost your economic IQ.



Or, an exchange-traded fund. The most popular exchange-traded product on the market, the ETF is an investment fund in which an investor can buy and sell shares, much like a stock. The ETF fund itself holds assets (stocks, commodities or bonds) and its value is subject to change through the course of a day. They have high liquidity, lower fees (but not always!) and usually track an index, such as a stock or bond index.



The expense ratio of a stock or mutual fund is the total percentage of the fund’s operating expenses divided by the average dollar value of its assets under management – essentially, what does it cost the investment firm to operate the fund? For example, a 1% expense ratio (considered a typical annual ratio for a domestic stock fund stateside, although index funds are considerably lower) means that 1% of the fund’s total assets will be used to cover the fund’s expenses. Keep in mind that the expense ratio is not the only fee being charged.



The commission paid to a broker (financial advisor, etc.) by the investor for purchasing mutual funds on the investor’s behalf. These can vary greatly and often sway a broker’s decision to sell the fund.



Opposite a load fund, a no-load mutual fund is sold without a commission or sales charge to the investor. This means 100% of the investor’s money is working for the investor, rather than a percentage being taken off the top (front-end load) or upon payout (back-end load) to pay commissions. A no-load fund still charges a management fee (aka expense ratio) and other fees, so by no means is it free.



One of those ‘other fees’ mentioned earlier that some mutual funds charge investors when they transfer from one fund to another within the same “family” of funds.



Cash is usually a good thing and makes you feel safe, but in this case, it really may be hurting you. Cash drag is the uninvested cash that a fund manager sets aside, usually to handle withdrawals from the fund. However, this portion of the fund is failing to participate in the market and therefore has no upside or downside potential. To add insult to injury, you are paying fees on this portion of the fund.



A structured note is a loan to a bank in which the bank knows it will retain your money for a specific period of time (say, three years). The bank issues you a note and at the end of the period, they usually provide 100% of your money back AND a percentage of the upside of the market (or a particular index). It’s a way to have a relatively safe investment with some upside participation. Beware of very high and hidden fees. It’s best to access through a fee-based fiduciary advisor who legally can’t charge commissions and can strip out the unnecessary fees.



A rule of thumb that conservatively suggests that retirees withdraw just four percent from their retirement account annually in order to maintain adequate funds to sustain the investor through their later years.



Just as its name implies, high-frequency trading consists of firms using powerful computers with complex algorithms to transact an incredibly large number of orders at very fast speeds. These traders can move in and out of positions within fractions of a second, often with the goal of capturing a fraction of a cent in profit on every trade.



In this niche, traders focus on stocks that are moving significantly in one direction on high volume, and much like surfers, try to ride the wave of momentum in order to pull in a profit. Typically they hold their positions for a short period of time – from minutes to a day.



Otherwise known as a “constant dollar plan” or the “cost average effect.” This strategy consists of buying a fixed dollar amount of a particular investment on a set schedule, whatever the share price may be. When the share price is high, the investor receives less shares for the dollar amount (or whatever currency used), and when the price of shares is low, the investor gains more shares. This strategy reduces the risk of volatility on large purchases and is particularly effective in markets undergoing temporary declines.



Also known as a “shareholder rights plan.” This is a defense tactic used by corporations to discourage a hostile takeover by making its stock less attractive to the would-be buyer. This is done by essentially giving the shareholders a discount on the stock, thus diluting the buyer’s interest.

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Source: https://www.tonyrobbins.com/wealth-lifestyle/12-financial-terms-need-know/

The "Experts" Are Getting Crypto All Wrong

Bitcoin peaked about a month ago, on December 17, at a high of nearly $20,000. As I write, the cryptocurrency is under $11,000... a loss of about 45%. That's more than $150 billion in lost market cap.

Cue much hand-wringing and gnashing of teeth in the crypto-commentariat. It's neck-and-neck, but I think the "I-told-you-so" crowd has the edge over the "excuse-makers."

Here's the thing: Unless you just lost your shirt on bitcoin, this doesn't matter at all. And chances are, the "experts" you may see in the press aren't telling you why.

In fact, bitcoin's crash is wonderful... because it means we can all just stop thinking about cryptocurrencies altogether.

The Death of Bitcoin...

In a year or so, people won't be talking about bitcoin in the line at the grocery store or on the bus, as they are now. Here's why.

Bitcoin is the product of justified frustration. Its designer explicitly said the cryptocurrency was a reaction to government abuse of fiat currencies like the dollar or euro. It was supposed to provide an independent, peer-to-peer payment system based on a virtual currency that couldn't be debased, since there was a finite number of them.

That dream has long since been jettisoned in favor of raw speculation. Ironically, most people care about bitcoin because it seems like an easy way to get more fiat currency! They don't own it because they want to buy pizzas or gas with it.

Besides being a terrible way to transact electronically - it's agonizingly slow - bitcoin's success as a speculative play has made it useless as a currency. Why would anyone spend it if it's appreciating so fast? Who would accept one when it's depreciating rapidly?

Bitcoin is also a major source of pollution. It takes 351 kilowatt-hours of electricity just to process one transaction - which also releases 172 kilograms of carbon dioxide into the atmosphere. That's enough to power one U.S. household for a year. The energy consumed by all bitcoin mining to date could power almost 4 million U.S. households for a year.

Paradoxically, bitcoin's success as an old-fashioned speculative play - not its envisaged libertarian uses - has attracted government crackdown.

China, South Korea, Germany, Switzerland and France have implemented, or are considering, bans or limitations on bitcoin trading. Several intergovernmental organizations have called for concerted action to rein in the obvious bubble. The U.S. Securities and Exchange Commission, which once seemed likely to approve bitcoin-based financial derivatives, now seems hesitant.

And according to Investing.com: "The European Union is implementing stricter rules to prevent money laundering and terrorism financing on virtual currency platforms. It's also looking into limits on cryptocurrency trading."

We may see a functional, widely accepted cryptocurrency someday, but it won't be bitcoin.

... But a Boost for Crypto Assets

Good. Getting over bitcoin allows us to see where the real value of crypto assets lies. Here's how.

To use the New York subway system, you need tokens. You can't use them to buy anything else... although you could sell them to someone who wanted to use the subway more than you.

In fact, if subway tokens were in limited supply, a lively market for them might spring up. They might even trade for a lot more than they originally cost. It all depends on how much people want to use the subway.

That, in a nutshell, is the scenario for the most promising "cryptocurrencies" other than bitcoin. They're not money, they're tokens - "crypto-tokens," if you will. They aren't used as general currency. They are only good within the platform for which they were designed.

If those platforms deliver valuable services, people will want those crypto-tokens, and that will determine their price. In other words, crypto-tokens will have value to the extent that people value the things you can get for them from their associated platform.

That will make them real assets, with intrinsic value - because they can be used to obtain something that people value. That means you can reliably expect a stream of revenue or services from owning such crypto-tokens. Critically, you can measure that stream of future returns against the price of the crypto-token, just as we do when we calculate the price/earnings ratio (P/E) of a stock.

Bitcoin, by contrast, has no intrinsic value. It only has a price - the price set by supply and demand. It can't produce future streams of revenue, and you can't measure anything like a P/E ratio for it.

One day it will be worthless because it doesn't get you anything real.

Ether and Other Crypto Assets Are the Future

The crypto-token ether sure seems like a currency. It's traded on cryptocurrency exchanges under the code ETH. Its symbol is the Greek uppercase Xi character. It's mined in a similar (but less energy-intensive) process to bitcoin.

But ether isn't a currency. Its designers describe it as "a fuel for operating the distributed application platform Ethereum. It is a form of payment made by the clients of the platform to the machines executing the requested operations."

Ether tokens get you access to one of the world's most sophisticated distributed computational networks. It's so promising that big companies are falling all over each other to develop practical, real-world uses for it.

Because most people who trade it don't really understand or care about its true purpose, the price of ether has bubbled and frothed like bitcoin in recent weeks.

But eventually, ether will revert to a stable price based on the demand for the computational services it can "buy" for people. That price will represent real value that can be priced into the future. There'll be a futures market for it, and exchange-traded funds (ETFs), because everyone will have a way to assess its underlying value over time. Just as we do with stocks.

What will that value be? I have no idea. But I know it will be a lot more than bitcoin.

My advice: Get rid of your bitcoin, and buy ether at the next dip.

Ted Bauman joined The Sovereign Investor Daily in 2013. As an expat who lived in South Africa for 25 years, Ted specializes in asset protection and international migration. Read more of what he has to say about offshore living here.

Article Source: https://EzineArticles.com/expert/Ted_Bauman/1964192

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4 Current Commodity Tips You Need to Know About

Commodities are an incredibly strong investment choice. A great way to build a diverse portfolio, they lack the volatility of stocks while providing great room for financial growth.

But investing in commodities without knowing what you're doing is a bad idea.

If you want to make this investment, you'll need to develop an intelligent strategy. Here are some commodity tips to help you make that move.

Commodities Explained

Before you read any other commodity tips, you need to understand the concept. Commodities are structured trades around the delivery, sale, import, and export of a particular good. Popular commodities include oil, gold, and soybeans.

The most popular strategy for investing in commodities is signing a futures contract. These ensure that you will own the commodity for a set amount of time before selling it on a certain date at a specific price.

Here are a few tips for making the most out of your commodity trades in 2017.

Why ETFs Are A Good Choice

If you're looking for an effective way to invest in commodities, one of the best ways to do it is through ETFs. ETFs, or Exchange-traded funds, can either monitor a commodity or a specific market index.

ETFs can be a great way for beginners to invest in commodities. They are easy to manage and involve a lot less red tape than a futures index. While investing in ETFs is not the only way to make a profit off of a commodity investment, it is the best way to get acquainted.

How To Use a Short Position

Many have a strong preference for the simple game of going long on their commodities. But this can be a mistake. There's a lot of money to be made off of the short sell, and it also isn't particularly difficult.

If you detect a market depreciation, you should sell shares in a commodity. Let the commodity depreciate in value: when you feel it has bottomed out and will experience a resurgence in value, you should buy shares.

This will allow you to minimize the cost of purchasing valuable commodities while profiting off of purchases of a commodity at a low value. Every trader should stop worrying and love the short.

Read The News (Financial and Otherwise)

Commodities are very complex. But in a way, they can also be relatively simple to understand. As a matter of fact, indexes for every commodity from corn to currency will appear in the newspaper. And not just in the business section.

Staying on top of everything from policy to boardroom rumors can help you make the right decision. So devote at least an hour to the news each day.

Be An Oil Skeptic

Oil is one of the most popular commodities. And while it can perform well or poorly in various technical analyses, an essential part of risk mitigation involves taking a look at the international political environment.

Whether it's through long-term transformations in the energy market or instability in OPEC nations, the future for oil is questionable. In the name of risk mitigation, we would advise approaching oil with caution.

Beyond Commodity Tips: Work With The Best

Tips can take you far. But you can go even further by working with seasoned financial professionals.

Work with the experts in various areas of trading. One of these areas is commodities trading. But whether you're looking to succeed at the trading of commodity ETFs or to continue boosting an already thriving portfolio, always look for the best people to work with.

Trade Finance Consultant, Business Development Strategist, Strategic Trade Risk Mitigation Solutions Provider Visit http://www.adamsmith.tv for more details.

It is one of India's leading Trade Finance Company, performing business of arranging trade finance and providing consultancy, advisory, structuring and management services relating to trade finance transactions. One of its main expertise is in commodity trade finance.

Article Source: https://EzineArticles.com/expert/Vivek_A_Sharma/2429241

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