Infographic: Rise of the Female Trader

Posted August 28th, 2012 in Investing by Jeremy Waller

CityIndex has put together an infographic showcasing some of the data they’ve recently collected. CityIndex is based in the UK, so the figures are in Pounds, but I thought it was interesting nonetheless.

  • Over the last 10 years the number of female traders has risen by 1000%
  • Occupations of part-time female traders vary wildly, but the most popular are house wives, teachers, secretaries and those working in administration.
  • CityIndex’ most successful female trader is 51 and has profited over £1,200,000.
  • Their youngest active female trader is a 19-year old shop assistant. She has made a total profit of £11,222.
  • A contract teacher earning £32,000 a year has profited over £158,000 with her account

Female Trading Infographic

Financial Spread Betting Explained

Posted May 27th, 2012 in Investing by Jeremy Waller

For those with an appetite for risk, there are a wide variety of derivatives that you can trade. When traded as a speculative investment, rather than as a hedge, they can be extremely high risk. Just ask JPMorgan Chase who lost well over $2 billion this month from trading naked credit default swaps.

On the other hand, derivatives have tremendous upside potential. But upside potential isn’t everything – the lottery has a great upside as well!

Spread betting is one of the many derivatives that allow you to speculate on the price movement of an underlying security. If you don’t mind the risk, a great way to make an additional income is spread betting.

Now, let me be clear here. You shouldn’t do this with your retirement portfolio. But if you have some extra money to play with, I don’t have a problem with speculative investments – as long as you are okay with the fact that you could lose 100% of your investment.

The Basics of Betting the Spread

Essentially, spread betting is placing a bet on the price movement of a security. Let’s say that Apple is trading at $550. You believe it is oversold and think that the price will rise over the next few weeks. You could use a spread betting firm to bet a certain dollar amount per point. If you buy a stake size of $10 per point then you gain $10 for every point that Apple rises. Conversely, you lose $10 per point that Apple falls.

Say after two weeks, Apple is trading at $575. You could exit your position, taking a profit of  $250 (25 point increase x $10). It works in reverse as well; if you exit your stake when Apple is at $540 your loss would be $200.

How to Manage Risk in Spread Betting

Stop loss orders can be used in spread betting in the same way they can be used when trading equities.

Before you open a new position, you should already know at what price you will take your profits and at what price you will cut your losses. As soon as you get into the position, immediately set your stop loss – allowing some room for price fluctuation, but tight enough that you won’t lose more than you can afford.

As mentioned above, the amount you invest should be a very small percentage of your portfolio. Never use money that you can’t afford to lose. Spread betting offers the potential for high returns, but also has the potential to wipe you out if you don’t effectively manage your risk.

 

Oh Noes! The Facebook IPO!

Posted May 18th, 2012 in Investing by Jeremy Waller

Today is the big day. The day that Facebook goes public and makes Mark Zukerberg the 29th richest person in the world.

It’s unreal how much hype is surrounding this IPO. I don’t know if it’s because it’s one of the biggest IPOs in history or if its simply because it’s Facebook.

I’m sure there’s no shortage of people that will be doing everything they can to grab a piece of the action as soon as the opening bell rings.

I think those people are fools.

Facebook is incredibly overpriced at $38 – the price it is set to start trading. (Though there’s no way you could actually buy it at that price today. FB it going to pop like you wouldn’t believe today.)

At $38, Facebook will trade at 65 times projected earnings for 2012. 65x is nuts!

Google is currently trading at 15x projected earnings for 2012 and Apple is currently trading at 13x.

Oh, but I’m buying Facebook on future earnings. I’m getting in at the bottom!

Oh you are?

Are we looking at the same data here?

Well, we probably are – you just don’t care.

Let’s be realistic here folks. Everyone buying Facebook today is doing so on pure speculation.

The fundamentals simply do not support the pricing of the IPO.

But, people simply don’t care.

They look at Google’s IPO in 2004 with was priced at $85, immediately rose above $100 and continued to climb to $400 in less than 1 year.

There’s a very significant difference in the IPOs though. Google was priced cheaper compared to earnings and Google had more than double the revenue growth in the quarter before its IPO than FB has.

Even if Facebook can achieve 50% earnings growth year-over-year, $38 will still be 40x earnings.

Ding! Ding! Ding!

There goes the opening bell.

Grab you bucket of popcorn and get ready to see an opening pop like you’ve never seen before!

 

The True Risk of Investing: Understanding the Types of Investment Risk

Posted February 17th, 2012 in Investing by Jeremy Waller

understanding the types of investment risk

In my last post I talked about the fact that there is no such thing as a risk free investment. Specifically I talked about how some of the investments that are traditionally considered “safe” are some of the riskiest. Many people don’t really understand risk which skews their perception of risk.

So many people are weary of investing right now because of everything that has happened with the economy recently. I think a lot of the trepidation has been driven by the sensationalist media coverage. The Dow dropping 500 points in one day becomes a front page headline and people who have no clue what they’re talking about ramble on about double dip recessions and the decline of America. The next day the Dow rises back to where is was the day before and all is well again. Continue Reading »

Risk Free Investments Do Not Exist

Posted February 14th, 2012 in Investing by Jeremy Waller

Money Back Guarantee

With the turmoil in the markets we’ve seen over the past few years it makes sense that people are more interested than ever in low-risk investments. I’ve even heard people talking about putting their money in “risk free” investments until the economy recovers.

The problem is there’s no such thing as a risk free investment.

Risk free implies that there is absolutely no chance that the value of your investment could decline. To state it another way, in order for an investment to be risk free you would need a guaranty that the purchasing power of your money in the future will be greater than or equal to the purchasing power of your money today.

That simply doesn’t exist in the real world. Continue Reading »

How Much Should I Have Saved For Retirement By Age 30?

Posted January 25th, 2012 in Investing, Retirement, Saving by Jeremy Waller

My birthday is next week. I’m only a couple of years away from 30 now. I’m very much getting to the point where I need to get serious about retirement planning if I don’t want to experience a lifestyle cut later in life.

For the past 5 years I’ve been systematically investing 6% of my income with a 50% employer match each month. My portfolio has performed well with returns averaging around 13% per year over the last 5 years.

I’m optimistic that I can achieve returns in the 12% range but am realistic enough to know that I need to structure my plan as though my actual rate of return will be less.

My main concern after that is if I am contributing enough each month. What amount do I need in my retirement accounts by age 30 to be confident that I will have enough to retire on? Continue Reading »

Two Ways to Beat Market Volatility

Posted December 5th, 2011 in Investing by Jeremy Waller

The following is a guest post from Jay Tyner, president and founder of Semmax Financial Group

The ongoing market volatility we have seen recently is a scary and frustrating time for many investors, regardless of their age and risk tolerance. More young people are considering pulling out of the market to focus more on safe investments and preserving their assets.

With so many investment options and strategies to choose from, opting out of the craziness may seem more confusing than staying put. However, some of the more obvious investments, such as ETFs and guaranteed income vehicles could help you overcome the market volatility.

Have a Conservative Income Portfolio that is Actively Managed

Having a conservative income portfolio is great for those who do not wish to experience large swings in portfolio value. To achieve this type of portfolio, consider using an ETF. An ETF is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock or an exchange. ETFs also track economic and market conditions, indicators and trends while dynamically adapting to changing market conditions.

Although an ETF does a lot of the monitoring, it is also important to actively manage a portfolio, allocating capital to the most attractive asset classes, while avoiding the least attractive asset classes. An asset class breakdown is placing a percentage of an investor’s holdings in different types of investments, such as large stocks, international, bonds, etc.

Allocating assets to the most beneficial classes allows investors to have a consistent and positive investment performance. Moreover, assets should be reallocated based on your risk tolerance into diversified classes that will provide the most attractive risk-adjusted opportunities for income, capital appreciation and principal protection.

Invest in Guaranteed Income Vehicles

Another way to beat market volatility is to invest in vehicles that provide a guaranteed income stream. One option that can provide you with money throughout retirement is income annuities.

Although annuities have a negative reputation among some investors, their popularity has recently increased in light of the market ups and downs. Annuities are known to provide investors with a guaranteed income for life, which is great for current and aspiring retirees who are seeking asset protection and financial security.

Certain annuities can be selected that have no ties to the market and it is simply a contract between you and an insurance company. The way an annuity contract works is you make a lump-sum payment or a series of payments and in return, the insurer agrees to make periodic payments to you beginning immediately or at some future date.

This is a great way for you to have a secured income throughout your retirement, without worrying about the market’s future and losing your capital.

The market’s instability may continue for some time, but don’t let it stop you from achieving your retirement goal. If you need help setting up a conservative income portfolio and don’t have the time to manage your investments, consider seeking a financial advisor. Take control of your financial situation today and use the appropriate investments that best fit your risk tolerance.

Jay Tyner is president and founder of Semmax Financial Group, with locations in Greensboro, NC and Winston Salem, NC. He has over 20 years of financial experience, specializing in investments and retirement planning for pre-retirees and retirees.

Offsetting the Tax Ramifications of Required Minimum Distributions For Inherited IRAs

Posted November 14th, 2011 in Investing, Taxes by Jeremy Waller

Roth IRA and Taxes

This following is a guest post from John Papa, president of Diversified Planning Strategies. More information about John can be found at the bottom of this post.

Those looking to pass on their hard earned wealth by way of an IRA often fail to account for the potential tax ramifications of required minimum distributions for inherited IRAs. Even someone that does not need these distributions to live is required by law to start taking them at age 70.5.  If they don’t, Uncle Sam can become an unintended heir.

By marrying a few financial tools though, portfolios can avoid being sabotaged by the IRS and offset the tax implications of these distributions. Continue Reading »

Are Annuities A Good Investment?

Posted October 31st, 2011 in Insurance, Investing by Jeremy Waller

Last week I hit on a financial vehicle that tends to get a bad rap – annuities. Dun dun dun dun….

I’ve seen a lot of popular financial advisers and finance bloggers preach the evils of this vehicle. For some people, that advise is solid. But for others, annuities might actually be useful. So are annuities a good investment? Continue Reading »

What Is An Annuity And How Does It Work?

Posted October 26th, 2011 in Insurance, Investing by Jeremy Waller
Annuity Cartoon

Comic courtesy of Lance Andrew

I listen to a number of podcasts from several different finance gurus. Over the past week I’ve heard people asking questions about annuties. The story usually goes something like this…

Caller: My financial advisor told me I should roll my IRA into an annuity. Is this a good idea?

Guru: No! It’s a terrible idea!

End of call. Continue Reading »