ETFs are generally tax efficient; most often they have indexed securities with little transactions among their investments. Therefore, at year end they have little taxable charges due to Uncle Sam.
On some occasions they may have to sell assets to adjust their indexes, and taxes result. Mutual funds that are managed, however, buy and sell shares constantly, and are prone to capital gains, especially in rising markets. (See the Earl J Weinreb NewsHole® comments.)
Options offer an investor the right but not the obligation to buy or sell a security at a set price.
Options are used for investments becoming more impervious to swings in the markets, Also, to protect shares from under-performing. And to make money when market conditions are extreme.
To invest in options, you must take time to learn fully about them. Know the difference between a call and a put, strike price and all applicable terms.
There is no real quick options course, Take your time learning because of the complex nature of the arcane aspect of this classification of the securities business.
Do not get involved unless you learn about options both academically and in practice. Therefore, run through some fantasy dry-runs with no real funds, just to see how you would have done with real money. Then use your own real capital. (See the Earl J Weinreb NewsHole® comments.)
Recent years have not been as good for hedge funds as they have been in the past.
This past year has certainly not been as successful as the early 2000s. Some funds did well though not as they did several years ago, during their Golden Age. That’s when they were getting 20% and more return a year.
Many have been lucky to do as well as the S&P 500 Index, and without all the risk that hedge fund investors undertake.
But hope and professional ignorance can be eternal. (See the Earl J Weinreb NewsHole® comments.)
The Short-Market Investment Strategy?
One market strategy is watching the size of the number of short positions on the NYSE and Nasdaq exchanges.
“Short” shares are borrowed and then sold, hoping the price will fall before the borrowed shares have to be replaced. A larger than normal position can be bullish because it means more buying than the previous selling positions.
Yet, there can be other reasons why traders take such trading stances to reduce risk. At any rate, the strategy doesn’t always work for whatever the underlying facts.(See the Earl J Weinreb NewsHole® comments.)
Federal Reserve minutes disclosed early in 2012 indicate how off the mark the Fed was in gauging the instability of the residential market in 2006 and 2007, even after residential real estate prices began falling.
Outside a few voices, the consensus was that no serious dangers were ahead. A light cyclical downturn at most was the worst they saw.
This proves again there are no regulatory experts in government, just those given the job of being the master of a financial behemoth beyond their ability to comprehend. (See the Earl J Weinreb NewsHole® comments.)
To add to the injury done by financial advisers because of their high usage cost in form of fees: they tend to time the market with too much portfolio change.
This is done to show clients they’re actively engaged in servicing the account. The result of repeated research: The chances of "experts" getting out at a high is 10%. The chances of getting back in at a low is 10%. Thus roundtrip success rate is 1%.
The attempt at expert timing is futile and ridiculous. ( See the Earl J Weinreb NewsHole® comments.)
How much can you take from your nest-egg after retirement and have enough for the rest of your life?
The idea so many advisers suggest is that you can eat into a retirement fund to the extent of 4% a year, once you retire. But that is very arbitrary, meaningless and pointless.
The cost of living never remains constant while huge inflationary pressures are on the horizon. Health and other issues are never predictable.
Living conditions and personal needs vary with time and cannot be structured by a set formula. Unforeseen emergencies are bound to affect such percentage estimates and make them impractical. ( See the Earl J Weinreb NewsHole® comments.)
Some folks try to outsmart inflation and get income at the same time by buying corporate bonds outright. The idea is fine if you need monthly income but wrong in all other respects.
Even if you “ladder” maturities, buy increasing maturities in a pattern of increasing years-to-maturity, you will need quite a number of bonds to get needed diversification.
All this is impractical. Instead, buy a low-cost bond fund with the duration number you need. You’ll get lowest cost of bonds due to low management cost and inflation protection. ( See the Earl J Weinreb NewsHole® comments.)
Do bankers really make too much money? They may if they earn commissions and options of hundreds of millions a year. But they do work at responsible jobs that take years to perfect.
Do athletes earn too much money? They certainly do, if they earn up to $20 million a year for playing a kid’s game. For which many amateurs do for nothing, but just a little less efficiently. The real difference in their capability is not learned but in their eyes or muscles, for the most part.
Do gymnasts deserve more than they earn? They get practically no income despite all the pain, and years of training and practice, and the need to overcome physical fear.
It’s difficult to see how politicos in Washington are so ready to damn bankers as a group for making “too much” money while other genuinely overpaid groups are left to make their fortunes politically undisturbed.
And high-priced athletes are indirectly being financed by bailout funds of their bosses’ subsidized ballparks. (See the Earl J Weinreb NewsHole® comments.)
Politicians who never understand the tenets of the economist Joseph Schumpeter, will not accept the fact that private equity funds do a needed job. Schumpeter appreciated the role of capitalism’s “creative destruction.”
Private equity groups may clean up deadwood companies and use venture funds for startups, and thereby create far more jobs than they destroy. And even better, they initiate a more modernized and stable job picture than before.
Many companies they take over would have failed if left alone. (See the Earl J Weinreb NewsHole® comments.)
My experience has shown that undisciplined investments with no set strategy will not do as well as it should. It’s a case of market timing with adverse odds.
You know an adviser has no clue about strategy when he tells a mutual fund investor not to buy a fund that clings to a particular “style” of investment, such as small cap or large cap. But to instead choose what is right for the times.
That advice will let you know the adviser has no specific strategy. The adviser is willing to change strategy to suit whatever style may be popular at the time. (See the Earl J Weinreb NewsHole® comments.)
No matter how you appraise value, only the public will tell you what your asset is really worth.
This is especially true with collectibles and art. There is no way of knowing an item’s worth in advance. No matter it’s appraisal or what you paid.
That is why collectibles and art are a field for Ponzi schemes that are impossible to uncover, Value is in the eyes of the would-be buyer and the Bigger-Fool Theory is always in action. ( See the Earl J Weinreb NewsHole® comments.)
Don’t believe everything you get from the media. They are often distractions from reality.
Research shows that analyst predictions can mean little, unless they’re used for quick trading. And that can be very tricky if legal and if you’re not a Wall Street professional insider.
Sell predictions tend to be more accurate than buy recommendations. But there are fewer of those; under 10% of total predictions, and about 5% of the total of buy or hold suggestions. ( See the Earl J Weinreb NewsHole® comments.)
XBRL or Extensible Business Reporting Language can permit data to be collected and analyzed. It can be used to assess risk on about 600 mortgage points. And the data may be readily tracked.
We know from experience that layers of added regulation does not work.
There is a far better case for using such data resources for collection and review and more transparency on mortgages, than the need for extensive federal regulation, including the Dodd-Frank Act.
XBRL or Extensible Business Reporting Language can permit data to be collected and analyzed. It can be used to assess risk on about 600 mortgage points. And the data may be readily tracked. ( See the Earl J Weinreb NewsHole® comments.)
Private equity companies are not doing as well as they did a few years ago, despite the publicity they have gotten from political debates.
Less funds are available to them as before, simply because they have not made as much profit as in the past, You could do as well with the S&P 500 Index ETFs.
Moreover, the diminished profit comes with even more risk of loss as ever before.
Furthermore, there is less leverage for future profits because of less availability of funds to borrow. ( See the Earl J Weinreb NewsHole® comments.)
When some politicians speak about the top 1% of wage earners in this country and their domestic income, they are wrong in making comparisons and interpretations of official family income statistics of the past.
Their argument overlooks that families have changed. Twenty, thirty years ago, there may have been just one worker in a family, where today, husbands and wives more likely work. Perhaps kids are also part-timers.
Families may have two and perhaps more small income providers. They could add a sum of income that may classify them as so-called “rich,” ready to be heavily taxed. ( See the Earl J Weinreb NewsHole® comments.)
Yet, small business employs 50% of the U. S. work force. It makes up almost 40% of the GDP. The easy money policy of the Federal Reserve makes it far easier for banks to borrow at little cost from the Fed and invest in government bonds. So why bother to make risky small business loans?
Worse, small business cannot get meaningful relief from Washington in the form of lower taxes and less restrictive wage regulation. (See the Earl J Weinreb NewsHole® comments.)
You can take more risks when you are younger because there’s more time to recoup your errors. But If you lose a big chunk of capital, it still sets you back.
Sure, it is better to lose chunks of capital at age 30 than when you’re 60, or older. Nevertheless, look at a compound interest table, and see what happens to any amount of principal, when you lose a large sum early on.
Therefore, it’s essential that investment risks always be a concern in your planning. (See the Earl J Weinreb NewsHole® comments.)
Small business has relatively little access to public borrowing. They are usually in no position to sell stock to investors. So where will they get funds?
Credit cards are one solution. About 80% of small businesses pursue this arrangement, though rates are high. But this source is getting tougher, because of increased government meddling.
Left-leaning politicians believe that anyone who charges more than what a bank does is a usurer, even when there is no money available at bank rates. That’s because such politicians never understand supply/demand economics. ( See the Earl J Weinreb NewsHole® comments.)
Gold prices these days relate primarily to the rise and fall of the dollar, rather than inflation itself.
There are many other ways to protect yourself against inflation. A weaker dollar waxes and wanes cyclically. Other investments are more directly attuned to inflationary factors.
For those who have decided to buy gold, however, an option that often is not fully understood is whether to buy gold mining shares, instead of gold coins or bullion.
There is dividend income in holding shares and potential capital growth. Gold coins and bullion offer no income. And you have to store and safeguard the physical assets.
However, mining company shares run into occasional production problems and potentially negative management issues.
Gold can be bought without physical possession, in the form of mutual funds or exchange traded funds (ETF)s. . ( See the Earl J Weinreb NewsHole® comments.)
Once again the government is seeing to it that folks who cannot afford to own a house are able to buy one. Getting to buy homes with practically nothing down. In no time, they will join the rest of the rising numbers of homeowners in default.
The media will repeat that the villains once more will be the “greedy” banks and mortgage brokers whose jobs depend on carrying out government edicts. ( See the Earl J Weinreb NewsHole® comments
Recent years have not been as good for hedge funds as in the past. This past year has not been as successful as the early 2000s. Some did well though not as they did several years ago.
Many hedge funds went out of business due to a loss of investor interest. Or so-so performance that failed to attract followers of the past.
The main peeve against them are their charges. In addition to their standard management fee which is usually set at 2% of assets managed, they still get about 20% of earnings they produce. That is far too much for funds doing conventional, non-rocket-science investing. (See the Earl J Weinreb NewsHole® comments
Many insider trading rules are vague. It’s easy to get caught for what was done in good faith. Often, those who are arrested and go to jail, are guilty merely of lying in one way or another in their testimony, but not for insider dealings.
The rules are not as simple as headlines would make them appear. What has been firmly established about insider trading is this:
An employee has an obligation to an employer not to divulge information received while on the job. You cannot trade on company secrets.
You can act on gossip and what you overhear from general discussions of others, who are not restricted in the dissemination of such information.
There is nothing illegal about trying to get information about a company in which you wish to invest, provided you don’t have someone break a law or a duty to get at that information. (See the Earl J Weinreb NewsHole® comments.)
I got lots of flak in the late 1990s and early in the 21st century because, from 1996 to 2008, residential real estate values rose sharply, about 72% on average.
Research shows that from 1890 to 1996, residential real estate values increased about 27%. I had always advised folks to treat a home as just that, not a means of growing rich. The small increase in home values would attest to that reasoning over the years.
That up-cycle has obviously come to a sudden end and is in a down-spin. And I repeat: Buy a home to suit your budget and your family requirements.
If you want to invest in real estate there are other options. For example, commercial REIT index mutual funds or ETFs. ( See the Earl J Weinreb NewsHole® comments
Investors who buy foreign securities as a means of diversification may do so in several ways.
One is to buy ADRs or American Depositary Receipts. These are dollar, Euro or other currency denominated participation in global issues.
They’re more expensive for those who want basic, non-technical investing. Why not use foreign mutual funds or exchange traded funds (ETFs)? The latter can be traded and are cheaper to transact. (See the Earl J Weinreb NewsHole® comments.)
High frequency trading improves market liquidity, It assures a buyer or seller availability whenever one wants to trade
High frequency trading benefits mutual fund investors and traders by reducing costs. It lets investors with fast computers take advantage of small price discrepancies and brings market liquidity.
In the past, the stock market was efficiently operated by middle men or “market-makers.” They normally completed sales by buying and selling in their own accounts, if they could not immediately match buyers and sellers. Market makers profited on the difference between the bid prices buyers were willing to pay and the ask prices sellers accepted.
The SEC is tightening its controls of high frequency trading which it’s currently suspicious of. ( See the Earl J Weinreb NewsHole® comments.)
While high-frequency trading benefits most traders, there are some hazards involved. The presumption is that high-frequency traders are more efficient, at the expense of the less adept. Individuals who feel they cannot compete with mutual funds or other large investors, view the subject negatively.
If profits are made on tiny price variations, unscrupulous players can profit in some manipulation, like that caused by rumors. However, the SEC has the ability to supervise this possibility.
The SEC should protect small investors from active traders who could conceivably be hurt by high-frequency trading with their faster computers. At the same time, high-frequency trading benefits small investors who use mutual funds. (See the Earl J Weinreb NewsHole® comments.)
Dodd-Frank is attempting to make sure that too-big-to-fail banks will not bring on another economic disaster. In doing so, they are strangling the economy with regulations while big banks are more insecure.
Dodd-Frank also overlooked a major fact. Monetary policy has been set up merely to accommodate this too-big-to-fail doctrine at the expense of businesses who cannot or will not access loans.
Banks who have received government treatment get low interest rates and safe government bond investments to bolster earnings. Why would banks not play this spread rather than make risky loans to business? Especially with government agencies looking over their shoulders, suggesting that risky business loans are taboo?
Only government bureaucrats can think up such absurdities when rescuing banks. (See the Earl J Weinreb NewsHole® comments.)
We will soon have over $58 trillion in unfunded public debt obligations. That is close to $500,000 for the average family household. The figure mounts every day our legislators are in Washington.
That sounds worse when you figure that it is about ten times the average income of each American household. What is more, the amount grows because it is a debt that accrues interest.
And interest rates will eventually grow enormously. Plus, the value of the dollar to pay debt back will be worth less as our obligations mount. As inflation grows, interest levels may well triple or quadruple or go even higher. They can’t remain at today’s artificial fed levels forever.( See the Earl J Weinreb NewsHole® comments.)
The Dodd-Frank legislation was to remedy, in part, financial institutional failing. Past bailouts that produced extraordinary budget deficits. Which, in turn, is dooming our economic prospects for decades to come.
And still Dodd-Frank is ready to impose layers upon additional layers of stifling regulation. Unfortunately, with no possibility Big Banks will have eliminated systemic risk.
There is a simple, free market solution that has worked in the past, but left-leaning politicians have no clues nor inclinations about its implementation.
They did separate commercial banking operations from proprietary trading. Banks, though, will not be smaller, less risky and less apt to fail than the risk-taking and more leveraged investment entities of the past. (See the Earl J Weinreb NewsHole® comments.)
Jobs do not come from government hires in questionable projects. The worthwhile, stable variety generate within industry, not in a make-work program with no true productivity aim.
Always keep in mind what has made the U.S. different from socialist governments with all their perfect job-planning schemes. Fancy words and plans never succeed. They may fool and appease the public, at least for awhile. But never for long.
For proof look at the ongoing unemployment records of European welfare economies. (See the Earl J Weinreb NewsHole® comments.)
