The World's Largest ETFs

Is an exchange-traded fund with lots of assets necessarily a desirable one? On the one hand, obviously the largeness of an ETF is a selling point in and of itself, both literally and figuratively. Plenty of investors have already found such a fund worth owning a piece of, and that popularity becomes self-perpetuating – investors new to the market are going to be lured by an ETF with enough of a reputation to have amassed large holdings. 

On the other hand, the larger the fund, the less fluid and more inert it and its holdings are going to be. And the less difference there’ll be between the returns of one colossal fund and the next. If every ETF ends up holding comparably sized portions of this petrochemicals multinational and that internet search company, the less opportunity there is for the investor to enjoy returns that beat the market. (Assuming that that’s even what he’s looking for in the first place.) Still, a large exchange-traded fund means reduced risk, which is part of what most ETF investors are hoping for anyway.

The largest ETF in existence was built for the express purpose of tracking an index. The SPDR S&P 500 (SPY) from State Street Global Advisors was created in 1993 – making it also the oldest ETF in the United States – and, as its name indicates, contains proportionate holdings of each of the issues listed on the Standard & Poor’s 500 index. (SPDR is “Standard & Poor’s Depositary Receipts.”) The index itself summarizes the prices of the stocks of 500 U.S. companies that each have a market capitalization of at least $4.6 billion. Forthwith, here are the fund’s largest components:

Apple (AAPL) 

Exxon Mobil (XOM)

Microsoft (MSFT)

Johnson & Johnson (JNJ)

General Electric (GE)

Wells Fargo (WFC)

Chevron (CVX)

Berkshire Hathaway (BRK-B)

Procter & Gamble (PG)

JP Morgan Chase (JPM)

Verizon (VZ)

Pfizer (PFE)

Track the daily movements of the S&P 500, and you’ve essentially done the same for this particular ETF. It’s among the most conservative of securities that aren’t government bonds, created more to preserve wealth than enhance it.

The 2nd-largest ETF is a little more interesting. It’s Vanguard’s FTSE Emerging Markets fund (VWO), and again, an expository name helps to describe what the fund’s business is. FTSE stands for Financial Times/(London) Stock Exchange, the joint sponsors of a UK compiler of indices, sort of an Old World version of Standard & Poor’s. “Emerging Markets” is the universally accepted euphemism for second-tier countries whose economies show glints of brilliance outnumbered by wide stretches of poverty. The Vanguard FTSE Emerging Markets ETF consists of the stock of 955 largely Chinese and Taiwanese companies, many of them large but unfamiliar to North Americans. The stocks that make up the biggest proportion of the FTSE Emerging Markets fund are:

Are the emerging market stocks of this FTSE fund a better investment than the blue and comparably colored chips of the SPDR fund? The obligatory disclaimer about “past performance” aside, the SPDR ETF has doubled in value over the past 5 years, while the FTSE fund has failed to even keep pace with inflation.

Next up is the iShares Core S&P 500 ETF (IVV), which looks and sounds an awful lot like the SPDR S&P 500. Like its SPDR competitor, the iShares ETF tracks the S&P 500 perfectly, to the point where there’s no need to list the former’s largest components. So why would 2 investment firms sell an identical product?

They’re not completely identical. The iShares Core’s expense ratio is 2 basis points less than the SPDR’s, and you also can’t buy the latter without paying a commission. Which would seem to make the iShares Core ETF the better investment across the board, a position that’s reinforced when you examine other differences between the two ETFs. The SPDR ETF is set up as a unit investment trust and issues dividends at fixed quarterly dates, so when one of its underlying securities issues a dividend, the ETF has to hold onto the cash until the end of the quarter instead of reinvesting it. Which makes for a difference a few basis points in favor of the iShares Core ETF when markets are rising, SPDR when they’re falling. The difference is microscopic for the ordinary investor, less so for the institutional investor with millions on the line.

Homogeneity is inherent to large ETFs. Rounding out our quartet of the world’s largest is another iShares offering, MSCI EAFE (EFA), with net assets of $56 billion. That double initialism stands for another index, specifically Morgan Stanley Capital International/Europe, Australasia and Far East. A discussion of the ETF requires a brief explanation of the index itself, which is the oldest international stock index and contains issues from 21 developed countries excluding Canada and the United States. The fund offers an alternative for investors wary of putting their eggs in a basket dominated by just two countries – a pair consisting of a superpower with an increasingly intervening executive branch, and its neighbor whom, as the proverb goes, sneezes when the superpower catches a cold. Thus the MSCI EAFE ETF consists primarily of the following:

The MSCI EAFE ETF has gained 45% over the past half-decade, a more than suitable return for those concerned about wealth preservation.

The Bottom Line

Given that there are 1200 exchange-traded funds in existence, with the potential to create infinitely many more (all you need are at least two stocks, in varying proportions), this particular collective investment scheme is clearly here to stay. The largest examples of the genre will continue to be those that offer diversity, risk reduction, and liquidity.  

The Top Way To Invest In Commodities

As this guide has rather exhaustively demostrated, commodities are as complex as the people who trade in them. Because of this, the top ways to invest in commodities are as follow:

1. Pick a commodity or commodities that are interesting.
No successful commodity trader gets there purely because of his understanding of abstract mathematical formulas. Commodities are impacted by real life events. Even the steadiest commodities will experience fluctuations. The only way to have some notion of what is around the bend is to be a full participant in the process. By choosing a commodity that is interesting, a trader or investor will be able to stay motivated to keep track of developments that are affecting that particular commodity.

2. Register with a licensed and affiliated broker.
No matter how well informed any trader is, no one will be able to interact meaningfully unless that trader is registered with a licensed broker. Each exchange house requires that all traders are members, or are affiliated with members of the Commodity Futures Trading Commission.

3. Be prepared to lose initial investments.
For those who are attempting to trade and invest in commodities for the first time, being prepared to lose money while learning how quickly the market can change and shift will save potential heartbreak and help individual investors avoid a personal financial crisis. Using trailing stop losses can help lock in gains and protect investors from some of the downside risks. It is far more important to be profitable than it is to be right all the time.

4. After experience has been gained, invest in indexes.
After an individual investor or trader has learned the ropes of commodities trading, investing in larger financial institutions, such as indexes, can yield surprisingly profitable results. However, this should only be attempted after significant experience has been gained by the individual investor.

Important Market Indicators
Commodity bull and bear cycles usually occur over long periods of time. However, some key commodities can frequently provide clues as to what may lie ahead in terms of the direction of the market. The price of gold and silver is usually taken to be an indicator of the overall health of the commodities market. Additionally, oil prices have a heavy impact on how the commodities market is perceived.

If any of these main commodities suddenly experiences a price hike or price drop, investors and traders should take note that the market is probably going to experience a fairly significant change. Because these are tied into industry and general economic perceptions of fiscal reality, they are considered to be extremely important market indicators.



Additional Recommended Resources
Each year, innumerable books, blogs, and magazine articles are devoted to the intricacies of trading in the futures market. The internet has played a particularly vital role in the development of the commodities market, and continues to generate enormous amounts of constantly updated information on potential futures positions.

Individuals who wish to seek out additional information and resources about commodities trading are encouraged to explore the resources offered by the Commodity Futures Trading Commission, which regularly publishes texts detailing their studies of trends in energy stocks. Websites such as Bloomberg.com frequently have intelligent, highly informed web articles that can help investors seek out the information they need to make crucial decisions.

Several major exchanges maintain websites that provide up to the minute information on trades and other financial transactions. Keeping up on changing regulations in terms of how trades are managed is also vital to any investor or trader. These websites post their new rules as they change.

The best resources are frequently the people who have experienced the market first hand. By contacting brokerage firms either through the phone or via an online software platform, an interested individual can schedule an interview with a learned broker to truly understand how this incredibly complex and versatile system works. The key to any informational quest is to enjoy the experience of discovery and be unafraid to ask questions. Most people, when asked an intelligent and informed question, will be happy to give an interesting and fully rounded answer.

The 5 Invstment Myths

Equity trading may seem like an easy way to get rich quick but jumping on the bandwagon just because your neighbour made some serious cash can spell T-R-O-U-B-L-E.
Though it can potentially yield great returns you should only jump in armed with the right knowledge. Consider these before plunking your hard-earned cash onto some excitable shares just because your best friend’s cousin’s wife’s brother made some quick cash off of it.

1. If it worked once, it’ll work again.Lightning doesn’t strike in the same spot twice when it comes to investing in shares. There are too many factors, including current economic volatility, social upheaval and political instability that may have affected the performance of shares you made cash on previously.
If a developed country like the US can run afoul with mortgage issues as well as house some of the biggest investment frauds (Ponzi scheme anyone?) in its history, we should realise that we too are vulnerable to uncertain economic cycles that can derail our investments. Remember, history helps us form the groundwork for the future. It doesn’t repeat.

2. Accreditation means the stocks are good.
A company’s shares that earns a five-star rating is as good as a movie getting rave reviews from critics then later flops at the box office. A good rating does not mean the performance would endure and grow. “There is no evidence that superior performance persists. If you buy a top-performing fund, you have no better than a random chance that it will post above average performance,” said Marry Ellen McCarthy, registered investment adviser with Responsible Investing of Brookline (US).
It is acceptable to invest in an actively sought-after and praised company, but buying shares based on the money it made for other people last year may not yield similar results this year.

3. Gold and Bonds are safer bets compared to equities.
Gleeful appreciation of gold values has been the sales call of the jewelers to lure us into parting with our money in exchange for some gold. Similar to gold, bonds are also another “slow but steady” investment that have attracted many to invest in.
However, for some, these money makers are often seen as the “frumpier” parts of an investment portfolio.
There are high-yield bonds that are safe to take on, but they are also victim of contemporary socio-political repercussions like we often seen happen in the Middle East. As safe as they seem to be, they are not completely immune to external damaging factors.

4. You need a finance degree or specialist skills to invest in shares.
You don’t. The most common adage newbies get from investment gurus is, “do your homework before investing in anything”. As in most cases, experience and knowledge (not just luck) count in investment.
To fatten your knowledge bank, you need to constantly keep yourself updated with news that may affect the market.
Warren Buffett once said, “You don’t need to be a rocket scientist. Investing is not a game where the guy with 160 IQ beats the guy with 130 IQ.” And we agree with Buffett, you need to be informed but you don’t need to have specific qualifications for it.

5. Share investment requires a lot of cash.
You may have heard about folks who have pawned their valuables and immediately had access to a fistful of currency to invest in. But does investing in stocks really require enough bags of dough to be carried by ten mules?
Not necessarily, you can start your investment in shares with as low as USD 100.
In short, it may not be much, but it is enough to “test the water” to see if it’s really your cup of tea.
We call these myths busted. So go ahead and pull that investment trigger. You really just need to have enough knowledge and information to back you up, you’ll be equipped to make wise financial decisions that might make you (or at least save you) a lot of money.

When it comes to coffee-table wisdom, leave it on the table; as when you make the potential bank-account altering call, you are, indeed, alone.

5 Investment Basics We Should Remind Ourselves On

Investing can be as simple as making an omelet, or hard-boiled egg. What was soft, soggy and uncertain can be turned into something solid and nutritious (in this case, financially). But to get from gooey egg to delicious breakfast, investors should avoid certain pitfalls – at all cost!
Most investment experts would advise you to always exercise caution. Being skeptical is not only about being cautious but also about having good knowledge and experience before plunging into your next investment decision.

Just like what the foremost novelist, satirist and social critic Mark Twain once said, “October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.”
However, risks aside, smart investment is not synonymous to rocket science. Here’s how everyone can get a taste of investing by getting back to the basics.

1. Digest valid information first
Information is king. Before you put your money in, you need to know as much as possible about a potential stock including the daily input of its performance and how the company does in the market. On top of that, always be aware of how that particular industry is fairing.
Ultimately, the information you refer to should be a lot more credible than Madam Zorras’ vision after peering into a crystal ball. There are plenty of these “seers” under the guise of investment experts. Be careful and strive to stay ahead of them.

2. Don’t make sudden decisions with your smartphone
Your smartphones may be good for not just selfies, but also keeping you abreast of market happenings and helping you make prompt decision. However, this can come at a cost if the prompt decision is not made with full consideration.
Warren Buffet once said, “Only buy something that you’d be perfectly happy to hold if the market shut down for ten years.”
If the foundation is right when it comes to choosing the right investment, you will not be swayed by sudden market movements, and thus, you won’t panic every time you get news on your smartphone.

3. Your age and goals matter
Always go back to the drawing board when it comes to making an investment decision. The drawing board in this case would be your age and your financial goals.
It’s true that the younger you are, the more reckless you can be. However, it is only because you have the room to make mistakes. The age horizon plays a huge role in a person’s investment portfolio.
Though you may be investing for years, it is always wise to go back to the drawing board once in a while and review your investment portfolio to fit your age horizon and your shifting goals.

4. Put all your eggs in the basket you know everything about
Some would swear that differently coloured M&M chocolate candies taste different, when actually the only thing that differs is the appearance (unless you are colour blind like this author). It is a ridiculous assumption, but the same applies to your preference for your variety of investments.
Diversification is important, but it is not compulsory at all times. During financially turbulent times for the stocks you are holding, you can minimise the risk by spreading your investment to a few asset classes. However, if times are good, you can reduce your diversification (given you’re well informed about it) and as a result, increase your returns.
With mixed choices, you may have one portfolio hitting the dirt and even biting the dust, while another soar like a kite. This helps reduce your risk but at the same time minimises your gains.

5. Occasionally, kick back
It pays to be calm, calculative and well informed. This patience will pay off when it’s the right time to strike! Just like the fable about the rabbit and the tortoise, the slow and steady wins the race.
Being rash means you will likely slip up. With intrusions, challenges, and changes in the sociopolitical environment that you didn’t consider, you could turn your thousands of Ringgit into nothing more than a memory.
Learning from history and sticking to the investment basics may just save your investments. Many people have made big losses simply because they started over thinking their investment strategies and over complicating their decisions. Sometimes it pays to take a step back and just look at the basics.

Forget Gold, Invest In These Precious Metals

Over the last year or so, investors have left precious metals with abandon. Prices for safe-haven metals like gold have reflected a new atmosphere. The kind of hyper inflationary scenarios predicted by wave after wave of global easing programs simply hasn’t come true. Meanwhile, a strengthening global economy has been met with rising equity and bond prices at the expense of precious metals.

So why invest in precious metals? Here's why:

The white metals of silver, palladium and platinum are just as much about rising industrial production and global growth as they are about hedging against inflation or providing a safe-have investment. For investors, the white metals allow can capture much of the upside in the global economy as well provide some downside protection in case the fudge really hits the fan. Investors should act quickly, though. 

Rising Demand

Overall, industrial uses account for roughly 45% of silver demand. It's used in automotive, electronic, solar and photographic applications. Both platinum and palladium are found in auto and truck catalytic converters to control emissions, as well as a variety of tech products, such as LCD monitors, hard disk drives, batteries and electrodes.

And with such a diverse range of manufacturing uses outside of the world of jewelry and bullion, demand for white metals is surging as industrial production grows. 

According to investment bank Commerzbank, China’s imports of silver earmarked for industrial use have now totaled roughly 1,154 tons since the start of the year. That’s nearly 16% more than it imported during the same period last year and reflects its recent improvements to its PMI reading, a key gauge of industrial production. At the same time, higher PMI readings in the United States, the Eurozone and Japan have helped buoy silver prices. Japan’s solar explosion has especially contributed to its rising demand for silver.

The story is the same for platinum and palladium, which have seen global automobile manufacturing rise by roughly 5% this year. Also benefiting the duo is growing shale oil and gas exploration in the U.S. The metals are required by converters used in petrochemical facilities to process shale gas. The growth in ethane/ethylene production in the U.S. is a new market for the two metals, as are natural gas powered automobiles.

Simply put, global manufacturing growth will boost demand for the white metals and should provide solid returns to investors. As for the doomsayers, they'll always have a geopolitical event to persuade them to buy in, such as recent tensions in Iraq and Russia.

 Making a Play for the White Metals

A simple way to invest in silver, platinum and palladium is through an ETF, such as the Physical White Metals Basket Shares (WITE).

Just like the uber-popular iShares Gold Trust (IAU), WITE holds physical bullion in a vault on behalf of investors. The fund is currently weighted so that each share represents a 50% interest in silver, 34% interest in platinum and 16% in palladium. Overall, WITE makes a good broad play on the white metals theme, and at 0.60% in expenses, it’s relatively cheap. The only issue is that volume for the ETF is low; about 1,000 shares trade hands per day. That means investors may want to go the individual route to gain exposure to the industrial/precious metal trio.

In terms of silver, the only real game in town is the iShares Silver Trust (SLV). As with the IAU, it’s physically backed, features robust trading volume and has managed to tack on nearly 10% in gains since the end of May. As for platinum and palladium, the ETFS Physical Palladium Shares (PALL) and the ETFS Physical Platinum Shares (PPLT) are good vehicles.

Another interesting route for investors could be the miners. Rising prices for the white metals will only boost profits for the companies that extract them. The Global X Silver Miners ETF (SIL) tracks 26 different miners, including industry stalwarts like Hecla Mining Co. (HL) and Silver Wheaton Corp. (SLW). The First Trust ISE Global Platinum Index (PLTM), on the other hand, holds 19 global producers. Both funds have been hammered over the last few years, but should rebound as industrial demand grows.

The Bottom Line

As the global economy improves, precious metals prices have suffered as fewer investors see the need for a safe haven. That’s huge news for investors looking to get into the white metals group. The trio of silver, platinum and palladium are driven as much by their industrial demand than their safe-haven status. Continued rising manufacturing will only strengthen their appeal.

Best Ways To Trade Gold And Silver

The Reuters/Jefferies CRB Index, which tracks a diverse group of commodities, has been in an uptrend since the start of the year, lead largely by the strong performance in the energy sector. Gold and silver are now following suit, with a sharp rally higher starting in July. Here are four stock and ETF plays you can use to take part.

Relative to the January 2014 low at $114.46, the recent June low was much higher at $119.42 in the SPDR Gold Trust Shares ETF (GLD), indicating accumulation. The subsequent rally through resistance in the $126 to $127 region signals a broader upside move could be underway. There is little resistance until $131.50 to $132.50, the region of a downward sloping trendline, which extends back to the summer of 2013. If the price moves about that trendline the longer-term uptrend is likely commencing, which could put the price into the $154 area. Waiting for a pullback toward $124.50 is ideal, but may not occur due to the upside momentum. Stops can be placed below $123 for swing trades and below $119.40 for longer-term traders willing to give the trade more room based on the long-term potential. 

The Market Vectors Gold Miners ETF (GDX) has a tendency to lead gold prices. The bottom in GDX occurred in late May, a couple days before the GLD bottom in early June. GDX has been slightly outperforming GLD over most time frames in the last year, indicating the gold rally may have strength behind it. Since GDX is relatively strong compared to gold – especially over the last month – it may provide better profit potential. GDX is about two-to-three times more volatile than GLD.

GDX is already approaching its resistance area between $27 and $27.50; if it moves though the resistance area it is a good indication that GLD will do the same. Waiting for a pullback to $24 would be ideal, but may not occur. Stops can go below $23.60, or below $22 for those who want to provide more room for the long-term potential. The long-term target is $36 if the ETF can clear resistance. 

The iShares Silver Trust (SLV) has formed a strong base around $18, which has been tested multiple times. The June rally has broken through a downward sloping trendline (triangle pattern) extending back to the summer of 2013 – a long-term bullish signal. The breakout signals a target of $25.25. An entry near the trendline break at $19.50 provides a much better risk-reward than the current price, but strong upside momentum may not provide that opportunity. Stops can go below $19.25, or longer-term traders can place it below $18 if anticipating a long-term uptrend.  

Silver Wheaton Corp. (SLW) is an alternative way to trade silver. The stock has a 1.1% dividend yield, which compensates investors for holding the stock, whereas SLV has a 0.5% expense ratio. Silver Wheaton is outperforming SLV by about two-fold (percentage terms) over the last several months. It has a tendency to lead silver prices, and the relative strength indicates that the rally has some strong hands behind it. The price needs to close above $25.80 to break above its triangle pattern, giving a long-term target of $36.8. Below $22.40 is the nearest spot for a stop loss, or $20 for those willing to give the trade more room in anticipation of a long-term upside breakout. 

The Bottom Line

Commodities have been strong since the start of year, and gold and silver are finally following. The Market Vectors Gold Miners ETF has a tendency to lead gold prices slightly, and can therefore be traded on its own or used as a type of analysis tool for gold. Silver Wheaton has a similar tendency in relation to silver. All these securities are near inflection points, which will likely determine the next major trending move. Use stop losses to control risk in case the uptrend doesn't continue. 

Recent Flag Pattern Breakouts

A flag is a small continuation pattern and these four stocks recently broke out of one, or are close to it. Flags provide an entry, stop and target, making them a relatively straightforward pattern to trade. The pattern is created by a strong run higher, followed by a small sideways or downward slanting consolidation — the flag. When the price breaks above the flag, initiate a long position, with a stop below the consolidation/flag. The target is traditionally based on the height of recent run higher, added to the bottom of the flag. On-balance volume can also be added to the chart to gauge the strength of trends and legitimacy of breakouts. 

Hewlett-Packard Co. (HPQ) popped higher on strong buying on June 13, and since then has been edging lower in a small channel or flag. A break above the flag at $35 is likely to spark further buying into the top of a trend channel at $37. The rising trend channel has been in place since December. The potential trade shouldn't last more than a couple weeks and a stop can be placed below the low of the flag — currently $34.22. On-balance volume (OBV) is steadily rising, showing continued buying interest in the stock. 

Comerica Inc. (CMA) is also in a trend channel extending back to early 2013. The price has consolidated through most of June, but broke out on June 20. The breakout signals a likely move toward the top of the channel near $55. A stop can be placed just below the $49.59 consolidation low. On-balance volume is also increasing steadily as it pushes back toward the March highs, indicating that buyers remain keen.

PolyOne Corp. (POL) jumped 2.32% on June 20, and closed above a small consolidation which should mark the resumption of the uptrend. $43 is one target, based on a trend channel which began in May 2013. Based on the run higher in mid-May to early June, a more aggressive target is $45. Stops go below $40.08. A massive volume day in late May has resulted in a skewed OBV. Even so, since that time the indicator has been trending higher, signaling that the uptrend is healthy and likely to continue. 

Finally, Rexnord Corp. (RXN) is currently in a flag formation following a strong run higher in early June. Since March, though, the stock is in a downtrend, with resistance right near the flag breakout point. If the price breaks above the flag it will spark a short-term move higher but also potentially initiate the next wave higher of the long-term trend. Target for the flag breakout is $32, with a stop below $27.91. OBV broke above its own descending trendline recently, indicating the buyers have the upper hand and an upside breakout is more likely than a downside breakout. 

The Bottom Line

Flags are a small continuation pattern which provide and entry point, stop and target. On-balance volume can be used in conjunction with flags, and other chart patterns, to see the health of the trend. Stops should always be used, as the price won't always trend in the anticipated direction, even after a breakout. Manage position size so that a single loss won't significantly draw down account capital. 

Break Into Forex In 12 Steps

Getting Started

Learning to trade in the Forex market can seem like a daunting task when you're first starting out, but it is not impossible. Here we will cover the preliminary steps you need to take to find your footing in the FX market.

• The Eight Majors

In no specific order, the eight currencies every currency trader should know are the U.S. Dollar (USD) or "greenback", British Pound (GBP) or "cable", Japanese Yen (JPY), European Euro (EUR), Swiss Franc (CHF), Canadian Dollar (CAD) or "loonie", and the Australian/New Zealand Dollar (AUD/NZD). Currencies must be traded in pairs, and there are 18 different currency pairs that are conventionally quoted by forex market makers, including USD/CAD, EUR/USD, USD/CHF, AUD/USD, GBP/USD, NZD/USD, and USD/JPY.

• Yield Drives Return

In every fx transaction, you are simultaneously buying one currency and selling another. Since every currency in the world is attached with an interest rate set by the central bank of that currency's country, you are obligated to pay the interest on the currency that you have sold, but you also have the privilege of earning interest on the currency that you have bought. For example, assume that New Zealand has an interest rate of 8% (800 basis points) and that Japan has an interest rate of 0.5% (50 basis points). If you decide to go long NZD/JPY, you will earn 800 basis points in annualized interest, but have to pay 50 basis points for a net return of 7.5% or 750 basis points.

• Low Spreads Save Money

The difference between the price at which a currency can be purchased and the price at which it can be sold is called the spread. It is calculated in "pips", and this difference is how Forex brokers make their money, since they don't charge commission. In comparing brokers, you will find that the time spent shopping around is worth it, as the difference in spreads can by very large. 

• Look For A Reliable Institution

Forex brokers are usually tied to large banks or lending institutions because of the large amount of leverage they need to provide. Also, forex brokers should be registered with the Futures Commission Merchant (FCM) and regulated by the Commodity Futures Trading Commission (CFTC). You can find this and other financial information and statistics about a forex brokerage on its website or on the website of its parent company.

• Proper Tools = Success

Forex brokers offer many different trading platforms for their clients - just like brokers in other markets. These trading platforms often feature real-time charts, technical analysis tools, real-time news and data, and even support for trading systems. Before committing to any broker, be sure to request free trials to test different trading platforms. Brokers usually also provide technical and fundamental commentaries, economic calendars and other research.

• Keep Leverage Options Open

Leverage is necessary in forex because the price deviations (the sources of profit) are merely fractions of a cent. Leverage, expressed as a ratio between total capital available to actual capital, is the amount of money a broker will lend you for trading. For example, a ratio of 100:1 means your broker would lend you $100 for every $1 of actual capital. Many brokerages offer as much as 250:1. Remember, lower leverage means lower risk of a margin call, but also lower bang for your buck (and vice-versa).

• Avoid Shady Brokers

Sniping and hunting - or prematurely buying and selling near preset points - is used by shady brokers to increase profits. Of course, no broker will admit to committing these acts, and there is no blacklist or organization that reports such activity. Secondly, when you are trading with borrowed money, your broker can buy or sell at its discretion, even if you had enough cash to cover. If your position takes a dive before rebounding to all-time highs, some brokers will liquidate your position on a margin call at that low. The only way to determine which brokers do this and which brokers don't is to talk to fellow traders.

• Fundamental Analysis Vs. Technical Analysis

Every Trader is different, but the best trading style is probably a combination of both technical and fundamental analysis. Smart traders will always be aware of the broader fundamental picture while using their technicals to pinpoint good entry and exit levels. Fundamental indicators include the consumer price index (CPI), retail sales, and durable goods. In addition, meetings held by the Federal Open Market Committee can cause market volatility. Technical analysis is most popular among forex traders, common forms include the Elliot Waves, Fibonacci studies and pivot points. 

• Define A Forex Strategy

The FX market offers multiple avenues to trading success, but in order to take advantage of these opportunities, you must first understand your strengths and weaknesses. Are you more comfortable with short-term or long-term time frames? How will you use fundamental and technical analysis? 

• Practice Makes Perfect

Forex is a decentralized market in which dealers distribute their own price feeds through proprietary trading platforms. As such, it's important to learn the features of each type of trading software before committing real funds to an account. Open a demo account and paper trade until you can make a consistent profit. Many people jump into the forex market and quickly lose a lot of money (because of leverage). It is important to take your time and learn to trade properly before committing capital. The best way to learn is by doing. 

• Trade Without Emotion

Don't keep "mental" stop-loss points if you don't have the ability to execute them on time. Always set your stop-loss and take-profit points to execute automatically, and don't change them unless absolutely necessary. Make your decisions and stick to them.

• The Trend Is Your Friend

If you go against the trend, you had better have a good reason. Because the forex market tends to trend more than move sideways, you have a higher chance of success in trading with the trend.

How to make money from your trading talent

Social trading is a great tool for experienced traders. It provides them with a number of advantages that may not be available by just trading their own account.

Generate revenue

One of the most enticing aspects of social trading is further revenue generation.

If a trader can demonstrate good performance, then he or she will naturally start to get interest from those seeking to follow other traders and therefor increase their revenue stream by others copying their trades.

Scale with minimum capital

A competent trader may not have the capital they need to be able to make the money that they want. Social trading provides a means to scale their ability to trade, making money from both their own trading capital and that of the incentives for attracting followers. The more followers a lead trader has, the more they revenue they generate.

There are even social trading providers that allow traders to use a demo account to be a lead trader, meaning that someone may not even have to put down any capital themselves and can make money trading.

Build your brand and reputation

You can build your reputation and create your own personal brand through social trading. If you perform well, you will likely receive positive online coverage that will help build your credibility, which in turn can lead to more followers and increased revenue. The more you develop your online profile and build an online presence, the more revenue you can potentially make.

Engage with users

Engagement from the beginning is key to developing your brand and so blogging is another way to raise your profile. It can also provide you with an opportunity to discuss the ins and outs of different strategies.

At GCM you can complete your profile, write blog posts and participate in our community.

Educating potential followers

Answering questions and educating potential followers in the GCM forum can also be a good way of promoting your trading style and ability to trade.

In many cases, followers will not have the same depth of the knowledge or understanding of a particular strategy. Therefore, this approach could help boost followers while also helping others to develop their knowledge.

Stocks Pulling Back to a Buy-Zone

There's an adage which claims old resistance becomes new support. That's only partially true. For the price to likely (but not always) find support at an old resistance level, the resistance level should have been tested at least twice (preferably three or more times) and the breakout above that resistance should be aggressive and fairly extensive. "Fairly extensive" is subjective, but means the price should move far enough above the old resistance zone to rule out a false breakout. When the price tests a resistance zone two (preferably more) times, and then has a strong break above that area, when the price pulls back to that area it is more likely to act as support. Such is the case with these four stocks. 

Throughout March, April and early May, American Airlines (NYSE:AAL) met a resistance zone between $38 and $40; it tested the area about six times before eventually breaking above it in June. Since the resistance area was about $2 in height, the breakout above the resistance should also be at least $2 to rule out the possibility the price rise was just a false breakout. On June 9, the price reached $44.43, $4.43 above the former resistance area, indicating the breakout is legitimate. A pullback to, or into, the former resistance area ($40 to $38) presents a buying opportunity. Target is $45.50 with a stop below $37.50.

Capital One Financial (NYSE:COF) tested a resistance area between $78.49 and $77.91 three times since the start of 2014. A breakout in June saw the price rally to $82.32, successfully clearing the resistance and indicating the the move higher isn't a false breakout. How far the price will pull back is unknown, but the buy-zone is between $79.50 and $78, with a stop below $77.50. The upside target is $85 to $86.50.

Atmel (Nasdaq:ATML) peaked three times in early 2014 between $8.91 and $8.76 before breaking higher in June. The breakout was aggressive and substantial enough to indicate it wasn't a false breakout. Buying on a pullback to the former resistance area, or slightly above it, is one option. Given the price has had a near vertical run since the may low at $7.47, a deeper pullback is possible. While it may not occur, waiting for a pullback to the $8.50 to $8.25 provides a better risk reward. Place a stop loss below $8. The target is between $9.25 and $9.50 since the stock has a tendency to breakout then range again; getting out near the top of what is likely to be another range ($9.50 area) is the prudent play.

Anadarko Petroleum (NYSE:APC) is moving aggressively higher after testing the $103.92 to $104.84 resistance zone three times in April and May. In June, the stock broke aggressively higher, and it could be some time before a sizable pullback occurs. Based on the old resistance zone, a pullback between $105 to $104 presents a buying opportunity. Stop loss is placed below $102, or $100 to provide a bit more room on longer-term trades. Following the pullback the target is above $110.

The Bottom Line

For old resistance to become new support, the resistance area should be tested multiple times before a breakout occurs. The breakout should be large enough to rule out a false breakout. When the price pulls back to, or into, the former resistance area, it presents a buying opportunity. This pullback is caused by traders selling their position to lock in a small profit from the prior breakout. Once that selling ceases, the uptrend is likely to continue. The same process can be applied to different time frames to suite your trading style and time frame. Nothing works all the time, but by making sure the resistance area and breakout correspond to the aforementioned guidelines, old resistance is more likely to become new support. 

Invest In Brazil With These ETFs

The 2014 World Cup of soccer has turned more than the eyes of soccer fans toward Brazil. Based recent price swings, traders and investors are also finding themselves intrigued by the dynamic nation. Brazil is the largest economy in South America with GDP of nearly $2.4 trillion (estimated as of 2012). As the media has clearly shown over the past week, no nation is free from problems. Brazil is still balancing economic growth with social issues, such as urban and rural poverty, crime, violence and drugs. Despite its internal struggles, the global nature of the financial markets makes Brazil one of the most intriguing nations for investment. In this article, we’ll take a look at many ETFs that retail traders can use to gain exposure to various segments of Brazil. 

The Brazilian Stock Market - BM&F Bovespa

The BM&F Bovespa, located in São Paulo, has a market capitalization of more than $1.22 trillion making it the 13th-largest stock exchange in the world. As you can see from the chart below, the Bovespa index reached its highest level in more than seven months on increasing speculation that President Dilma Rousseff is losing ground in polls for the country’s upcoming election. The recent bullish crossover between the 50-day and 200-day moving average suggests that the long-term trend in Brazilian assets is turning upward. Notice how the 200-day moving average has been acting as a strong level of resistance since late March. Investors and traders will likely continue to hold a bullish outlook on Brazil until this main index closes below 51,226.

Looking at the Large Caps

The strength of any nation’s economy can be found by analyzing the shares of its large-cap companies. Such companies offer tremendous diversification and scale, and are usually a great starting point for any investor or trader looking to invest in a relatively unknown area of the world. The most popular ETF for buying into Brazilian large caps is the iShares MSCI Brazil Capped ETF (EWZ). This fund as total net assets of nearly $5 billion and holds positions in 76 of the nation’s largest companies. The fee-conscious traders out there will be happy to learn that this fund carries a respectable expense ratio of 0.61%. 

For The Risk Takers: Small and Mid-Cap Stocks

Traders looking who are looking to take on more risk, there are several interesting ETFs that cover Brazilian small and mid-cap stocks - the Global X Brazil Mid Cap ETF (BRAZ), iShares MSCI Brazil Small-Cap ETF (EWZS) and the Market Vectors Brazil Small-Cap ETF (BRF). The riskier nature of small-cap stocks means that these ETFs are much more thinly traded than their large-cap counterparts so these funds should only be traded by those with experience.

From a technical perspective, the recent crossover between the 50 and 200-day moving averages suggest that the long-term trend is now been confirmed to be in the upward direction. Increased money flow into Brazil will likely significantly benefit this group of stocks. The nearby averages provide and interesting risk/reward scenario and it wouldn’t be surprising to see traders set their stop-losses directly below $29.72 (red line).

Brazil Sector ETFs

If a trader wanted to only increase their exposure to a certain sector of Brazil rather than the entire market it's possible to do so with various ETFs. A few ETFs that fit the bill are the EGShares Brazil Infrastructure ETF (BRXX), Global X Brazil Financials ETF (BRAF) and the Global X Brazil Consumer ETF (BRAQ). These ETFs are still developing and don’t quite have the following as the broader market ETFs mentioned above so proceed with caution. It's not uncommon for some of these funds to only trade a few thousand shares per day, which means it can often be difficult to enter or exit a position without proper planning. There is no dispute that these ETFs are not for everyone, but they could be a wise choice for the strategic trader. 

The Bottom Line

The World Cup has sparked renewed interest about Brazil among traders. As stated above, there are many different ETFs available for retail traders looking to buy into this dynamic country. While the ETFs mentioned in this article are a good starting point, you’ll find with a little research there are other interesting picks that should not be ignored. 

Will The High Times In High Yield Continue?

With interest rates still in the basement and Treasury bonds yielding next to nothing, investors have been forced to look outside the box in order to find income. For those wanting to stay within bonds, that means loading up on junk bonds and funds like the SPDR Barclays High Yield Bond ETF (JNK).

High-yield bonds have been on an absolute tear since the Great Recession and continue to rack up impressive gains. So much so that the average junk bond is now only yielding 5%. That has plenty of investors wondering whether the risk is worth the return.

The answer may come down to how you think about high-yield bonds in your portfolio. The truth is that junk could still be where it’s at for quite a while. (For related reading, see: Is The Party Over For Junk Bonds?)

Risk and Potential Reward

According to investment researcher and ratings service Morningstar Inc. (MORN), investors have already moved a cool $5.4 billion into high-yield bond funds in the first four months of 2014. That’s on top of the $3.4 billion they invested in the sector during all of 2013. All of this yield-searching has allowed the sector to return nearly 8% last year and around 5.16% year-to-date.

It’s also caused yields on the bonds issued to companies with lower creditworthiness to plummet to just 5% – well below historical norms. That has many investors worrying that the sector is now reaching overvalued territory.

While there is some validity to the argument, there still are plenty of bullish tailwinds propelling the high-yield bond sector, one of which is stable or falling default rates. (For related reading, see: Junk Bonds No Longer Junk)

Economic growth is helping companies meet their financial obligations, meaning that default rates for junk bonds are still below their historic averages. A recent report from Moody’s Investor's Service shows that junk bond default rates in the U.S. held steady at just 2.1% in May. The figure for the rest of the globe fell to 2.3% in May, down from 2.5% in April. That average default rate is still well below the 4.5% reached in the 1990s.

What About Rising Rates?

The specter of rising interest rates may not be all that detrimental to junk bonds. Due to their nature, junk has actually done quite well in the face of raising rates. According to TIAA-CREF, during prior periods of relatively moderate and steady interest rate increases, junk actually produced positive returns. Looking at the period between 1998 and 2013, of the 14 times that Treasury yields spiked, high-yield bonds produced a return of 4.99%. Regular corporate bonds returned -0.48% and Treasuries -5.53%. (For related reading, see: Junk Bonds: Everything You Need To Know)

Betting on Junk

So there’s still room for good news for junk bond investors, albeit with a grain of salt. The lesson here is to be cautiously optimistic. That means investors may want to trade out broad junk bond index funds, such as the popular iShares iBoxx $ High Yield Corporate Bond ETF (HYG) or the aforementioned JNK, for some active management. Active managers can shift through the sector and pick out the best bonds for the new environment. A prime starting point could be the AdvisorShares Peritus High Yield ETF (HYLD).

HYLD’s managers take a “value-based, active credit” approach to the sector. The fund tracks 74 different companies, with Arch Coal Inc. (ACI) and Air Canada bonds as some of its top holdings. That focus on credit and deeply valued bonds helps HYLD produce a monster 7.71% distribution yield. The only drawback is the ETF's high 1.25% expense ratio. Another option could be the PowerShares Fundamental High Yield Corp Bond (PHB), which uses screens to create an index of junk bonds on the better end of the spectrum. (For more on this topic, see: 4 High Yielding Junk Bond ETFs)

For options at the upper end of the risk spectrum there's the iShares Baa - Ba Rated Corporate Bond ETF (QLTB) and the Market Vectors Fallen Angel High Yield Bond ETF (ANGL), which buys bonds of companies that were once considered investment grade that have now slipped down to junk status. QLTB yields 4%, while ANGL yield's a hefty 5.5%.

Finally, investors have flooded the senior and floating-rate bank loan market looking for yield. Similar to junk bonds, these loans are often made to firms with less-than-stellar credit. Like the previously mentioned HYLD, the SPDR Blackstone/GSO Senior Loan ETF (SRLN) applies active management to this sector of the high-yield marketplace. SRLN's managers can then weight the risks/rewards accordingly.

The Bottom Line

Despite recent gains, junk bonds still could be a good bet for investors based on a variety of factors working in their favor, such as stable or falling default rates and improving economic conditions. The key could be focusing on quality within the space. Accordingly, a dose of active management could be just what the doctor ordered.

Why Real Estate Crowdfunding Will Be Loved by You, The Lazy Investor

A new investment that is growing in popularity is called real estate crowdfunding. This type of crowdfunding is the same as investor crowdfunding, in which you and a group of other investors pool your money together to help fund an endeavor, except this type of investment is in the form of real estate. Real estate crowdfunding is perfect for anyone who is interested in investing in property, but who does not want the stress associated with the upkeep and energy required to maintain real estate.

The money is crowdfunded until the goal is reached. If the project is not fully funded, your investment is returned to you in full. Just like any other investment in real estate, a drawback is that the investment may flop, yielding you no return, or even a loss of money.

Where can someone begin an investment in real estate crowdfunding?

The premier platform to place a real estate crowdfunding investment is through Realty Mogul. Realty Mogul was created by Jilliene Helman in Sept. of 2012. She was 27 at the time and saw limited initial success with the company; it was not until the "Jumpstart Our Business Startups Act" was passed (which helped reduce the restrictions on an investor’s ability to invest in companies via real estate crowdfunding) that the company was able to generate a great deal of success.

Today, investors claim to make anywhere from 8 to 15 percent return on investments annually, as reported by Fox Business.

A setback you may encounter when attempting to invest through Realty Mogul is that you need to be an accredited investor, which requires a net worth of $1 million and an annual income of $200,000. Luckily, there are other platforms such as Fundrise, and iFunding designed for the everyday person to make an investment in real estate.

Real estate crowdfunding vs. CDs

How much can a person make from real estate crowdfunding as opposed to a CD investment?

The return on investments made through real estate crowdfunding as opposed to even the highest yielding CD investments is significantly different. Let’s use current GE Capital CD rates to compare how much can be made between these two types of investments. For this example, we will use the lowest expected return on investment for crowdfunding in real estate, 8 percent.

The difference between these two types of investments is $56,474 in the favor of real estate crowdfunding. While no type of investment is ever secure and there is a chance you won’t get a return on your initial investment, you may want to consider looking into this form of crowdfunding as you plan your portfolio for the future.

Do your research and consider investing through reputable crowdfunding platforms such as Funrise or iFunding.

Additionally, review any investment plan to ensure your money is going into a promising endeavor. This means getting familiar with the local economy of the investment location, as well as the qualifications and reputation of the management team behind the project. Doing your homework ahead of time can help you place your investment into the right hands.

A Guide To Trading Binary Options In The U.S.

Binary options are based on a simple 'yes' or 'no' proposition: Will an underlying asset be above a certain price at a certain time? Traders place trades based on whether they believe the answer is yes or no, making it one of the simplest financial assets to trade. This simplicity has resulted in broad appeal amongst traders and newcomers to the financial markets. As simple as it may seem, traders should fully understand how binary options work, what markets and time frames they can trade with binary options, advantages and disadvantages of these products, and which companies are legally authorized to provide binary options to U.S. residents.

Binary options traded outside the U.S. are typically structured differently than binaries available on U.S. exchanges. When considering speculating or hedging, binary options are an alternative, but only if the trader fully understands the two potential outcomes of these "exotic options." 

U.S. Binary Options Explained

Binary options provide a way to trade markets with capped risk and capped profit potential, based on a 'yes' or 'no' proposition.

For example: Will the price of gold be above $1,250 at 1:30 p.m. today? 

If you believe it will be, you buy the binary option. If think gold will be below $1,250 at 1:30 p.m., then you sell this binary option. 

The price of a binary option is always between $0 and $100, and just like other financial markets, there is a bid and ask price.

The above binary may be trading at $42.50 (bid) and $44.50 (offer) at 1 p.m. If you buy the binary option right then you will pay $44.50, if you decide to sell right then you'll sell at $42.50.

Let's assume you decide to buy at $44.50. If at 1:30 p.m. the the price of gold is above $1,250, your option expires and it becomes worth $100. You make a profit of $100 - $44.50 = $55.50 (less fees). This is called being "in the money."

But if the price of gold is below $1,250 at 1:30 p.m., the option expires at $0. Therefore you lose the $44.50 invested. This called "out of the money."

The bid and offer fluctuate until the option expires. You can close your position at any time before expiry to lock in a profit or a reduce a loss (compared to letting it expire out of the money).

A Zero-sum Game

Eventually every option settles at $100 or $0; $100 if the binary option proposition is true, and $0 if it turns out to be false. Thus each binary option has a total value potential of $100, and it is a zero-sum game – what you make someone else loses, and what you lose someone else makes.

Each trader must put up the capital for their side of the trade. In the examples above, you purchased an option at $44.50, and someone sold you that option. Your maximum risk is $44.50 if the option settles at $0, therefore the trade costs you $44.50. The person who sold to you has a maximum risk of $55.50 if the option settles at $100 ($100 - $44.50 = $55.50).

A trader may purchase multiple contracts, if desired.

Another example: NASDAQ US Tech 100 index > $3,784 (11 a.m.). 

The current bid and offer is $74.00 and $80.00, respectively. If you think the index will be above $3,784 at 11 a.m., you buy the binary option at $80 (or place a bid at a lower price and hope someone sells to you at that price). If you the think the index will be below $3,784 at that time, you sell at $74.00 (or place an offer above that price and hope someone buys it from you). 

You decide to sell at $74.00, believing the index is going to fall below $3,784 (called the "strike price") by 11 a.m. And if you really like the trade, you can sell (or buy) multiple contracts.

How the Bid and Ask are Determined

The bid and ask are determined by traders themselves as they assess the probability of the proposition being true or not. In simple terms, if the bid and ask on a binary option are at 85 and 89, respectively, then traders are assuming a very high probability that the outcome of the binary option will be 'yes,' and option will expire worth $100. If the bid and ask are near 50, traders are unsure if the binary will expire at $0 or $100 – it's even odds.

If the bid and ask are at 10 and 15, respectively, that indicates traders think there is a high likelihood the option outcome will be 'no,' and expire worth $0. The buyers in this area are willing take the small risk for a big gain. While those selling are willing to take a small – but very likely – profit for a large risk (relative to their gain). 

Where to Trade Binary Options

Binary options trade on the exchange, the first legal U.S. exchange focused on binary options. It provides its own browser-based binary options trading platform which traders can access via demo account or live account. The trading platform provides real-time charts along with direct market access to current binary option prices. 

Fees

Each contract traded costs $0.90 to enter and $0.90 to exit. The fee is capped at $9, so purchasing 15 lots will still only cost $9 to enter and $9 to exit. 

If you hold your trade until settlement and finish in the money, the fee to exit is assessed to you at expiry.

If you hold the trade until settlement, but finish out of the money, no trade fee to exit is assessed.

Pick Your Binary Market

Trades can be placed on forex pairs: EUR/USD, GBP/USD, USD/JPY, EUR/JPY, AUD/USD, USD/CAD, GBP/JPY, USD/CHF, EUR/GBP, as well as AUD/JPY.

It also offers commodity binary options related to the price of crude oil, natural gas, gold, silver, copper, corn and soybeans.

Trading news events is also possible with event binary options. Buy or sell options based on whether the Federal Reserve will increase or decrease rates, or whether jobless claims and nonfarm payrolls will come in above or below consensus estimates. 

Pick Your Time Frame

A trader may choose from binary options that expire hourly, daily or weekly.

Hourly options provide opportunity for day traders, even in quiet market conditions, to attain an established return if they are correct in choosing the direction of the market over that time frame. 

Daily options expire at the end of the trading day, and are useful for day traders or those looking to hedge other stock, forex or commodity holdings against that day's movements.

Weekly options expire at the end of trading week, and are therefore traded by swing traders throughout the week, and also by day traders as the options' expiry approaches on Friday afternoon. 

Event-based contracts expire after the official news release associated with the event, and therefore all types of traders take positions well in advance of -- and right up to – the expiry. 

Advantages and Disadvantages

Unlike the actual stock or forex markets where price gaps or slippage can occur, the risk on binary options is capped. It's not possible to lose more than the cost of the trade. 

Better-than-average returns are also possible in very quiet markets. If a stock index or forex pair is barely moving, it's hard to profit, but with a binary option the payout is known. If you buy a binary option at $20, it will either settle at $100 or $0, making you $80 on your $20 investment or losing you $20. This is a 4:1 reward to risk ratio, an opportunity which is unlikely to be found in the actual market underlying the binary option. 

The flip side of this is that your gain is always capped. No matter how much the stock or forex pair moves in your favor, the most a binary option option can be worth is $100. Purchasing multiple options contracts is one way to potentially profit more from an expected price move. 

Since binary options are worth a maximum of $100, that makes them accessible to traders even with limited trading capital, as traditional stock day trading limits do not apply. Trading can begin with a $100 deposit at Nadex. 

Binary options are a derivative based on an underlying asset, which you do not own. Therefore, you're not entitled to voting rights or dividends that you'd be entitled to if you owned an actual stock. 

The Bottom Line

Binary options are based on a 'yes' or 'no' proposition. Your profit and loss potential are determined by your buy or sell price, and whether the option expires worth $100 or $0. Risk and reward are both capped, and you can exit an options at any time before expiry to lock in a profit or reduce a loss. Foreign companies soliciting U.S. residents to trade their form of binary options are usually operating illegally. Binary options trading has a low barrier to entry, but just because something is simple doesn't mean it'll be easy to make money with. There is always someone else on the other side of the trade who thinks they're correct and you're wrong. Only trade with capital you can afford to lose, and trade a demo account to become completely comfortable with how binary options work before trading with real capital.