Current Events

Labor Market Challenges: Beyond the Surface

Written by

The ADP National Employment Report announced Wednesday that private employers hired 158,000 new workers in March — the smallest gain in five months and far below the 200,000 forecast by economists.

Most of these new jobs are low-paying retail, food services and health care related. The Bureau of Labor Statistics (BLS) reported in February that retailers hired 252,000 new workers over the last year and that retail recovered 723,000 jobs since reaching a low in December 2009. In comparison, the construction industry has added 349,000 new jobs since reaching its employment low in January 2011.

The U.S. economy overall increased payroll by 355,000 since January 2013 and more than 1.8 million in 2012. This Friday The Bureau of Labor Statistics will present its latest snapshot of our domestic labor market. Economists once again expect an average gain of 200,000 jobs for March.

Despite thirty consecutive months of job growth since the dark days in 2009, but the national unemployment rate remains high at 7.7%.

According to Robin Harding, U.S. economics editor at the Financial Times, the U.S. has shed nearly two million clerical jobs since 2007 while creating just 387,000 managerial positions. People are finding that they are not able to find the kind of job in this economy they’d like to find.”

Harding says the shift to low-wage jobs from “good, middle-class” jobs such as construction workers, bookkeepers, typists, bank tellers and data entry employees, has led to growing income inequality. “Companies are finding ways to automate these office processes,” Harding says, and this leads “to a lot fewer of the steady office jobs that the middle class has been relying on since the Second World War.” He found that the average wage for a clerical job in 2012 was $34,410. But the positions that are being created in this economy – like a personal care aid – paid on average of $24,550.

Perhaps more worrisome is that despite relatively strong growth in February, the economy is adding jobs more slowly to start 2013 than it did early in 2012, when payrolls grew by an average of 262,000 jobs over the first three months of the year.

Glossary, H - M

Inflation-Indexed Securities

Written by

Definition

A security with a guarantee of a return rate that is higher than the rate of inflation if it is held to maturity. Inflation-indexed securities link their capital appreciation, or coupon, to inflation rates. Investors who are seeking safe returns with little risk often hold inflation-indexed securities.

An inflation-indexed security guarantees a real return. Real return securities are usually bonds or notes, but may also come in other forms. Since these types of securities offer investors a very high level of safety, the coupons attached to such securities are typically lower than notes with a higher level of risk.

A - G, Glossary

Commission

Written by

Definition

The fee charged by a broker or investment adviser in exchange for investment advice and/or handling the purchase or sale of a security. Commission(s) can vary from brokerage to brokerage.

Details on Commission

There are two basic types of broker. Discount brokerages offer little or no advice. These type of brokerage companies can be problematic for rookie investors but save a lot of money for those who have a basic understanding of the market. On the other hand, full-service brokerages offer more services, but commissions are much higher.

There is potential for a conflict of interest between brokerages and their clients when a commission is charged. For agents that make most of their money from commissions, they do not get paid if their clients do not do regular trades. Unethical brokers have been accused of encouraging clients to conduct more trades than necessary.

A - G, Glossary

Brokerage Account

Written by
A - G, Glossary

Fibonacci Ratios

Written by

Think back a few years to high school and you will likely remember lessons dealing with the Golden Ratio and Fibonacci ratios.

For those needing a little refresher, Fibonacci numbers are a sequence of numbers where each is the sum of the two preceding numbers (1,1,2,3,5,8,13,21,34 and so forth). This sequence of numbers forms various ratios including the infamous “Golden Ratio” which is .618. Other common Fibonacci ratios include .382, .500, .618, .786 etc.

Advocates of Fibonacci ratios point to the tendency of markets to mimic natural science so likewise, expect the ratios to hold true for investing as well. These ratios form the basis for critical points in the market and allow investors to forecast buying or selling opportunities once they identify the ratio sequence. Traders use Fibonacci ratios to predict the next high or low for a market or stock. The Fibonacci ratio in finance and the stock market is fully explained in this video by INO.TV.

Interested in learning more about Fibonacci ratios or want to test the theory without risk? Sign up for a virtual portfolio with HowTheMarketWorks.com and see for yourself it it really works or not

A - G, Glossary

Earnings Report

Written by

Earnings report stock trends, profit and more but making sense of an earnings report can seem daunting especially in light of the catastrophic endings of Lehman Brothers, Enron and Worldcom. What is the best method of making sense from earnings reports? First and foremost, read between the lines and don’t be afraid of playing the role of cynic.

  • Don’t rely on corporate sponsored press release statements. They tend to play up the positive and down play the negatives. A press release isn’t required to comply with SEC (Securities and Exchange Commission regulations so don’t put much weight on it. Instead, take time to actually read the earnings report. It will include cash flow, income statement and balance sheet. That’s a lot of good information for those who take the time to read it.
  • Dare to compare. Don’t just look at quarterly growth but compare to year-over-year growth and even five-year growth. Look for increased growth and be sure to take inflation into account before getting overly excited.
  • Track sales-to-receivable ratios. Abnormal ratios in this area are a common red-flag that could signify trouble ahead.
A - G, Glossary

Earning Estimates

Written by

Past performance is not an indication of future performance. How many times have you heard that? Of course, earnings estimates provide one strong measure of potential future performance and are a mainstay of stock investing research.

Earnings estimates are exactly what they sound like: an estimate of forecasted earnings. Notice the built in ambiguity? It’s there for a good reason. Revised estimates are a given contingent upon market conditions, the overall economy and other unforeseen forces impacting the profitability of the company.

You might wonder how analysts get away with forecasting earning estimates only to revise them, repeatedly, at the first sign of trouble. All too often, the average investor has already acted on the first estimate and is left holding a rapidly declining security – sans fees. Is there a solution? Yes, search for companies with upwardly revised earnings estimates and steadily rising analyst ratings.

Use our stock screener to search for companies that have consistently beat estimated earnings.

Technical Analysis

Fundamental Research Links

Written by

As an HTMW Investor, it is very important to have a bird’s eye view of the market. Whether you are gathering information for a purchase/sell transaction or just to learn more about a security, you will be required to collect information from various external sources. Below is a couple of links that we have compiled for our users with an explanation of their usefulness. If you have any suggestions to our list, please do not hesitate to send us a message!

Bloomberg:

  • bloomberg.com
  • Bloomberg is a one of the most notable financial news company in the business. If you are considering pursuing a career in finance, you will most probably be initiated with the Bloomberg Terminal, which is computer software that professionals use to analyze financial data. Bloomberg often incorporate data from the Terminal in their news and often publish articles for the average investor. As an example, here is an article on 7 habits of highly effective investors: https://www.bloomberg.com/features/2016-personal-finance-basics/.

StockTwits:

  • stocktwits.com
  • StockTwits is a social media platform for Investors, dedicated to discussions on stocks. You can share your thoughts on a stock and see other investor’s comments on a security. They also measure the sentiment towards a stock, which can be useful when evaluating how the market feels on a specific security.

Yahoo! Finance:

  • finance.yahoo.com
  • Yahoo! Finance is a free financial resource that can be used to view stock quotes, historical prices, earnings, recommendation trends, etc. This website can be very useful if you are looking to collect data or to simply lookup a security’s quote.

Earnings Whispers:

  • earningswhispers.com
  • Earnings Whispers is a website that presents the earnings calendar. Earnings can have a significant impact on price fluctuations, which is why we believe it is very important to be aware of upcoming earnings announcements and the expected values.

ETF.com

  • etf.com
  • Throughout your journey as an Investor, you will most often hear or read that diversification is key. We can’t talk about diversification without mentioning ETFs, which are ready-made diversified securities that can be traded like stocks. ETF.com is a website that helps users find the ETF that suits their needs.

As mentioned earlier, these are merely a couple of suggestions that we have for our HTMW investors. Should you have any suggestions that should be here, please do not hesitate to let us know!

Glossary, N - T

Return on Equity

Written by

What are they doing with your money? Have you ever wondered how well your money is really being managed by the corporations you hand it over to? After all, the media is full of stories about CEO compensation reaching new heights, buy-outs of non-profitable holdings, million dollar birthday parties and other horror stories.

Return on Equity (ROE) is used to measure how much profit a company is able to generate from the money invested by shareholders. Think of this way; if your teenager asked to borrow $1,000 to start-up a small side business then chances are you would comply. When they came back to ask for $10,000 you would examine how well they performed with the initial $1,000 before making the next loan.

It makes such good sense that you might wonder why more people don’t use this handy little measure before pouring massive sums into a money pit masking as a company. Join the ranks of those in the know. ROE is easy to compute and provides valuable insight into the workings of the company. Think twice before investing in a company with a negative ROE. Instead, search out self-sustaining companies with a healthy ROE that indicates the willingness and ability to use invested dollars for future growth rather than operating expenses. A good ROE is 15% or better so keep your eyes and ears open for opportunity.

Glossary, N - T

Price to Earnings Growth (PEG)

Written by

What is the PEG, or Projected Earnings Growth? In the article on Price to Earnings Ratio or P/E, I mentioned that this number gave you an idea of what value was placed on a company’s earnings. The P/E is the most usual way to compare the relative value of stocks based on earnings since you calculate it by taking the current price of the stock and divide it by the Earnings Per Share (EPS).

This helps identify if a stock’s price is high or low relative to its earnings. Some will say a company with a high P/E is overpriced and they may be correct. A high P/E may warn you that traders have raised a stock’s price past the point where any acceptable near term growth is feasible. But, a high P/E may also signal that the company still has strong growth prospects in the future, which could predict an even higher PPS (price per share).

Because the market cares more about the future than the present, it is always looking for some way to predict it. Another indicator you can use to help you look at future earnings growth is called the PEG ratio. Price/Earnings To Growth, is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share (EPS), and the company’s expected future growth. PEG is a widely employed indicator of a stock’s possible true value.

You calculate the PEG by taking the P/E and dividing it by the projected growth in earnings. PEG = P/E / (projected growth in earnings). For example, a stock with a P/E of 60 and projected earning growth next year of 30% would have a PEG of 2 (60 / 30 = 2). What does the “2” mean? Like all ratios, it simply shows you a relationship. In this case, the lower the number the less you pay for each unit of future earnings growth. So even a stock with a high P/E, but high projected earning growth may be a good value. In other words, a lower ratio is “better” (cheaper) and a higher ratio is worse” (expensive). The PEG ratio of one represents a fair trade-off between the values of cost and the values of growth, then the stock is reasonably valued given the expected growth.

Similar to PE ratios, a lower PEG means that the stock is undervalued more. It is favored by many over the price/earnings ratio because it also accounts for growth. If a company is growing at 30% a year, then the stock’s P/E could be as high as approximately 30. PEG ratios between 1 and 2 are therefore considered to be in the range of normal values. A crude analysis suggests that companies with PEG values between 0 to 1 may provide higher returns. Looking at the opposite situation; a low P/E stock with low or no projected earnings growth, you see that what looks like a value may not work out that way. For example,a stock with a P/E of 8 and flat earnings growth equals a PEG of 8. This could prove to be an expensive investment.

A few important things to remember about PEG:  (a) Investors may prefer the PEG ratio because it explicitly puts a value on the expected growth in earnings of a company. The PEG ratio can offer a suggestion of whether a company’s high P/E ratio reflects an excessively high stock price or is a reflection of promising growth prospects for the company. (b) The PEG ratio is less appropriate for measuring companies without high growth. Large, well-established companies, for instance, may offer dependable dividend income, but little opportunity for growth. (c) A company’s growth rate is an estimate. It is subject to the limitations of projecting future events. Future growth of a company can change due to any number of factors: market conditions, expansion setbacks, and hype of investors. (d) The convention that (PEG=1) is appropriate is somewhat arbitrary and considered a rule of thumb metric.

Glossary

When to Sell Stocks: Key Strategies for Investors

Written by

 

The “when to sell stocks” question must be one of the hardest question to answer. One way to answer is that it depends on the Investor and his risk aversion. As an Investor, you will often encounter a situation where you have sold too early or you held a stock way longer than you should. If we follow the “hope for the best, prepare for the worst” quote, the best way to answer this question would be to create a worst-case scenario for each security that you hold and create stop orders or trailing-stop orders. By doing this, you can construct a trading mechanism where the system will automatically sell your securities that that are at a loss. You will then incur a loss that resides within your risk aversion and have stocks that are in the green.

Here is a table that you can use as a template to create precise stop orders.

Ticker Symbol Allocation Fund Allocation Current Price Approx. quantity

I should order

 Willingness to Lose Stop Price Loss Per Share
ABC 5% $50,000 $50.12 997 –          $5,000 45.15 -4.97
DEF 25% $250,000 $241.22 1036 –          $5,000 236.49 -4.73
GHI 25% $250,000 $61.13 4089 –          $5,000 59.91 -1.22
JKL 7% $66,666.67 $150.24 443.73 –          $5,000 138.97 -11.27
MNO 7% $66,666.67 $120.25 554 –          $5,000 111.31 -8.94
PQR 7% $66,666.67 $19.54 3411 –          $5,000 18.07 -1.47
STU 7% $66,666.67 $963.05 69 –          $5,000 893.72 -69.33
VWX 7% $66,666.67 $111.99 595 –          $5,000 103.64 -8.35
Total 90% 883,333.35 –          $40,000

 

Alternatively, you can always use trailing stop orders (%), where the order will automatically be sent to the market when the price goes lower than the percentage you have specified in your order. Here is a video that will provide more details on what is a trailing stop order:

 

Glossary, N - T

Stock Volatility

Written by

Definition

Stock Volatility is the measurement of how much a stock moves up and down in a given amount of time. The more volatile the stock, the more “movement” you will see in its stock chart.

Example

Consider the following 3 stocks:

volatility

All 3 of these stocks had the same growth rate between period 1 and period 12, but they had very different volatility.

Stock 1 was the least volatile, growing at a constant rate throughout the entire time.

Stock 2 was in the middle, it moved up and down but was fairly consistent.

Stock 3 was very volatile, with huge swings up and down over time.

How Do We Use It?

How you treat volatility depends on how you see yourself in the stock market. The average investor, who makes fairly few trades and is just trying to make their savings grow, does not like volatility, since they want consistent returns over time. Traders, who often trade multiple times per day, are trying to always “buy low and sell high”, so stocks that move up and down a lot are the best place to make profit.

However, a few bad trades, where a trader accidentally “sells low and buys high” can cause huge losses. For this reason, most investors concerned with “Capital Preservation” try to avoid volatility.

For more information on volatility, and how it affects your portfolio, read about the Sharpe Ratio (Beginner).

Glossary, N - T

Stock Exit Strategies

Written by

Congratulations! You just made your first stock trades and now you’re sitting back waiting for them to take off and make you a millionaire.

You see a few of them inching higher just like you had hoped, but one of your stocks is starting to fall. It is the moment of truth. Should you sell the loser and cut your losses? Is there a chance it will recover? What should you do if it doesn’t? One big loser can eliminate a solid year of gains — don’t let this happen to you.

The stock market slide in 2008 cost investors over $1 trillion in paper losses. This bear market has been the wake up call which reminds us of the risk inherent in the stock market, and more importantly, the need to protect our portfolios from major losses. It is impossible to predict what the market will do today, tomorrow or next year, but there is one thing that is definite: markets go up, they go down, and they stay the same.

There is so much information available about how to find the hot stocks, yet there is very little information available about how to handle the stocks you already own. One of the many overused market clichés is “Ride your winners and cut your losses.” However, this is one that must be followed. As an example, suppose you pick 10 stocks and invest $10,000 in each one. At the end of the first year if 7 of the stocks are up 10%, two are unchanged, and one has gone bankrupt, your $100,000 portfolio is now $97,000. That math doesn’t seem right at first: you picked 7 winners and only one loser. However, the math doesn’t lie. If you think only suckers hold stocks that go bankrupt, let me remind you of such blue chippers as MCI, KMart, Enron, GM and many others that were once huge stocks and now cease to exist. The rule of thumb is to limit your losses to 10% or less.

So in our example, if you had sold your loser at $9,000 (a 10% loss) instead of holding it to the bitter end, your portfolio would have been worth $106,000. The lesson here is that the stock market is full of risk and every dollar that you invest in a stock is at risk for a 100% loss. That doesn’t mean that you shouldn’t be investing in the market; it simply means that you should be taking every precaution to ensure that you minimize your losses.

Using Stop Loss Orders

When you buy a stock, there is a way to ensure that you minimize your losses on all of your trades. By placing stop losses on all of your trades, you virtually guarantee that your losses do not exceed a certain amount. A stop loss is an order placed with a broker to sell a security when it reaches a predetermined price or percentage. For example, if you buyApple (AAPL) for $150 and you do not want to lose more than 10% of your investment, you simply place a stop order at $135. If Apple’s price drops below $135, your holding is automatically sold. Similarly, if you bought AAPL at $100 and it is trading at $150 then you currently have a nice profit of $50 a share, or 50%. At this point you can lock in your profits, and put in a stop order at $120 and enjoy the peace of mind. One advantage of using stop losses includes peace of mind; the ability to step away form your computer without worrying that you will lose your savings while you are gone and eliminating some of the inherent dangers of volatility in the market. Stop losses enable traders act with logic and discipline. Stop losses make sure you stay on track. If you always put a 5% stop on all your trades, you assure yourself that you will NEVER lose more than 5%. A stop loss is a straightforward, simple tool that allows traders to minimize losses, yet many people do not use them.

Take risk out of the market and practice using stop losses in your How The Market Works portfolio (sign up now for FREE if you don’t have a Survivor portfolio). So, what stop loss percentage should you use? William O’Neil, the founder of Investor’s Business Daily, has done lots of research on this topic and his recommendation is 8%. As soon as you buy a stock, immediately but a stop loss at 8%. Revisit that order every month and if your stock has increased in price, adjust your stop loss order accordingly. A more dynamic strategy gaining a lot of attention lately is from a company called SmartStops.net, founded by Chuck Lebeau. SmartStops provides both short-term and long-term stops that trigger when your stock or ETF fall into that range. Smartstops uses advanced mathematics that adjusts to follow an uptrend longer but quickly react to a downturn.

Glossary

Cutting Your Losses: Strategic Approaches for Preserving Capital​

Written by

The golden rule of stock investing dictates cutting your losses when they fall 10 percent from the price paid, but common wisdom just might be wrong. Instead, use some common sense to determine if it’s time to hold or fold.

  • Diversification. If your total portfolio is down 10 percent, but diversified then the diversification itself is one layer of protection. Don’t automatically assume you need to sell all of your stocks and start over.
  • Dividends. If the stock pays dividends, then calculate the total dividend plus stock price in your estimates before making the decision to sell.
  • Dumb Pricing. If you paid too much to begin with, then a 10 percent correction will often work it’s way out if you hold a bit longer. Just stop buying high and learn your lesson in the future. Then again, extra caution is advised because if you bought wrong to begin, then there is little chance you have the required savvy to know when it’s time to fold.

The final rule of investing is to make informed decisions so instead of blindly following the 10 percent rule, use the following recovery estimates and averages. Remember, a 25 percent return on investment is a strong return, 100 percent is very rare. Beyond that is a long tail that cannot be relied upon or properly forecasted. With that in mind …

If stock drops Then the stock must gain to break even
5% 5.26%
10% 11.1%
20% 25.0%
30% 42.86%
40% 66.67%
50% 100%

As this table shows, cutting your losses quickly in a losing stock and reinvesting in another stock is often the smart play.

Glossary, H - M

Hedge Fund

Written by

If you are fortunate enough to be seriously contemplating a partnership with a well-known hedge fund then you don’t need to be reading this. For the rest of you, a hedge fund is one of the investment tools you will aspire toward as a serious investor.

The first hedge fund came out in 1949 as a strategy to neutralize the effect of overall market movements on a portfolio. The strategy was simply to buy stocks that were expected to rise and selling short stocks expected to fall. The concept was to add BALANCE — to produce returns that were not market-dependent and tended to hedge a portfolio’s market exposure. Nowadays, that has changed in a very fundamental way; besides protecting a portfolio from downside risk, hedge funds often go for maximum return by deploying large amounts of leverage and investing in several asset classes among global markets.

The typical hedge fund is designed to be a partnership arrangement with the fund manager acting as the general partner responsible for making investment decisions. To join, you must be an “accredited investor” which is defined as a person with a net worth of at least $1 million (or an annual income of at least $200,000 for the past two years and expectation of continued income in that range). These levels are due to increase. These private investment funds are usually not registered with the SEC and use complex investment strategies in order to secure a targeted rate of return. For this reason, they are not marketed to the average investor, but instead to high worth individuals and professional investors. For those aspiring toward this goal, here is what you will need to get started:

  • An average starting investment of $250,000 – $500,000 USD. Although some “so-called” funds start as low as $10,000 it is uncommon. Top hedge funds require as much as $10,000,000 or more to play.
  • The ability to lose money. When it comes to hedge funds, you have to pay to play. Even if the hedge fund loses money, you will owe management fees and other costs and of course, your principal is at risk.
  • Acceptance. Remember, hedge funds are typically formed as partnerships. There are over 6,000 funds available, but they don’t take just anyone. By law, you must be a qualified investor and able to meet specific guidelines.
Book: Hedge Funds Demystified
Book: Create Your Own ETF Hedge Fund: A Do-It-Yourself ETF Strategy for Private Wealth Management
Book: An American Hedge Fund: How I Made $2 Million as a Stock Operator and Created a Hedge Fund
Book: Hedge Hunters Hedge Fund Masters on the Rewards, the Risk, and the Reckoning
Book: Hedge Fund Masters: How Top Hedge Fund Traders Set Goals, Overcome Barriers, And Achieve Peak Performance
A - G, Glossary

Cramer Bounce

Written by

With so much attention given to The Daily Show’s Jon Stewart’s on-air bashing of CNBC personality Jim Cramer, it is interesting to look at a phenomenon known as the “Cramer Bounce”. Jim Cramer is the host of a hot-topic, stock recommendation television show called Mad Money and was previously the head of a large hedge fund called Cramer, Berkowitz & Co. Jon Stewart argued that Jim Cramer has a responsibility to the public given his power as a leading representative of the largest financial reporting channel on television. But how much power does Cramer actually hold? The Cramer bounce is a theory that the stocks that Jim Cramer recommends on his TV show will almost always increase the day after the show airs. The increase is attributed to Cramer’s reputation as a stock picking guru, his convincing theatrics and a sheep following the herd mentality.

Jim Cramer vs. Jon Stewart

Empirically, there are studies depicting the Market’s reaction to the Cramer Bounce. Notably, in January 2009, graduate students from the University of Pennsylvania published a report entitled Market Madness: The Case of Mad Money which claims that over time, the average next day increase for a stock that Cramer recommends is 3% for the entire study sample, and almost 7% for smaller cap stocks. They proved through the use of ECN’s that most trades came in after 7pm EST when Mad Money concluded. Another Study conducted by Northwestern University entitled Is the Market Mad?: Evidence from Mad Money published in 2006 showed that the average cumulative return on Cramer’s recommendation was 5.19%, but more importantly almost all of the increases were nullified within 12 days. Cramer argued that he is an entertainer and educator who does more than just recommend stock picks. But Stewart argued that his actions and recommendations seem to bear credence over a segment of investors who take his recommendations as gospel. It is hard to tell who is right and who is wrong but it is entirely plausible that the Cramer Bounce has some effect on the overall market. Use your How The Market Works account (if you don’t have one, sign up for free) to test some of his stock picks and that way, you’ll find out the truth while not risking any real cash.

Beginners

How To Open Your First Stock Broker Account

Written by
Current Events

International ETFs

Written by

It used to be difficult for investors to invest in international economies in Asia or South America. There were several hurdles and risks to overcome like: currency fluctuations which meant you could lose money on a foreign stock even if it went up! Transparency of the business often made it difficult for foreign investors to understand a business and if it was making money. Liquidity of foreign shares was often very low which meant large spreads and the risk of getting “stuck” in an investment. Now, with the advent of International ETF’s, you can stay home and easily let your money do the traveling for you, often with the returns associated with hedge funds! These international ETFs allow easy trading on American exchanges and they invest only in the best-established, reputable companies of the country. This doesn’t mean these stocks can’t lose money, only that your chances of getting swindled are much lower. Investors can now choose ETFs that focus exclusively on the stocks of a single country or an entire foreign region of countries. This reduces your risk and makes investing internationally very simple. If you think that the Asia Pacific region will dominate growth in the future, the Vanguard MSCI Pacific (VPL) ETF provides exposure to stocks from Japan, Australia, Hong Kong, Singapore and New Zealand. Since VPL’s index is market-weighted, Japan is its biggest holding. If you want to focus solely the land of the rising sun (Japan), theSPDR Russell/Nomura Prime Japan (JPP), provides a portfolio full of Japanese blue chips. It’s just one of ten ETFs that focus exclusively on Japan.

Other Asian ETFs, especially Chinese ETFs are hot now:

    • PowerShares Golden Dragon Halter USX China (PGJ)
    • iShares FTSE/Xinhua 25 China (FXI)
    • Claymore/AlphaShares China Small Cap (HAO). In addition to investing exclusively in China, HAO concentrates on fast-growing Chinese small-cap stocks.
    • iShares Singapore (EWS)
    • iShares Korea (EWY)
    • iShares Malaysia (EWM)
    • iPath India ETN (INP)
    • iShares Hong Kong (EWH)
    • iShares Taiwan (EWT)
    • iShares Turkey (TUR)
    • NEW!!! Market Vectors Vietnam (VNM)
    • NEW!!! Market Vectors Indonesia (IDX)

European ETFs:

      • iShares Austria (EWO)
      • iShares France (EWQ)
      • iShares Germany (EWG)
      • iShares Spain (EWP)
      • iShares Switzerland (EWL)
      • iShares United Kingdom (EWU)
      • iShares Sweden (EWD)
      • iShares Spain (EWP)
      • iShares Netherlands (EWN)
      • iShares Belgium Index (EWK)
      • SPDR Emerging Europe (GUR)
      • iShares Eurozone EMU (EZU)
      • STREETTRACKS EURO STOXX 50 (FEZ)
      • NEW!!! Global X FTSE Nordic 30 ETF (GXF) – This ETF covers the Nordic nations of northern Europe including Sweden, Denmark, Norway, and Finland.

American ETFs (minus the USA):

      • iShares Brazil (EWZ)
      • iShares Chile (ECH)
      • iShares Canada (EWC)
      • iShares Mexico (EWW)
      • NEW!!! iShares Peru (EPU)
      • NEW!!! InterBolsa FTSE Colombia 20 (GXG)

Global X

    • SPDR LATIN AMERICA ETF (GML)

Other regions:

      • Market Vectors Africa ETF (AFK)
      • SPDR S&P Emerging Middle East & Africa (GAF)
      • WisdomTree Middle East Dividend (GULF)
      • Market Vectors Gulf States (MES)
      • iShares MSCI South Africa (EZA)
      • Market Vectors Russia (RSX)
      • iShares Australia (EWA)
      • iShares Emerging Markets (EEM)
      • Claymore/BNY Mellon Frontier Markets (FRN) This ETF attempts to capture still-tiny economies. Its top holdings include stocks of companies from countries such as Egypt, Czechoslovakia, and Qatar.

International Sector ETFs

These ETFs allow investors to to place bets on certain industries outside of the U.S.:

  • WisdomTree International Communications (DGG)
  • WisdomTree International Health Care (DBR)
  • WisdomTree International Utilities (DBU)
  • SPDR S&P International Energy (IPW)
  • SPDR Barclays International Treasury Bond (BWX)

NEW Leveraged International ETFs!!!

ProShares has released leveraged international ETFs designed to seek twice the daily returns of indexes covering developed foreign markets, emerging markets, China and Japan:

  • Ultra Emerging Markets (EET) – Designed to return 200% of the MSCI Emerging Markets Index
  • Ultra FTSE/Xinhua China 25 (XPP) – Designed to return 200% of the FTSE/Xinhua China 25 Index
  • Ultra Japan 25 (EZJ) – Designed to return 200% of the MSCI Japan 25 Index

SHORT and LEVERAGED International ETFs

These ETFs allow investors to bet on the demise or decline of international stock markets:

  • UltraShort MSCI EAFE (EFU) – Designed to return -200% of the MSCI EAFE Index
  • UltraShort Emerging Markets (EEV) – Designed to return -200% of the MSCI Emerging Markets Index
  • UltraShort FTSE/Xinhua China 25 (FXP) – Designed to return -200% of the FTSE/Xinhua China 25 Index
  • UltraShort Japan (EWV) – Designed to return -200% of the MSCI Japan Index
Advanced Trading Strategies

Small-Cap Stock Investing: High-Risk, High-Reward Opportunities​

Written by

Small cap stock investing is volatile. That is one of first things you should know and understand. So, why risk your money by investing in what is typically considered risky business? First and foremost – increased risk equals increased potential reward. However, there is another way to look at it. Investing in risk can actually decrease the total risk of your portfolio. Here is how it works. By diversifying your portfolio to include high volatility, moderate and minimum risk instruments the overall return tends to be greater thereby actually eliminating risk by increasing volatility. Small cap stock are defined as those companies with a market cap of less than $1 billion (calculate market cap by multiplying share price by number of outstanding shares). Size matters when it comes to small cap stock investing. Just ask yourself, what is easier to do – double your money from $1 to $2 or double $1 million to $2 million. It’s a no-brainer. The same applies to corporations. Growth becomes more difficult as the company grows beyond a certain point, but the rewards for finding the right company in the early growth stage can lead to the type of returns every investor dreams of. Use these quick tips when searching for small cap stocks:

  • Understand the market. Yes – we are saying it again for a reason. The fundamentals never go out of style and there are few places this is more true than investing in small cap stocks.
  • Don’t believe the better mouse-trap theory. You know the old adage “build a better mouse-trap and they will come.” The reality is closer to “imitation is the best form of flattery.” Before you bet the farm on the next new and improved technology, remember how much money is required to bring it to market.
  • Stay involved with the company. Read and understand the company information itself. Who is at the helm? What is their prior experience? The best plans fall apart without proper guidance.

Small Cap Stock Selection Checklist

Not sure what to look for when purchasing small cap stock? Use this small cap stock selection checklist to make sure you cover the basics:

  • Earnings. Look for a rise in current and annual earnings. Some investors will use a 25 percent increase in current earnings per share, but that is heavily contingent upon prevailing market conditions and the industry averages.
  • Volume. Trading volume is critical especially when dealing with small cap stocks. Remember, to make a profit you need someone willing and able to buy what you are selling.
  • Institutional sponsorship. Look for investment by mutual funds and other large institutional buyers.
  • Growth. Read analyst reports for growth forecasts of 15 percent and up.
  • Revenue. Look for revenue or sales growth of at least 15 percent change above year over year rate.
Glossary, H - M

Hyperinflation

Written by

Hyperinflation refers to out of control or extremely rapid inflation, where prices increase so quickly that the concept of real inflation becomes meaningless. The classical definition of hyperinflation is inflation greater than 50% per month. Recently, Argentina, Brazil and Peru (1989-90) all experienced hyperinflation. Perhaps the most well known example of hyperinflation occurred in Germany from 1922-1923 where the average price for all goods and services increased 20 billion times. Prices doubled every 28 hours for 20 months! Some Germans were seen carrying cash in wheelbarrows to buy a loaf of bread.

Hyperinflation often occurs during periods of economic depression where there is a large increase in the money supply that cannot be supported by economic growth. It can also occur during periods of war where there is a loss of confidence in a country’s currency to maintain its value after the war is over.

Hyperinflation Trading Strategies

  • When an investor expects inflation, buy companies that sell or produce gold, as well as other commodities, since tangible assets will increase in price with the rate of inflation. Today, the world’s largest producer of gold is Barrick Gold (ABX)
  • Buy physical Gold Bullion coins or bars and keep it at home. In times of Hyperinflation, banks may fail or be closed for “holiday”. Having gold in your hand can buy just about anything when cash becomes worthless.
  • Invest in large companies who can easily adjust prices higher in the wake of inflationary times.
  • Buy Treasury Inflation-Protected Securities (TIPS) and other inflation protected investment vehicles.
  • Buy Real Estate Investment Trusts (REITs) becuase real estate will also rise in value as other prices rise.