The “buy side” refers to businesses in the financial services industry such as pensions, mutual funds, and asset managers that manage money. Since firms on this “side” of Wall Street tend to be the ones buying and selling securities for their portfolios, when a person works for one of these funds or companies they are said to be on the “buy side.” Research analysts that provide analysis and data to fund managers solely for the purpose of making investment decisions within the portfolio are “buy side analysts.” That research is typically not published for public use. Continue reading...
Passive investing relies on market indices and unmanaged approaches to investing, with the idea being that attempting to beat the market is futile, especially if such attempts involve fees and speculation. Passive investing favors buy-and-hold strategies using no-load, low-fee index funds and other securities meant to be held long-term, in a portfolio allocation suiting the investor that will usually be rebalanced over time to prevent overweighting anything. Continue reading...
Stock prices change based on the law of supply and demand. Ultimately, as with the price of any good or service, the outstanding supply and consumer demand will define its value in the marketplace. Indeed, the efficient market hypothesis states that the price of a LINK will already reflect all known information about it and what investors are willing to pay for it at the time, based on that information. Continue reading...
There are probably more important things you can do with your time than find a place to store your suitcase full of gold and hover over it like a mother hen. But it may be worth it to you, since owning shares of a gold ETF is not the same as owning actual gold. Gold ETFs work by holding some amount of gold in trust and then selling shares of the fund that owns it. There is a significant discrepancy between the dollar value of the gold which is held and the total value of the shares which are sold, however, and if there were ever a “run” on the fund, no one would be able to actually get gold bricks out of fund managers. Continue reading...
Gold bullion are an asset that will hold value due to their gold content; gold coins which are more numismatic, that is, collector’s items, may not retain the same value. The value of gold coins is twofold: the price of the gold in the coin and the numismatic value of the coin. There is an important distinction to be made, because some gold coins will have a lot of one, and not the other, and, if you want to make sure your investment is an investment in precious metal and not just a collector’s item, you should make sure you’re getting a coin that qualifies as bullion. Continue reading...
Gold is one of those things that gets plenty of hype and that most investors think they understand well. Gold, as any other commodity (silver, platinum, palladium, oil, wheat, copper, coffee beans, etc), might be a valuable part of your asset allocation. It is important to recognize, however, that gold is an extremely volatile commodity, and there is frequent chatter and hype surrounding it that easily influences many investors. Continue reading...
Gold can provide diversification in a simple way, since it has a history of being generally non-correlated with most other asset classes. It is not necessarily a hedge against anything specific, as some claim, since its price movement is too random. Conventional wisdom says that investing in gold might be a good hedge against inflation or market cataclysms. Some of these beliefs are unfounded. The price of gold appears to go up only when it is in high demand (such as when the price has gone up some already), rather than in tandem to any specific market force such as inflation or interest rates. If investors have some idea of when other investors are going to pile in, such as during times of uncertainty, they will likely be able to ride an uptrend in gold prices for a while. Continue reading...
There are some things to keep in mind when investing in commodities and their ETFs. Most commodities trading revolves around who owns a hard asset and when. ETFs occupy a space in the commodities world that is somewhat unique. An ETF such as the Crude Oil Index does not physically buy millions of barrels of oil and store them. It buys financial instruments which theoretically should reflect the price of oil. Continue reading...
With regards to Margin Trading, ‘Buying Power’ is a term used to describe how much additional leverage you have given the excess equity in your account. When your broker or custodian authorizes buying on margin, the purchasing power of your assets can become substantial. Instead of just owning $10,000 worth of stock, you might be able to leverage that to buy $10,000 more, therefore having $20,000 of long exposure even though you only have $10,000. Continue reading...
An account freeze stops all pending transactions and does not honor new transaction requests for a financial depository account. A checking or savings account might be frozen at the prerogative of the banking institution or at the request of the account owner or government agency. Similarly an investment account might be frozen for breaking the terms of the account agreement with regards to trading activity or margin requirements, in addition to illegal activity or court order for another reason. Continue reading...
“Buying the dips” is a bullish description of investing in stocks whose prices have gone down. We say this is a bullish sentiment because a bearish investor would be more likely to interpret the downturn as a sign of impending doom, or might prefer to play it safe. A “dip” can be loosely defined as a downtrend without much momentum or evidence to support a bearish outlook. Another way of interpreting a dip would be as an oversold condition, where investor sentiment has caused the price of a quality stock to fall. Bullish investors could maximize their gains in such a scenario by buying low and selling when the stock has recovered and pushed on to new highs. Technical analysis indicators such as Bollinger Bands can be used to identify favorable buying conditions. Continue reading...
When an investor takes a short position on an option contract by selling (“writing”) a call or put option, he or she is opening a position, which creates more open interest in an underlying security which will be handled by the brokerage house, and this is called “selling to open.” If the price changes in the underlying security in an unfavorable way, the investor will seek to get out of the short position he holds on the options contract before the option’s expiration date. To do so, the investor must buy back the option (or, really, cancel out the position by buying the same kind of contract that he or she previously sold short). Continue reading...
When trading options, the language is slightly different than other transactions. You might be “opening” or “closing” a position with each trade. If you buy a put or call option, your ticket with say “buy to open” since you are opening a position and increasing the open interest on the underlying. Open interest is similar to trade volume in the stock markets, but it only increases with the number of outstanding positions interested in the outcome of the movements of the underlying security, and does not increase with each trade like trading volume. Continue reading...
Investors who were bearish on a stock may have chosen to short-sell shares in the hopes that they could cover at a lower price. Short selling is when a broker facilitates the actions of an investor who wishes to take on the risk of replacing sold shares of a particular stock because he or she believes the price will be lower when he or she replaces the inventory. The broker passes the proceeds of the sale (minus a fee) along to the investor who is taking the risk of replacing the shares, and charges the investor interest or fees as long as the shares are outstanding. Investors need to cover the short before prices go up and it results in a loss for them. Continue reading...
While there aren’t that many ways to use institutional-level, regulated vehicles to get exposure to bitcoin and other cryptocurrencies, there are some, and the market will likely expand. Money managers are finding ways to offer managed investments that offer exposure to cryptocurrencies, despite the hurdles presented by regulators and skepticism from large financial companies. On the over-the-counter market OTCQX, you can buy shares of the Bitcoin Investment Trust from Grayscale (Nasdaq: GBTC). This fund has seen massive gains recently but does come with a 2% fee. The Chicago Mercantile Exchange (CME) has stated that it would like to start trading cryptocurrency futures, but it may be a little time before this becomes a reality, due to significant red tape and guidance needed regarding cryptocurrencies. Continue reading...
Instead of waiting for confirmation of reversal, “buying on weakness” means to go ahead and buy a long position (or cover a short position) while a stock is in the middle of a downtrend, in the hopes that it will reverse soon and the preemptive move will allow you to capture the entire upside. Upswings can happen very quickly, and failure to prepare for them can cost investors a lot of money. Buying on weakness is intended to put the investor in a position for maximum gains, as well as preventing losses on a short position. This is one part of the “buy on weakness / sell on strength” mantra, which is essentially the same thing as “buy low / sell high”. Continue reading...
Commodities are more volatile than most assets. The supply-demand dynamics of commodities are continuously changing, and sometimes very rapidly. Different commodities will have different levels of volatility, of course. Some commodities are extremely volatile. For example, natural gas has had a volatility of almost 45% in some periods, and gold has experienced movements of 20-30% per year lately. Crude oil prices fell some 50% in 2015, as a global supply glut was met with weakening demand, particularly from China. Gold is actually on the less-volatile side of the spectrum for commodities. Silver, Nickel, and crude oil tend to be on the upper end of the spectrum along with exotic metals such as platinum and palladium. Continue reading...
Calculators are available to help you decide whether to lease or buy a car. Despite the advice of our older family members, many financial decisions will benefit from the use of math and technology, instead of just “rules of thumb,” and they will depend on the circumstances present at the time of the decision. Despite the fact that you may have purchased a vehicle or two in the past, you might benefit from using an online calculator that can help you compare whether it might be in your best interest to lease the vehicle this time or buy it. Continue reading...
A commodity is usually a raw material or agricultural good which has an extremely high demand and very little price differentiation between competitors. If a good will not increase or decrease significantly in quality regardless of who brings it to market, and the demand is very high (such as for a good used in the production of many other products) it might be considered a commodity. Examples would be oil, silver, gold, steel and wheat, but a full list would be very extensive. Continue reading...
Every institution that can be your IRA trustee will offer different options within the IRA. IRA is a tax designation which can be placed on an account at various institutions that offer a compliant list of investment options. Some can be as simple as a CD characterized as an IRA at a bank or credit union. Investment institutions can offer a wide variety of investment choices in an IRA: stocks, bonds, mutual funds, CDs, annuities, and so on. Margin trading is not allowed in IRA accounts, so you might not be able to use options or other hedging strategies in your IRA. Continue reading...