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Who Manages ETFs?

Several large and well-known investment banks and companies are major players in the ETF industry. There are several large investment houses which specialize in managing ETFs such as Barclays, ProShares, Vanguard, and Guggenheim Partners, LLC. ETFs are also managed by investment firms such as Schwab, Credit Suisse, and Eaton Vance. Even New York Life’s Mainstay Investments recently acquired Index IQ. The ETF industry has been growing rapidly in the last 10 years, with more investors choosing to use them, more ETFs on the market, and more investment companies choosing to offer them. Continue reading...

Is there a Benefit to Self-Managing?

An investor may be able to save money in management fees self-managing, but there are also limitations and risks. Perhaps the biggest risk is the role that emotion can play in investing. Even the most skilled professionals are tempted by emotions in the market - big declines like the financial crisis can make one second-guess whether the market has hope of recovering, and big gains can create confidence that leads to less prudent risk-taking. Continue reading...

What is an Investment Manager?

An investment manager’s job is to adhere to the guidelines set forth in a prospectus while directing the decision-making process for a pooled investment company such as a mutual fund. He must remain accountable to the shareholders and observe SEC regulations while attempting to generate the best returns possible. Investment managers direct the flow of assets and trading in an investment account, usually a pooled investment using the funds of various numbers of investors, while seeking to serve the best interests of the investors whom he serves. Continue reading...

What is active management?

Active management is the practice of attempting to outperform the market with selection and timing. Active management is a thoughtful and time-consuming approach to investing and is the opposite of Passive management. Active managers seek to outperform the benchmarks for their portfolio by researching and selecting stocks and other assets based on strategies and analysis methods thought to be superior. Continue reading...

What is index investing?

The main idea behind index investing is that markets are efficient, and, especially with the low fees of indexed funds, it can be a winning strategy. Index investing is a simple strategy of choosing the indices which reflect your investment beliefs and offer diversification, buying mutual funds or ETFs that track these indices, and holding them for a long period of time. The last 10 years have seen the propagation of index funds for any specific market, industry, country, commodity, etc. Continue reading...

What is active money management?

Active management is when an investor or money manager attempts to outperform an index or benchmark, using tactical strategies. Many economists and financial professionals believe that the markets are efficient. This means that all available financial information has already been built into the prices of securities, and that you cannot outperform the market by making specific selections of stocks, timing the market, reallocating your assets regularly, following the advice of market pundits, or finding the best portfolio managers. Continue reading...

What are futures contracts?

Futures contracts constitute a binding agreement to trade a commodity, share, or instrument at a future date at an agreed-upon price. They are auctioned on regulated futures exchanges. Futures contracts are used primarily to deal with agricultural assets and natural resources but have come into use for anything that can be commoditized, including financial instruments and technological resources. Continue reading...

What are Actively-Managed ETFs?

At their conception, ETFs only tracked indexes, but today there is also demand for actively-managed ETFs. ETFs tend to look a lot like passive index mutual funds, except that they can trade intra-day like stocks, while mutual funds only settle within 24 hours. In the last decade or so, there has been an increasing market for actively-managed ETFs as well. It is somewhat ironic that the popularity of actively-managed mutual funds has decreased while an abundance of actively-managed ETFs has appeared. The popularity of ETFs has grown enough for fund managers to attempt more and more things. Continue reading...

How old should my portfolio manager Be?

While we do not doubt that a young advisor can be intelligent and helpful, there is really no substitution for experience and tenure. Generally speaking, it’s a good idea to choose a manager who has experienced various market cycles. Younger advisors who have never helped their clients through a recession may not be as humble, prudent, or knowledgeable as ones who have. If you can find an advisor with over 10 years of experience, we would recommend that over an advisor with only 3, all other things being equal. There are advisors and wealth managers with only a few years under their belts but who have learned a lot in a short time. Continue reading...

What is the difference between active and passive money management?

The debate on whether active or passive management is better for investors has polarized many advisors and theorists for years. There are two schools of thought when it comes to long-term investing. One basically states that you should determine a proper allocation of asset classes for yourself, buy index funds to reflect each particular asset class, and possibly rebalance the portfolio periodically. This basically means “set it and forget it,” and the investor must be willing to ignore fluctuations in the markets and maintain a faith in an Efficient Market. Continue reading...

Who are Some of the More Well-Known Investment Managers?

There have been many notable investors who have withstood the test of time. Of those that are still living, Warren Buffett definitely stands out of the crowd. If you had invested $1,000 with him in 1965, the investment would be worth over $6 million today. Some of those who could be considered in the realm of "founding fathers" of sound investment strategy would include J.P. Morgan, Benjamin Graham (author of the famous "The Intelligent Investor"), and John Templeton. Continue reading...

What are index futures?

Index futures are futures contracts written on an index in which a large position can be held with a relatively small margin requirement. Index futures can be used for hedging or speculation. A "good faith" initial margin deposit (also called a performance bond) of a fraction of the contract size is all that is required to hold a substantial position, with a notional value worth significantly more than the amount invested. Continue reading...

What are currency futures?

Currency futures are derivative contracts that trade on regulated exchanges around the world. Like forward contracts, they name a specific amount of one currency which is to be exchanged for a specific amount of another currency at a future date. Futures name a specific amount of one currency which will be exchanged for a specific amount of another currency at a future date. Like other derivative contracts that trade on exchanges (e.g., options), futures are transferable and are traded as the market calls for up until their expiration. Investors can short them (sell to open) and hold them long (buy to open), and can close their positions as they see fit without riding out the contract to the expiration date. Continue reading...

What are futures markets?

Futures markets are the formal exchanges on which futures contracts are bought and sold for commodities, financial products, and interest rates. Futures markets constitute a large part of the financial system and are an attempt by participants to hedge against some of the volatility and risks to which they might be exposed as time passes, especially where contracts await resolution or payment. Futures contracts might be created for financial instruments, commodities, and other derivative interests. The Chicago Mercantile Exchange, the Intercontinental Exchange (ICE) and the Eurex Exchange are large parts of the international network of futures markets and clearing houses. Continue reading...

How Do I Find the Best Mutual Fund?

It requires a great deal of due diligence, but investors should understand that past performance is not indicative of future performance. Focus on experience. In the stock market, as with most things in life, hindsight is 20/20. There are countless lists on the internet with titles like “The Best Mutual Fund Families” and “50 Winning Mutual Funds.” It is important to understand that the names on those lists are a function of hindsight and not foresight. Continue reading...

What is a Certified Financial Planner?

A Certified Financial Planner (CFP) is a financial advisor capable of investment and insurance/estate planning. For an advisor that wants the “CFP” designation, they must complete the CFP Board’s initial and ongoing certification requirements, which include extensive exams in the areas of financial planning, taxes, insurance, estate planning and retirement. They must also complete continuing education courses. Continue reading...

What is a commodity pool?

Commodity pools are like the REITs of the commodity world, and some of them can be categorized as hedge funds or managed futures accounts (MFAs). Accredited investors, who meet qualifying requirements regarding income and total net worth, pool their money to be managed by a commodity pool operator (CPO) or commodity trading advisor (CTA) for the purpose of investing in commodities and commodity derivative instruments. Continue reading...

Where Can I Get Help With My IRA Investments?

There are several sources of information and help that you can tap into for your IRA. Your IRA is a vital component of your future retirement assets. The decision on how to invest is entirely yours: you might want to manage the assets on your own, or look for professional help. The choice of Financial Advisor who would help manage your IRA is similar to the choice of any other professional. For more, see “How Can I Get Help With My IRA Investments?” Continue reading...

What do I need to know about investing in commodities?

Investing in commodities is a little different than stock market investing. It is primarily done with derivatives, such as futures, and the strategies and lingo used are sometimes unique to the commodities market. Of course, you can always get commodities exposure by investing in ETFs and mutual funds that invest in commodities for you. Investing in commodities can be a complex and volatile business, and, if you are going to invest in them, it is best to do so with the help an a specialized and experienced advisor. Continue reading...

What is a Long Position?

A long position - or to be “long a stock” - means that an investor has share ownership and will receive an economic benefit if the share price rises, and vice versa. Creating and maintaining a long position is simple: an investor just buys and owns the investment. A “long-only” strategy refers to an asset manager that only buys and sells securities in the portfolio as a management strategy - they will not use options or shorting strategies as a result. Continue reading...