Tag: gold

  • Beginner Investment Portfolio- How Should It Look Like?

    Beginner Investment Portfolio- How Should It Look Like?

    Beginner Investment Portfolio
    These tips are kind of a guide to new investors for building a good stock portfolio. Selecting stocks needs analysis, time, and the ability to estimate different parameters for the stock, industry, and overall market.

    By Guy Avtalyon

    We are going to show you how a beginner investment portfolio should look like. Of course, if you think the stock market is getting crazy, you couldn’t be more right. DJIA is going up, going down, S&P 500 Index also. The graphs are looking like ECG of some very vulnerable hearts. Maybe you don’t believe it, but this is the right time to enter the stock market. A stock market is truly a wealth-building tool. Moreover, entering the stock market is easier than ever. But, as you are new in this field, you would like to know what to buy or, in other words, how a beginner investment portfolio should look like.

    There are so many ways to invest the money and can pick the level of risk you’re willing to take. So, it is obvious the first thing you have to decide – the level of risk you can tolerate.

    High-risk investments mean greater chances for high rewards. Wait, that also means bigger chances for losses. As a beginner investor, you should avoid high-risk investments if you don’t want your capital to throw through the window. Later, when you become more experienced and earn more cash, you’ll understand how to handle the risk, for now, here are some tips of how a beginner investment portfolio should look like

    We know that a lot of beginners think of investing as attempting to get a short-term gain in the stock market. But if you want to build wealth, you have to think about long-term investing. 

    Beginner investment portfolio in 2020

    ETFs

    The world of the stock market and investing can be confused for beginners. There are individual stocks, mutual funds, bonds, mutual funds, etc.

    Our first suggestion for you is some low-cost ETF. But there is a question: is it worth it? You’ll need time to build an individual stock portfolio.

    Exchange-traded funds (ETFs) can be an excellent investment way for small investors. You can trade these funds like stocks. They can give you to expand the diversity of your portfolio and to do that without spending too much time on it. 

    Here is how an ETF works. A fund provider holds the underlying assets. Such creates a fund to follow the performance of underlying assets. At some point, such a provider decides to sell shares in that fund to other investors. As a shareholder, you’ll own a part of an ETF, but you will not own the underlying assets in the fund. 

    ETF tracks a stock index. So, as a shareholder of the ETF, you’ll get dividends, which you can reinvest, for the stocks included to the index.

    ETFs are a passive approach to investing. Brokers will not charge you trading costs for ETFs. It is zero. Just make an automatic investment each week or month, it’s up to you.

    Include the gold

    Due to the coronavirus pandemic, the global economy is suffering. In the first quarter, only five main asset classes posted gains. Among them, apart from the US dollar and yen which are currencies, the list includes gold. Gold always was a great way to protect the portfolio and historically it was known as a safe-haven investment. It is the same nowadays. You can add some gold into your portfolio while you are waiting to come into stocks because today they can be too volatile for beginner investors. So, you should grow the exposure to gold. Gold works great when the dollar is flat-to-down. Also, gold can be a great hedge against inflation.

    Moreover, it performs best when investors are worried about low growth on other assets. Basically, if we take a look at its historical performances, we’ll notice that gold played best and rose fastest when other economic measures were falling quickly. We have such a situation today.

    We have negative interest rates, bond yields are almost zero, so gold could be a very good opportunity to hold it. Add it as very good protection to your portfolios.

    A beginner investment portfolio should include mutual funds

    Mutual funds are still amazingly popular. Especially target-date mutual funds in retirement plans, so add them in your beginner investment portfolio. Mutual funds are basically a basket of investments. When you buy a share in some mutual fund you are actually investing in all holdings included to the fund with just one step. 

    A target-date mutual fund usually is a mix of stocks and bonds. 

    How to invest in target-date mutual funds? 

    For example, you plan to retire in 20 years and everything you have to do is to pick the fund with 2045 in the name. But you have to know, so don’t be surprised, the fund you choose will hold stocks essentially. How is that possible? Your retirement is far away, and stocks have higher returns in the long run, higher than any other asset. As time goes by, the fund manager will shift part of your investment toward bonds because they are less risky. You wouldn’t like to take too much risk while you are approaching the date of your retirement.

    Add Index funds to the beginner investment portfolio

    If you don’t want to employ a manager to create and manage your beginner investment portfolio, index funds are a good choice for you since they track a market index. What is the market index? It is a collection of different investments that represent a part of the market. For example the S&P 500 Index. It is a market index that covers the stocks of about 500 biggest companies in the US. So, an S&P 500 index fund will reflect the performance of the S&P 500, by purchasing the stocks in that index.

    Index funds represent another passive approach to invest just like ETFs. They carry lower fees charged based on the sum you have invested. The advantage of these funds is that some brokerages offer a range of index funds without an established minimum. So you can start investing in some index fund at $100 or less.

    Help to create the portfolio

    For example a robo-advisor. Let’s assume you would like to invest but you’re not the DIY type. Well, we have some good news for you. You have a lot of robo-advisors out there. They will handle your investment by using very complex algorithms. But don’t be worried. It will cost you less than a human advisor, usually, it will be from 0.25% to 0.50% of your account per year. Also, robo-advisers will let you open an account without the minimum required.

    Robo-advisors are an excellent way for beginners to get started investing. Look, you are a beginner and you don’t have good knowledge about investing yet. So, robo-advisors will do all that hard work for you and you’ll need a little money for them. All you have to do is to check your portfolio from time to time. So to say, it’s your money invested. Also, they will give you a chance to learn more about investing since they’ll provide you tools and educational material.

    Investment apps are also extremely helpful. You can easily find some aimed at beginners.

    Traders-Paradise recommends

    For example, M1 Finance is excellent if you want to build a free portfolio for long-term investments. This app offers commission-free investing, automated deposit, buying fractional shares, and has many other features like free maintenance of a portfolio, diversified portfolio, etc.

    Fidelity is another great app that offers full service at zero trade prices. It allows you to invest for free, a variety of ETFs that it offers can help you to build a well-balanced portfolio, stocks, or options trades and all for free.

    TD Ameritrade offers free options trading. If you want to become a trader rather than an investor, it’s a really good pick for you. We already wrote about this app but we would like to point again how excellent it is. For example, its platform “Thinkorswim” is one of the best. It will not charge you a commission for trading stocks, options or ETFs.

    After deeper investigation, you might choose to invest in the companies that offer the chance for growth. Just keep in mind, your portfolio has to be diversified. Never expect that each stock can generate great returns. That is the reason for diversification. It appears especially when we are talking about a beginner investment portfolio. But that doesn’t mean you’ll need a large collection of investments. You’ll need just a few stocks but they have to run together in your favor.

    Today’s volatile stock market offers discounts on great stocks. So, this is a great time to start investing and create your beginner investment portfolio that will generate you amazing gains in the future. 

  • Safe Haven Assets Where Investors Have Begun Piling Into

    Safe Haven Assets Where Investors Have Begun Piling Into

    safe-haven assets
    Safe-haven assets are a fundamental place to avoid economic downturns. They express the markets that can protect the investment from losses when the market falls.

    The safe-haven assets are investments that investors start piling into during intense market volatility and uncertainty. The main goal is to take a position into investments that are recognized as safe from losses. Even more, they have the capacity to rise in price while the bulk of other assets are declining value. 

    Safe-haven assets provide investors to limit their exposure to losses when market downturns and protect their capital invested. Like we have now when almost all markets plunged. When the markets enter tumultuous times like this one, the value of investments falls sharply. Investors are seeking assets that are not correlated to the markets. These kinds of assets are safe-haven assets.

    So, we can say that safe-haven assets are able to hold or grow in value during the market turbulence.

    Do anything to minimize the risk

    Risk is real if you want to invest in stock markets. But it isn’t necessary to be exposed to great risks if you can avoid it. The point is to minimize the risks all the time, during the life of your investment. But when the market is declining almost all assets become too risky. In order to protect their capital, investors leave their position in unsafe assets and start buying something safer.
    Safe-haven assets are those that don’t carry a high risk of loss. Historically that was cash, real estate, mutual funds, CDs, etc. You may ask, is gold a safe-haven asset? Gold as much as silver are historically used as a hedge against market or political uncertainty or the devaluation of a currency. But having in mind that gold coins have varied during the unstable political situations, it might be a wrong choice. Anyway, commodities are risky.

    Better pick s risk-free assets, such as sovereign debt instruments or hold gold and silver trough futures.

    What are safe-haven assets?

    Safe-haven assets are the necessary answer to economic downturns. They are the markets that can protect investors from losses when other assets and markets fall. How can they protect your investment portfolio?
    Safe-haven assets are holdings where investors and traders set their money to protect against major droppings. Safe-haven assets must allow protection from losses.

    But what are the characteristics of safe-haven assets?

    If you want trade safe-haven assets you must pay attention to liquidity. Such assets must have high liquidity. Why is this characteristic so important? Because that will provide you to enter and exit positions at a price you determine but without slippage. Further, safe-haven markets must have limited supply.  You don’t want the assets with a supply that passes their demand. It is more likely for such an asset to decrease in value. For example, gold has a deficit of supply, but higher value when demand increases. 

    True safe-haven assets have to hold a certain level of demand in the future. So you, as an investor, must believe in the assets’ future, you must be confident about it. For example, that is the reason why silver isn’t so good investment choice. Yes, it has many purposes now, but it can be replaced in the future by some other material. On the other side, you might recognize copper as safe-haven assets because of its importance that increases over time. Almost every day, science, the industry find new ways to use copper.

    Can you see where the essence of safe-haven assets? It is permanent. We cannot ever say that some temporary high valued asset belongs to the corpus of safe-haven assets. 

    Is gold the ultimate safe-haven asset?

    For many investors, gold is a safer asset to buy and hold, safer than cash, because it is a tangible asset. Further, no one can print more gold as it is possible with banknotes. This is important because it provides the value of gold not being changed in this way. From the historical point, gold served as insurance during unfavorable economic circumstances. Gold prices regularly rise when drastic events happen. Moreover, gold is negatively correlated to the US dollar. Meaning, when the dollar is strong it is costly to buy and hold. That drives gold prices lower. And vice versa. Investors know this. Whenever the US dollar was trading lower, they started piling into gold.

    What are other safe-havens?

    When the market records turbulent circumstances the value of most investments falls sharply. So, investors want to buy assets that are negatively correlated to the overall market. They are moving their investments into safe-haven assets.
    That can be defensive stocks, such as consumer goods, utility, biotechnology, healthcare. These stocks tend to resist the market’s downturn. People are buying food, drugs, they need health care and groceries.  Also, don’t think that real estate due to its lack of liquidity isn’t a safe-haven asset. The real estate has a constant income flow that can offset the liquidity. 

    Infrastructure is also safe-haven assets. So, even though the markets are going down there are plenty of ways to stay invested.

    Building a safe-haven assets portfolio will need some additional attention to optimizing returns. But the results may be quite surprising. But there are safe-haven currencies also. For example, the Japanese Yen (JPY) is seen as one of the most stable safe-haven currencies.

    Can we trade safe-haven assets?

    Of course, we can. So after we’ve recognized safe-havens assets, want to trade them. The question is how and when to trade them. The possibility isn’t questionable. Let’s say this way, a market downturn is likely to hit due to the factors you can recognize. 

    If you want to move a chunk of your portfolio into safer assets there are several things you have to consider.

    First of all, trading safe-haven stocks is practiced as a defensive tool. The aim is to overcome a declining economy as even defensive stocks may not generate a positive return. It’s true that the slow economy will let safe-haven stocks beat the market, but it doesn’t mean that you will profit.

    When trading safe-haven stocks examine the beta of stocks before investing. Beta points the relationship between the stock and the market. If the beta is 1, that means the stock price is fully correlated with the market, but when the beta is above 1, the stock is more volatile than the market, and finally, when the beta is closer to zero the correlation with the market is smaller. Knowing the beta of the stock will enable you to hedge against volatility. 

    The P/E ratio will show you if the safe-haven stocks are undervalued or overvalued. The safe-haven stocks are well-known for being undervalued.  Also, the stocks with high dividends, meaning greater than 6%, are a good pick for safe-haven stocks. At least, as much as the stock from a well-established company. Well-known brands or large-cap stocks will lose less in value than small-caps during the market downturns.

    All these factors are important and you have to evaluate them before picking your safe-haven assets and adjust your new holdings to your risk appetite.

    Currencies as safe-haven assets

    Some currencies are recognized as safe-havens. In periods when the market is extremely volatile, currency traders would like to move their cash into safe-haven currencies as protection. Those kinds of currencies are the Swiss franc, the euro, the Japanese yen, and the U.S. dollar.

    Forex traders have to pay attention to some currencies that might act differently to market shifts than others. Also, there is always a question of what currencies suit to be safe-havens. 

    Bottom line

    The “safe-haven” refers to financial assets that investors turn to protect their profit from periods of market turbulence.
    Safe-haven currencies, safe-haven stocks, gold, have historically preserved or increased their value during market downturns. They gave good protection against losses. Why shouldn’t they do such a thing for us now?

    One suggestion before doing anything in real: use our preferred trading platform virtual trading system and check the two formula pattern.

  • Investing In Gold Will Always Be the Smart Move

    Investing In Gold Will Always Be the Smart Move

    Investing In Gold Will Always Be the Smart Move
    Get exposure to gold, it isn’t as risky as some may think and deserves a place in your portfolio.
    Gold can be a hedge against inflation and deflation

    By Guy Avtalyon

    Investing in gold whether own it as a metal, jewelry, mining stock or mutual fund is always a smart decision. This is especially true when the main currencies are dropping. There is one interesting situation that confirms the gold to be the most valuable asset. Gold is a benchmark for national currencies, for example. As the currency falls, gold will rise. 

    So, let’s highlight the chance of gold’s future. 

    Some may say that investing in blue-chips is better. Okay, it is still a good investment, yes. But is there a true potential for profit? Can blue-chips persist in the global market? They are mastodons. We are talking about them with respect but for most investors they are unachievable. 

    What is investing in gold?

    Gold has a possibility for future growth. The “golden standard” is still live no matter what the banks will insist on. It was in the past, it is now, and it will be. 

    Traders-Paradise wants to highlight some opportunities for investing in gold and how to do so. Hopefully, you will find your way.

    Why investing in gold? 

    Gold is respected everywhere in the world because of its value and bright history. 

    Gold’s history started in 3000 B.C but from 560 B.C. gold is used as a currency. The need of the ancient merchants was to use something broadly accepted in order to make trade simpler. Since the gold was universally accepted for expensive jewelry they recognized the potential in gold for valuing their products. And in trading, also.

    A coin with a seal was accepted all over the world as value for products. Since then, this rare metal that comes back, when other currencies don’t work.

    So, we can conclude that gold prices are negatively proportional to equity. Speaking about returns in long-term investments, gold isn’t so good because stocks or funds will always give better returns.

    Gold returns in comparison to assets returns

    Yes, the asset will always do better. But it can be volatile during the time.

    Oh, wait! Gold is a volatile investment too.

    Let’s look at some stats, like standard deviation. What is the standard deviation? It is a degree of how spread out numbers is. In the example of a stock price, it measures the volume of variability and dispersion around an average. It is a measure of volatility, also. Generally, dispersion is the difference between the current value and the average value. The larger the dispersion or variability means the higher the standard deviation. And vice versa, the lower figures are implying less price variability. Investors use the standard deviation to estimate the supposed risk and define the importance of specific price movements.

    During the last five years, the annual standard deviation of gold was 16. The annual loss was about 4%. This means that the chance that gold will give a profit is about 12% and a loss of 20%. That represents a big range and falls into a negative area. 

    If we compare data for, let’s say the S&P 500, we will see that the standard deviation was a bit under 10, for the same period of five years and an annual average return was around 13%.

    Let’s calculate again and we will see the range was between a gain of 23% and a gain of 3%.    

    Is gold volatile?

    But, keep in mind, the higher volatility of gold is the standard, not the anomaly. As an investment, gold is risky. But, something very similar to the relationship with currencies arises.
    Gold and stocks very rarely perform the same thing at the same time. Meaning, when the stock market lags, gold will be doing well. This doesn’t mean you shouldn’t invest in gold. Investing in gold ONLY is a risky position.
    This synergy between stocks and gold is where gold is a good investment. Honestly, gold can be a very safe investment. 

    For example, the relationship between the entire stock market and the midcap over the past 10 years is about 0.98. Gold has a relationship with the stock market of 0.04 during the same period. Basically, gold creates its own game.

    Is gold a good hedge against inflation

    Historically speaking, gold has been a good hedge against inflation. 

    The price of gold will always increase along with the increased cost of living. If we consider how gold prices performed over the past 50 years, we could see that its price has been rising while the stock market has been falling during the inflation periods. Do you remember the relationship between gold and currencies? 

    When fiat reduces its buying power during inflation, meaning, you will need more units of money to buy anything. Also, gold is much more valued in money, and, therefore, gold price tends to rise. Furthermore, gold is a good store of value. People are more willing to buy gold when they think that their national coin is dropping in value.

    But, should gold can be used as a hedge against inflation? In short, according to the mentioned above, yes. 

    Investing in gold as deflation protection

    When the business operations decrease, the economy has excessive debt, and prices decrease too, we are speaking about deflation. The full deflation we saw last time was the Great Depression (1930). Part of deflation happened after the 2008 financial crisis. But it has happened in some parts of the world.

    During the deflation (Great Depression), the buying power of gold rose while other assets’ prices fell. The most secure place to put cash in that time was gold. Today, we have a similar situation in some parts of the world.

    A portfolio plan

    Let’s explain this in the example from the recent past. During the recession from 2007 to 2009, the S$P 500 Index dropped 36%. But the gold price increased by 25%. Yes, it was extremely. But, can you see how good is to diversify your portfolio by adding gold? Even with the knowledge that gold is a volatile investment. 

    When you add the gold in your portfolio you will have that one that performs differently from the others. Gold will always act differently from bonds and stocks. That’s why many investors add gold to their portfolios. The recommended part is 10% of the overall portfolio in gold. That will create a good balance and good diversification of your investments. Moreover, you will provide the safety of the complete portfolio. By adding gold you will reduce volatility and risk. Moreover, investors are investing in gold as a safe haven during political and economic difficulties.

    Investing to have the dividend

    Gold stocks are suitable for growth investors, but a lot less for income investors. That is because the gold stock will change the prices along with the gold prices. But you can find well-managed mining companies, profitable even when the gold prices are falling.
    Rises in the price of gold are often increased in gold-stock prices. A small rise in gold prices can lead to important gains in the gold stocks. Moreover, holders of gold stocks could get a much higher ROI than holders of natural gold.
    Gold stocks that pay dividends tend to produce bigger gains. In periods when the whole industry is rising, they could be twice better than non-paying dividends when the market is in a downturn.

    Investing in gold is possible in many different ways.
    Today we have more investment options, such as futures, companies, bullion, coins, mutual funds, miners, jewelry, etc.
    For example, gold can outperform stocks and bonds which has happened during a period of 45 years. But if we look at 30 years-period, stocks and bonds were better. If we evaluate 15 years-period gold has outperformed both stocks and bonds. 

    This is one angle of view. The other comes from gold’s ability to protect your portfolio and act as a hedge against inflation.

    Anyway, it is smart to consider holding not more than 10% of the portfolio in gold. Choosing how to invest in gold includes analyzing the various gold-related investment products These investment products have various risks and return forms, liquidity components, etc. Consider how gold performs in a correlation with other assets.

  • Gold In India Is High But Tracking Global Signals

    Gold In India Is High But Tracking Global Signals

    2 min read

    Gold In India Is High But Tracking Global Signals

    The gold in the Indian market continued its rise with an over 1% surge today, September 16.

    October gold futures values on the MCX were trading higher by Rs 491.00 or 1.31% at Rs. 38015.00 per 10gm. The silver also climbed in price by 2.4% or Rs. 1100 to Rs. 46,856 per kg. 

    The notable increases in domestic gold price is a consequence of dropping of the rupee. It is to 71.62 per US dollar today. India imports most of its gold demand, and decrease in the price of rupee caused gold to be so expensive in the Indian markets. 

    The additional value of gold comes from the unstable geopolitical situation in the Middle-East. 

    Gold was trading higher at 1.6% ($1,512) in Singapore and silver was trading higher at 3.2%  ($17.9938) per ounce. Earlier this month, gold prices hit a 6-year high of over $ 1550 per ounce in the global market. 

    Gold could go up in the next week because some traders are buying it feeling uncertainty because of the attack on Saudi Arabian oil facilities during the last weekend. It is the so-called “safe-haven” buying. Gold traders are also interested in Wednesday’s Fed interest rate and further monetary policy. 

    Anyway, the gold price is higher than ever and precious in India which is phenomena per se. So, it deserves some explanation.

    Why is gold so valuable in India?

    Gold is valuable as a store of value and as a raw material for jewelry and electronic industry. Did you know that a lot of Indian nationals like to hold gold more than money in the banks?

    That habit has its opposing side too. Indian banks have fewer funds to lend. That’s why the credits are more expensive and companies are not so enthusiastic to invest, therefore. And there is that tricky situation, a classical Catch 22.

    When there are not enough investments and economic activity, the value of deposits and savings will be low. In turn, the borrowing, which is supposed to fund new investments and economic activity will be low, thus they will stay low. Because of these conditions wages, GDP and employment will stagnate. And also, there is a great possibility for domestic currency to go lower and become weaker. It can be, at the same time, a great possibility to grow export. But gold is our subject now.

    India is the biggest gold importer in the world. But the Indian government set limitations to importing gold. That caused another problem. There is great consumer demand but less supply. Hence, the price of gold goes up.

    The weaker currency has many consequences. 

    The inflation could be higher and the capacity for repayment foreign debt could be lower.

    The rupee has proceeded to decrease due to different circumstances. Besides the gold demand, the reduced growth expectations have led to a fall in the equities markets. Foreign investors had to buy rupee to be able to invest in the market and now they are selling the rupee to cash out. This is extremely strong pressure on the rupee. It looks like the fundamental changes needed in the Indian economy.

    You would like to know Who are the most successful investors in India?