Investor Fees

There is a considerable amount of profit that can be generated from the right kind of investment, but merely being successful in the market is not enough to guarantee a good return.

One of the most important factors to consider is the cost of fees and failure to include this in any calculations can turn a winning investment into one that generates a loss.

Not every investment generates the same kind of fees and those wanting to hold a diverse portfolio must ensure they understand the various different structures that apply.

Fees are not always obvious and can be disguised in a variety of ways, such as being factored into the bid-ask spread, a method that is used in foreign currency trading. Fixed sum fees plus a percentage of either the profits or the initial investment are another common way of charging, as well as pure commission.

Some types of investment carry far higher fees than others. Typically, those further away from the mainstream and with lower volumes will be more expensive than the kinds of investments that will appeal to the masses. For example, a Brazilian corporate bond will cost far more in fees than purchasing a US Treasury Bond.

At the opposite end of the spectrum, ETFs are one of the cheapest forms of investment, charging very little in the way of fees and thus making them an attractive option for many. Mutual funds overall tend to offer good value, but a select few carry front end charges of as much as 5.5%. This kind of fee structure means that in order to return a decent profit, the investment must significantly outperform the market, an almost impossible task.

Whilst fees without doubt impact on potential gains, it is important to ensure that this is not the only factor taken into account when choosing an investment vehicle. It is important to decide on the right kind of asset, balancing risk with profit rather than opting to proceed because a particular option has a cheap fee structure. Once you have decided the basics of what you want to invest in, you should then scour the market for the most profitable deal on offer.

It is possible to find some brokers in the market who are willing to waive fees if you are depositing above a certain amount. Again, whilst this should not influence you to invest more money than you can afford to, it is worth considering, because the financial advantages to zero charges will have a significant impact on your return. However, other brokers also charge their clients fees for a lack of activity, meaning you will be stung with a bill before you even start. Needless to say, these kind of contracts are best avoided unless you can be absolutely certain that you will be remaining active.

When it comes to investing money saving money to start with should be the primary consideration. By ensuring you take care at the outset not to sign up to a deal that is going to be expensive, the chance of making a healthy profit on any investment increases substantially.

Best Currencies for Forex Trading

The foreign currency market, or forex as it is more commonly known, is becoming an increasingly attractive venture for those new to financial trading.

Whilst forex offers many advantages not possible with conventional stock dealing, such as making a profit even when prices are falling, there are so many options to take into account that it can be bewildering for novices to know where to start.

Many brokers offers in excess of 80 different forex pairs and knowing the best pairs to trade without much experience under your belt can be difficult. However, picking the currencies to trade is a very serious business and can mean the difference between becoming successful or finding the market to difficult to follow.

Forex has several currencies that are known as `majors` and these are the ones which are recommended for novices. Those included in the list of majors are the US dollar, sterling, Canadian dollar, Japanese yen, Australian dollar, Swiss franc and the euro.

Whilst the market does offer the option to trade in a long list of currencies and the more exotic ones may seem like a more glamorous option, these are best avoided until a considerable amount of experience has been gained. This is because there is not as much information to be found on these currencies and they may move in a very different way to the majors. They therefore require indepth research before a position is opened.

Another reason why exotics are best left to experienced traders is because the spreads are often far larger and this is another sign that a pair should be avoided. Traders with less experience should look for a currency pairing with a low spread, because these tend to be less volatile with less prolonged spikes. These two factors mean they are easier to trade.

Whilst any pairing from the majors should be relatively easy to adopt to start with, the EUR/USD or GBP/USD are two trades that are worth a special consideration. The former is one of the most popular pairings in the market, with a rock bottom spread and one of the least risky positions to trade. Many experts believe it conforms very well to technical analysis, whilst fundamental experts agree that there is a wealth of information available from the global coverage of these two international heavyweights.

The latter is a slightly riskier option and can be viewed as more volatile, but it remains an option for new traders. One of the reasons why it is a recommended pairing for newbies is that it is the subject of plenty of market research, making analysis far easier to carry out.

However, it is essential that anyone new to the trade does not go overboard in selecting which currencies to start with; it is recommended that just one pairing is picked at first. Every currency has its own individual way of moving and responding to global events and it can take some time to learn. Having several currencies on the go at once can dilute the learning experience and prevent sufficient notice of being taken of key indicators.

Success in forex currency trading can be achieved by anyone, but anyone hoping to make a million overnight is likely to be disappointed. Patience and a slow and steady approach are the two most essential factors to prevent a total wipeout and will gradually build a healthy balance in your account.

The Benefits Of An Investment Club

The uninitiated tend to view them with suspicion, but investment clubs are by no means as spurious as they sound; joining an investment club is not akin to signing up for a Ponzi scheme, flushing money down the toilet or walking down a dark alley with an envelope full of cash. Investment clubs actually make good commercial sense, providing novice investors with the opportunity to make money from stocks and shares in a way that may be considered safe, fun and friendly.

Unless Nick Leeson is in charge of proceedings, an investment club is likely to involve relatively small investments, at minimal risk, for moderately healthy returns. An investment club is often seen as a way to make a little extra cash or as a more logical (in terms of odds) alternative to joining a lottery syndicate, but what exactly is an investment club?

As its name suggests, an investment club is a club that has been formed for the purpose of investing money in stocks, shares or commodities. The majority of investment clubs are formed by people who already know each other, but groups can also consist of complete strangers. The special ingredient of most investment clubs is unity: all members of the club should share similar ideas on how their money is invested. So how much is invested and who decides what to do?

Investment clubs were initially regulated, in a completely unofficial capacity, by ProShareClubs, but any legally eligible person can join or form a new investment club in the UK. Typically, investment clubs comprise a number of individuals who contribute an agreed sum of cash (usually anything from £10 per month) to the investment pot, out of which money is invested in stocks, shares, etc., in a way that is planned by the club.

Friends and family often form investment clubs because they feel that control over the direction of spending is in their control. This happens to be one of the most important advantages of joining or forming an investment club instead of dealing with an investment firm or manager. The members of an investment club can democratically choose how to invest funds, selecting stocks and shares that reflect the interests of members. In contrast, investment managers tend to manage portfolios with limited direction from clients, who retain little control over investments.

Another advantage or benefit of investment clubs is that people who know relatively little about the stock market can share ideas and information with like-minded members. The knowledge that can be gained from taking part in an investment club is very often substantial, but the learning curve is not usually too steep for most novice investors to tackle.

Unlike private portfolios, investment clubs share gains and losses equally. Assuming the constitution of the investment club requires all members to contribute equally to the investment pot, the amount of money generated from dividends and share transfers can be distributed evenly throughout the club (after fees have been subtracted). Profits and losses accrued from investment clubs must be individually declared for tax purposes by each member.

Aside from the benefits mentioned above, investment clubs offer people the chance to meet and interact with others in a way that is both exciting and educational. The risks involved in small to medium sized investment clubs are usually very small, but any person who plans to invest money on stocks and shares should proceed with caution. In all cases, it is sensible to seek help from professional traders for complex investments, while general information can be sought from Moneysupermarket.

Ways to Invest Your Money

If you have some cash to invest there’s usually three main ways of investing your money – Cash, Bonds and Stocks. However things aren’t quite as straightforward as that as each of these three types has multiple types of investment opportunities that come under that main heading.

The stock markets can be intimidating for anyone with little knowledge of investing, however depending on the type of investor you intend to be – Aggressive, Moderate or Conservative and whether you intend to invest your capital in high or low risk investments will have an effect on the understanding you will need to gain before taking the plunge and starting your investment strategy.

Investors who are cautious with their cash known as conservative investors often invest in cash such as savings accounts that pay an interest rate, mutual funds, Certificates of deposit and US treasury bills. These tend to be a lower risk where your initial investment will grow slowly over time.

Moderate Investors whilst investing in bonds or cash tend to also dip into the stock market, foreign exchnages aka FOREX as well as investing in lower risk real estate. This can all be low or medium risk.

People who are willing to take higher risks with their investments are known as Aggressive Investors. They usually invest mainly in the stock market but may also diversify into higher risk real estate as well as business ventures. With the much higher risks comes the opportunity of bigger returns on investment (ROI).

Whilst books can be written on the subject in summary those are the main types of investment and investor. Try your hand at investing your money can be a lot of fun and can give you a decent return on your investment. However whatever investment strategy you decide to undertake, they all do carry risks. Do some research or seek professional advice first, understand what risks are involved and pay attentions to current relevant news and past trends that do tend to repeat themselves.

Employ Your Home Equity

If you’ve got a home loan the chances are you have some equity in it. Equity is the value of your property after subtracting the cost of your mortgage on your home i.e. the amount left over if you were to sell your home and pay off your mortgage. The equity in your home increases over time as you gradually pay off the initial mortgage and can also increase with property inflation, and this built up equity can be used if required at a later date for all sorts of purposes.

It’s a very bad idea to spend any equity you may have in your home on things like holidays or new cars. A much better idea is to invest the money in something that will give you a decent return on your investment and therefore grow your equity.

Home Improvement

Renovation of your home can significantly increase the value of your home, and therefore increasing the equity held in it. This also has the added benefit of also improving your living conditions and comfort. But before you decide to use some of your equity, research should be undertaken to discover what home improvements are likely to give you the best return on your investment as not all improvements made to your house will significantly improve your property’s resale value.

Kids Education

Growing and then releasing some of your homes equity is a good way of helping to fund your children’s education. Whilst not giving a financial return on your investment it can be very satisfying having the ability to give your children a decent start in life.

Improve Your Credit Score

In today’s modern world debt in one form or another such as credit cards, mortgages or loans is almost unavoidable. Unfortunately even with careful financial planning many people do at some point in their run into financial difficulties. This in turn leaves you with a poor credit history which can affect the cost of future borrowing. By releasing equity from your home and using that to help pay off creditors can help you to improve your FICO score, which will in turn potentially allow you to benefit from cheaper finance rates in the future.

Before deciding to take this route you should find out the interest rates on your savings and debts and maybe consult with a financial expert to go through the calculations. With so many variables it can become confusing about choosing the right term for your home equity loan, how much to save and assign to payments and how to consolidate.

A Word of Warning

If you fail to plan and budget properly and overstretch yourself financially your home equity could be at risk. You could potentially lose your house and even be made bankrupt. Therefore always use your home equity intelligently with plenty of forethought.