Archives For Investing

Although we all knew the UK entertained a Brexit situation, not many believed it could happen, and a few made money when it happened. What is the situation now and how can it affect your portfolio?

At XTrade we like to keep an eye on the future without loosing sight of the past. Of course, we do not stare into the past, but we know that understanding the past can prepare you for the future. Would you not agree with that?

If so, have a look at what has happened since the Brexit announcement. The first signals were “SLOW”—like what you see written on the UK roads when you approach a tight curve or a crossing. Manufacturing exporters may have benefited a bit, but the GBP seemed to explore the depths of the GBP-USD chart, reaching its lowest point in 31 years, and the UK-centric FTSE 250 sheered abruptly.

What was the reaction of the bank of England? They clearly indicated that in August, interest rates would be cut.

In view of this, it is completely understandable that consumers and business confidence plummeted.

XTrade’s Advice for Investors

XTrade agrees with the majority of experts when they say that it is wise to be cautious. What usually happens in big-impact situations like the Brexit? Normally there is an instinctive reaction, the same as when you hear the horn of a car behind you—you jump. But what if the car is not beeping at you, but at someone else? If you instinctively jump you could actually be putting yourself at risk by moving towards the car. So, first make sure of what is happening and then take the right action, if necessary. We say if because at XTrade we are aware that many investors’ outlooks may have not changed, therefore it would not be advisable to change their strategy.

Nonetheless, it is evident to all that the vote to take the jigsaw piece with the English flag away from the European puzzle can and will have big consequences for investors which will affect their pensions, properties, and even the capacity to trade collectibles.

Should I Buy Government Bonds?

The reality is that while the future of the economy of the United Kingdom is a bit gloomy since it lost the AAA rating, quite a few investors seem to be purchasing UK bonds, why? Well, that depends on the amount of optimism they have.

For those who believe that the UK economy will thrive as a result of the challenge presented by saying au revoir to the European Union, buying fixed income securities right now may not be the best idea.

However, what would happen were inflation to continue lethargic over a long period of time? The Bank of England would be obliged to kick into action and cut rates, in which case it would be beneficial for you to lock in the interest now, before it goes into a tailspin.

So far, UK government bonds have managed to be one of the top assets, recompensing owners—or those who trade CFDs with XTrade—with substantial returns. And it is quite likely that the Bank of England will work to support UK government bonds.

In this day and age, living from cheque to cheque can be a dangerous prospect. Factors such as an uncertain economy, inflation and mounting expenses can all dictate that once-liquid finances may very well be subject to a great deal of strain. Personal wealth growth is nonetheless a reality when referring to the opportunities that await within the world of currency trading. The Forex markets are now exceedingly popular due to the fact that anyone can access this realm through modern online trading systems. How can personal wealth be grown through such an approach?

The Non-Stop Nature of the Currency Markets

Indices such as the FTSE, the Dow Jones and the NASDAQ are only open for a certain amount of time each day. This can prove problematic for those in different geographic locations. For example, traders in the United Kingdom have to grapple with a six-hour time difference between London and New York. This is not the case in regards to the currency markets. There is always an index open somewhere in the world. Thus, positions can be opened or closed when it is the most convenient (and sensible) for the investor.

Sensible Margin Trades

Margin trading has developed somewhat of a dubious reputation during the past few years. This is primarily cause by investors who were unaware of the risks involved. When greed supersedes logic, losses inevitably occur. CMC Markets offers healthy margins and yet, these should only be utilised when an understanding of their mechanics has taken place. Prudent margin trading can offer incredible returns while the exact opposite is true for those who are risk takers.

Modern Technology

There is no reason not to use the tools at one’s disposal. CMC Markets currently boasts more than 80 technical indicators within their trading architecture. These include:

  • Price projections.
  • Technical analyses.
  • Mobile capabilities.
  • Price histories.
  • Chart intervals.

All of these instruments will provide the clarity necessary to make informed choices. Why not exploit what they have to offer?

Emotionless Trading

Perhaps the biggest downfall of the would-be successful Forex trader is that greed and fear overtake logic and sensibility. Trades should always be enacted with an objective sense of pragmatism in mind. While there is no doubt that a winning position will cause excitement, this emotion should never supersede logical decision-making strategies. What goes up and can will come back down. “Letting it ride” can therefore be a dangerous prospect. In the same respect, completely pulling out because of one poorly performing position can just as easily limit the ability to accrue a profit.

Whether short-term goals are the main objective or the trader wishes to build a sustainable income to be used during an upcoming retirement, the Forex markets offer a wealth of opportunities. It is nonetheless a fact that these strategies need to be adopted in order to maximise the potential of walking away a winner. As always, CMC Markets is here to help.

We have all heard of them. We have laughed them off but secretly have wondered whether they are true or not. Like any other profession, the stock market also has developed quite a lot of myths. While some may be true most of them are not. These are just random stories made up by people who have suffered a loss in the market. Listed below are the top 5 stock market myths which are not true

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Tips When Buying a Home

February 25, 2013 — 10 Comments

Buying a new place, whether it be a condo, house, townhouse, and so on, can be a very long and difficult process.  When we bought our current house that we live in, it was extremely easy. Of course easy is relative, but it sure did seem easy.

We looked at a lot of houses, but we only put a contract down on one and it was accepted (after a couple of negotiations). Our move in date was set for just a couple of weeks after that and we moved in maybe less than one month from the day that we first toured the house. Even our loan officer said he’s never been through a home process as quick and as easy as process was.

However, I have heard others’ stories about how hard their home buying process was. Some have to wait months to sign the papers and move in. Some submit multiple offers just to be outbid by tons of other people.

There are so many things to think about when you buy a new home, and in today’s post I will be listing some of those.

Put 20% down

Putting 20% down has many positives for a home buyer. It will lower your payment in more than one way, mainly that you will take out a smaller home loan.

If you don’t put down at least 20%, then most mortgage companies will require that you pay Private Mortgage Insurance (PMI). This can add an extra $50 to $150 to your monthly mortgage amount, and possibly even more. We made the mistake of not putting 20% down and now have to pay PMI. We definitely won’t be making this mistake with our next house.

Get pre-approved

Getting pre-approved is a big step.  Not knowing what you can “afford” and looking can be a big problem because you might fall in love with something but then no bank approve you for that amount. If you are pre-approved, then you can eliminate houses out of your search that are not possible due to your budget. It will save you a lot of time and the possibility that you will buy way outside of your budget.

Buy what you can truly afford

Now, just because you were pre-approved for a loan, it does not mean that you can truly afford that loan amount. Banks are notorious for approving individuals for MUCH more than they can afford. When we bought our current house, we were pre-approved for much more than could truly afford. Also, you are pre-approved normally on your gross income, not net income. Your gross income is of course much higher than your net and can make it seem like you can afford a house, when in reality you cannot.

Our real estate agent also gave us a little tip: if you are pre-approved for much more than you ever plan on buying a house for, then ask the loan officer to send you a pre-approval letter stating that you are pre-approved for a smaller amount. This way when you put a contract on a house, the seller and/or their real estate agent do not see some crazy number that someone believes you can afford. This way there will be less negotiations as the seller won’t be trying to get you to your top dollar.

Think about the long-term

How long do you plan on living in your home? A lot of people will say that their first home will just be a starter home, but what if that ends up not being the case and you live there for quite some time? You might want to look into the school district there just in case you do decide to have children, make sure the house is something that you would like for quite some time, and so on.

What tips do you have for a potential homebuyer?

Any smart investor is going to look to look to both protect their investments while also securing the best return possible. It is always a juggling act for any investor, regardless of how much experience he/she may have. Investment tracking is quite a task. While there are many important ways to accomplish this balance, diversification is one of best ways to accomplish both values.

What is Diversification?

According to investopedia, diversification is defined as:

A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio. 

Diversification strives to smooth out unsystematic risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Therefore, the benefits of diversification will hold only if the securities in the portfolio are not perfectly correlated.

Why Diversification is Important

Diversification is important, as I mentioned above, because it allows you to accomplish two things at once. The first, and perhaps more important, is to protect yourself from any significant loss. The basic idea is that one area of the market is performing poorly, the others will make up for it. It is also very unlikely for all markets or investments within a market to drop significantly at one time. The risk is inherently lower despite taking a more aggressive investment strategy.

The other major benefit to diversification is the ability to maintain an aggressive approach and thereby maximizing long-term return. Instead of sticking to conservative investments like bonds or cd’s, diversified investors are able to keep their money in high-yielding investments.

How to Diversify Your Investments

While a lot (maybe enough to fit in entire books) could be said about how to actually diversify your investments, I thought I would give you a picture of what I am doing to diversify my portfolio. Keep in mind that my investment history is quite short and over the next few years I plan to diversify it even further.

Employer 403b Account – One of the best ways to start investing is with your employer’s investment account. It often comes with some form of matching, so it automatically gives you a great return on your investment. I personally have mine set up with a mutual fund because of how little is being invested. It provides for some inherent diversification.

Real Estate Investing – One of the ways I am in the process of investing in over the next few months is real estate investing. I believe this to be a secure investment for decades to come and the revenue stream should only increase with inflation.

Dividend Stocks – While I am not an expert on dividend stocks, I have been learning a lot about the benefits of investing in dividend stocks. In fact, dividend stocks over a period from 1972 to 2010 provided a significantly larger return than non-dividend stocks. Dividend stocks offer some minor diversification as there are two revenue streams. The first is the dividend as a form of cash flow and the other in the potential increase in the stock value. If you want to learn more about dividend stocks, there are many great resources like the list of high yield dividend stocks by Dividend Stocks Online.

Side Business – Another way that I am trying to diversify my investments is to build up a side business for myself. Eventually I would like to see it develop into my full-time gig, but I have to sustain a decent income before I make that leap.

While diversification can (and often is) be simplified to investing in mutual funds or ETFs, it is much more than that. It should include different investment vehicles and markets.

How are you diversifying your investments?


Top 5 Mortgage Mistakes

April 19, 2012 — 6 Comments

As someone who is looking forward to purchasing a condo next year, I have been doing a crazy amount of research on mortgages.  Honestly, I keep stumbling upon mistakes that people have made with mortgages.  Since I don’t want to be someone who makes a mistake with their mortgage, I’m planning on soaking in all useful advice and attempting to make the wisest decisions I can going forward!

So, what are the worst mortgage mistakes one can make?  Well, I’ve compiled the top five mortgage mistakes and hopefully you can learn from what other people have done wrong and not make the same mistake!

1- Taking out an adjustable rate mortgage

Can someone say 2008?!  This is what caused our most recent recession among some other things.  An adjustable rate mortgage plays into the greedy side of Americans and allows you to buy a bigger house than you can afford.  The first few years, you’ll have a really low interest rate but then this rate ends up shooting up over time.  The problem with this is that you’ll end up drowning in interest payments and more than likely lose your home!  Talk about humiliating…

2- Settling for a reverse mortgage

For the crowd of age 62 and older, a reverse mortgage may seem inviting but it’s designed to bite you in the butt.  What a reverse mortgage does is provides a stream of income by pulling out funds from your home equity.  This can be paid out through an annuity or monthly payments.  It’s up to you what poison you pick because either way, you’ll be faced with hefty fees and you will slowly lose ownership over your home and have to hand it all over back to the bank.  Does not sound like fun to me!

3- Skipping the down payment

If there is one thing you need to remember from this article, it’s that you NEED to put down a down payment!  Why you ask?  It’s not unusual to find yourself upside down with your mortgage if you don’t.  You can end up owing more money than your home is worth.  At this point, it’s flat out painful.  You want to avoid this situation.

4- Can anyone say exotic mortgages?

I bet you’ve never heard of these bad boys.  Exotic mortgages may sound enticing but they are dangerous financial vehicles!  Instead of building up your equity, exotic mortgages produce negative equity.  Yes, you’re naming your payment price, but at some point, all the debt you took out for your mortgage is going to come due.  As the years go on, you are increasing the amount you owe.  It’s counter-intuitive and I advise that you avoid this at all costs.  Owning a home is not worth this risk!

5- Liar, liar, pants on fire: liar loans

Liar loans make me sick just thinking about them.  Not only are they irresponsible to take out but they can ruin your financial life.  At the core of a liar loan is that you don’t need to produce any verifiable documentation in terms of income and job stability.  In theory, people can lie on these loans and the bank will just assume you’re telling the truth.  Because you lied on your income statement, you will soon find yourself not being able to make the monthly payments.

Don’t fall for these mistakes!

In conclusion, don’t fall for these bad decisions.  While they may seem cool and unique, they are designed for your failure.  There is something to be said about ethical mortgages and choosing responsibility over showing off a big house.  At the end of the day, you should only be buying enough house for your needs.  It’s anti-American to do that but times are changing!

S&P 500 Soars After Earthquake!       This just in… today’s earthquake in Mineral, VA that prompted the evacuation of several buildings in Washington caused the stock market to soar. Stocks edged a full 1.23% higher before closing for the day after the temblor* hit the East Coast. In other news, butter production in Bangladesh was up 0.615% on August 23, 2010.

       And that’s why financial reporting is completely ridiculous… All the financial reporting that talks about stock market movements should come with a required phrase – “We think that the stock market…”. It’s amusing how we try to peg exactly what caused the market movements and why. The truth is these are only guesses.

       But seriously, the stock market really did go up after everyone in Washington had to leave their offices. Coincidence? I think not.

* Note: I picked this up from NPR. Gotta love thesauri…