SmartInMoney.com wrote in the article "ETF Structure and Advantage" that Exchange-traded funds (ETFs) keep flourishing as they recorded their largest month on record in July with US$646-billion in assets, according to Birinyi Associates
Exchange traded funds in their basic form are baskets of securities that are traded, like individual stocks, on an exchange. Funds can track any number of indexes from the large-cap S&P 500, small-cap Russell 2000, or even commodities. Most of ETFs on the market currently are passively managed, tracking a wide variety of broad to narrow market indexes.
As of July, SPDR (SPY) remains the largest ETF at US$69-billion. SPDR Trust is an exchange-traded fund that holds all of the S&P 500 Index stocks
Exchange traded funds have grown rapidly to cover most broad investment purchases and many niche markets. Funds that drill down into specific sectors, industries, regions, countries, and asset classes make up a great percentage of the ETF universe, offering relatively inexpensive access to investments such as currencies, precious metals, or emergent industries that thus far have been the sole province of larger institutional and wealthy investors.
Recently, fund companies have also launched actively managed ETFs. These funds are not tied to a benchmark, but continue to sport the familiar benefits of ETFs.
ETFs attract both investors and traders who do not wish to make individual stock selections but only capture the broad movement of the market. ETFs appeal to different types of do-it-yourself investors. Investors who prefer index funds over actively managed offerings find ETFs appealing because many of them are very cheap. Some day-traders like ETFs because of their stock-like qualities and their focus on individual sectors or markets.
Read full article at smartinmoney.com
4.8.09
Flash orders will be banned
The Securities and Exchange Commission (SEC) is moving toward banning a trading practice, called as “flash orders”, that gives some brokerages a split-second advantage in buying or selling stocks.
Flash orders give certain members of exchanges including Nasdaq, Direct Edge and BATS the ability to buy and sell order information for milliseconds before that information is made public. High-speed computer software can take advantage of that brief period to allow those members to get better prices and profits.
Flash orders give certain members of exchanges including Nasdaq, Direct Edge and BATS the ability to buy and sell order information for milliseconds before that information is made public. High-speed computer software can take advantage of that brief period to allow those members to get better prices and profits.
26.3.09
Investing in bear market by dollar cost averaging
At times like these you may even admit that shares are probably pretty cheap now. But what if things get a lot worse?
Investing by dollar cost averaging can facilitate your investment appetite and your worry about the risk. The idea is that you put exactly the same amount of money into mutual funds or stocks every month or certain interval of time.
Choosing to dollar cost average strategy, you are giving up any attempt to time or catch the market bottom. Trying to catch the bottom is like attempting grasp a falling knife.
To see how dollar cost averaging might have helped an ordinary investor during the worst meltdown in history, Brett Arends looked at the Great Depression data from Ibbotson Associates. He looked at total shareholder returns, which includes reinvested dividends, for a basket of the top 500 companies on the market. He wrote the following results on the Wall Street Journal.
At the worst moment in the crash of 1929-1932, someone who dollar cost averaged had still lost about two-thirds of his or her money.
That is plenty scary. Terrifying, even. But before you bolt from your mutual funds, never to return, let me add several things.
First, these are the numbers for the unluckiest investor - the guy who began dollar cost averaging at the absolute worst moment in history, namely Sept. 3, 1929. Those who started later in the crash did at least slightly better.
Second, the performance in real terms wasn't quite as bad as it seems. That's because of deflation - the phenomenon of falling prices that helped cause the crash in the first place. A dollar in 1932 bought a lot more than a dollar in 1929: Average prices fell by about a third. So in real terms even the unluckiest investor - one who started in September 1929 - was only down, at the low point, by just over a half.
Third, they recovered fast. When the market turned, those who stuck quietly to their plan got repaid quickly. Forget that stuff about 1954. According to Ibbotson data, someone who dollar cost averaged was back on level terms by 1933. And by 1936 he had doubled his money (though the crash of 1938 then knocked him back to evens for a while).
Incidentally, while Wall Street plummeted 89% at its lows, overseas markets did not do quite so badly. They fell, overall, about two-thirds according to data from Philippe Jorion, an economics professor at University of California-Irvine. That's still bad, but it is very different from 89%.
It's an argument for sticking to regular investments through this crash: Not bailing, and not jumping in with both feet either. The simplest strategy worked; investing the same amount, every month. It's also an argument for investing globally, and not just in the U.S., which is a lot easier to do today than it was in 1929.
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Investing by dollar cost averaging can facilitate your investment appetite and your worry about the risk. The idea is that you put exactly the same amount of money into mutual funds or stocks every month or certain interval of time.
Choosing to dollar cost average strategy, you are giving up any attempt to time or catch the market bottom. Trying to catch the bottom is like attempting grasp a falling knife.
To see how dollar cost averaging might have helped an ordinary investor during the worst meltdown in history, Brett Arends looked at the Great Depression data from Ibbotson Associates. He looked at total shareholder returns, which includes reinvested dividends, for a basket of the top 500 companies on the market. He wrote the following results on the Wall Street Journal.
At the worst moment in the crash of 1929-1932, someone who dollar cost averaged had still lost about two-thirds of his or her money.
That is plenty scary. Terrifying, even. But before you bolt from your mutual funds, never to return, let me add several things.
First, these are the numbers for the unluckiest investor - the guy who began dollar cost averaging at the absolute worst moment in history, namely Sept. 3, 1929. Those who started later in the crash did at least slightly better.
Second, the performance in real terms wasn't quite as bad as it seems. That's because of deflation - the phenomenon of falling prices that helped cause the crash in the first place. A dollar in 1932 bought a lot more than a dollar in 1929: Average prices fell by about a third. So in real terms even the unluckiest investor - one who started in September 1929 - was only down, at the low point, by just over a half.
Third, they recovered fast. When the market turned, those who stuck quietly to their plan got repaid quickly. Forget that stuff about 1954. According to Ibbotson data, someone who dollar cost averaged was back on level terms by 1933. And by 1936 he had doubled his money (though the crash of 1938 then knocked him back to evens for a while).
Incidentally, while Wall Street plummeted 89% at its lows, overseas markets did not do quite so badly. They fell, overall, about two-thirds according to data from Philippe Jorion, an economics professor at University of California-Irvine. That's still bad, but it is very different from 89%.
It's an argument for sticking to regular investments through this crash: Not bailing, and not jumping in with both feet either. The simplest strategy worked; investing the same amount, every month. It's also an argument for investing globally, and not just in the U.S., which is a lot easier to do today than it was in 1929.
Sponsored Links
Futurist69
Consfin
12.3.09
Madoff goes to jail for running Ponzi scheme
Bernie L. Madoff pleaded guilty to all charges against him for running the largest Ponzi scheme at a hearing in Federal District Court on Thursday, Mar. 12. He also said he was deeply sorry and ashamed.
Mr. Madoff delivered a plea allocution, essentially an explanation of his crime and an acknowledgment of guilt. “I am painfully aware that I have deeply hurt many, many people, including the members of my family, my closest friends, business associates and the thousands of clients who gave me their money,” he said in his statement. “I cannot adequately express how sorry I am for what I have done.”
Madoff was also pulled away to jail, after the judge Denny Chin refused to let him remain free until sentencing. “I don’t need your statement,” the judge told prosecutors, who were waiting to argue against setting Madoff free until his sentencing time in June. “It is my intention to remand.”
Here's the AP's list of the government’s 11 counts and possibly penalties:
Count 1: Securities fraud. Maximum penalty: 20 years in prison; fine of the greatest of $5 million or twice the gross gain or loss from the offense; restitution.
Count 2: Investment adviser fraud. Maximum penalty: Five years in prison, fine and restitution.
Count 3: Mail fraud. Maximum penalty: 20 years in prison, fine and restitution.
Count 4: Wire fraud. Maximum penalty: 20 years in prison, fine and restitution.
Count 5: International money laundering, related to transfer of funds between New York-based brokerage operation and London trading desk. Maximum penalty: 20 years in prison, fine and restitution.
Count 6: International money laundering. Maximum penalty: 20 years in prison, fine and restitution.
Count 7: Money laundering. Maximum penalty: 10 years in prison, fine and restitution.
Count 8: False statements. Maximum penalty: Five years in prison, fine and restitution.
Count 9: Perjury. Maximum penalty: Five years in prison, fine and restitution.
Count 10: Making a false filing with the Securities and Exchange Commission. Maximum Penalty: 20 years in prison, fine and restitution.
Count 11: Theft from an employee benefit plan, for failing to invest pension fund assets on behalf of about 35 labor union pension plans. Maximum penalty: Five years in prison, fine and restitution.
Mr. Madoff delivered a plea allocution, essentially an explanation of his crime and an acknowledgment of guilt. “I am painfully aware that I have deeply hurt many, many people, including the members of my family, my closest friends, business associates and the thousands of clients who gave me their money,” he said in his statement. “I cannot adequately express how sorry I am for what I have done.”
Madoff was also pulled away to jail, after the judge Denny Chin refused to let him remain free until sentencing. “I don’t need your statement,” the judge told prosecutors, who were waiting to argue against setting Madoff free until his sentencing time in June. “It is my intention to remand.”
Here's the AP's list of the government’s 11 counts and possibly penalties:
Count 1: Securities fraud. Maximum penalty: 20 years in prison; fine of the greatest of $5 million or twice the gross gain or loss from the offense; restitution.
Count 2: Investment adviser fraud. Maximum penalty: Five years in prison, fine and restitution.
Count 3: Mail fraud. Maximum penalty: 20 years in prison, fine and restitution.
Count 4: Wire fraud. Maximum penalty: 20 years in prison, fine and restitution.
Count 5: International money laundering, related to transfer of funds between New York-based brokerage operation and London trading desk. Maximum penalty: 20 years in prison, fine and restitution.
Count 6: International money laundering. Maximum penalty: 20 years in prison, fine and restitution.
Count 7: Money laundering. Maximum penalty: 10 years in prison, fine and restitution.
Count 8: False statements. Maximum penalty: Five years in prison, fine and restitution.
Count 9: Perjury. Maximum penalty: Five years in prison, fine and restitution.
Count 10: Making a false filing with the Securities and Exchange Commission. Maximum Penalty: 20 years in prison, fine and restitution.
Count 11: Theft from an employee benefit plan, for failing to invest pension fund assets on behalf of about 35 labor union pension plans. Maximum penalty: Five years in prison, fine and restitution.
31.1.09
How small investors got burned by Madoff
Bernard Madoff, was arrested Dec. 11, 2008 and charged criminally at federal court in Manhattan with securities fraud in masterminding a massive Ponzi scheme.
The alleged fraud of Bernard Madoff has put the heat on so-called feeders, the giant hedge funds that funneled more than $20 billion to the now-disgraced money manager. But it turns out those players depended on another group of smaller funds and individuals to gather money. The largely unregulated crowd, including accountants, lawyers, investment managers, even doctors, opened the exclusive world of hedge funds to more investors and charged exorbitant fees for the privilege.
A lot of small investors got exposure to Madoff through sub-feeders. The system allowed investors to gain entrée to Madoff with far fewer dollars, thereby expanding his clientele beyond big institutions and billionaires to wealthy individuals of more modest means. Many investors had no idea what they were buying since marketing documents rarely mentioned Madoff by name.
Fees were collected at every level. Investors paid layer upon layer of fees with seemingly little regard for how they ate into gains. Those at the bottom paid the biggest tab and realized the smallest returns; and now only see their investments disappear.
The alleged fraud of Bernard Madoff has put the heat on so-called feeders, the giant hedge funds that funneled more than $20 billion to the now-disgraced money manager. But it turns out those players depended on another group of smaller funds and individuals to gather money. The largely unregulated crowd, including accountants, lawyers, investment managers, even doctors, opened the exclusive world of hedge funds to more investors and charged exorbitant fees for the privilege.
A lot of small investors got exposure to Madoff through sub-feeders. The system allowed investors to gain entrée to Madoff with far fewer dollars, thereby expanding his clientele beyond big institutions and billionaires to wealthy individuals of more modest means. Many investors had no idea what they were buying since marketing documents rarely mentioned Madoff by name.
Fees were collected at every level. Investors paid layer upon layer of fees with seemingly little regard for how they ate into gains. Those at the bottom paid the biggest tab and realized the smallest returns; and now only see their investments disappear.
10.1.09
Lessons from tumultuous 2008
We just left the tumultuous year 2008, when
Entering this new year of 2009, investors should learn the lesson of the 2008. John C. Bogle, the founder and former chief executive of the Vanguard Group of Mutual Funds, shared his following thought about Six Lesson for Investor, as he wrote on The Wall Street Journal.
Beware of market forecasts, even by experts.
…Strategists aren't always wrong. But they have been consistent, betting year after year that the market will rise. Thus, they got it about right in 2004, 2006 and 2007, but also totally missed the market declines in 2000, 2001 and 2002, and vastly underestimated the resurgence in 2003…
Never underrate the importance of asset allocation.
…With all the focus on historical returns that greatly favor stocks, don't ignore bonds. Consider not only the probabilities of future returns on stocks, but the consequences if you are wrong…
Mutual funds with superior performance records often falter.
… Chasing past performance is all too often a loser's game…
Owning the market remains the strategy of choice.
…Active management strategies as a group lose because they are expensive. Passive indexing strategies win because they are cheap…
Look before you leap into alternative asset classes.
…When the investment grass looks greener on the other side of the fence, look twice before you leap…
Beware of financial innovation.
…Most of financial innovation is designed to enrich the innovators, not investors…
4.12.08
Under the mattress money outperforms equity
This year has been a disaster for investors as their stock portfolios dive to unimaginable level. Frustrated investors may be discouraged from buying stocks for their retirement. The daunting truth is that they would be better off putting their money under the mattress than saving in equity funds or balance funds in the past ten years. The following excerpt and chart from The Economist tells a little of the facts
… The stockmarket’s decline this year has been so steep that it has erased all the gains made in the rally from 2003 to 2007. In late November, the S&P 500 index dipped to its lowest level in 11 years. The extravagant claims made for equities in the late 1990s, when there was talk of the Dow Jones Industrial Average hitting 36,000 (or even 100,000) have proven to be hollow. Lately the Dow, which was at about 13,000 at the end of last year, has been trading between 8,000 and 9,000.
… Those who have been methodically putting money into pension plans (often known in
Figures from Morningstar, an investment-research firm, show that an American who put $100 a month for the past ten years into the average equity fund would have accumulated just $10,932—$1,068 less than he invested. Even a balanced fund (one that mixes government bonds and equities) would have lost money.
… The value of stockmarkets around the world has fallen by almost half and is now about $30 trillion below its peak.
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