Different Ways to Invest in Gold

Gold is considered as the major hedging investment against inflation and economic crisis. The price of gold is some what steady compared to other investment options. There are many different options available for investing in gold.

• Gold bullion: involves investing in certified gold bars and gold coins. This is somewhat costly option which includes the direct ownership of the commodity; and thus includes storage and insurance costs. The price volatility of gold and dollar can cause positive or negative impacts.
• Gold jewelry: this is a more costly option from an investment point of view as you are buying product which is far more priced than the underlying gold value. But is a good option if gold price is expected to rise considerably in future.
• Gold based ETF and Mutual funds: cheaper option compared to first two and one does not need too much investing knowledge or research. No direct ownership required. But the fund allocation of mutual funds and ETFs may differ and thus investors should choose the one right for them.
• Futures on Gold and Options: For those having trading experience, gold futures are the most cost effective method to invest in gold. Because of low commission and margin requirements investors can control large sized contracts for small amounts. Options on gold futures are also a good option as they limit risks.
• Stocks of gold mining companies: this is one another indirect way of profiting from gold. But there are risks of holding equities and one should do proper research and analysis before owning a companies stock.

NobleTrading.com Features Online Stock Trading, Online Options Trading Online Futures Trading, Online Forex Trading Worldwide Brokerage Service, Day Trading Brokerage

What is Capital Growth Strategy?

Capital growth strategy is an aggressive asset management strategy, which aims at maximizing value of the capital or asset. It is a long-term strategy in which the portfolio is mainly constituted of equities. Capital growth strategy is usually a high-risk high-profit strategy which requires extreme money management and discipline.

Usually, a more than 65% of a portfolio based on capital growth strategy is of equities; the exact percentage can vary according to individual goals, portfolio capital and risk tolerance. 20 to 25% capital is allocated for fixed-income securities to limit the overall portfolio risk. More portfolio diversification is achieved through money market securities and keeping money as cash. Most individuals following capital growth strategy prefer growth stocks for investment. Most give preference to mid-cap and small-cap stocks because many of these sector companies show higher growth rate than market average.

The upside of capital growth portfolio management is faster capital appreciation – i.e. increase in asset value with rise in market value. The downside is high risk, high portfolio volatility and unpredictable return. One should properly analyze his financial stability and risk tolerance before adopting this type of portfolio management strategy.

NobleTrading.com Features Online Stock Trading, Online Options Trading Online Futures Trading, Online Forex Trading Worldwide Brokerage Service, Day Trading Brokerage

Ratios for Good Stock Picking

Determining the strength of the company and growth possibilities of its stocks are important steps in stock picking with a long-term profit goal. Traders and investors use many technical indicators and ratios for this purpose. Below are some of the important ratios to be considered when picking good stocks.

• Reserves and ploughback : Reserves are the accumulative profit of the company and plaughback is the profit available for adding to reserve after expenses and dividend payoffs. Growth companies usually have high reserve and high ploughback.
• Book value : shows the worthiness of company shares. Book value per share is the ratio between total asset minus total liabilities of the company and total equity shares.
• EPS (Earnings Per Share) ratio : one of the most important investment ratio. Is calculated as profit after tax divided by number of issued equity shares.
• P/E (Price to Earning) ratio : shows the relationship of market price of stock with earnings per share (EPS).
• Dividends : Many investors own stocks for yielding dividends. Although most growth companies offer very small dividends at their growing phase; they offer good returns over long periods of time.
• PEG (Price/Earnings to Growth) ratio : shows whether a stock is fully or over or under priced. It is a comparison of P/E ratio of the company with the expected future growth of the company.

NobleTrading.com Features Online Stock Trading, Online Options Trading Online Futures Trading, Online Forex Trading Worldwide Brokerage Service, Day Trading Brokerage

NobleTrading Stock Market Letter, May 6, 2008

The Week Ahead: Employment fell for the 4th straight month in April, but the decline was smaller than expected. Wage growth continues to stagnate as well as consumers cut back on spending. Further evidence could be in the Non-Manufacturing Index for the service sector on Monday. Also, watch the consumer credit numbers and pending home sales on Wednesday. The chain store sales figures and wholesale trade inventories will be out on Thursday. The March trade balance will be released on Friday.

Stocks to Watch: The aircraft components business of Triumph Group (TGI) was solid in the 4th Q beating estimates and recording a strong backlog of orders. Shares of Netsuite (N ) showed a smaller 1st Q loss versus a year ago and sees a potential breakeven 2nd Q, but the shares still made a new low after going public in December of 08'. The aerospace and industrial components maker, Barnes Group (B ), beat earnings from a year ago and boosted there forecast for 2008, but the stock could see resistance at its 200 day moving average.

Special Note: The three major indexes are either at or approaching 200 day moving average resistance. This may limit upside potential near term, but the back-in filling nature of the recent rally may also limit downside risk as well. With the volatility Index (VIX) now at its lowest level since last November look for markets to trade in a relatively narrow range with upside potential increasing the longer the markets stay sideways. One potential positive catalyst for markets going forward is a peak in oil prices followed by a lower gas price trend.


Commentary provided by Barry Ward, Registered Principal, NobleTrading.com, Inc.

To view all of NobleTrading's historical newsletters, click here.

Click here to open an account.
NobleTrading Direct Access Trading

---

email: info@nobletrading.com
phone: 877.872.3311
web: http://www.nobletrading.com

Commodity Channel Index or CCI Indicator

Commodity Channel Index (CCI) is one of the most popular momentum indicators used by traders to identify trend formation and ending, and/or overbought and oversold conditions. CII was originally developed by Donald Lambert in 1980 for commodity traders, but is now widely used by all traders trading all financial instruments. Commodity channel index is considered a better trading tool when used in conjunction with other indicators.

The basic idea behind Commodity Channel Index is that the market moves in a cyclic fashion with periodical ups and downs. The actual formula for calculating CCI is some what complex, the simplified one is,

CCI = (Current Price – Simple Moving Average) /0.015 x D.

Where D is the normal deviation OR Typical Price, which is calculated as

Typical Price = (High + Low + Close) /3

Commodity channel index is used as an oscillator having positive and negative values (the value 0.015 is used for this purpose).

With Commodity channel index overbought conditions are identified when CCI is above +100 and oversold conditions are identified when CCI is below -100. Beginning of an uptrend is identified when CCI crosses +100 line and beginning of a downtrend is identified with CCI crosses -100 line; the trend ends when CCI crosses back over the line. Buy signals are generated when CCI crosses +100 and the position is closed before or on reaching back +100. Similarly sell signals are generated when CCI crosses -100 and the position is closed before or on reaching back -100.

NobleTrading.com Features Online Stock Trading, Online Options Trading Online Futures Trading, Online Forex Trading Worldwide Brokerage Service, Day Trading Brokerage

Tactical Asset Allocation Strategy

Tactical asset allocation strategy is a moderately active portfolio management strategy, which includes adjustments of investments with respect to short-term goals. Although the basic idea is to diversify investments and limit risks, investment preferences are given to different asset classes with respect to short-term yield predictions.

A tactical asset allocation strategy starts just like a strategic asset allocation strategy with diversification of portfolio with respect to long term goals in mind. The investor/portfolio manager then readjusts the investments with different asset classes. If equities are predicted to perform well in the near future, he/she allocates more capital for it; and if bonds are predicted to perform well, then more investments in bonds, and so on. Once the preferred result is obtained, the investor returns to the original allocation ratio desired for long-term goals.

Success with tactical asset allocation requires good money management, and ability to interpret and predict short-term trends. Investors consider P/E and P/B ratio of equities, fundamental indicators, various momentum and sentiment signals, and economic predictions in making decisions. The investor/portfolio manager must be keen enough to go back to original ratio, once the short-term profit opportunity is diminished. Tactical asset allocation strategy, in theory, can offer better results than strategic asset allocation strategy; but it also has more risks associated with it.

NobleTrading.com Features Online Stock Trading, Online Options Trading Online Futures Trading, Online Forex Trading Worldwide Brokerage Service, Day Trading Brokerage

Risks Associated with Forex Trading

Although Forex trading is becoming the number one choice for many novice traders to make profit, it is not at all free of risk. There are many other risks associated with Forex trading other than the common ‘trading risk’ that occurs as a result of price difference.

1. Credit risk or default risk – Credit risk in Forex trading occurs when the counter party fails to payoff the currency position as agreed. This happens when the counter party has planned to payoff you from future cash flow, which does not occur as planned.
2. Replacement risk or Replacement cost risk – Occurs when one needs to replace a contract, because the counter party fails to meet the terms of contract. The markets/prices may be changed from original, so the replacement contact now has to deal with new changes.
3. Settlement risk – This occurs as a result of difference in prices at different time zones of the world. The creation of CLS (Continuously Linked Settlement) has eliminated the time differences.
4. Exchange rate risk or currency risk – occurs as a result of changes in exchanger rate.
5. Interest rate risk – occurs as a result of changes in interest rate by central banks. Affects Forex futures contracts more than spot contracts.
6. Dictatorship risk – occurs when Governments impose restrictions or interferes with currency trading activities.

NobleTrading.com Features Online Stock Trading, Online Options Trading Online Futures Trading, Online Forex Trading Worldwide Brokerage Service, Day Trading Brokerage