ETF vs Mutual Fund What’s the Difference Ally

Tech only Portfolios are too RISKY

I assume those of you on this sub are investing, not gambling. I also assume that y'all care about risk. If so, please read on.
I feel like several times a day I see a "portfolio" advice post for "portfolios" that is 100% tech. IMO, these portfolios will perform poorly and have extreme amounts of risk. In a loose sense, portfolios seek to balance many different equities to achieve an optimal risk/reward. This is done through diversification. If you're 100% tech (especially if it's only US tech) you have little to no diversification. If you want extreme risk, you're better off trading individual stock, options or even FOREX.
Why: There is a reasonable chance of a tech correction


Import case study (thanks investing)
Will all this actually happen?: Maybe, maybe not. I just wanted to show y'all that it's not unreasonable. Hence you must diversify to minimize downside risk.
What to do :
Even the pros love tech, but they're not 100% tech: https://wallethub.com/edu/hedge-fund-stocks/38113/
I'm long tech, buy it frequently and it makes up ~15-20% of my portfolio.
Edit: Nice example, I looked at what happened right before the last tech crash:
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=2&startYear=2000&firstMonth=8&endYear=2020&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&showYield=false&reinvestDividends=true&portfolioNames=true&portfolioName1=Tech+Mutual+Fund&portfolioName2=SP+500&portfolioName3=Mix&symbol1=FSPTX&allocation1_1=100&allocation1_3=50&symbol2=SPY&allocation2_2=100&allocation2_3=50

submitted by z109620 to ETFs [link] [comments]

Hoping to get Feedback on my Investing/ Trading Courses (Get 2 Weeks Free)

Hi all, I have been publishing courses on Skillshare and would love if you could check them out and give some feedback :)Use this link to get 2 free weeks of Skillshare premium: https://www.skillshare.com/usegideon-t (That'll give you access to their other premium courses too, cancel anytime before 2 weeks to not pay anything).So far I have published 3 courses:1. Technical Analysis 101: Indicators, Patterns, Strategy for Trading & Investing2. Investing 101: Asset Classes (Stocks, Bonds, REITs, Mutual Funds, Commodities etc.)3. Trading 101: Forex, Stocks, ETFs & StrategiesThank you
submitted by haystackneedlebob to Skillshare [link] [comments]

The rough guide to the Islamic Investment world (in South Africa)

So this is my rough guide to Islamic investments within the South African Universe (it can apply globally, except my examples is all South African based). Hope it is informative and encourages halal investing.
Suggestions welcome
Section 1: Investment Universe 
  1. Islamic Bank fixed deposits
About: Invest your money for a fixed period (1 month up to 5 years). Get profit when period is completed
Pros: Reliable profit , Low financial risk, low Islamic risk : covered by a board of Shariah scholars
Cons: Low profit rates.

  1. Unit trusts
About: Collective investment - managed by investment company, protected by SA law, typically invests in equities, sukuks and property
Pros: Plenty of choice, Provided by registered Financial Service Providers, Sharia Boards , diversification
Cons: Typically High fees, .

  1. ETF
About: Collective investment
Pros: low fees, Provided by registered Financial Service Providers, Sharia Boards , diversification
Cons: only one option in SA, heavily weighted on Resources

  1. Shares
About: Pick your own stocks off the exchange
Pros: High profit potential,
Cons: Very Risky, No Islamic oversight (hence need to do your own screening)

  1. Property
About: Tried and test property
Pros: Stable Asset, Tangible, Straightforward, Zakah benefits,
Cons: High capital outlay, expensive legal costs (transfebond registration) , Not very liquid,
  1. Custom Wealth Solutions
About: Customized Wealth management and investments
Pros: Professional advice, custom solution
Cons: Available exclusively to high net worth individuals, Investment advise appears to be fee based

Section 2: Definitely not halal 
  1. Margin based investing: Margin = interest = haram. Also very risky
  2. Futures contracts: Shorting, going long, all CFD's and futures contracts are impermissible. Because a condition for a halal investment is that the underlying asset must be owned
  3. Forex: Or at least forex based on CFD's and margins. Buying dollars to travel should be perfectly fine.
  4. Stocks/Equities that primarily deal in haram activities: Gambling, pork, etc

Section 3: Grey Areas 
  1. Crypto ( Bitcoin ,etc) : In theory these should be more "halal" than fiat currency (what all money in the world is) however there are differences of opinion.
  2. Shares : There are grey areas : Most companies has an element of haram income (interest, etc). Scholars have devised ratios to to filter out "islamic stocks" from haram stocks (30-33% max debt, max 5% haram income, liquid ratios, etc). It is for this reason these stocks requires dividend purification.
However you should be aware of this before venturing into to stocks as you might not be comfortable with that thought (This also affects EFTs, Unit trusts, etc).
3 Easy Equities: Easy equities makes it cheap and easy to own equities. However I would at all times buy/sell only whole shares and not fractional shares. Fractional shares are done as a CFD (a bit different from a forex CFD). You get all the benefits of ownership such as dividends and capital gains on a pro rate basis. But you do not actually own the CFD until you buy enough CFD to get a real whole share. That being said, it is still grey, best to avoid fractional shares entirely
4. Halal Forex Accounts: Somehow these are marketed that way. Here's a link to (Islamic Finance Guru) who has a bit more knowledge on this. (Note: I am not affiliated in any way or get any benefit)
Section 4: Conclusion 
I sincerely hope this helps , and encourages to invest in the Islamic world.
Any ideas, inputs and suggestions welcome.


Disclaimer 1 : Corrections welcome, I am not a learned scholar, this is not financial advice, you bear the responsibility & consequences of your own decisions/investments
Disclaimer 2 : At some point FNB Sharia board quit , they subsequently hired a new board. They don't however make it easy to find who is in the board from their website. However the information can be found in news websites.
submitted by Flying_Koeksister to IslamicFinance [link] [comments]

Hoping to get Feedback on my Investing/ Trading Courses (Get 2 Months Free)

Hi all, I have been publishing courses on Skillshare and would love if you could check them out and give some feedback :)Use this link to get 2 free months of Skillshare premium: https://www.skillshare.com/usegideon-t (That'll give you access to their other premium courses too, cancel anytime before 2 months to not pay anything).So far I have published 3 courses:1. Technical Analysis 101: Indicators, Patterns, Strategy for Trading & Investing2. Investing 101: Asset Classes (Stocks, Bonds, REITs, Mutual Funds, Commodities etc.)3. Trading 101: Forex, Stocks, ETFs & StrategiesThank you
submitted by haystackneedlebob to Skillshare [link] [comments]

Hoping to get Feedback on my Investing/ Trading Courses (Get 2 Months Free)

Hi all, I have been publishing courses on Skillshare and would love if you could check them out and give some feedback :)
Use this link to get 2 free months of Skillshare premium: https://www.skillshare.com/usegideon-t (That'll give you access to their other premium courses too, cancel anytime before 2 months to not pay anything).
So far I have published 3 courses: 1. Technical Analysis 101: Indicators, Patterns, Strategy for Trading & Investing 2. Investing 101: Asset Classes (Stocks, Bonds, REITs, Mutual Funds, Commodities etc.) 3. Trading 101: Forex, Stocks, ETFs & Strategies
Thank you <3
submitted by haystackneedlebob to Skillshare [link] [comments]

Trading View (Request)

App Name: TradingView - stock charts, Forex & Bitcoin ticker
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Alerts will help you not to miss the smallest of changes in the market and will allow you to react in time to invest or sell profitably, increasing your overall profit.
Flexible settings help you to track the indices you need and also group them in a way that is convenient for you.
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Playstore Link: https://play.google.com/store/apps/details?id=com.tradingview.tradingviewapp
Mod Features: Additional indicators available in pro version of this app
submitted by shinigamidoge to moddedandroidapps [link] [comments]

Hoping to get Feedback on my Investing/ Trading Courses (Get 2 Months Free)

Hi all, I have been publishing courses on Skillshare and would love if you could check them out and give some feedback :)
Use this link to get 2 free months of Skillshare premium: https://www.skillshare.com/usegideon-t (that'll give you access to their other premium courses too).
So far I have published 3 courses (my most recent one on Technical Analysis published an hour ago):
1) Technical Analysis 101: Indicators, Patterns, Strategy for Trading & Investing
2) Investing 101: Asset Classes (Stocks, Bonds, REITs, Mutual Funds, Commodities etc.)
3) Trading 101: Forex, Stocks, ETFs & Strategies
Thank you <3
submitted by jaquezmun to Skillshare [link] [comments]

[udemy] Free courses on Bonds, Mutual Funds, ETFs

Deal Link
Price: $0
Savings: 100% off
Retailer: udemy
I realize from the previous posts on stocks, Bitcoin, Options, Forex etc. that many on here either don't have the basics of investment knowledge or prefer much safer ways in saving their hard-earned dollars.
The returns from bonds, mutual funds and ETFs may be comparatively lower, but the risk is also much less.
Other than simply leaving your money in the savings accounts or GICs, it's much preferable to start on these and get comfortable before expanding any extra savings into stocks etc.
5 Keys To Investing
https://www.udemy.com/course/investing-keys/
Understanding Bonds
https://www.udemy.com/course/understanding-bonds/
Mutual Funds [2019]: Complete Guide to Better Understanding
https://www.udemy.com/course/mutual-fun ... rstanding/
Understanding Exchange Traded Funds (ETFs)
https://www.udemy.com/course/understand ... ded-funds/
How to PROFIT from the stock market SAFELY with ETF-Complete
https://www.udemy.com/course/profitstocksetf/
submitted by DealsCanada to ShopCanada [link] [comments]

Introduction to investing as a U.S. citizen residing in Japan

[meta: I ask for help in making sure this information is accurate and correct. Please contribute as you see fit!]
WARNING!! I am not a lawyer, accountant, or broker, nor do I have any experience or training in any of those fields. ALWAYS confirm with a professional before taking any advice you read on the internet.
Foreward
If you're old enough to pay taxes, you should start investing. The earlier, the better.
Here’s another example to illustrate the enormous benefit of getting an early start. At age 25, Eric Early invests $4,000 per year in a Roth IRA for 10 years and stops investing. His total investment is $40,000. Larry Lately makes yearly deposits of $4,000 in his Roth IRA starting at age 35 for 30 years. His total investment is $120,000. Assuming both portfolios earn an 8 percent average annual return, at age 65, Eric’s IRA will be worth $629,741, but Larry’s IRA will be worth only $489,383. By starting 10 years earlier and making one third of the investment, Eric ends up with 29 percent more.
- quote from "The Boglehead's Guide to Investing"
Target audience
This is an introduction for U.S. citizens with residency in Japan who want to do long-term investing in U.S. equity (stocks, bonds, etc.).
Disclaimer
This advice may not be accurate for citizens of countries other than the U.S. or for those U.S. citizens living in Japan who work for the military or are only temporarily living and working in Japan as affiliated with a U.S. company. This is also not advice for ForEx or day traders looking to make money. Nor is it advice for what to invest in. This is also not advice for investing in the Japanese stock market.
This is just one way to invest in U.S. equity from Japan. There are other ways.
Assumptions
  • You're a U.S. citizen
  • Your income is in JPY
  • You want to invest in U.S. equity (stock market, bond market, etc)
  • You have basic knowledge about taxes and tax-related terms
  • You have at least $10,000 USD to invest (or $3,000 USD if age 25 or younger)
Background
I am an ordinary guy living in Japan. I have disposable income and, rather than pour all of it into my local izakaya and Philipino hookers (who hang out in front of Mister Donut at night and ask if I "want the massage?" (just kidding, really!)), I wanted to invest in my future by saving for retirement. I'm an early 30's-year-old guy and spent about a month reading up on investing and then set off trying to invest as a resident of Japan.
My Story
I moved to Japan 3 years ago after working in the U.S. I have an IRA leftover from my time in the U.S., but never contributed to it since moving to Japan (thankfully - find out why in a bit). I recently saw a post from /personalfinance (seriously, go read information in that sub if you want to have more money upon retirement or just get out of debt!) and decided to read the book "The Boglehead's Guide to Investing" based on recommendations there. After that, I started looking into my options for investing from Japan.
Before I left the U.S. for Japan, I rolled over my 401k into an IRA using Vanguard (arguably the best broker available for U.S. citizens). Since moving to Japan, I had not contributed anything to my IRA. So, the first thing I wanted to do was start contributing to my IRA again, and use any remainder to invest in U.S. equity. Turns out this is not as easy as it sounds.
I found out that in order to legally contribute to my IRA, I had to pay U.S. taxes on my income used to contribute to it. Well, if you're like me and don't make an awful lot of money, you're probably filing with Foreign Tax Credit/IRS Foreign Earned Income Exclusion. This stuff basically let's you deduct all your taxes in Japan, as it on Japanese income and you already paid glorious Nippon taxes on that income. For me, this basically meant that I owed the IRS absolutely nothing every year. Great! Right? Buuuuut since I didn't pay any U.S. tax on my income, I cannot use it to contribute to my IRA! Dammit! (But actually a blessing in disguise because if I had been contributing to my IRA, I would have been breaking U.S. tax law because I didn't pay taxes on it.)
So, I started looking into other ways to invest: the U.S. stock market, bonds, etc. After reading The Boglehead's Guide, I knew I wanted to invest in Vanguard's mutual index funds. My first instinct was to open a brokerage account (which is different from your IRA account) with Vanguard. I started filling out the online form, but ran into issues. You have to specify a U.S. address. Also, you have to specify your U.S. employer. I had neither of these, so I called Vanguard (from Japan at a ridiculous call charge) and spoke with someone about doing this. They gave me the OK but said I'd have to submit a paper form through snail mail, and sent me a PDF to fill out and mail in. I mailed it (from Japan using EMS which was like $20..), and got a call about a week later. Surprise! Because I'm not working in Japan temporarily for a U.S. company or living on a U.S. military base (considered U.S. soil, I assume?), I actually can't open a brokerage account with them. Dammit again! What a waste of money calling them and mailing the form overseas.
So, I started looking into other options. I read about a few other brokers and most people agreed that I should either use Fidelity or Interactive Brokers. I had never heard of Interactive Brokers and honestly they seemed scary at first, so I decided to go with Fidelity, who I had actually heard of and is a U.S. based firm. I created an account with Fidelity, but once again ran into roadblocks when trying to open a stock trading account. I didn't have a U.S. address or employer, and actually wasn't able to link my U.S. bank account with them either (for reasons unknown). Dammit once again!
So, I started reading more about Interactive Brokers. Okay, it's still a little scary, but there are positive reports about using them online. I signed up for an account with minimal hassle, linked up my bank account, was able to transfer money over to them, and then successfully bought U.S. shares! Sweet success! Finally!

How to Invest

Part I: Contributing to your IRA
If you do not have an IRA, you probably should, as they are your basic investment option and tax-friendly to boot. However, good luck setting one up as a resident in Japan! Vanguard will happily babysit an IRA you opened prior to leaving the U.S., but they will not let you open a new one with a foreign address. I don't know about other brokers such as Fidelity or Schwabb, but it's probably the same story there.
If you are like me and happen to have an IRA leftover in the U.S., you CAN contribute to it, but in order to do so you must not deduct your Japanese tax on your IRS 1040 or file Form 1116, "Foreign Tax Credit". In other words, you must pay U.S. taxes on any income used to contribute to the IRA.
Refer to your broker for how to actually get the money to them from Japan.
Part II: Investing in U.S. Equity from Japan
Using Interactive Brokers
First, let me tell you a little bit about Interactive Brokers (IB). They are a service mostly used by regulaprofessional traders. The fees are very low and reasonable. However, they have a service charge of $10/month if your commission is equal to or less than $10 USD in that month. This is probably not a problem for people over 25 years old investing with $10,000+ USD, but for people 25 and under with an initial investment of $3000, it's possible you might not make the minimum commission per month. Beware of this fee.
IB lets you fund the account from many different currencies, regardless of what market you are buying (this needs confirmation, but seems to be accurate). So, whether you have a U.S. bank account or a Japanese bank account, you can fund the IB account. You can even fund from both.
IB does not let you invest in U.S. mutual funds. This sounds like a deal-breaker, but it's actually not. You can still invest in U.S. ETFs. This includes Vanguard's total stock market index ETF, total bond market index ETF, etc.
IB has an iPhone app that is pretty good and probably an Android app too. Although, as someone doing long-term investing for retirement, you probably don't need this and don't want to be checking your account too much (refer to /personalfinance as to why).
IB has multiple account types. You will probably see IBLLC and IBSJ. The differences are two-fold: First: an IBSJ is only used to trade Japan domestic equity. You don't want this because you want to trade U.S. equity. Instead, IBLLC is used to trade overseas (U.S. equity). Second: as of 2016, IBJS requires your My Number information, but IBLLC does not. Again, you don't want IBJS, so don't worry about the My Number information.
Open a "Japan Resident Individual Account for IBLLC" account online. This is a lengthy process. Make sure you have the required information.
  • You will need to send info about your current address in Japan, your 在留カード (zairyuu/"gaijin" card), job information, bank account information, and so on. I got confused and sent my My Number card information as well, but this only caused a hiccup in their process and I was told to remove it. Don't submit your My Number information.
  • You need to choose your base currency. Your base currency determines what currency you trade in and receive dividends/money from selling in. I think you need to specify USD here, but not sure. I chose USD because U.S. stocks are in USD and I used my U.S. bank account to intially fund my account. It may not matter, but this needs confirmation.
  • You need to specify that you have trading experience. I forget the actual numbers you need to put into the form, but make sure you put enough experience that allows you to trade ETFs overseas. You can fiddle with the numbers right there in the form, and options open up as you change the numbers. Play with it until it's just right. This part is hazy, and just seems to be some safeguards for IB so that new investors can't sue/blame IB for their own trading stupidity when they lose all their money. If you really don't have any experience trading, IB offers virtual "fake" accounts you can use to play around with trading. I suggest you try it.
After about a week you should have your new account. The next step is funding it, or you may have selected to fund it up front when you created the account so it may already be done. Anyway, the easiest way is to have IB request the wire transfer from your bank. I did this. It was really annoying, but it took about another week or so to go through. Beware that you probably can't start buying right away and need to wait for the transfer to clear.
Congratulations! You're ready to start buying now. Refer to /personalfinance in what to invest in. Remember that you are limited to buying ETFs and a few other things, and not mutual funds (but you can get their ETF equivalents).
Using
TBD... (anyone want to fill this out?)
Part III: Taxes
You need to declare and pay taxes on your dividends and any capital gains you make. Beware.
TBD... (this is arguably the most important part, but I just don't have time to go into it now. Someone feel free to help!)
TL;DR: Open an account with Interactive Brokers online and buy ETFs.
submitted by crab_balls to japanlife [link] [comments]

(Early Macro Monday) Blackbox trading and the moment the global market vanished.

Warning: There's a bit of conjecture involved in this topic.
'Blackbox' trading, or Algorithmic trading is one of the least well understood and largest facets of, in particular, the FOREX market. HFT (high-frequency trading) accounts for a staggering 70% of all orders executed. Many of these orders sit at the other end of CFD platforms, they exist to take up the other end of the trade and levee a tiny commission.
As you should know, the currency market is by far the most traded, the top pairs like EUUSD, GBP/USD, USD/JPY are pushed back and forth in high volume on the floors of Goldman, J.P. Morgan and Citi (to name a few) and move billions in this market, part of the essential function of keeping currencies liquid. What many don't realise is this system is probably the most pervasive in the modern financial market. Lets look at a quick hierarchy of how firms interact with buysiders and where the algorithms (and Quants) fit.
Top dogs: The big 10 banks. GS, MS, Citi and the others are the alpha predators. Exchanges: NYSE, NASDAQ, JEG. The exchanges are a gateway between the groups. The feeding ground. Quants: These are the firms which develop and run the algorithms Buysiders: Vanguard, Pension funds, superannuation funds. This group is the lunch. Independent traders: Generally options day traders of CFD users. Lower than an amoeba in the chain. 
The algorithms mediate the other end of each trade, the best way to picture this ecosystem is as an aquatic food chain. Make no mistake, the buyside cap management investors (Pen funds, Vanguard, etc) are the defenseless free lunch. Every trade they place gets slapped with multiple commission cuts: Broker fees, other-side fees (taken by the algorithm for holding a position in the intermediary time between the sell and the buy) then on the reverse trade. For those who don't understand how this works exactly: Inst. traders trade in large volume over the phone to inst. brokers. The brokers buy/sell and take a commission, the Quants take another commission. Then when the market makes a move the brokers take another commission, as do the Quants.
It gets interesting when you appreciate the largest investment banks actually own the majority of the Quant firms, pour tens of billions into developing more complex algorithms and faster networks between their server farms. In addition many banks have brokerage firms as a part of their operations, such as BoA (with ML) and Credit Suisse. Without coming off as too cynical, the severe danger that comes with this one-sided ecosystem is banks have been known to dump and buy colossal quantities of any currency they fancy in less than a tenth of a second, massively destabilizing the currency itself. Equities are small-fry compared with the profit potential of literally manufacturing volatility.
Events such as the 2010 'flashcrash' highlight how detached the Blackbox system has become. $860billion USD evaporated in approximately 8 seconds as conditions mutated into a complete mathematical anomaly and, there's no way not to be dramatic about this, the market vanished. A vanishing market means there are no buyers on the other side of the sellers. The entire market, for ~8 seconds, was selling. This might not sound like such a dangerous situation but remember that in order for a market to be liquid, and stable, you need one end to take up the deal from the other (at any price). Imagine for a moment FB stock went into a freefall to assumed zero and every sentiment metric said 100% sellers. This does not mean every action is a sell action, it just means every action taken by a trading algorithm is a buy action. In other words, the blackbox market is buying 100% of the sold shares. Now imagine for a moment even the algorithms had decided it was not possible to take up any end of the trade. The result is a complete and utter illiquidity in the stock. It would be pandemonium. This did indeed happen, in 2010, only it wasn't localised to one company, rather it was everything: Currencies, Equities, Commodities, Bonds, Interest Swaps.
How does this help you? I believe awareness is the best asset for a trader. The automated ecosystem has many implications, it also explains who takes up the other end of trades. I've had many questions of the topic in the last couple of years and it's not an easy one to explain. Essentially the Vanguard mutual funds, pen funds, estate funds and any other private cap management firm is recognised as the "dumb money" for this reason. They're the only significant entities outside the system and always end up losing more than those on the inside.
submitted by 432parkavenue to investing [link] [comments]

(Early Macro Monday) Blackbox trading and the moment the global market vanished.

Warning: There's a bit of conjecture involved in this topic.
'Blackbox' trading, or Algorithmic trading is one of the least well understood and largest facets of, in particular, the FOREX market. HFT (high-frequency trading) accounts for a staggering 70% of all orders executed. Many of these orders sit at the other end of CFD platforms, they exist to take up the other end of the trade and levee a tiny commission.
As you should know, the currency market is by far the most traded, the top pairs like EUUSD, GBP/USD, USD/JPY are pushed back and forth in high volume on the floors of Goldman, J.P. Morgan and Citi (to name a few) and move billions in this market, part of the essential function of keeping currencies liquid. What many don't realise is this system is probably the most pervasive in the modern financial market. Lets look at a quick hierarchy of how firms interact with buysiders and where the algorithms (and Quants) fit.
Top dogs: The big 10 banks. GS, MS, Citi and the others are the alpha predators. Exchanges: NYSE, NASDAQ, JEG. The exchanges are a gateway between the groups. The feeding ground. Quants: These are the firms which develop and run the algorithms Buysiders: Vanguard, Pension funds, superannuation funds. This group is the lunch. Independent traders: Generally options day traders or CFD users. Lower than an amoeba in the chain. 
The algorithms mediate the other end of each trade, the best way to picture this ecosystem is as an aquatic food chain. Make no mistake, the buyside cap management investors (Pen funds, Vanguard, etc) are the defenseless free lunch. Every trade they place gets slapped with multiple commission cuts: Broker fees, other-side fees (taken by the algorithm for holding a position in the intermediary time between the sell and the buy) then on the reverse trade. For those who don't understand how this works exactly: Inst. traders trade in large volume over the phone to inst. brokers. The brokers buy/sell and take a commission, the Quants take another commission. Then when the market makes a move the brokers take another commission, as do the Quants.
It gets interesting when you appreciate the largest investment banks actually own the majority of the Quant firms, pour tens of billions into developing more complex algorithms and faster networks between their server farms. In addition many banks have brokerage firms as a part of their operations, such as BoA (with ML) and Credit Suisse. Without coming off as too cynical, the severe danger that comes with this one-sided ecosystem is banks have been known to dump and buy colossal quantities of any currency they fancy in less than a tenth of a second, massively destabilizing the currency itself. Equities are small-fry compared with the profit potential of literally manufacturing volatility.
Events such as the 2010 'flashcrash' highlight how detached the Blackbox system has become. $860billion USD evaporated in approximately 8 seconds as conditions mutated into a complete mathematical anomaly and, there's no way not to be dramatic about this, the market vanished. A vanishing market means there are no buyers on the other side of the sellers. The entire market, for ~8 seconds, was selling. This might not sound like such a dangerous situation but remember that in order for a market to be liquid, and stable, you need one end to take up the deal from the other (at any price). Imagine for a moment FB stock went into a freefall to assumed zero and every sentiment metric said 100% sellers. This does not mean every action is a sell action, it just means every action taken by a trading algorithm is a buy action. In other words, the blackbox market is buying 100% of the sold shares. Now imagine for a moment even the algorithms had decided it was not possible to take up any end of the trade. The result is a complete and utter illiquidity in the stock. It would be pandemonium. This did indeed happen, in 2010, only it wasn't localised to one company, rather it was everything: Currencies, Equities, Commodities, Bonds, Interest Swaps.
How does this help you? I believe awareness is the best asset for a trader. The automated ecosystem has many implications, it also explains who takes up the other end of trades. I've had many questions of the topic in the last couple of years and it's not an easy one to explain. Essentially the Vanguard mutual funds, pen funds, estate funds and any other private cap management firm is recognised as the "dumb money" for this reason. They're the only significant entities outside the system and always end up losing more than those on the inside. Yet another reason investing is a sub for plums.
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PART 1 Lesson 2) Products

In this short part, we will look at the majority of products you can invest in. This is no NO WAY an exhaustive list; in fact, if you were millionaire, you could very well "invent" a new product. However the products below resuem 99% of actively traded items.
The most obvious are stocks. When you buy a stock, you buy a share of the company and of its future profits. At the most simple level, this is exactly what buying a share is. Stockholders own the company and not the opposite. If you have a company and go public, even if you're the CEO, you do not OWN the company anymore (unless you own 50%+1 stock of the company, we will see why later).
Stocks are the instruments you will invest in the most UNLESS you specialized in another field since they are so simple, relatively low-risk and have no expiration value. If your grand-mother had bought 10 coca-cola shares in 1945 and forgotten about it, they would still be valid today.
There is much to be said on shares. One important concept is the concept of dividend. Dividends are cash OR stocks that are given to shareholders. Not all stocks pay dividends. The dividends theory is vast and complex and will be checked in Part 3.
Another one is the concept of split / reversal. When a stock splits, your number of shares increases. If you have 10 shares and the company does a 10:1 split, you now own 100, magically! However, this does not increase the value of the as, you guessed it, the stocks will go down 90%. Miller and Modigliani were the first to bring this theory up. The reverse operation is a reverse split; 10 shares become 1. We will see later that stocks usually increase after a split, and decrease after a reverse split, due to market psychology (part 3)
The last concept we will talk about is the buybacks. A company may buyback its shares - or a competitor might buy the company by buying 50% +1 shares (see this like an election; if you own 50% + 1 votes, and there are only 2 options (yes or no) you effectively control every vote and thus the company). Buybacks always increase the value of the stocks UNLESS they are below market value; usually, buybacks will be much above the market value.
One last concept: if you are certain a company is going up, you buy the stock. But if you think it is going down, what do you do? You short the stock. This concept is very important. By shorting the stock, you BORROW the stock from someone who already holds it and sell it, with the promise of buying it later, preferably at a lower price. With stocks, the maximum you can lose is 100% of your investment; in a bankruptcy. With shorting, there is no limit to what you can lose. If you short the stock at $100 and it goes to $1,000, you just lost $900 per share! Shorting is very dangerous, although very lucrative. The best scenario in a shorting is if the stock reaches 0, where the money you got by selling short the stock is entirely yours.
Stocks really deserve their own chapters; however, this is a rough introduction to the subject.
Options There are many times as more options traded as stocks. Options are extremely popular product.
With an option, you buy/sell the right to buy a stock later at a fixed price. A call is the OPTION (not the obligation) to buy Google at $500 at any time by november 22, for example.
Options are very complex. The most-traded options are calls and puts - options to buy at a fixed price, and option to sell at a fixed price. There are two types of calls/puts: european and american. European options can only be exerciced at a fixed date; american options can be exerciced at any time until the fixed date. AFTER THIS FIXED DATE, THE OPTIONS ARE WORTHLESS
Futures
So far we have checked companies. What if you want to invest in gold, or oil? Since the stock market is electronic, buying the gold and having it kept somewhere is not possible (it is possible through a bank) since stock markets do not have vault. If you want to invest in commodities, you could buy companies that hold a large amount of that commodities, but this is risky, and can cost a lot.
In a future - another type of derivative product, similar to a forward - you buy the OBLIGATION to buy a product at a fixed date, at a fixed price. You are FORCED to buy oil at $80 a barrel on november 22. Naturally, not everyone wants to take physical delivery of the commodity; most of the time, the futures is settled by cash.
Futures are settled every day; every day, one party pays the other. If you bought a future and the price of the item went down, you pay the other party.
FOREX**
Forex is for currency exchange. You buy or sell a pair of currency - USD/CAN for example. In this example, you BUY USD by SELLING CAN.
Futures options
Options we saw above, but applied to futures and not stocks. Stock futures exist too.
Bonds
Bonds are exactly what we saw in chapter one. Simply said, it's a debt that pays X% per year, the yield. It might not pay anything until expiration (zero-coupon) but usually, it will pay semi-annual coupons.
Mutual Funds
A funds that holds many products. For smaller investor, mutual funds allow a diversification. If you have $1,000 for example, you cannot buy a diversified portfolio at a resonable cost. Mutual funds are simply pools where everyone chips money in, to invest in a particular field (china stocks, energy, banks, USA...). In my opinion, mutual funds charge a lot and 90% of mutual funds do worse than the stock market.
SWAP
You won't trade a SWAP, although it pays to know what it is. A SWAP is another derivative product whereas two parties exchange payment. One will agree to pay a fixed cost, another will agree to pay a variable cost (for example).
ETFs
Stocks traded on the stock market, similar to Mutual Funds, allowing exposition to a more focused product (Oil ETF, Gold ETF, etc)
FOP/Warrants/CFD/Funds
Products you will rarely hear of. Forget it.
This is a rough introduction to MOST of the traded products on the investing market. As a beginner, you will only trade stocks. You can lose 100% of your capital on options (on stocks too, but hopefully you will make nice picks ;)). Plus, generally speaking, over a long period, stocks always go up. We will look later at how to choose stocks.
submitted by daytrader2010 to Investing101 [link] [comments]

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Complex + Confusing Investments: index funds, stocks, reits, forex, etfs, exchange traded funds, etc

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