How to Minimize Risk for Higher Returns

It seems to be impossible to have that combination of low risk and high returns but it has been historically shown that International portfolios will do that when compared to domestic portfolios. The best way to manage your risk is through Smart Diversification. Or what i called Intelligent Risk Taking. The way to do that is to invest your money into an international Portfolio, the trick here or the most important part is to invest in stock that are not correlated.

Wherever there is low correlation between the stocks, then there is a great chance for diversification. When u have 2 stocks are both highly correlated, then there is no reason to diversify , we just go with the stock that has the highest return. So look for stocks that have very small correlation, and in international markets, that way you hedge the currency risk and exposure, being in more than one market and one economy, and pursue higher returns because it has been historically shown that international portfolios have higher returns with lower standard deviation which means lower risk. International Portfolio also capture higher number of stocks where in domestic markets , you are only limited to a certain number.

To make it easier, use asset allocation softwares. those available software will do the allocation part for you, the software will test for correlation between the stocks you have picked and give u the optimal percentage combination between those stocks. Google " Asset allocation programs" and you will get plenty that will help you to do that task.

Remember, International Portfolio, 8 to 10 stocks, low correlation between the stocks though using an asset allocation program to determine the optimal combination between the stocks. it will only make your life easier and your investing more intelligent.10

The Dark Side of Prepaid Credit Cards

Prepaid credit cards are becoming increasingly popular. The problem is that greedy financial scoundrels have noticed this popularity increase and are trying to get in on the action. If you're considering getting one or two prepaid credit cards, there are a few things you need to know.

1. They Don't Do Anything For Your Credit

Some people have made the mistake of confusing prepaid credit cards with secured credit cards and then regretting it when the damage was already done. It's important to understand that there is a huge difference between these two financial tools.

The only real similarity between secured credit cards and prepaid credit cards is that both of them require money up front and the amount you supply determines your available credit (or balance). That, however, is where the similarities end.

Unlike secured credit cards, prepaid credit cards do not offer a revolving line of credit, you do not earn interest on the money that was used to establish your initial credit line and your account activity isn't reported to the credit bureaus.

All things considered, prepaid credit cards are not a good idea if you want to re-establish your credit history or establish a revolving line of credit. However, if you want to give someone a gift or put your child's allowance on plastic, prepaid credit cards might be a solution.

2. The Good, The Bad and The Ugly

Like most financial tools, not all prepaid credit cards are equal. Some are good, some aren't so good and some are downright ridiculous.

Before purchasing prepaid credit cards, it's essential that you know the terms of the card you're buying. Believe it or not, some prepaid credit cards not only charge a monthly fee, they actually charge you money every time you use the card.

If you charge your $4 coffee house order with your prepaid credit card, you might actually be paying $5 for that cup of joe after the credit card company tacks on their $1 fee. Then, to add insult to injury, the credit card company may bill you almost $10 a month for the privilege.

Make sure you are familiar with ALL of the fees (including monthly fees, transaction fees, deposit fees, etc.) before committing to any prepaid credit cards.

3. Where'd It All Go?

So you get a prepaid credit card for $50 and you have it in your wallet for a four or five months. Then one day you go to use it on a $30 purchase but the card isn't working. You call to find out your balance and you realize it's less than $20. How did it happen?

Well, if you're not careful, those monthly fees can quickly add up. If you buy a prepaid credit card with a monthly fee of $6.95, after five months that card is going to have incurred charges of $34.75. That means your $50 card now only has an available balance of $15.25 and you haven't even used it yet!

Remember, when dealing with prepaid credit cards, what seems like a nominal fee can really add up over the months and you need to be careful. Not all prepaid credit cards are bad, but if you aren't careful and you don't look at the small print, you may end up with one of the ugly ones.

Stock Picks 101 - Cut Your Losses and Let Your Profits Run

Did you know that many successful traders win less than 50% of their trades? Yes, top traders know that they can be VERY successful winning only 40% of the time.

“How can that be?” you ask. Simple, really. They are truly following the old adage of “Cut Your Losses and Let Your Profits Run.” Let’s see how this might actually work.

Suppose you had a stock pick, and it hit your stop loss at 98% of your entry price, which gives you a loss. You pick another stock, and again, it hits your stop loss, for another 2% ding to your account. Third time’s the charm, and your stock pick gains 15% before falling back and triggering your trailing stop at 10% above your entry price. In other words, you made 10%.

In this example, you had two losers and one winner for a win/loss percentage of 33%, yet you are ahead by about 6%. You let your profits run and cut your losses short.

It is not easy having more losers than winners, because you can easily find yourself with 5, 10 or even a string of 20 losses in a row. But those numbers are deceptive, because each loss will be fairly small.

Think of it in terms of baseball. A player can have only a fair lifetime batting average and still be a great player if he hits a home run when he finally does connect with the ball.

It takes confidence in yourself as a trader to work a stock trading system that only wins less than half the time. It’s not easy to be wrong most of the time. But that is why the market rewards such a strategy so highly, if it is done right.

In other words, don’t dismiss a system out of hand because it has more losers than winners. As long as the average win is significantly larger than the average loss, you can be very successful with such a system in the long run.

So keep this in mind as you are searching around for the right strategy for you. Many small losses and a few big winners can be much more profitable then a lot of little winners and a few large losses that take it all back and then some.

College Loans - Easy Money

Today a check came in the mail… $5,338.00.

The check came in my daughters name. She'll be a senior at St John's University this year in September.

But, she needs to go to summer school. She will be taking 2 classes... Spanish Level II - 3.0 credits and Public Speaking Col - 3.0 credits ……… for a total of 6.0 credits.

Language Lab Fee………… $25.00 Tuition: St Johns College……$5,238.00

University General Fee………$50.00. … Total - $5,338.00 …

That's how much the check was for… $5,338.00 It was from her favorite lender Sallie Mae.

The envelope with the check was addressed to my daughter, not me. I didn't even know she had applied for the loan. She didn't ask my opinion or advice or permission. She's 20 years old, no longer my little girl. Old enough to borrow $5,338.00 on her own. Damn!

There will come a time when that $5,338 will have to be paid back. There is a price to be paid for this "easy-money".

At about $50/mo, it will take about 10 years to pay that off. … Not so easy to pay back! My daughter owes $28,973.13 in student loans so far. She still has at least 1 more year to go for a bachelors degree.

Plus she has to go to grad school for at least another 2 years if she wants to find a job in Psychology...

And she's talking about going for a doctorate degree. Another 2 years. If she keeps borrowing at the same rate over the next 5 years, to get her PhD, she'll owe $72,432 in student loans.

$72,432 in student loans - Easy Money!

And that doesn't take into account inflation and the increasing cost of higher education each and every year.

Most students (and their parents) will end up taking out student loans. However, if you can get some scholarship money, that is money you don't have to pay back. Since ALL schools are inundated with too many applications for scholarship money, emphasis is placed on the scholarship essay to determine who will get the available scholarship monies.

Unfortunately, many students and parents don't know how to apply for scholarships. Here is a quick but important tip for winning scholarship money. Set yourself apart from the thousands of other applicants by being specific about what you have done in your life. If you've achieved, tell the judges. Put your best foot forward.

If you have family responsibilities, tell them what you do. Otherwise the judges don't know. Write about what you have actually done and you will be remembered by the committee members and increase your chances of winning scholarships.

Types and Characteristics of Trading Gaps

Gaps are a common occurance in the markets. Everyday there is always at least one stock that has gapped up or down when the market opens. Why? As long there is some event happening somewhere between the market close of the previous day to the opening of today, there will be gaps. Even if the markets eventually move little by little toward the inevitable 24-hour format, there will always be gaps. After all, somewhere around the world, there is some event happening during the weekends as well. Plus, there is always an excited group of investors who making a big deal out of something or even for no reason unknown to the rest of us. So, gaps are a fact of life and there is no avoiding it. The best thing is to take it in stride and learn how to profit from it.

There are three different types of gaps: Breakaway, Runaway and Exhaustion gaps. Each of these gaps appear at a different cycles of the markets.

Breakaway gaps occur when a stock has been in a consolidation stage; instead of a normal market-session move, it breaks out with an opening gap. Normally, these gap in the same direction before to the consolidation stage. There is one caveat: when the breakout happens, it can be in either direction. This gap is trickier than the others because the intent of direction is unclear.

In the chart example above, the market was going through a correction. When it finally finished consolidating (a symmetrical triangle pattern), it broke out with a gap to the upside to end the correction period.

As for Runaway gaps appear when the stock has been trending for some time. Instead of a normal move up during market hours, they open with a gap in continuation of the dominant trend. It shows there is more interest in the stock, possibly by some positive news to further boost the investors' eagerness to own it. Runaway gaps are also called Measuring gaps because they are often used as a centering point of measurement from the beginning of the trend to the gap, then from the other side of the gap to measure the next likely level where it would reach.

The chart below shows the prevailing trend, moving steadily upward. Along comes the opening gap, pushing in the same direction higher, not even a moment's pause or pullback until much later in the trend.

Below is the example of how a Runaway gap is also used as a Measuring tool. When the gap has been identified, the measurement is taken from the beginning of the trend (61.98) up to the bottom of the gap (87.08). From that distance, it is used to measure how far the prices will likely to continue. So the measured target starts at the upper part of the gap (102.64) to the expected level above it. In this example, the target was 130.27. This is a very powerful and easy-to-apply concept which can be used to find profitable trades.

The last type of gaps is the Exhaustion gaps. These occur when the market has been trending for a long period of time, normally after a bull market or bear market that as been lasting for a few years. When it appears, there is a period of slowing of the trend slowing, or period of consolidation. They usually appear near tops or consolidation areas after strong trends. Many times, the Exhaustion and Breakaway gaps are mistaken for one another. Depending on the location and whether or not it was an up gap or a down gap. The Exhaustion gap is an up gap appearing in the market tops, and a down gap in market bottoms. As for the Breakaway gaps, they are up gaps in market bottoms (and from consolidations) and down gaps on market tops (and from consolidations).

Below is example of each to better identify the difference. The market has been forming what look like a top, with the symmetrical triangle consolidation. Triangles are usually trend continuation patterns, but as the chart shows, the gap was break away from the pattern to the downside. This is a breakaway gap. After that gap, YHOO attempted to push prices up again with an up gap. The prices gapped up to a new high, then turned around immediately the same day. Then the next following days, the prices filled the gap, confirming that the previous gap and the direction of the market (now downtrend) are real. The Exhaustion gap was at last identified as such when considering the surrounding price action. The action created an island reversal.

The example below is the exhaustion gap (down) at market bottom. The market has been trending down with determination. Finally, a blow-off came with a big gap down, but there were no more selling. The next few days show the market stabilizing, even some buying. Finally, more buying pushed the market higher, ending the market bottom.

Knowing where the gap is located in the chart can quickly help identify what type of gap it is. These gaps give clues to the strength or weakness of the stock since they are usually turning points in the market direction. Paying extra attention to them can provide unique opportunities to trade with the right trend (or reversals) and profit from them. The next article will discuss the tactics in entering and exiting in trading these gaps.

Futures Contracts - Profitable Investment Alternatives?

With the growing popularity of futures trading, more and more people are jumping into this interesting form of investing. People quickly find out that futures contracts are vastly different than agreements to purchase common stocks; with futures contracts, you are not actually buying a particular commodity, you are obtaining the right to purchase the underlying asset during a particular time period.

Pork Bellies?

Another difference between investing in the stock market and investing in futures contracts is the asset itself. Of course stocks are the assets involved in the stock market, while the commodity assets in futures contracts include:

• Currencies – The currency market is one of the best known commodities, trading the likes of the British pound and the American dollar.

• Interest Rate Futures – T-Bonds represent long-term interest rates and Eurodollars are for short-term interest rates.

• Energy Futures – Natural gas, heating oil and crude oil futures are the most widely known in this sector.

• Food Sector – Coffee, orange juice and sugar are well known commodities in this sector.

• Metals – Gold, silver and copper are traditionally strong commodities.

• Agricultural – Wheat, coffee, cotton, soybeans, pork bellies and corn futures are among those that are best known.

With so many futures contracts available, it can be difficult to decide which commodities interest you, especially if you are new to commodities trading. Sometimes it can be helpful when you start trading to begin with more popular commodities.

Below are five of the most popularly traded futures contracts:

1. S&P 500 E-mini – This is extremely popular for those investing in the futures markets. The E-mini can be traded electronically 24 hours a day, five days a week. In addition, the E-mini has most of the same advantages of the regular S&P 500 commodity but the cost of investment is much less.

2. E-mini NASDAQ 100 – The E-mini NASDAQ 100 follows the movement of the NASDAQ 100. Like the S&P 500 E-mini, this futures contract can be electronically traded and the contract and the amount of margin you have to set aside to trade the contract are smaller than a standard contract. Since most individuals don't have large enough accounts to trade regular contracts for the NASDAQ 100, the E-mini works out great.

3. Light Sweet Crude Oil – Probably the most famous commodity traded is oil futures. When you see the price of oil discussed on the evening news or in an investment newsletter, this is exactly what they are discussing.

4. Gold – If oil isn’t the most famous futures contract, then gold surely is. A gold contract tracks the price variations of one ounce of gold. Gold became an important part of the US economy when the United States went to the Gold Standard in the 1970’s. Since then, the price of gold changes dramatically, almost always in the opposite direction of the US dollar. Gold investments are frequently used as hedge funds because of the relationship with the US dollar.

5. E-mini Euro FX - The E-mini Euro FX contract tracks the movement of the exchange rate between the U.S. dollar and the Euro. The "E-mini" means that the contract and the amount of margin you have to set aside to trade these futures contracts are smaller than regular contracts. Most individuals don't have large enough accounts to trade a regular contract for the Euro, so E-minis are excellent investment strategies.

Conclusion

Futures contracts provide interesting and potentially profitable investment alternatives to many investors. Understanding the investment basics of futures contracts and commodities such as these will help you to be a more successful trader when it comes to futures contracts.

Futures Contracts - Profitable Investment Alternatives?

With the growing popularity of futures trading, more and more people are jumping into this interesting form of investing. People quickly find out that futures contracts are vastly different than agreements to purchase common stocks; with futures contracts, you are not actually buying a particular commodity, you are obtaining the right to purchase the underlying asset during a particular time period.

Pork Bellies?

Another difference between investing in the stock market and investing in futures contracts is the asset itself. Of course stocks are the assets involved in the stock market, while the commodity assets in futures contracts include:

• Currencies – The currency market is one of the best known commodities, trading the likes of the British pound and the American dollar.

• Interest Rate Futures – T-Bonds represent long-term interest rates and Eurodollars are for short-term interest rates.

• Energy Futures – Natural gas, heating oil and crude oil futures are the most widely known in this sector.

• Food Sector – Coffee, orange juice and sugar are well known commodities in this sector.

• Metals – Gold, silver and copper are traditionally strong commodities.

• Agricultural – Wheat, coffee, cotton, soybeans, pork bellies and corn futures are among those that are best known.

With so many futures contracts available, it can be difficult to decide which commodities interest you, especially if you are new to commodities trading. Sometimes it can be helpful when you start trading to begin with more popular commodities.

Below are five of the most popularly traded futures contracts:

1. S&P 500 E-mini – This is extremely popular for those investing in the futures markets. The E-mini can be traded electronically 24 hours a day, five days a week. In addition, the E-mini has most of the same advantages of the regular S&P 500 commodity but the cost of investment is much less.

2. E-mini NASDAQ 100 – The E-mini NASDAQ 100 follows the movement of the NASDAQ 100. Like the S&P 500 E-mini, this futures contract can be electronically traded and the contract and the amount of margin you have to set aside to trade the contract are smaller than a standard contract. Since most individuals don't have large enough accounts to trade regular contracts for the NASDAQ 100, the E-mini works out great.

3. Light Sweet Crude Oil – Probably the most famous commodity traded is oil futures. When you see the price of oil discussed on the evening news or in an investment newsletter, this is exactly what they are discussing.

4. Gold – If oil isn’t the most famous futures contract, then gold surely is. A gold contract tracks the price variations of one ounce of gold. Gold became an important part of the US economy when the United States went to the Gold Standard in the 1970’s. Since then, the price of gold changes dramatically, almost always in the opposite direction of the US dollar. Gold investments are frequently used as hedge funds because of the relationship with the US dollar.

5. E-mini Euro FX - The E-mini Euro FX contract tracks the movement of the exchange rate between the U.S. dollar and the Euro. The "E-mini" means that the contract and the amount of margin you have to set aside to trade these futures contracts are smaller than regular contracts. Most individuals don't have large enough accounts to trade a regular contract for the Euro, so E-minis are excellent investment strategies.

Conclusion

Futures contracts provide interesting and potentially profitable investment alternatives to many investors. Understanding the investment basics of futures contracts and commodities such as these will help you to be a more successful trader when it comes to futures contracts.