established by the market. Why no-load market index funds instead of individual stocks or Exchange Traded Funds (ETFs) that mirror various market indexes? Because no-load market index funds allow leveraging and short selling without the need for a margin account. Also, some of these funds allow twice-daily trading (which is important for exiting early on bad days). In addition,
tory burch flip flops sale, the fund company I use doesn’t charge redemption fees for actively trading its funds. Most fund companies, even those that specialize in no-load funds, charge these fees.
Like I said at the beginning, I’m not going into great detail, especially about my more aggressive strategy. However, I should define some terms so all of this will make more sense to those who are novices in the world of investments.
What is leveraging? Leveraging, in this context, is the ability to buy shares of a stock or mutual fund and realize a multiple of its gain or loss during the time you hold it. For example, if you buy a fund leveraged at 2 times a given stock index and that fund goes up 20%, you realize a 40% gain. However, if it goes down 20%, you incur a 40% loss. With individual stocks or ETFs, you need a margin account to do this. With a margin account, your broker is loaning you money on “margin” at a rather high rate of interest to cover the leveraged (or extra) amount. Obviously, this could be very risky and costly. However, there are some funds that have this leveraging built in at no cost to you. These funds automatically give you one-and-a-half or two times the gain or loss of a given stock index.
What is short selling? Short selling is when you sell a stock (that you don’t already own) immediately at its current market price while agreeing to buy it at whatever the market price will be at a fixed point in the near future. In other words, you are betting that the stock will be going down, so you can buy it for less than you sold it for. Have you ever heard anyone say “don’t sell me short”? Well, this is where that term came from. Selling someone short is tantamount to treating them like a bad stock that you believe is going down. Yes, it’s backwards of the normal process of buying and selling stocks. As with leveraging, you need a margin account to do this for individual stocks or ETFs. Your broker loans you money on “margin” (actually buying the stock temporarily), so you can sell a stock that you don’t own yet.
Once again, however, the funds I use have this short selling mechanism already built in to them at no cost to you. For example, you can buy a fund that gives you the inverse performance of the Nasdaq-100 Index. When that index goes up 10%, the fund goes down 10%; conversely, when that index goes down 10%, the fund goes up 10%. There are even funds with leveraging and short selling built in to them, at no cost to you! For example, there is an available fund that goes up 20% when the Nasdaq-100 Index goes down 10%. Of course, that same fund goes down 20% when then the Nasdaq-100 Index goes up 10%. As you can probably imagine,
moncler down, these funds can be powerful tools for profit-making for those who know how to use them, but can be highly dangerous for those who do not.
For more information about any or all of these concepts and to find out what kind of investment is right for you, contact your financial advisor and/or do your own research. Hopefully,
coach crossbody bags, I have provided some food for thought as well as several resources that might be helpful to you when doing your own research.
Terry Mitchell is a software engineer, freelance writer, and trivia buff from Hopewell, VA. He also serves as a political columnist for American Daily and operates his own website - http://www.commenterry.com - on which he posts commentaries on various subjects such as politics, technology, religion, health and well-being, personal finance, and sports. His commentaries offer a unique point of view that is not often found in mainstream media.