Dollar cost averaging (DCA) or systematic investment plan is one of the most popular investing strategies followed by many investors, especially small-scale investors who frequently invest small amounts. Know more about dollar cost averaging. Exchange traded funds (ETFs) are also good instruments to DCA but there are two factors to be concerned, expense ratio and trading costs.
Low expense ratios make ETFs suitable for dollar cost averaging; even the low-cost mutual funds (which are considered ideal for DCA) have high expense ratios than most ETFs. The expense ratio is a fixed-rate percentage. For example if the expense ratio of an ETF is 10 basic points, the expense ratio cost will be $0.1 for $100 investment and $1 for $1000 investment. Also ETFs do not have any sales charges, low-balance fee or purchase fees, which some mutual funds include.
As ETFs are traded just like stocks, they include trading brokerage fees, which can be of per trade or per share basis. For keeping the effect of trading costs minimum, the investor should trade ETFs in larger amounts less frequently preferably through a discount broker offering low charges. For example, if the flat fee of trading is $10 per trade, investing $100 in ETF monthly will result in 10% disappearance of money ($100 - $10) and after a year the portfolio value should be $1080 (90%); if the value of ETF stays same. But if the investment is done tri-monthly basis ($300 per trade) then the portfolio value after a year should be $1160 ($290 x 4).
The Week Ahead: The volatility pendulum has swung to the positive side as a five day winning streak left equities with the best week in 34 years and an 18.5% gain since November 21. Reports to watch include: construction spending and ISM Manufacturing on Monday, auto sales on Tuesday, Q3 productivity along with the Fed's Beige Book of economic activity on Wednesday, factory orders, chain store sales, and jobless claims on Thursday, and finally the all important November Employment Report on Friday.
Stocks to Watch: Retail stocks are showing mixed results heading into the Christmas season with Family Dollar Stores (FDO) outperforming most on a relative basis. Panasonic Corp. (PC) cut its fiscal year 09' earnings and sales forecast as the stock sunk to levels not seen since 03'. Frontline Limited (FRO), the Norwegian shipping company, cut its quarterly dividend to .50 from 1.50 but the stock recovered from its low despite this news. Dun & Bradstreet (DNB) will be added to the S&P 500 and Thoratec Corp. (THOR) to the Mid-Cap 400 on Monday.
Special Note: Despite the markets recent sprint, November ended its worst month in 8 years led by financials and information technology. The last time the market closed higher 5 straight days with white candlesticks was July 2007 which incidentally marked a top and a month long swoon in stocks. The way the 4th quarter has gone so far a continuation of the worst quarter in recent memory should not surprise investors. Near term resistance remains near 9000 on the Dow Industrials with strong resistance at 9600.
Commentary provided by Barry Ward, Registered Principal, NobleTrading.com, Inc.
Class A and class B are two different classes of stocks, known as classified stocks, which are issued publicly. Although most companies issue only one type of stock to public (known a common stock) having same voting and dividend rights, some companies issue more than one type of stock (class A, B, C...) to achieve some specific goals. The goals can be
For retaining of company control by the founders
To offer fixed (higher) dividend to some shareholders, or
To offer shares for higher/lower prices than existing
For example, class A stocks of a company may have a voting right ‘one vote per share’ and class B stocks may have a voting right ‘ten vote per share’. In this case, class A stocks should be widely traded in public and class B should be owned by some specific individuals who controls the company.
The practice of issuing different classes of stocks started in 1996, when Berkshire Hathaway of which 40% shares are owned by Warren Buffett at that time issued a new class B stock to public having one-thirtieth price and voting right of their existing class A stocks. Class A stock (ticker symbol: BRKa or BRK.A) holders can exchange their stocks for 30 class B stocks (ticker symbol: BRKb or BRK.B), but no exchange in opposite direction was allowed.
The Week Ahead: The appointment of Timothy Geithner as the new Treasury Secretary in 2009 helped to lift the market sharply on Friday after a breakdown in the major indexes earlier in the week. The S&P 500 reached levels not seen since 1997. Existing home sales are due out on Monday. The preliminary GDP numbers for Q3 are released Tuesday along with consumer confidence and the Case Shiller Home Price Index. Wednesday brings the durable goods report and personal income & spending. The market is closed Thursday for Thanksgiving with a shortened trading session on Friday.
Stocks to Watch: Celanese (CE) warned that the 4th quarter and 2008 profits will miss analysts estimates. The stock dropped 41% to new all time lows. Anglogold (AU) secured a $1 billion bridge loan to refinance expiring convertible bonds and helped rocket the stock 43%. Other gold stocks rose sharply as well including Kinross Gold (KGC) which broke through its 50 day moving average. Alpha Natural Resources (ANR) received an upgrade from a major brokerage which helped lift the stock from a deep low.
Special Note: Yet another bailout is in store this time for Citigroup, one of the largest money center banks in the country. The Treasury will inject $20 billion from the congressionally approved TARP funds and receive an 8% preferred stock. In addition a $306 billion backstop will be provided against a pool of Citi's troubled assets. The deleveraging process of all assets classes will likely continue despite this news making it tough for the market to make any headway. There are still no technical signs of a bottom in place.
Commentary provided by Barry Ward, Registered Principal, NobleTrading.com, Inc.
World forex market has its own language. There are nicknames to currencies and currency pairs and there are some interesting terminologies. Knowing them is important is for a forex trader as it will help him in better understanding of news, reports and commentaries. Here are some of them with some interesting explanations.
Nicknames of Currencies
US Dollar (USD) – Greenback and buck. The name buck came from “buckskins” which were used for trading in late 1700s, when there was no paper money.
British Pound (GBP) – Cable, Pound and Sterling. The name cable probably came from the trans-Atlantic cable between US and Britain.
Canadian Dollar (CAD) – Loonie and Little dollar. Loonie is the bird depicted on the Canadian coin.
Euro (EUR) – Fiber.
Australian Dollar (AUD) – Aussie or Ozzie. Aussie is the word now-a-days used to denote anything having an origin in Australia.
Swiss Franc (CHF) – Swissie.
New Zealand Dollar (NZD) – Kiwi, named after the non-flying bird found there.
Currency Pair Nicknames
EUR/JPY – Euppy or Yuppy.
EUR/GBP – Chunnel, as a tunnel connect Britain and France (the European continent).
GBP/JPY – Gopher.
USD/JPY – Ninja.
Terminologies
Yard – is a billion unit of a currency.
Figure – is a term denoting a round term. Eg: 1.2000 and 2.400
