November 22nd, 2009 — Brokers, ETFs, Investing, Trading
Tired of paying high brokerage fees? Looking to lower your brokerage commissions? Charles Schwab recently began offering free ETF trades when you open a brokerage account with them. Are the benefits worth it?
ETFs Available To Trade Free Now
Schwab US Broad Market ETF (SCHB)
Schwab US Large-Cap ETF (SCHX)
Schwab US Small-Cap ETF (SCHA)
Schwab International Equity ETF (SCHF)
Available In December
Schwab US Large-Cap Growth ETF (SCHG)
Schwab US Large-Cap Value ETF (SCHV)
Schwab International Small Cap ETF (SCHC)
Schwab Emerging Markets Equity ETF (SCHE)
Are Charles Schwab’s ETFs Right For You?
If you are a investor looking for longer-term investments or trades and like using indexes; then these ETFs are worth looking at. For traders and shorter-term investors, the volume is too low for me to recommend them. When trading stocks and ETFs (other than the Schwab ETFs listed above), commissions rates are $8.95 – $19.95, depending on the amount of trades placed.
Understand that commission free trading is nice, but with Charles Schwab, you are limited to a few ETFs that you can trade. If the volume rises in these ETFs, it might be worth looking into. For now, the products are too limited and commissions on other ETFs and stocks are higher than most online brokers.
Get more information on opening an account and Charles Schwab ETFs @ www.schwab.com.
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- Tags: Brokers, ETFs, Investing, Trading
November 6th, 2009 — Market Commentary
Tomorrow the employment numbers come out and expectation are that unemployment will come in just below 10%. How will the market react? Will the Dow hold 10,000 or sell-off?
The Psychological Effect
The psychological effect of the unemployment number crossing 10 percent could have a significant impact on trading tomorrow. If the number comes in higher than expected, the market will probably sell-off. A correction would not necessarily be a bad thing now, as the markets have come a long way since the March bottoms.
Market Looking For Direction
Recently, the market volatility has increased along with the market swings. The Dow 10,000 looks toppy and if the number comes in worse than expected, expect a quick loss in the markets. If the number comes out better than expected, the market will probably continue higher. Those who are short the markets get out of the way until the next source of bad news or lose big.
Be Prepared To Jump In Or Out
You can make a lot of money trading economic new but prepare yourself to get out quickly if the trade does not go your way. If you are trading the employment numbers, please remember your stop orders. The unemployment numbers will move the markets tomorrow. I do not recommend trading economic numbers. If you do so, play it safe and take profits or stop losses.
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October 25th, 2009 — Investing
I recall watching CNBC when the DOW crossed 10,000 a little over a week ago. What was it that made the traders and investors on the floor cheer? Why is the 10,000 milestone so important? What makes this time different from the first time the DOW passed the 10,000 mark 10 years ago?
The Decade That Flat-lined
To me, the DOW crossing 10,000 means nothing fundamentally and technically it is another whole number to trade off. The DOW crossing 10,000 did not create any new jobs, nor did it help the declining dollar. As I mentioned earlier, the DOW crossed the 10,000 milestone 10 years ago. If you had put your money into an index fund 10 years ago, it has done nothing…not counting dividends. Dividends that, if reinvested, have lost value and taxes you paid on them probably wipes out anything you might have gained.
Dow 10,000 – The Second Time Around
With a decade of no performance, where do we really stand? Well, 10,000 today is not the same 10,000 as it were 10 years ago. Thanks to inflation, your investment in an index fund that tracks the DOW might have returned you the same dollar amount as you invested but it gave you a dollar with a significantly weaker buying power. Want to know more about the loss in your buying power? Head over to ZeroHedge.com and read an article called “DOW 10,000!!!! OhWait, Make That 7,537.”
Investing In Index Funds
If you are investing in index funds think about this post. Ten years of no gains and loss of buying power will make anyone poorer than they were 10 years ago. Do not get me wrong, I am not saying that index funds are a terrible investment. I am saying that the buy and hold theory should be history. A decade of losing 25% of your buying power and no investment gains is an obstacle you do not want in a retirement account.
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- Tags: Investing, Market Commentary
September 5th, 2009 — Trading
Beta, in short, is a measurement of risk a stock or ETF holds against a benchmark index such as the S&P 500. Higher beta usually means bigger movements and visa versa for lower beta stocks or ETFs. Understanding beta can provide your portfolio with a hedging tool and the opportunity for bigger gains (and losses).
Beta, Beta, Beta.
The S&P 500 SPDR (SPY) has a beta of 1, while stocks and ETFs are calculated using an index to compare the correlation. Any beta over 1 means a stock or ETF outperforms its benchmark index. A stock with a beta of 2.0 will usually go up twice the amount of the benchmark that tracks it but also goes down at the same rate. Stocks and ETFs with a negative beta trade inverse to their benchmark index and are useful in hedging long positions.
The more confident you are of a markets direction, the higher beta stocks and ETFs you want in your portfolio. In an uncertain, choppy market, you should stay with lower beta stocks and ETFs or stick to the indexes.
Pairs Trading
When used correctly, beta is an easy way to outperform (and underperform) a benchmark but can also be a tool to hedge your investments. Buying a stock with a higher beta and shorting a lower beta stock is one way to hedge your investments in an upward trending market. In a downward trending market, just reverse the trade selling the high beta stock and buying the lower beta stock.
Things To Remember
- Beta is calculated on past performance.
- Beta can hide negative correlations.
- Beta, alone, should never be used to buy/short any security.
Use beta wisely and always have stop orders.
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August 28th, 2009 — Market Commentary
Sell in May and go away, a slogan referred to when traders and investors go flat (hold no positions) over the summer. If traders and investors took part in the sell in May and go away theory this year, many would probably have some catching up to do as they are lagging the indexes.
I traded the failed head and shoulders pattern in July, but quickly reversed the trade after breaking up through and holding the neckline. Too many people were shorting the head and shoulders pattern in July and when a few people stepped in to buy; those who were shorting got stopped out. With September around the corner, is it time to sell?
As the market seems to keep going higher, some stocks are getting ahead of the underlying fundamentals. So, why have we not seen a pullback? Whenever the market looks like it wants to pull back, fund managers, retail investors, and others are piling in with hopes of catching up to the indexes. Afraid they will miss the next move higher. The current market just doesn’t want to sell.
Looking at the chart below, the S&P 500 volume is thinning out while making new highs. Recent volume has been concentrated in just a few companies.
Although the S&P 500 is in a nice upward trend, many others and I think there will be a correction. The $64,000 question is when and how much? One thing I learned quickly in trading is that if most investors and traders suspect it, then most likely it will fail. How many times did investors and traders call a bottom on the way down to the March lows? I think the head and shoulders pattern failed because it was a one sided trade…everyone was short, including myself.
While I think a pullback is near, I remain bearishly long. My trading portfolio is currently flat while my income portfolio is loaded with preferred stocks and junk bonds. However, as the markets continue to rise, so do my stop loss orders. Maybe, September will show us what is next to come.
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