Anet Capital

• 28Dec

  Investment Portfolios

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  Since investors like to increase their expected wealth and like to avoid risk or uncertainty, it is possible to imagine different combinations of expected gain and risk which are valued equally by an investor. That is, an investor will be willing to assume greater risk, if he achieves greater expected wealth.

  The individual investor is now conceptually prepared to select the optimum portfolio from those constituting the efficient set. The optimum portfolio (i.e., the one which maximizes expected utility) is the one at the point of tangency between the efficient frontier and an indifference curve. In images it can be seen that the investor can do no better than choose the portfolio at point A on the efficient frontier, since no other portfolio is on as high an indifference. Another escape is to say that concavity does not necessarily imply that the relationship is quadratic and that other equations can preserve the concavity without ever implying a maximum value from which utility will decline as wealth increases.

  The difficulty with these other curves is that efficiency in terms of the mean and variance of a portfolio does not necessarily imply maximization of expected utility. Markowitz has shown, however, that many utility functions can be reasonably approximated by the quadratic.

  A different line of criticism has been advanced by Arditti and others. They argue that investors may be interested in characteristics of distributions of rates of return additional to the mean and variance. In particular, they argue that skewness may be of importance. That is, if the rates of return on the portfolios have the same mean and variance, but different skewness, investors may prefer the distribution which is more skewed to the right. One is not excused from reaching tentative conclusions simply because the theoretical development of a field is still rudimentary.

  A conclusion which is consistent with much that has been observed in the real world and which is satisfying theoretically is the one with which we started: namely, that portfolios which are efficient in terms of their means and variances necessarily maximize expected utility which can be represented by a quadratic equation. Markowitz, perhaps, does the best job of showing that his efficient portfolios are very close to optimum or come very close to maximizing expected utility, even if things other than the mean and variance of the distributions of returns make a difference to or affect the expected utility of inves tors. Even if the investor is concerned about the magnitude of the expected loss, the maximum expected loss, the probability of a loss, or other attributes of the distribution, the portfolios selected according to those criteria will be very similar to portfolios selected according to their means and variances.

  Tags: Investment, Portfolios

• 24Dec

  Commodity investing

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  A commodity investment is an  scheme where many individual investors combine their moneys and trade in futures contracts as a single entity in order to gain leverage. They are analogous to mutual funds wherein a fund is similarly set up expressly for trading in equity, except that mutual funds are open to public subscription whereas commodity pool and hedge funds are private.

  Commodity market deal in the trade of commodities like gold, cotton, crude oil, orange juice etc. Many items both perishable non perishable, finished goods, raw materials and semi finished goods will be traded in this market at the international level. Commodity market does not necessarily require you to buy or sell the commodities but you can even exchange them.
   
  Commodity tips was initially received well only by a few sectors.

  Commodities investing were first restricted to the trade and exchange of commodities meant for regular and day to day use. However the awareness in the subsequent stages has brought all sectors into the manifold of commodity investing and has enabled speedy movements, transfer and transaction of goods and services.

  It covers physical product (food, metals, electricity) markets but not the ways that services, including those of governments, nor investment, nor debt, can be seen as a commodity.

  Commodity enthusiasts, on the other hand, would argue that it is better to own futures contracts than to own shares of companies that produce commodities. Reason: They expect commodity-price inflation. Periods of price inflation tend to hurt equity valuations, so you won’t get the full benefit of rising commodity prices by investing in the companies that produce them.

  The group started the Citi BRIC Commodities Index, a gauge of raw materials based on consumption by Brazil, Russia, India and China, a year ago. The index returned about 19 percent to investors this year, the most among 52 indexes monitored by Bloomberg News. The Citi CUBES GSCI-Weighted Index, introduced in 2009, gained more than 16 percent and ranked second, beating the Standard & Poor’s GSCI Enhanced Commodity Index.

  Each commodity contract requires a different minimum deposit, depending on the broker, and the value of your account will increase or decrease with the value of the contract. If the value of the contract goes down, you will be subject to a margin call and will be required to place more money into your account to keep the position open. Due to the huge amounts of leverage, small price movements can mean huge returns or losses, and a futures account can be wiped out or doubled in a matter of minutes.

  Tags: Commodity, Investing

• 24Dec

  Commodity investing

  Investing No Comments
  
  

  A commodity investment is an  scheme where many individual investors combine their moneys and trade in futures contracts as a single entity in order to gain leverage. They are analogous to mutual funds wherein a fund is similarly set up expressly for trading in equity, except that mutual funds are open to public subscription whereas commodity pool and hedge funds are private.

  Commodity market deal in the trade of commodities like gold, cotton, crude oil, orange juice etc. Many items both perishable non perishable, finished goods, raw materials and semi finished goods will be traded in this market at the international level. Commodity market does not necessarily require you to buy or sell the commodities but you can even exchange them.
   
  Commodity tips was initially received well only by a few sectors.

  Commodities investing were first restricted to the trade and exchange of commodities meant for regular and day to day use. However the awareness in the subsequent stages has brought all sectors into the manifold of commodity investing and has enabled speedy movements, transfer and transaction of goods and services.

  It covers physical product (food, metals, electricity) markets but not the ways that services, including those of governments, nor investment, nor debt, can be seen as a commodity.

  Commodity enthusiasts, on the other hand, would argue that it is better to own futures contracts than to own shares of companies that produce commodities. Reason: They expect commodity-price inflation. Periods of price inflation tend to hurt equity valuations, so you won’t get the full benefit of rising commodity prices by investing in the companies that produce them.

  The group started the Citi BRIC Commodities Index, a gauge of raw materials based on consumption by Brazil, Russia, India and China, a year ago. The index returned about 19 percent to investors this year, the most among 52 indexes monitored by Bloomberg News. The Citi CUBES GSCI-Weighted Index, introduced in 2009, gained more than 16 percent and ranked second, beating the Standard & Poor’s GSCI Enhanced Commodity Index.

  Each commodity contract requires a different minimum deposit, depending on the broker, and the value of your account will increase or decrease with the value of the contract. If the value of the contract goes down, you will be subject to a margin call and will be required to place more money into your account to keep the position open. Due to the huge amounts of leverage, small price movements can mean huge returns or losses, and a futures account can be wiped out or doubled in a matter of minutes.

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  Tags: Commodity, Investing

• 21Dec

  Retirement Investing

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  .. 

  How many times have you heard people speak of investing in the stock market? They talk about selling short or long, putts & calls. How they bought a ‘penny’ stock & sold for ‘a killing’. You have to admit, it has a  romanticism to it. Wall street is an exciting place where Billions (with a B) are trading every day. Some millions are gained and some are lost.

  For most, Wall Street is a place in the movies or what we read about in the newspaper. If you ever get the oppor

  tunity, go visit Wall Street.

  You will be amazed. It is a frantic experience.

  Baby Boomers are risk takers. That’s why this country has progressed to where it is today. Are you? If you decide to invest in the stock market, you must do your due diligence.

  You could be a very successful investor or you may bring financial ruin to yourself and family. Remember Bernie and his Ponzi scheme?

  With today’s electronic world, you can do trading online with just a few clicks of the mouse. Imagine with one click you can go broke. So here lies your Caviot. Do your home work, speak with professional investment counselors, CPA’s, tax attorney’s, bankers and the like.

  Some of the advantages of being online with your financial information are:

   

  ..  Your bank balances are only a few clicks away & your investments > are there for you on a daily basis. You can have updates emailed to you.

  This type of investing can raise your awareness or lower your tolerance when you see what’s happening on a daily or hourly basis.

  …  Online services have lowered trading fee’s and made it more convenient for you.  However, by not meeting with a broker, you may loose contact with their expertise.

  … Warning!  Your online trading can become not only entertaining but also obsessive.  Rather than putting your money into an investment that will meet your long term goals, you may look to do short term more risky investments.

  . The sudden interest in online trading has made more people knowledgeable about the stock market and what their money is doing.  There is no downside to becoming educated about this important part of your financial planning.

   

  As with anything in life, common sense and balance is crucial not to let yourself be obsessed with investing.  Baby Boomers have a lot of time on their hands and often find themselves without enough money at the end of the month.  So, it’s easy to see online investing as a way to supplement their income.  Be careful….You may loose it all.

  If there was any mantra, we must have about investing, especially if we are using online tools, it is, ?Be prudent and be informed.?  There is no replacement for getting some education and doing some comprehension into the workings of the stock market and into the strategies that are most likely to be a success for you.  The stock market is no place for ?get rich quick? schemes because they are more likely to result in ?get poor quick? outcomes. 

   

  But for the smart  baby boomer who does his or her homework and knows what they are doing and gets good advice from investment analysts that know the market, online investing can become a good addition to your financial planning arsenal and be a lot of fun for you as well.

   

  How will you build your retirement fortune?

   

  Http://www.Retirementusa.Com provides complete solutions for your life-style

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  Tags: Investing, Retirement

• 18Dec

  Investment Procedures

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  Investment Procedures

   

  Almost certainly, the discussion has been at such a high level of generality that it provides little concrete guidance for real investors. After some more similar, general, and abstract discussion of related topics, such as capital asset pricing and risk, we hope to provide some help in translating these general concepts into usable investment procedures. In order to define Markowitz’s efficient set of portfolios, it is necessary to know for each security its expected return, its variance, and its covariance with each other security. If the efficient set were to be selected from a list of only 1,000 securities, the volume of necessary inputs and the computational costs would be intolerably large. It would be necessary to have 1,000 statistics for expected return, 1,000 variances, and 499,500 covariances.* It is not realistic to expect security analysts to provide this volume of inputs.

  If 20 analysts were responsible for the 1,000 stocks, each analyst would be responsible for providing almost 25,000 covariances. The volume of work would be intolerable and, furthermore, it seems to be quite difficult to have an intuitive feeling about the significance of a covariance.

  Because of this practical difficulty, the Markowitz portfolio model was exclusively of academic interest until William Sharpe suggested a simplification which made it usable.1 Since almost all securities are significantly correlated with the market as a whole, Sharpe suggested that a satisfactory simplification would be to abandon the covariances of each security with each other security and to substitute information on the relationship of each security to the market.

  In his terms, it is possible to consider the return for each security to be represented by the following equation: where Rtis the return on security i, atand b,Lare parameters, ciis a random variable with an expected value of zero, and / is the level of some index, typically a common stock price index. In words, the return on any stock depends on some constant (a) plus some coefficient (b) times the value of a comprehensive stock index (say, the S & P “500″) plus a random component. Sharpe’s simplication reduces the number of estimates that the analyst must produce from 501,500 to 3,002 for a list of 1,000 securities.*

  There have been other efforts at simplification derived from Sharpe’s ideas. Cohen and Poague suggested that several indexes rather than a single index be used, with the return for each security being related to the index most appropriate for it—perhaps some index of production which is a component of the aggregate Index of Industrial Production of the Federal Reserve Board. Their empirical results suggest that the cost of using simplifications—either Sharpe’s or theirs—is small. That is, the portfolios which are efficient as a result of their simplified processes are very similar to the efficient portfolios that result from Markowitz’s more complex process. Furthermore, if results are evaluated in terms of the two criteria, expected return and risk, the efficient portfolios from the simple process are insignificantly worse than the efficient portfolios from the complex process.

   

  Tags: Investment, Procedures

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