The Pitfalls of Foreign Mutual Funds

When comparing the returns of equity mutual funds, many foreign mutual funds outperform domestic ones. This has caused some investors to buy more securities in international companies in the hopes of huge returns. While these funds offer great diversification, you must also be aware of the pitfalls of foreign mutual funds.

The Pitfalls of Foreign Mutual Funds

What Are Foreign Mutual Funds?

Foreign mutual funds are international funds that invest in securities of foreign companies that are listed in foreign markets. Some mutual funds invest directly in international stock markets. Others serve as feeder funds that invest in specified mutual funds in international markets.

They can be categorized geographically or by the markets they invest in. Some international funds choose to focus on a single sector, commodity or emerging market.

Why Do People Invest in Foreign Markets?

One of the greatest advantages when investing in foreign markets is the instant diversification you receive. With these funds, you are buying a piece of larger portfolios than you couldn’t assemble on your own. Investing in foreign markets also diversifies your holdings into different currencies. Monetary depreciation between currencies increases your returns on investments in foreign markets as well.

Another benefit of foreign investment is exposure to new markets and economies. Varying markets and economies do not necessarily move in tandem with one another. Investing in foreign mutual funds allows you the chance to invest in other economies that are performing better at that particular time.

Finally, you get professional management for your portfolio backed by a full financial team. Fund managers have extensive experience in the global markets. Additionally, research analysts located worldwide are constantly looking at new investment opportunities for their firms.

What are the Pitfalls of Foreign Mutual Funds?

However, there are many pitfalls of foreign mutual funds. Before you run off and invest in an international fund, consider these drawbacks.

1. They charge annual management fees. The average international fund charges about 1.5% of the total assets, but some are much more expensive. This figure seems like a small amount but it can add up over time.

2. You have less control over decisions since your fund manager chooses where to invest. They may choose to focus on a different region than you prefer, or invest in different companies that you would not choose for yourself. Since they are only required to report holdings twice per year, you may not know the details of what your manager is buying until long after the fact. This is not always a bad thing, but many things are out of your hands

3. Not all international funds perform well. Furthermore, currency exchange rates could work against you as well. If the foreign currency appreciates instead, this can reduce your returns.

4. U.S. tax payers who invest in foreign mutual funds more heavily taxed for foreign mutual funds. Since the Tax Reform Act of 1986, investors can no longer cash in on the loophole related to tax-free foreign mutual funds.

Should You Invest in Foreign Mutual Funds?

In the end, the argument for global diversification in your portfolio is a compelling one. However, you must carefully weigh it against the pitfalls of foreign mutual funds. Should you choose to invest in foreign markets, it is always wise to proceed with caution. Don’t sink all your money into an unfamiliar market or ignore the risks of forex investments. As with all financial matters, never invest money that you can’t afford to lose and seek professional advice when you feel out of your depth.

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How to Become Independently Wealthy

Become Independently Wealthy

Becoming wealthy is a goal many of us hope to achieve in our lifetime.  Some want to be wealthy to have unbelievable lifelong experiences or to validate success. However, the goal is often dreamed of but rarely achieved.  Ken Fisher, the author of The Ten Roads to Riches, discusses the many ways people can achieve wealth throughout their lifetime, ten to be exact.  All of these roads have proven to make someone independently wealthy in their lifetime.  Some are more common than others.  So, if the question of how to become independently wealthy has crossed your mind, I will discuss two of the ten roads Ken illustrates in his book.

What Does It Mean to Be Independently Wealthy?

To determine whether you are independently wealthy, you must ask yourself a few basic questions. First, do you rely on financial support from anyone? If not, then consider yourself financially independent. Second, do you depend on your employment income? If you answer no to the second question, you would be considered independently wealthy. When you have become independently wealthy, you have either saved enough or earn sufficient passive income to give up your day job.

How to Become Independently Wealthy: Save and Invest Wisely

I usually sign off my posts with a simple phrase: Budget Smart, Invest Wise.  Budgeting allows you to allocate your funds to various categories. Hopefully one of those categories is savings.  Whether your savings vehicle is an IRA, Roth IRA or other type of investment, saving money is critical to building wealth.  However, saving is only half of the battle to building wealth this way.

The other key ingredient is investing wisely.  Investing wisely means creating a smart investment plan. This may be with a financial advisor or through acquired knowledge that creates a return on your investment.  For example, I have found that investing on a monthly basis in a mutual fund is of most benefit to me because it covers the broad range of the U.S. Stock Market.  This investment, although it has risk involved, prevents me from being susceptible to the failure of one company or one sector of the market.  Saving and investing wisely is the road most traveled. But, it also provides the greatest chance of reward.

How to Become Independently Wealthy: Invent Income

Inventing income can cover a wide spectrum of earning additional money.  For example, if you are a songwriter or musician, you can create an ongoing stream of royalties from your lyrics or music.  If you purchase a rental property, you could turn it into a cash flow positive stream of income.  The possibilities are endless.  Maybe you have a specific skill that people are willing to pay you to teach them.  Perhaps your area of expertise at work can lead to consulting other companies on the side.  Do you have something you’re passionate about that you can create into a blog or website and charge for ad revenue?  Many of us have the tools, knowledge, and talent to create additional income. However, do you have the drive to reach your goal?

Becoming independently wealthy or successful all boils down to the level of commitment.  If you are committed to becoming independently wealthy, then  you can find a way.  Some individuals, like Bill Gates or Mark Zuckerberg, created an enormous amount of wealth.  Maybe you want billions like these company creators. On the other hand, maybe you will be satisfied with millions or even a million.  Only you can determine what being wealthy is to you.

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How to Protect Yourself Financially Through Fundrise

Real Estate Investment Trust REIT on double exsposure business background

Fundrise has revolutionized the real estate market with its meteoric rise that can be attributed to its invention of eREITs (electronic real estate investment trusts). These unique investment trusts give low income-bracket investors an opportunity to buy into commercial and residential properties.

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10 Industries Which Could Do Well from the Coronavirus

coronvirus investing

Having killed more than 100,000 people already, the Novel Coronavirus, Covid-19, is wreaking havoc. To date, more than 1.7 million people in at least 210 countries and territories worldwide have been affected, with the number rising by several thousand each day. Without exaggerating, it’s been one of the worst epidemics in the last 100 years.

Unsurprisingly, Not Everyone Is Feeling the Blues

While some stare at months or potentially years of turmoil, a few industries are reaping big from the impacts of the Covid-19. Here are just a few examples of industries that seem to be thriving amidst the chaos.

Health and Wellness 

Businesses that prescribe or sell home fitness programs and exercise equipment, also known as Lifestyle of Health and Sustainability (LOHAS) providers, are swimming in money this Covid-19 season.

From fitness apps that offer workout programs such as yoga and cycling to live broadcast fitness classes, sales have surged exponentially. Sales of skipping ropes (56%), dumbbells (60%), and yoga mats (150%), for instance, have increased.

Grocery delivery 

Now that people can’t go out freely, they can’t do their own shopping. But, they still need to eat. So, what do they do? Find someone else to do their grocery shopping! That’s where delivery companies come in.

Alibaba’s grocery delivery app, Fresh Hema, for instance, witnessed 100,000 new downloads in a single day during the February lockdown in China.

Ecommerce and e-marketplaces 

Similar to grocery delivery, although people have been asked to stay indoors, that doesn’t mean they can’t buy the items they need. It just means that they can’t do it while outside their homes. A quick solution? Order whatever you need online!

The result has been a sharp spike in online shopping. Amazon, for instance, is adding 100,000 new jobs to manage the extra demand.

Online education and remote learning 

Although education programs in many countries are suspended, learning hasn’t stopped entirely. Instead, many people are turning to online platforms, and EdTech companies are taking full advantage.

In China, TAL Education owner Zhang Bangxin saw his wealth rise by over $1.7 billion within just three months after partnering with 300 schools in the country to offer courses online.

Pharmaceuticals 

First off, in nearly all nations, pharmacies have been classified as “essential” and thus left open despite strict restrictions on movement. Those who need medicines will quickly get permission from the authorities to visit the nearest pharmacy.

Additionally, the pharmaceutical companies that eventually develop a vaccine for the coronavirus are guaranteed billions in profits.

Logistics 

Since everyone else is indoors, logistics companies are needed now more than ever to plan and execute the delivery of essential goods such as oil, medical equipment, and food. And, they’re making a killing off the current strains.

Alibaba’s Green Channel Initiative, which delivers PPEs, masks, and other medical equipment, for instance, has shipped over 5 million medical equipment in China alone.

Video Conferencing 

If people can’t go to the office to work, how do they attend to clients? Easy – find a reliable video conferencing app and discuss new deals or the progress of old contracts from the comfort of your homes!

Video conferencing apps are significantly benefiting from this new trend. Zoom, a US-based videoconferencing start-up, for example, has witnessed a 50% jump in sales over the Covid-19 period.

Online gambling 

A joint study by analytics firm AlphaBeta and the Australian credit bureau illion shows a 67% increase in online gambling in the week ending Thursday 9, April. And, in the US, Global Poker recently revealed a 43% increase in the use of online poker sites in the country.

It makes sense considering that people are stuck at home. Bored and without any other viable alternatives, even lottery players will be looking to buy tickets online. It’s an excellent distraction from the prevailing confusion.

Entertainment streaming 

Forbes indicates that Covid-19 has pushed up streaming by more than 12%. Although the shock of the lockdowns and curfews initially led to a drop in streaming, there’s been a swift uptick in both new subscriptions and total streaming time.

In Italy, for example, streaming is up 90%, with one streaming site, MainStreaming, reporting a 300% rise in streaming traffic.

Online gaming 

Finally, more people are also playing video games as they stay at home this coronavirus season. Data from US telecommunications giant Verizon shows that video gaming has increased 75% during peak hours in North America.

Doug Creutz, an analyst for investment bank Cowen, predicts that the industry will “fare far better than the market average” during the pandemic.

Summary

Although it’s been doom and gloom for the past few months, covid-19 has had a positive impact on select industries. Hopefully, the gains made during this period will give these industries a firm footing and spur their growth even after the virus is long gone.

For more great articles, read these:

Your Monthly Budget

Simple Wealth, Inevitable Wealth

Five Keys For a $100 A Month Grocery Bill

Image source, Yuri Samoilov, via Flickr.

Consider Professional Companies To Guide You Through The Delaware Statutory Trust Or DST Process

A DST or Delaware Statutory Trust is a legal issuance that real estate investors create and frequently use, allowing for multiple investors to pool their money in an effort to hold fractional interest in the trust’s assets and holdings. It’s comparable though there are critical legal distinctions to the functionality of a limited partnership where a master partner has the assignment to manage the trust’s owned assets. The DST then gives owners limited liability and passes cash distributions and income to minority partners. Continue reading

Changes in Life that Affect Retirement Planning

Changes that affect retirement planning

Retirement planning is a challenging endeavor. With so much uncertainty in life, it pays to give enough thought to retirement plans. Many events take place which we do not expect. Such events can unfold new opportunities and challenges. The right plan and execution can allow one to leverage the resources one has to improve their future. But what life changes affect retirement planning? Continue reading

Is Trading More Profitable Than Investment?

Both trading and investing can be considered as two different methods of attaining profit in financial markets. Both traders and investors look for profit by taking part in the market. The only obvious difference between the two groups is that investors tend to seek larger returns over an extended period of time, while traders seek smaller, more frequent profits over a much shorter period of time.

Comparing Trading With Investing

Both trading and investing require a degree of emotional discipline as well as patience to execute correctly. However, the time required by a trader and an investor differs in many aspects. In the case of traders, they remain active, potentially executing several trades throughout the day if they find positive trading opportunities.  Investors, on the other hand, work on a long –term basis, as it does not require constantly watching the positions of his/her portfolio.

Comparing the potential returns of trading and investing is like comparing oranges to apples, as there are no definitive ways to answer it. One of the biggest advantages that trading has over normal investing is the phenomenon of rapid compounding of gains. For instance, if a trader starts out with $50000 with a 10% profit every month, the trader starts with $55000 in the next month, followed by $60500 the following month if the profit level remains the same.

Thus, through trading, a trader tends to make gains on prior gains, as well as on any additional deposited capital.   This serves as a striking advantage that trading has over long-term investing.  This is not the case with investing where traders have to wait years for profits to be realised and cannot use the said profit to generate even more gains.

Using IQ Option for Trading

Many potential traders avoid trading, citing a lack of reliable brokers as the prime reason behind their decisions. However, IQ Option, a Cyprus based brokerage service has become a popular option for traders looking to diversify their portfolio. Along with binary options trading, IQ Option offers a mix of forex contract for Differences, Stock CFDs, cryptocurrency CFDs, commodity CFDs as well as digital options, in a single, seamless platform.

As mentioned before, IQ Option offers a mix of forex, cryptocurrency, stock and commodity markets for traders to trade in. It offers Binary Options on some stocks, forex pairs and on some commodities. Because of recent changes in regulatory directives, it offers digital options for EU-based traders who are prohibited from trading Binary Options by law.

As traders require some skill and experience before attaining success, IQ Option offer a fully functional demo account for traders to get the hang of it. This demo account has all the features of a real account, with virtual money for traders to hone their skills. Novice traders can thus use this feature to get a feel of the trading market in real time, with options to restore the original virtual balance at any time.

IQ Option is thus a secure online broker which caters to both small and large participants in the market. The minimum deposits for IQ Option are as small as $ 1 USD with trades starting from $1 as well.Founded in 2008, the platform has more than 25,580,000 as of 2020.

Conclusion

Both trading and investments have their own sets of advantages and it cannot be definitively said which one is better. Ultimately, it depends on the skill level of the trader or investors involved, in order to be successful. With the emergence of online brokerage services such as IQ Option, the online trading industry has provided access to more traders worldwide than ever before, making trading one of the most accessible and profitable aspects of dealing in the financial market.

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Image source: OTA Photos, via Flickr.