Stockbroking has been around for centuries. The stock market was initiated on wanting to invest on a business and from that make profit off of its performance. This still remains the same today. Stock markets are very important today for they also help economic growth in countries all over the world. Stock markets do emerge because this way they get the public to continue investing or begin to invest their money into stocks.
Stocks aren’t the only thing the public can invest in there is also bonds from the government. Next we will speak on three great moments in the history of stockbroking.
The Birth of Stock Exchange
The first stock exchange to ever happen was in Belgium. Antwerp was where it all happened, back in 1531. The way this stock exchange worked was by dealing with it with promissory notes as well as bonds. In the 1500’s there were no real stocks meaning that there was no real share. Beurzen’ was what early stock markets were called.
This was due to the influence of the Van der Beurze family whom was a resident of Belgium. This stock market resembled a lot of what’s going on today in companies such as CMC Markets and the stockbroking world. The way they were organized and ran was very similar to what we have today. The only major difference was what was being traded. No real company trading shares were being traded.
The East India Company
Belgium might have had the first stock exchange happen, but East India had the first publically traded company. Simply because they were willing to take the risk that everyone else didn’t. No company was willing to take the risk to go across the planet. This company was called Governor and Company of Merchants of London trading with the East Indies.’ So what was different about this company aside from taking the risk?
They came up with a plan that was a lot more intriguing when it came to investing. Investors would no longer have to invest everything on one voyage and take the risk of losing everything. They would now be able to invest and purchase share in more than one company. This meant that if ships were lost the investors would still make a profit instead of it being a complete loss.
The First Major Stock Exchange in the U.S.
The New York Stock & Exchange Board was the first major stock exchange in the U.S. This stock was initiated in 1792 in New York City’s infamous Wall Street. NYSE (New York Stock Exchange) grew quickly, so quickly they had to relocate to a much bigger and spacious building in order to keep the large amount of traders they had.
NYSE is one of the most well-known and largest stock exchanges in the world. CMC Markets keeps traders up to date by following the world’s largest stock exchange. In 2000 NYSE launched an electronic trading platform that introduced a lot more transparency with a more accessible way to the OTC energy markets. It has continually kept growing with inspiration from their customer’s needs. They strive to keep their markets, clearing, risk management, listings, technology, data and customer service up to date to keep customer needs in top priority.
These three great moments in the stockbroking history definitely changed the world of stock exchange. Shaping the stock exchange into the way it is today and still learning from important events like these. Nowadays basically every country has it’s own stock market. Millions and trillions of dollars are being traded on the daily in the stock market all around the world. Of course major stocks have gone through the ups and downs of having a crash at some point. Some of the biggest crashes include one’s like Black Thursday and Terrible Thursday back in 1929.
The electronic trading had it’s own crash in 1987 which nobody saw coming. Stock markets that are on the rise as of today include the Bombay Stock Exchange in Mumbai, India, BM&F Bovespa in Sao Paulo, Brazil. Today there are 18 major stocks exchanges in the planet. A big rise of online trading has made it quite easier to trade stocks all over the world.
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Forex (foreign exchange) trading is one of the most lucrative ways of making money online. It involves buying and selling of commodities/currencies based on tiny variations (or gaining and losing) of the same to make profits. The commodities or currencies are traded in pairs from which he/she relies on economic data forecasts, and trends to make trades.
While forex trading is a straightforward investment, a proper understanding of the market and how to carry trades is needed to make profits. This is the reason forex trading brokers encourage newbies and anyone willing to start trading to open demo accounts and learn forex trading through practice before engaging in a live account. Discussed below are a few methods and ways in which you can use while learning to trade online.
You can use the practice account to learn new tricks on how to make more money trading online, and determine what currencies to major on while trading. Most people do not go past using practice accounts when training to become professional traders online.
Many of the successful trading experts have been through the hands of online trading academies. Although signing up with a training academy involves digging deeper into your pockets, this may be the only way to prevent massive losses as a trader.
The first step to becoming a successful forex trader is by identifying platforms you are comfortable with while trading. It would however be advisable to try every available trading platform/software before choosing the best one is recommended. Some of the available trading platforms include meta traders, browser based trading platforms, and mobile platforms. It would also be advisable to choose the best forex trading broker to be successful as a trader.Comments: 0 Read More
Sometimes, I have the feeling that people think that managing their investments is as easy as making a peanut butter sandwich in the morning…
From what I’ve read in the financial industry for the past ten years, high management fees (called MERs) charged on mutual funds hurt a small investor’s portfolio. In fact, if we look at the Canadian industry, most investors pay about 2% (and sometimes more!) to invest in mutual funds. In other words, if you invest $1,000 and your fund make 5%, you only earn $30. The other $20 is paid to the mutual fund company to cover their management fees (and the advisor selling the fund). When you think about it, this is a 40% commission based your investment return.
It gets worst: imagine if the fund you invest in dropped -5% during a bad market. Your statement shows -7% or a loss of $70. Mutual fund companies will get their 2% no matter what, the rest goes in (or out!) of your pocket.
Unfortunately, mutual funds were, for a long time, the only way one can diversify in multiple products (company shares or bonds) managed by professional in a single trade. An investor could buy one mutual fund including a part of safer investments (like bonds), Canadian companies along with American and international company shares. For someone who doesn’t know how to invest, mutual funds are expensive but do the job.
As is the case in any industry; when a product is overpriced or shows high profit margins, other players come to the market to offer an alternative. The first player to come with an alternative to mutual funds was probably Vanguard, one of the first ETF firms in the US. ETFs (exchange traded funds) are another way to buy multiple stocks (or bonds) with one trade.
Explained simply, an ETF is a group of investment products (mostly company shares or bonds) representing a “basket”. For example, the ETF iShares S&P/TSX 60 (XIU on the stock market) represents the 60 biggest companies traded on the Canadian market (the TSX). Someone buying 1 unit of XIU is buying a basket containing the 60 biggest companies traded on the Canadian market. He doesn’t have to know them, he doesn’t even have to manage them in his portfolio, the ETF does it all for him.
What’s the difference between buying a Canadian stock mutual fund or the XIU? About 2% in management fees! While most Canadian stock mutual funds will charge over 2% in management fees, the XIU fees are set at 0.18% (source ishares.com). Therefore, the portfolio manager taking care of the mutual fund must outperform the ETF by 2% before generating $1 for the investor. Here’s a quick example:
|Investment||Fees||Investment Return||Net Return||$1000 Invested|
As you can see, there is a big discrepancy between the mutual fund and the ETF even if they show the same investment return (before fees).
Here’s my answer: because it’s harder to manage your portfolio than it is to make peanut butter sandwiches!
Then, some people will suggest a “coach potato” investing style. The coach potato approach is to select a few ETF indexes that reflects your risk tolerance. Let’s say you want a balanced portfolio (roughly 50% in the stock market and 50% in bonds). You could build a portfolio with only 4 ETFS:
50% in a bond ETF replicating the DEX universe (Canadian bonds in general)
25% in an ETF tracking Canadian stocks
15% in an ETF tracking US stocks
10% in an ETF tracking International stocks
I agree that pretty much anybody with a calculator, a sheet of paper and a pen can build such portfolio. Then, you rebalance your portfolio twice a year to make sure you always show the same % (sell high, buy low). That’s a pretty effective method to manage your portfolio and track your investment return to the markets (95% of portfolio managers don’t beat their benchmark on the 5 year return). On top of this, your management fee is under 0.50%… this is at least 1.50% cheaper than the same investment in a mutual fund. If you invest $100K in this portfolio, you save $1,500 per year just in fees!
But it’s not that easy. Nope: managing your portfolio is not that easy.
Last years, bonds were paying a ridiculously low interest rate and bonds started to lose value upon the rise in interest rates. This is why XBB (a Canadian ETF tracking bonds) shows a negative return of -2.37% over the past 12 months. Add the bond interest rate paid by this ETF (3.26%), you get a small investment return of 0.89%.
How can you explain that most mutual funds did better with their fixed income (bond) portion? After a good talk with a friend of mine who’s a super fan of ETF investing, I noticed that his bond performance weren’t that great over the past 3 years. This was mainly explained by the poor Canadian bond returns.
At first, I assumed it was the same environment for everybody… until I checked a few mutual funds performance records. Most mutual funds show better returns during the same period… how can this be possible? It’s not because portfolio managers were better. It’s because they included other classes in their fixed income portfolio such as high yield bonds, international bonds and US bonds. This is how, for the past 3 years, mutual funds are able to beat a classic coach potato portfolio: because they include several other investment classes.
It is true that if you had replicated the exact same model with 8 or 10 ETFs, you would probably have beaten the mutual fund. But here’s the thing: who is going to tell you how to make such a portfolio if you adopt a coach potato investment style? Not your online broker, he simply performs the trades. Not your advisor because you don’t have any. Your neighbor? Maybe.
I guess now you can see where the problem with ETF investing lies: you still need a good financial background to build and manage your portfolio. If you do it only after reading a few books, chances are that your investment returns will be lower than mutual funds even after their huge fees.
I wouldn’t risk opening the hood of my car to start working on the engine to solve a problem, I wonder why people think it’s that easy to invest money…Comment: 1 Read More
Wow…. Q2 was far from looking as good as Q1 on the market, huh? It’s interesting to see how fast the market can move based on a few bad news. I know… bad news coming from Europe are pretty bad. But still, most companies are making good money right now. Their value is still going down for no specific reason…
I’m getting dragged down by one of my pick after a disastrous first quarter; VNP continues its plunge to Neverland (as I’m never taking another gamble on the stock market!). Here’s the resume of my four picks:
National Bank is, once again, posting strong results during their last quarter. They also announced a dividend increase along with a repurchase program. In addition to that, they have been ranked 5th world most secured bank by Bloomberg. It’s definitely I truly feel that NA will be a good stock to hold for many years. It’s not doing much lately as the market is pretty bad. However, the dividend helps to be patient while the fundamentals are definitely there. National Bank is also showing the smaller P/E ratio among other Canadian banks :-D.
Argh! After a bad quarter, the management thought it would be a good idea to dilute shares with a new issuing. It had a catastrophic impact on the stock and we are now down by more than 50%! At least, their first Quarter of 2012 was showing positive earnings. They went from losing $0.54 per share to making $0.07 per share. Let’s hope that the next financial reports will be positive!
Another solid pick to go through the stock market storm as INTC is reporting strong results and steady dividend growth. I also like the fact that they are gradually entering into more partnership linked to tablets and Smartphone. This was their Achilles’ Heel as they are very strong in the computer environment. However, the growth is now coming from smaller gadgets J.
Chevron is suffering from the oil barrel roller coaster value. Nonetheless, they continue to post strong financial results and dividend raise too. Can you the pattern with my 3 picks that are keeping their heads over the water? they all pay strong dividend. In a highly volatile market such as this one, it’s definitely the best place to invest!
Just click on the blogger’s name to read his article:
Where All Does My Money Go 13.34%
Intelligent Speculator 12.25%
Dividend Mantra 6.78%
Dividend Growth Investor 4.89%
Million Dollar Journey 0.69%
My Traders Journal -1.37%
Passive Income Earner -5.65%
Wild Investor -7.73%
The Financial Blogger -13.15%
Beating The Index -26.55%
Disclaimer: I’m long NA, VNP, INTC & CVX.Comments: 3 Read More
2012 Best Stock Pick: Last Place is All Mine!
Each year, a few bloggers including myself participate in a friendly stock picking competition. The goal is to pick 4 stocks for the year and hope that our little portfolio will do better than everyone else’s. We can pick stocks from both the Canadian and US markets and ETFs are accepted as well. On the other hand, during the year no trades are allowed.
I have a weird feeling that history is repeating itself again this year: I’m last because of a single bad pick… Should I say “bad”? not yet. But I can’t say that it was a good move for Q1! Let’s take a look at what went well and what sucked in Q1 for my 2012 best stock picking contest:
National Bank – NA (TSE) +11.05%
The National stock has been good to me for the past 3 years. In fact, since December 2008 (when the stock was at $25), it has never stopped surging. We are now over $80 and the dividend keeps on increasing. The best part is that I think the best is yet to come for this small bank from Quebec. They have made several important moves over the last 2 years while investing massively in technology improvements. Disclaimer: I am long NA.
5N Plus – VNP (TSE) –29.04%
During my stock picking session, I mentioned that VNP could be one of the best 2012 Canadian Stocks. The company is solid and evolves as a leader in its niche. The problem is that they might have taken a bite into something they can’t swallow. For the first time this Quarter, they have reported losses. Very poor timing is behind these losses: important acquisitions last year, economic problems in Europe and a slowdown in the solar industry due to the potential threat of a recession. I hope that the next quarter will be better, if not, I will most likely drop this stock upon their 2nd financial report. Disclaimer: I’m long VNP too.
Intel – INTC (NASDAQ) + 16.85%
INTC has been a rising star in my portfolio since I bought it back in August 2011. They show great innovative power and dominate their market like no other. Their Achilles Heel is related to their difficulties in entering the smart phone and tablet markets with their chips. The good news is that they recently gained market share in this niche as well. I’m expecting INTC to continue to soar until the end of 2012. Disclaimer: I’m long INTC as well.
Chevron – CVX (NYSE) +1.54%
CVX was my “defensive play” for this year’s contest. I’m not expecting CVX to grow like crazy but I think that a strong dividend combined with a hiking price of oil is never a bad idea in a portfolio! You can’t expect much from a big boat like CVX if not to expect a steady growth. This is exactly what I expect CVX to do. So far, if I include CVX dividend yield, the stock is doing okay but it’s lagging as compared to the stock market. Let’s hope they will post strong profits throughout the year! Disclaimer: I’m long CVX.
2012 Best Stock Pick Ranking:
I know… I’m in last place… but still, I’m in positive territory. Look at the return of the other bloggers, it’s quite impressive (click on their name to read their article):
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