Monday, February 27, 2012

3 Financial Sector ETFs to Consider For Your Portfolio

The bankruptcies that led to the market collapse, which in turn led to bailouts - is known to all investors. Some believe that the sector is on mend but current statistics do not necessarily support this view. While the uncertainty to form a positive resolution to these several pending issues remain a drag on the sector, it is impossible to think of a growing economy without a firm financial sector. For that reason, it is always advised to maintain a decent exposure to the financial sector. In this article we suggest three financial sector exchange-traded funds (ETFs) that you may consider for investment.

PowerShares KBW High Dividend Yield Financial (KBWD) is based on the KBW Financial Sector Dividend Yield Index. Thereby the Fund generally invests at least 90% of its total assets in securities that comprise the Index. These securities are principally engaged in the business of providing financial services and products, including banking, insurance and diversified financial services. The Index is calculated using a divided yield weighted methodology that seeks to reflect the performance of approximately 24 to 40 of such publicly listed financial companies. As of June 11, 2012, the fund holds 36 securities, out of which 34 are from the financial sector, 1 from industrials sector and 1 investment company. The fund allocation is mainly towards small-cap value and mid-cap growth companies making for 59.14% and 32.49% of the fund respectively. In terms of yield, it is quite hard to beat KBWD. Charging 93 basis points a year in fees, it pays out an astounding 10.44% in trailing twelve-month yield, which is by far the highest in the category. However, the fund is mainly focused on U.S. securities and thereby it is not the most diversified from geographic viewpoint.

PowerShares Financial Preferred (PGF) is a fund based on the Wells Fargo Hybrid and Preferred Securities Financial Index (WHPSF Financial Index). The fund generally invests at least 90% of its total assets in preferred securities of the reference Index. As of June 11, 2012, the fund comprises of 50 such preferred securities - mainly large-cap value stocks. In terms of performance, it has a trailing twelve-month yield of 6.96% and has returned 12.00% on YTD basis. Designed to track the performance of American securities, the fund, like KBWD, is non-diversified from a geographic viewpoint. From an individual holding perspective, HSBC Holdings Plc Pfd, Bank of America Corp Pfd and ING Groep NV Pfd are the top three fund holders, combining to make up about 20.86% of the total assets in PGF.

iShares MSCI Emerging Markets Financials Sector Index Fund (EMFN) is based on the MSCI Emerging Market Financials Index. The exchange traded fund generally invests at least 90% of its assets in securities of the Index and in depositary receipts representing securities of the underlying index. As of 6/11/2012, the fund holds 99 securities. Banks, real estate, diversified financials and insurance companies form 73.97%, 8.59%, 8.49% and 7.92% of the fund respectively and thereby are the four main constituents. It charges investors 67 basis points a year for its service and has a noteworthy trailing twelve-month yield of 6.20%. The yield level should pacify those who are put-off by the fund's relatively high volatility and beta value. The fund allocation is mainly a blend of large-cap value and large cap growth securities, and thereby can be more volatile than the traditional financial EFTs. EMFN forms an attractive pick for investors seeking a high yield opportunity with room to grow over the years.

The list does not include the some of the ultra popular financial sector ETFs such as Financial Select Sector SPDR (XLF) or Dow Jones U.S. Financial Services Fund (IYG) or RevenueShares Financials Sector Fund (RWW), as they are still paying out paltry sums compared to ones mentioned above. Our goal is to help investors wade through the many competing ETF offering available and give them a more manageable list of issues from which to choose from. The article, thereby, underlines and presents three financial sector ETFs, those having strong growth prospects, for you to consider.

Friday, February 24, 2012

What Is a Penny Stock?

Many of us have heard of penny stocks, but what actually is one?

Well, there isn't actually a complete definition of what a penny stock is and the meaning differs by some individuals or organizations.

The Securities and Exchange Commission (SEC) defines the term to be stocks trading for less than $5 per share and regards them high-risk and speculative.

Some set the cut-off level at $3, while others consider only stocks that trade under $1 to be one. It all depends who you are dealing with!

So, lets take a look at a few elements of what some may determine as a one..

Price Per Share

Some consider stocks that trade below $5 per share to be a penny stock and some others consider stocks that trade below $1 to be one.

Exchange Stocks Trade Upon

Stocks trade on a variety of exchanges, such as NASDAQ, NYSE, AMEX, OTC (Over-the-Counter), and Pink Sheets.

Some consider stocks that trade only on the OTC (Over-the-Counter) or the Pink Sheets to be penny stocks. Despite the fact that most stocks might trade for under $1 per share on the OTC or the Pink Sheets, there are also some that trade higher than that. For example there are some that trade above $5 per share or more on the OTC or Pink Sheets markets.

Market Cap

Some consider any company beneath a certain market cap, such as a market cap under $50 million as a penny stock. But, a stock that has a market cap under $50 million may not be trading under $5 per share, some maybe trading much higher than that.

Sure, there are plenty of stocks that trade under $5 per share with a market cap under $50 million.

But, there might also be a stock that trades over $5 per share with a market cap under $50 million that maybe poised for massive growth. There might also be a stock with a market cap of $2 billion that trades for $.90 per share.

As you can see it is a bit difficult of putting an absolute definition of what a penny stock actually is.

For me I consider penny stocks to be shares that trade below $5 per share and must be under a certain market cap. But, that doesn't mean I just look for opportunities for stocks trading under $5 per share, I also look for stocks that may trade above that and are ready for massive growth.

I typically look for companies of the highest quality that are small or micro cap companies. These trade between 0.01 to $5 per share and trade on the NASDAQ, NYSE, AMEX, OTCBB (Over the Counter Bulletin Board), and Pink Sheets.

Visit my website for more information on penny stocks. Also, don't forget to signup for my FREE Penny Stock Newsletter to get my latest picks.

Tuesday, February 21, 2012

Why Is The Indian Rupee Depreciating Against The US Dollar?

India is not only the second largest country in the world, but also the second fastest growing economy. India has become the hub of many foreign and international brands, which set up their regional headquarters in India.

But despite the various transitions that the Indian economy is undergoing, the Indian rupee seems to be deflating in comparison to the US Dollar.

What is the actual reason behind this?

When the world experienced one of the greatest recessions, India bore the economic storm and stood robustly with a growth in all sectors that impressed its GDP.

As per the CIA Fact book, India had a GDP of 237 trillion US$ in 2008. An Achievement of 6.6% GDP growth.

The per capita income of India is estimated at 4,542 US $ in the context of Purchasing Power Parity.

The ministry of finance data shows Indian export growth by 7.3% in dollar terms during April-February 2008-2009. The unemployment rate stood at 6.8% in 2009 against the 7.2% in 2007 with an inflation rate of 7.8%.

Though the Indian economy has been stable and reliable in recent times, the last few years have experienced a positive upward growth trend which has consistently produced 8-9% annual growth rate which has been supported by a huge inflow of foreign funds.

The growing reserves in the foreign exchange sector, both an IT and real estate boom, a thriving capital market all have made their contribution to India's GDP growth.

Based on the statistics which were provided from the department of state, there is a huge and growing population of middle class Indians numbering more than 50 million. Indians with disposable income ranging from 200, 000 to 1000, 000 rupees per year increased when the US dollar weakened a little in the last two years.

The Indian Rupee grew steadily and appreciated vis-à-vis US dollar with 0.020837 USD equal to 1 Indian Rupee (

So, when the RBI started sucking out the excess liquidity flow from the system, which was caused due to huge capital dollar inflows, they are now compelled to reverse their stance and infuse liquidity back into the system. Therefore previously where the CRR was hiked, the RBI reduced the CRR, repo rate and decided to adopt an increase in the reverse repo rate. Since there is a shortage of money supply in the system, the credit has reduced in the market, thus devaluing the Indian rupee in comparison.

Thursday, February 16, 2012

The Top 3 Reasons to Open Your Stock Brokerage Account NOW!

We are approaching one of those pivotal moments in our nation's economic history where fortunes will be made by many people.

There are many great stories about famous stock traders. With few exceptions, most of them made their fortunes from recognizing the right time to buy!

We will soon see severe volatility in the stock markets. Historically, during periods of volatile stock prices, there have been extraordinary "buying opportunities." Buying at the right time can mean multiplying your cash by ten times or more.

Many who have been "thinking-about-it" for years, have procrastinated opening their stock brokerage account while watching opportunity after opportunity go by.

Don't let this opportunity pass you by.

When stock prices plummet, you have to be ready to act!

#1 A stock brokerage account gives you access to opportunities.

Access to opportunities simply means that you have everything in place to take advantage of a buying opportunity when it arrives. Without a stock brokerage account, you cannot buy stocks. By opening your account and depositing some cash, you will be ready to act when the time is right.

#2 You will gain a new perspective on the definition of "wealth" and a better understanding of money-management.

You will realize that most of us have accumulated many common misconceptions about money and finance. Most new stock traders soon understand that making money this way is a learned set of skill-sets. It's not rocket-science. It's easy to learn. Also, it's comforting to know that you can withdraw your cash balance at any time.

#3 You will both broaden and deepen your education.

In today's world, it is wise to focus our education on a specific area so that we can excel at a particular profession or corporate career.

A negative side-effect, however, is a lack of breadth and depth in other areas of our education. If money-management is one of those areas in which you are weak, you will strengthen your knowledge of economics and financial matters when you begin trading stocks.

With a stock brokerage account, you will immediately experience a desire to "pay attention" to the economy and the performance of companies that you now "own."

There are countless numbers of "stay-at-home-moms" who "play the market" each day and have developed acute business judgment because of their new-found interest in making money by stock trading.

If you own only a few shares of stock in Disney, for example, you're one of the owners. You will want to pay attention to their operations and profits. Your financial education and money-management skills will grow.

It will not be a "chore." It will be a purpose-driven interest. You will find it to be exciting!

Try to imagine how different your life will be if you successfully double or triple your savings in a matter of months. Better yet, be specific and picture turning $1,000 into 3 or 4 thousand in 6 months. Then, consider the results of doubling that each year. This really has happened to stock traders who buy at the right time.

Again, we are approaching the right time to buy!

Think of some of the obstacles that you have already overcome. How long did it take you to get around to cleaning out and organizing your closet or garage? Shop around for online discount brokerage firms and you will soon learn that opening your stock brokerage account is a step toward prosperity that is simpler and easier than either of those two chores.

Tuesday, February 14, 2012

What You Need to Know About Open Interest

The term open interest means an entire count of all option contracts that might be valid in the forms of stock, expiration, and even the strike price. The more open interests there are, the better. This means that there is more to the value and there are more liquid assets available to the said interest.

Sometimes a trade presents itself when a dividend increase has just been announced. Often that can be a good time to buy shares and then sell an in the money call option against those shares. The newly increased dividend will act as a floor on the stock most of the time, and it may take a few days for analysts to issue upgrades now that the stock pays a higher yield. In addition, if you set the expiration date of the option you sell to something after the ex-dividend date then you will receive the dividend in addition to the call premium.

The only gotcha here is early exercise. If the ex-dividend date is very near the option expiration date then when that day comes around it is possible the option holder will exercise in order to capture the dividend. This typically only happens when the amount of time premium remaining in the option is very small (or zero). The option holder will forfeit any remaining time premium when he exercises.

While this might all seem confusing, the one thing to keep in mind is that you don't want to put all of your eggs into one basket. You need to think outside the box, make sure that you know what all of your options are, and then choose which open interest opportunities you might want to take advantage of. Don't be shy because that will never get you anywhere. You are going to have to make some moves if you want them to pay off in the long run for you. Time is money and the time is now.

Finding a reliable option screener on the Internet can be a challenge too, but it is not impossible. This is extremely important to remember because you can't simply have given up on it all. Some people just feel so lucky because they came across some excellent resources that told them everything that they needed to know about the topic. Once this light was shed on them, they were then able to find better solutions such as an online option screener. Some still have problems finding investments they need once in a while, but for the most part being able to handle call covers is becoming easier as time goes on. There is no reason to worry about how you are going to go about getting the job done as long as you have the right resources on your side.