"Value" Investments: Social, Faith & Eco-Investing

Your head knows all the reasons why investing is good for you: tax benefits, retirement savings, tuition, mortgage, healthcare. But does your heart have questions? Perhaps you're concerned that companies you invest in are participating in fracking or other environmentally controversial  activities. Or maybe you believe strongly in humane treatment of all animals and don’t want your hard-earned money to go to companies that use animals for testing or other painful purposes. Other common concerns are exploitation of workers in less-developed countries or issues that go against your religious beliefs.

If you want your investments to grow, but not at the expense of beliefs you hold strongly, it’s time to look into investing with your heart – the new "value" investing. So what are your options?

Socially Responsible Investing

Also called ethical investing, socially responsible investing (SRI) aims to provide both profit on investments and encouragement to businesses that promote social good in various areas, including environmental stewardship, human rights, health-related issues and reduction in poverty. Although SRI has been around for decades, its popularity has surged in recent years. According to Forbes, currently $1.00 out of every $9.00 under professional management in the United States is in an SRI investment. While you can invest individually in companies that share your social concerns and goals, most investors choose to simplify the process with mutual funds or exchange-traded funds created around SRI.

Eco-Investing

Eco-investing, or green investing, is a subset of socially responsible investing that focuses on issues related to the environment. Technologies of interest to green investors cover a wide gamut of industries, including:

Renewable energy sources such as wind, solar, hydroelectric and geothermal
Energy-storage technology such as batteries for hybrid or electric cars
Biofuels made from non-petroleum sources
Green and energy-efficient building materials

Recycling

Other technologies related to eco-investing are those used for organic farming, including green pesticides and fertilizers, and green consumer products such as cosmetics, foods, healthcare products and pharmaceuticals.

Some companies often included in lists of eco-friendly investment opportunities aren’t specifically involved in environmental issues, but rather, strive to reduce their carbon footprint by making use of recycled materials, energy-efficient stores and offices, and more efficient shipping practices.

Impact Investing

While socially responsible investing often seeks to avoid doing harm by refraining from funding companies engaged in technologies or practices typically seen as harmful, impact investing funds individuals, companies or technologies not only in expectation of financial returns, but to achieve a measurable positive social impact. While non-profit organizations or for-profit companies most commonly do impact investing, individuals can participate in impact investing through microloans, bonds or impact investing firms such as Mosaic and Calvert Foundation.

Faith-Based Investing

Whether you’re Christian, Jewish, Hindu or Muslim, if your religion is an integral part of your worldview, you might want your investments to share that viewpoint. Faith-based financial managers invest in mutual funds and stocks that do not violate religious beliefs. For example, a Catholic mutual fund firm might steer clear of companies that violate traditional Catholic tenets, such as participating in stem-cell research, marketing products to same-sex couples or manufacturing contraceptives. 

Many faith-based investment firms avoid “sin stocks,” which generally cover alcohol, tobacco, gambling, pornography, weapons and high-interest loans. Typically, funds will invest in stocks of companies that are known to treat employees fairly, not harm the environment and support social good.

Bottom Line

When it comes to investing, your highest priority is probably receiving the best return possible on your money. But that doesn’t mean you have to check your values at the broker's door. When you seek to invest in ways that match your ethical principles, whether that be socially responsible investments, eco-investing, impact investing or faith-based choices, you have the satisfaction of knowing that your investment not only directly helped your own finances, it also worked to promote your beliefs in the world at large.

What's the difference between weighted average cost of capital (WACC) and internal rate of return (IRR)?

Weighted average cost of capital (WACC) is the average after-tax cost of a company’s various capital sources, including common stock, preferred stock, bonds and any other long-term debt. By taking the weighted average, the WACC shows how much interest the company pays for every dollar it finances.

The internal rate of return (IRR), on the other hand, is the discount rate used in capital budgeting that makes the net present value (NPV) of all cash flows (both inflow and outflow) from a particular project equal to zero. It is used by companies to compare and decide between capital projects. For example, a company may evaluate an investment in a new plant versus expanding an existing plant based on the IRR of each project.

The primary difference between WACC and IRR is that where WACC is the expected average future costs of funds (from both debt and equity sources), IRR is an investment analysis technique used by companies to decide if a project should be undertaken. A close relationship exists between WACC and IRR, however, because together these concepts make up the decision for IRR calculations. In general, the IRR method indicates that a project whose IRR is greater than or equal to the firm's cost of capital should be accepted, and a project whose IRR is less than the firm's cost of capital should be rejected.  

Why Your Next Dollar Should Go To Mexican Stocks

The World Cup has brought attention back to former emerging market superstar Brazil. As the 'B' in 'BRIC,' its abundant natural resources, strong government and growing middle class, have made it the poster child for growth in the region. Investors seem to agree, as there is now $4 billion in the broad iShares MSCI Brazil Index ETF (EWZ).

And while there is still plenty of samba left in Brazilian stocks, another Latin American nation could be a better long term bet. America's southern neighbor, Mexico, could be one of the most dynamic places for investors to place their money right now.

Regaining Manufacturing Muscle 

Thanks to a series of free-trade agreements with the United States and other nations, Mexico is quickly becoming a manufacturing powerhouse. Trade now represents 60% of Mexico's total GDP, and more than 80% of its exports are manufactured goods. That figure has quietly tripled since 1980, and has strengthened even more since the implementation of North American Free Trade Agreement (NAFTA).

And even better days could be ahead for Mexico.

Those trade agreements, with Japan and nations in the European Union, have brought in a tremendous amount of foreign direct investment. According to Mexico’s Finance and Public Credit Secretariat, the nation saw a record amount of FDI in 2013 at over $35 billion. That’s nearly a 178% increase over 2012. And that number is set to grow even more as several multinational corporations like Callaway Golf Co. (ELY) and Caterpillar Inc. (CAT) have begun expanding their operations in Mexico.

The reason is simple: lower costs.

Mexico continues to gain manufacturing market share away from rivals like China. First, energy costs are cheaper, as Mexico benefits from cheap natural gas produced in the United States, as well as its own petroleum production. There are now several pipelines that move natural gas downwards into the nation for electricity generation. Secondly, transportation costs are low, as both rail and truck traffic into the U.S. is robust. Finally, Mexico benefits from lower labor costs. Due to Chinese wage inflation, labor costs in Mexico are now about 20% cheaper. Just ten years ago, it was double China’s rate.

That shift and manufacturing growth will help Mexico see a 3.9% boost to its GDP this year, and a 4.7% increase in 2015, according to Mexico's finance ministry.

Tapping Into Mexican Manufacturing 

Given Mexico’s continued success as the world’s manufacturer, investors may want to consider overweighting it in their portfolios. While most Latin American focused ETFs, such as the SPDR S&P Emerging Latin America (GML), include hefty allocations to Mexico, there are ways to directly tap into Mexico’s maquiladora muscle. The easiest is through the iShares MSCI Mexico Capped ETF (EWW).

EWW tracks 59 different Mexican firms, including telecom giant America Movil (AMX) and Wal-Mart Stores, Inc.'s (WMT) Mexican subsidary Wal-Mart de Mexico (WMMVY). Expenses for the nearly $3 billion fund are low at 0.48%. More importantly, EWW has been a tremendous performer. Since its inception in 1996, the fund is up nearly 845%. The Deutsche MSCI Mexico Hedged Equity ETF (DBMX) can be used, as well, to take the peso out of the equation.

One of the benefit of NAFTA has been the proliferation of Mexican companies on U.S. exchanges. One of the best plays could be cement producer CEMEX (CX). CX was hit hard during the recession, as a result of dwindling construction activity, as well as an ill-timed acquisition. However, things seem to be on the mend, as the recovery in the U.S. bodes well for CEMEX’s bottom line. Analysts now have a $14 price target on the stock. Likewise, steel maker Grupo Simec (SIM) could be a good U.S. recovery choice.

Finally, as we’ve seen in other parts of the emerging world, an expanding local economy leads to an expanding middle class. And Mexico is no different. That makes both FEMSA (KOF) and Grupo Televisa (TV) prime picks. KOF is the leading Coca-Cola Co. (KO) bottler in thw world, while TV is the leading television broadcaster/programmer in Mexico.

The Bottom Line

Mexico is quickly moving to become a leading world manufacturer. Several free-trade agreements, along with lower labor and transportation costs, are boosting its manufacturing muscle.

Dealing With Stronger Trends

Currencies moving around the world, bringing up on strong Forex Trend. To your acknowledgement there are several ways we can enter our trades moving forward through the direction of Strong Trading.

Many traders of all experience levels follow a simple Forex strategy called trend trading. This article aids on learning ways to enter trades into the direction of a strong Forex trend.
The Forex market consistently attracts traders of all skill levels and strategies. With unconventional methods of economic stimulus becoming more conventional recently, strong trends have developed in the valuation of currencies. One common Forex strategy utilized is a trend following strategy.

There are 3 ways to identify trading opportunities into the direction of a strong trend.
1.Buy the dips, sell the rallies
2.Breakouts into new highs or lows
3.Diversify with currency baskets

Buy Dips

A common Forex strategy is to buy low and sell high. This type of strategy is generally sought out by many newer traders. More experienced traders will also buy dips and sell rallies too, but they bring a filter with an edge to this strategy. More experienced traders filter signals with a strong trend.
You see, many traders utilize indicators and oscillators to help them determine when currency pairs have become oversold so they can buy low. On the other hand, traders look for overbought levels on the oscillator to aid them in deciding when to sell. The signals on oscillators are generally straightforward and easy to read. However, one trading tip we offer in our Forex courses is to filter your signals in the direction of the trend.

Breakouts
A breakout strategy is technically the opposite of buying dips in a rally. In a breakout, wait for the price to move higher, and then buy at a higher price than you would have when buying dips. This begs the question, why somebody would want to do this?
The reason is because the market is made up of emotions. There are times when the prices don’t seem rational which is how bubbles develop. Breakout trading simply looks to play on those emotions because the reason prices are moving higher may not be rooted in fundamentals, but that traders are getting greedy and buying with all they have. Several famous traders like the Turtle traders used a breakout strategy.
Therefore, the advantage a breakout strategy is confirmation. You get entered into the buying position only when prices have confirmed they are ready to trade at new highs. Therefore, if the confirmation doesn’t come and if prices do not trade to new highs, then you have been kept away from a losing trade.

Baskets
A currency basket is a collection of currency pairs traded where the sole purpose is to highlight a specific currency’s move. For example, if you felt the US Dollar was going to gain strength and wanted to buy a US Dollar basket, you might look to place the following trades:
•Buy USDJPY
•Sell EURUSD
•Sell GBPUSD
•Sell AUDUSD

One advantage of basket trading is diversification. Since exchange rates are quoted as currency pairs, but wrong on the trade. For example, let’s assume you decide to trade the USDJPY because of US Dollar strength. If the JPY gains more strength than the USD, then you would have been right about US Dollar strength, but wrong on the trade simply due the other currency you matched it up against.
On the other hand, if you diversifying the trade as a basket, then you are boiling the trade down to a US Dollar move. Forex trends can last a while, so a powerful basket approach can be a less stressful way to trade these trends.

Good luck with your trading!

5 Ways To Avoid Analysis Paralysis in Trading

Analysis paralysis is the trading version of information overload. A trader is overwhelmed by multiple scenarios and possibilities of movement in price action, for every case there’s an opposing view in the mind of the trader. The conflicting views create confusion and make it almost impossible to take action and execute trades with clarity and discipline.

I had my fair share of analysis paralysis before I learned to keep things simple and stay focused. I used to delve in the details putting together speculative theories that sound great, but when it came down to pushing the button to execute a trade, I couldn’t do it!

1. Know What to Look ForThis obviously involves referring to your trading plan which outlines your trading style and mentions in detail the patterns or conditions you look for in a certain trading instrument to execute your trades. For example, whenever I’m looking for Gartley Patterns to trade, I always look for the impulse advance or decline that breaks the previous price structure and starts a new trend.
This gives me clarity when looking at charts because now I don’t have to scan through every bar/candlestick. Instead, I only look for the move that broke previous levels, then see if the Gartley conditions apply and asses my reward to risk ratios.

2. Focus on The Task at HandThe incredible availability of information in this age make it very hard not to get distracted by something, think about it for a moment, then google the term or idea, read a little here and a little there… And before you know it, you forget what you were looking for in the first place, or you wasted an hour or two on something irrelevant to your trading AND you haven’t taken the trade yet.
Keep a note book handy, if a certain idea occurs to your mind and you think it is worth researching, write it down. Make a deal with yourself that you only research ideas after you finish your current task, which is getting your analysis done and your trade executed.
Getting into the habit of researching only after you’ve finished your trading task at hand will also increase your discipline. Deep into your mind it will become some form of reward to look for ideas with passion after you’ve put in the important work.

3. Take the Top-Down Approach
Start from the top level, and drill down lower. It could be starting with the Macro levels if you are into fundamentals or starting with higher time frames or trend indicators in the technical field.
This will not only make it easier for you to analyze markets and trading instruments, it will also keep your attention on the bigger picture by giving you direction. This will make it harder for you to get distracted while analyzing markets.

4.Turn the TV Of
I strongly believe that the financial media is misleading at best. Looking at financial news channels is a leisure activity for me. I know that’s a bold claim right there but it comes from years of observation.
What normally happens is you have this great trade setting up, you’ve calculated your potential risk and potential reward, everything is set and you are ready to execute. Now in the background the TV is on and a financial news channel mentions stock XYZ which you’ve just completed the analysis for. Your mind picks it up quickly because of the focus and the recency factors, you pay attention to the news and an analyst presents this detailed view that he backs with evidence and extensive study. Sound good? Unfortunately, his case is completely against your analysis.
Even if your are not easily convinced by him. Trust me, when the doubts start creeping to your mind, this little piece of information will be 10 times as important as you thought it would be. Plus, why consume garbage information if you don’t need it in the first place?

5. Simplify, Simplify and SimplifyComplex things aren’t always better. For me, I think that the more simple things are, the more profound they will be. Generally traders are attracted to complex methods and systems. Complexity however introduces risks of over-optimization and curve fitting, which make systems sensitive to any change in volatility or market behavior.
Choose the methods that make sense to you, that you feel comfortable using and are good at. The possible scenarios will be clear to you, therefore you will be able to effectively assess situations and risks then execute with conviction.
Remember trading is simple, it might be a tough business, but the principles are simple.

How Are You Able To maintain Your Cash From Losing Value

In uncertain economic times, it is wise to have a chunk of cash set on the sidelines. You need to have some sort of a safety fund plus you never know what opportunities might swing by in times of distress and undervaluation. You know, the I-wish-I-had-the-cash sort of scenarios.
The idea in and of itself is profound and simple. And it is easy to implement – if you have the cash of course. However, the excess volatility (over $4 trillion daily volume) in the currency markets can make it difficult to stay on track in terms of value and stability. Obviously, the purpose of keeping this kind of cash is not speculation. It is there to mitigate risk and have some sort of a safe haven as opposed to taking on additional, unnecessary and “out of context” risk. This is about wealth preservation.

So the big question then is, how do we avoid exposing our hard-earned cash to currency exchange risks?

Well, many people resort to the 50:50 model, where they have 50% of their cash in Euros and 50% in the mighty greenback. On the face of it, this model sounds reasonable. However, the fact that 75% of the EUR/USD is the reverse of the USD makes things different in reality.
To clear things up, let’s consider this example. Suppose you have $80,000 in cash and you want to hedge the risk using the 50:50 model. You withdraw $40,000 , exchange them into Euros and deposit them in a Euro-based account. And you leave the other 40K in your original Dollar-based account.
Now since 75% of the EUR/USD pair is the reverse of the US Dollar Index, you have 75% of your funds or ($60,000 worth) fully hedged. They are minus 100% correlated. If half of the 75% goes one way, the other half goes completely the opposite way – which is not bad, but why not have a full hedge when you actually can? After all, 25% is not a small percentage of your capital ($20,000 in this example).

Being Fully HedgedSo, there is a possibility for a full hedge in this case. Elliott Wave International has created the Stable Currency Index as a way to fully hedge your cash to prevent exchange rate fluctuation and maintain purchasing power. It can also be a hedge against currency defaults.

Composition of the SCIThe SCI is comprised of four equal amounts of the Swiss Franc, Singapore Dollar, New Zealand Dollar and the US Dollar.

 Pie Chart courtesy of Elliott Wave International

 EWI chose the currencies (one currency from each quadrant) based on political and financial stability. The US Dollar was included because it is a stabilizing factor and still the world’s reserve currency.

Proving EffectivenessIn this chart below (courtesy of Elliott Wave International), the Stable Currency Benchmark is the horizontal line at 1. There’s no question to its performance in having a fully hedged currency portfolio.

Courtesy of EWI

Investing in the SCIAccording to Elliott Wave International, you can invest in the Index using one of 4 ways:
◾If you are wealth-preservation oriented, you can, through Safe Wealth Consultants Ltd., establish a relationship with a Swiss institution under which you can buy currencies in a mix that tracks the SCI: clientservices@safewealthconsultants.com or (011 from the U.S.) + 41-21-966-7200. Minimum investment: 250,000 USD or counter equivalent.
◾Open an account at a safe bank that will obtain short-term government debt instruments in the four SCI currencies for your account.
◾Buy bonds, bills or certificates of deposit in equal portions in each SCI country.
◾Set up a bank account in each SCI country and fund it.
Regardless of your financial goals in life, it is always better to have wealth preservation on your list. Otherwise, you’ll lose purchasing power and value faster than you accumulate funds. It pays to be on the lookout for new and innovative ways to minimize risk in places where you don’t need it.

Has the Stock Market Turned?

Talking Points:

• The Uk100 has failed to break over 6,900
• Price is still trading above support
• A lower low must be made for the trend to turn

Stock markets around the world have been making record runs over the past few years. However, with prices taking a pause, many traders are left to wonder if or when their favorite equities indices will turn. While fundamentally this can become a challenge, technical traders can use a series of price action clues to help them identify if indeed the market has turned. Today we will review the UK100 and identify tips to help better time the market. Let’s get started!

Learn Forex –UK100 Resistance Points

(Created using GCM’s Marketscope 2.0 charts)

Support & Resistance

The first clues that a trend has turned revolve around finding levels of support and resistance. In the event of an uptrend prices must be making higher highs, which in turn suggest rising points of resistance. The chart above displays a weekly graph of the UK100 (FTSE). Even though prices have generally been rising, prices have stalled under 6,900. While the lack of a new high doesn’t suggest that the market has turned, in the absence of a new breakout the trend should be at least in the interim considered stalled.
Now to get the full story of price action, technical traders should also identify key areas of support. In order for an uptrend to be concluded price must be seen breaking down towards a series of lower lows. These areas can be identified by pinpointing areas of price support. Below we can again see the UK100, but this time we have added an advancing line of support as a series of higher lows have been printed on the chart. In the absence of a breakout or any lower lows, traders can continue to say that the prevailing trend has not changed.

Learn Forex –EURUSD Trading Blocks

(Created using GCM’s Marketscope 2.0 charts)

Trading a Turn

Even in the absence of new highs or lows traders can begin looking for new trading opportunities. In these scenarios traders should consider trading a breakout. This will allow traders the opportunity to have entry orders pending in the event that price does turn and moves towards a fresh low. Entry orders can also be helpful in the event that a trend continues. If your order is set to sell the market pending a reversal under a point of support and price breaks resistance to a higher high, the order can simply be deleted. Traders will then be free to look for other opportunities.
Identifying key technical levels takes practice. You can get started analyzing the UK100 along with your favorite currency pairs such as the EURUSD with a Free Forex Demo with FXCM. This way you can develop your trading skills while tracking the market in real time!

Register HERE to start your FOREX learning now!