Investment Terms Best Stock Brokers

What is the Open-End Effect?

There are several ways to invest your money. One of the lesser known ways to invest is with companies which offer an open-end effect. The difference between traditional stocks and open end investments is the way stocks are presented. Open-ended investment companies have no limits upon their size. If more people invest in the stock then the fund’s assets go up. If people pull their money out, the assets decrease proportionately. Such a fund’s value and size can change dramatically even over the course of one day.

As a result the company must buy and sell its investments to accommodate fluctuations that occur as people increase or decrease their support of the fund. This is a difficult situation for the investor as transactions occur constantly and cost the investor in transaction costs. Of those funds which qualify as open-ended investment companies (OEIC) some are income units which pay you a dividend and others are accumulations units which reinvest dividends.

Mutual funds are prime examples of open ended funds. Typically they continuously buy and sell fund shares offering a flexible and useful investing mechanism for those involved. Occasionally, when fund assets become too large to be handled effectively the fund may be closed to new investors or even closed to any new investment, even by current owners. The decision to halt sales, in one way or another is a result of what may be called the open-end effect. The value of shares has become too diluted as a result of market conditions and needs to be shored up.

Should You Invest in Structured Settlement Investments?

In today’s economy, many people are looking for safe investments for their hard-earned cash. For those looking to make a long-term, relatively low-risk move, structured settlement investments are often touted as being better than bonds. However, there are several reasons why a structured settlement investment is not quite the best use for your money.

Understanding Structured Settlements
In court proceedings and some lotteries, the winner is often granted a series of periodic payments. These payments can be monthly, quarterly or on another schedule entirely. These payments are called a structured settlement. Those who are receiving these payments may wish to get a lump sum instead to buy a home, pay off medical bills or make other large purchases. Investors pay a lump sum and then package the remainder of the structured payments into an investment product. A structured settlement investment is the result. For a more detailed explanation, visit www.structuredsettlements.com.

The Risks
The first risk in this venture is that the person or entity required to pay the remainder of the payments fails to do so. While this happens rarely, sometimes the corporation or individual who has been ordered to make the payments will fold or flee the country. If this happens, your investment is lost or reduced.

The second risk, which is much more likely to happen, is that it is difficult to resell the investment. Other products, such as bonds or real estate, are easier to sell. The secondary market for structured settlement investments can be slow, especially if other markets are doing well and outpacing them in returns. For example, if the stock market is doing well, few would want to earn less by buying a structured settlement investment. This can be a big problem if you need to sell the investment later to raise cash quickly.

Better Alternatives
The fact that bonds are more secure and easier to sell off in a hurry make structured settlement investments look like a bad proposition from any angle. Some investors are also able to make larger returns with real estate or less-risky stocks. When you consider that the gains from those investments are much more tangible and easy to liquidate, you can see why structured settlement investing isn’t for everyone.

If you are considering making an investment for the future, make sure to weigh the options carefully. A well-balanced investment portfolio is integral to your financial well being and the success of your retirement plan. If you aren’t sure how to handle your investments, consider contacting a fee-only professional to help guide you in making the right decisions for you and your family.

Understanding the Finances Behind a Nonrenewable Resource

You can’t ignore the push to develop ecologically renewable energy sources, regardless of how you feel about them. For some the research into wind, water and solar power is encouraging – no matter how slowly it might go. Others feel just as strongly about the nonrenewable resource market. After all, the scarcer something becomes, the more valuable it is. Unfortunately, in the real world, things are not so clearly defined.

A nonrenewable resource is exactly what it sounds like – a source of energy which cannot be replaced once it is used. Fossil fuels are among the most commonly discussed nonrenewable resources. Coal, oil and natural gas are all used extensively in industry, and the point at which extracting and processing them will become non-viable is approaching. For the investor deciding whether to invest in what is likely to become obsolete offers both the opportunity for profit and risk.

Renewable resources are garnering a lot of interest from investors. Many of the larger investment firms are offering portfolios built upon this surge, providing funds which are built from a variety of green tech companies. Because much of this technology is still in its infancy, selecting those companies which are most likely to survive is challenging. An increasing number of firms traditionally associated with nonrenewable energy are actually investing in energy alternatives in anticipation of the expected change.

Once a sure bet, nonrenewable resources are no longer quite such a “sure thing” for the average investor. A bit of additional caution is advisable when investing in such companies.

Welcome to a Review of WellsTrade by Wells Fargo

WellsTrade by Wells Fargo is an online investment firm. Obviously connected to its parent company, the Wells Fargo banking chain, it provides investors an Internet-based platform through which they can manage their investments. Because it is related to the bank, however, its structure is a bit different than other firms.

Application Process

Online reviews state that the application process is particularly complicated and far from user friendly. You must print out numerous forms, sign them manually and mail them in. No online process exists. Additionally, the firm charges a $60 annual account maintenance fee up front. Drawn out and archaic, it isn’t the kind of application process you want for an online investment account.

Pricing Structure

WellsTrade requires a minimum account balance of $1,000. Once you have your account established you pay the following fees:

  • Stocks and ETFs: $19.95 per trade
  • Options: $9.95 +$1 per contract
  • Broker Assisted Trades for Stocks or ETFs: $45
  • Mutual Funds: $35
  • 100 commission free trades, online, per year, when linked to a Wells Fargo PMA package. PMA package is free as long as the qualifying balance exceeds $25,000 at all times. Otherwise it is $30/month.

Tools

While WellsTrade offers good research and education tools its trading tools are barely adequate. The positions screen renews infrequently and slowly and the charts are far from comprehensive. It is difficult to keep a close eye on your investments and equally challenging to determine which new opportunities might be worth your while. If you have an independent set of tools this might still work for you.

The Word Online

With all the financial connections that WellsTrade has you would expect that it would do well online as well. Frankly, that is just not the case. Finding a positive review of this brokerage firm takes effort. Complaints of unprocessed trades, the company not honoring promotional offers, and “erroneous” trades are much easier to find. Former clients are lavish with their disgruntlement.

The Pros and Cons

WellsTrade does have a few advantages. It offers the possibility to trade for free, it is connected to a full bank and therefore has many local offices and a full range of bank services. It also provides plenty of reliable independent research for the investor to peruse. If you can afford to maintain a minimum balance of $25,000 you will save a lot of money on fees.

Unfortunately, some of the highest commissions in the industry, poor trading tools, high margin rates and annual fees that even extend to IRA accounts pull it down. Other problems include inadequate customer service and frequent episodes of misinformation or ‘misplaced’ trades. In addition, WellsTrade doesn’t always go by its name, making it hard to tell if you are actually connecting to your investment site.

To Sum It Up

While WellsTrade has the backing of a reasonably reliable bank behind it, it hasn’t quite managed to translate that benefit to its Internet investment branch. Poor communication seems to be one of the biggest issues, but having some of the highest fees around is another. For a big investor who doesn’t plan to move his money around much, it may be a viable option.

What Lies Beneath a “Narrow Moat”?

The term ‘Narrow Moat’ is used to describe a small competitive advantage that one firm will have over another, competing company. Both companies will be in the same, or at least very similar, industries. This economic advantage won’t last long and provides a limited, but significant advantage to the superior company. At that point competition decreases the importance of the gap.

First used by Warren Buffet, the “Sage of Oklahoma,” this term and has gained in popularity since its inception. Today it is used in conjunction with ‘Wide Moat’ to define a number of financial conditions. A wide moat will offer significant financial benefit and is expected to last for a while. Conversely, a narrow moat lasts for a short while and will only generate a small return.

As these terms have become standardized several managers have grouped together funds which can be termed ‘narrow moats’ or ‘wide moats’ to present together in portfolios – the Morningstar Narrow Moat Index CW is such a collection of securities. Investment firms assign the designation narrow or wide moat depending upon a wide variety of criteria and market conditions. There is no actual standard. If you plan to invest based upon this determination it makes sense to find out what factors lead to the determination.

Narrow moat companies are generally regarded as good investments, but the wise investor will keep a close eye on such purchases since a firm which qualifies as a narrow moat today may be no more than an average investment tomorrow.

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