Investment Research: The New Trader’s Saving Grace

Hello everyone!  Welcome to the final installment of Bevo Markets and Bear Markets.  This week will end our conversation by looking into a favorite tool of many excellent traders: investment research companies.  Traditionally, banks, fund managers and elite traders were the only professionals with access and power to tremendous market and company research.

This changed dramatically with the rise of the internet, as it no longer cost hundreds of dollars to get one piece of advice from an overpaid banker across the country.  No, the tables have turned.  Companies such as Morningstar Inc. thrive on providing incredibly accurate, analytically sound research and recommendations to average traders, often for a fraction of the cost.

Specifically focusing on one of the most well known of these companies, Morningstar Inc., the blog will look at what makes these services so valuable and how they are used by everyday traders.  Additionally, the focus will be on the company’s security options and how this research can educate and improve the skills of new investors.  Investment research companies such as Morningstar Inc. can dramatically help those who are looking for a way to kick-start their journey to investing artfully.

 

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An example of Morningstar Inc.’s fund comparison tool.

http://www.tradeeagle.com/Portals/1/Images/morningstar/Morningstar2.png)

The most valuable facet of investment research companies like Morningstar Inc. is the sheer volume of stocks, bonds, funds, ETF’s, and markets covered by the service.  For each of these covered securities, highly skilled analysts make their recommendations to subscribers on whether to buy, hold or sell them.  Traders, along with their own research, consider these recommendations and make trades because of their decisions about the company.

According to the company’s website, Morningstar covers thousands of securities, a huge array of information to subscribers.  Non-subscribers can benefit from the company’s expertise, however, via many free resources offered by the company.  An example of this can be seen in a free YouTube video showing analysts covering the International ETF market.

If young traders want to improve their ability to value a company, there is no better place to start than with a service like this.  When a novice trader sees a high rating for a security, he or she can study what components that company has in common with other highly regarded companies.  This comparison starts building a mental tool kit with which the investor can start to assess securities on his or her own.

While a number of other, equally valuable investment research companies such as Standard & Poor’s, Moody’s Analytics, and Fitch Ratings all exist underneath the industry banner, the ease of use and relative cost advantage of Morningstar Inc. are what give it the BM&BM stamp of approval.

I would like to sincerely thank you for visiting Bevo Markets and Bear Markets.  It was the goal of this blog to provide a framework through which young people could build some attachment to the technology-charged, ever-evolving world of investing.  It is not certain that this goal was achieved, but Bevo Markets and Bear Markets is a testament to the fact that passion for investing exists and that young people can indeed influence the future of our world.  Thank you again for reading.

Good luck in the market!

Joe Kelly

 

So, Which Platform Do I Use?

Hello everyone!  Welcome back for the latest installment of Bevo Markets and Bear Markets.  I appreciate you coming to look at the newest post and am especially excited about the topic this week because it focuses on something very interesting: getting more young people directly involved with investing.

Once funds have been made available, a mechanism to make necessary trades is needed.  This mechanism is an online trading platform, and today Bevo Markets and Bear Markets will be looking at various platforms available to the public.  These platforms, including E*TRADE, TradeKing, and TD Ameritrade, are available to young people looking to take their crack at making some money from the market.

The first platform is the lesser-known TradeKing, a trading interface that is quickly gaining popularity with newer traders.  Despite little advertisement in the typical finance media such as the Wall Street Journal, CNBC and Bloomberg News, this platform has grown tremendously.  Offering a miniscule fee of $4.95 per trade, this platform is excellent for new traders because it will not drain one’s funds with unnecessary fees (it was not long ago when a trade fee of $15 or $20 was common).

(http://www.thesunsfinancialdiary.com/wp-content/uploads/tradeking11.png)

Additionally, there is no minimum account balance, so new traders can be at ease knowing they won’t be penalized for not having a massive balance.Finally, a well-documented knack for customer service and incredible trader education set TradeKing apart from other discount trading platforms.  Overall, TradeKing is a lesser known but incredibly competitive option for any trader, especially a rookie looking for experience and access to all the necessary securities to diversify one’s portfolio.

Another popular online platform, TD Ameritrade, has grown to be quite popular with new traders.  The brokerage gives its users access to trade the normal securities in a highly efficient trading system, which offers some of the quickest trade executions in the business.  While certainly more expensive than TradeKing (the fee is $9.99 per trade), TD Ameritrade makes up for it with advantages to new traders.  For example, there is no minimum balance to maintain and features a fully customizable and interactive “control panel” that is widely regarded as being incredibly easy to use.

(http://www.mobilecommercedaily.com/wp-content/uploads/2011/02/td-3.jpg)

Paired with strong customer service options, it is no wonder this platform has widely grown since its launch.  However, the dramatic increase in trade fees and lack of education resources makes this a platform novice traders should avoid.

The final platform is E*TRADE, perhaps the most popular online financial services company in part because of the “E*TRADE baby’s” wit and wisdom.  The platform has trading fees on the more expensive end ($7.99-$9.99 per trade), but this is the lone disadvantage of using the program.  During my time looking at various options, the educational resources offered by E*TRADE are thorough and informative, while not being so mundane or long-winded to cause the user to become uninterested in what is being presented.  Furthermore, E*TRADE offers its users the full-range of securities, including the ability to trade in six global markets.

With free, real-time streaming quotes, a customizable workstation, and in-depth applications offered on smart phones and the iPad (seen below), E*TRADE is one of the safest choices for a market greenhorn.

(http://www.mobilemag.com/2010/04/07/e-trade-app-lets-you-trade-like-a-pro-on-your-ipad/)

Upon entry into trading, it is difficult to determine what platform would be best suited for a new trader.  After substantial research and deliberation, Bevo Markets & Bear Markets chose E*TRADE as the means to make money work in the market.  Trying to get into online trading is an intimidating, vast landscape of websites and downloadable programs.  Do not be overwhelmed, however, as every successful day trader started at this same junction.

It is the goal of this blog that these analyses of a small fraction of the available platforms offers a stable starting ground for finding a program you are comfortable with and powerful enough to offer you a trading advantage.  In addition to this input, opinions from trading veterans such as those found here are incredibly valuable.  As always, if you have any questions about the different trading options or have had experience with these or any of the available platforms online, please sound off in the comments.

See you next week for another installment of Bevo Markets and Bear Markets, and you all enjoy the rest of your spring break!

Thanks!

Joe Kelly

Exchange-Traded Funds: A Sign of the Future?

Hello everyone! Glad to see y’all back for another installment of Bevo Markets and Bear Markets.  Today’s post is looking at a relatively new addition to the world of finance and one of the more pure examples of technology influencing the financial industry today.  These beauties are Exchange-Traded Funds, or ETF’s for short, and they have added a completely new wrinkle to not only how traders make money on the markets but also to the future careers of financial professionals.

The nature of ETF’s is simple to understand, but far more difficult to create in practice.  A fund manager, not unlike a mutual fund, manages the fund as a whole.  The large difference is that unlike a mutual fund, individual shares of the fund can be bought and sold on the marketplace, allowing for the investor to spread his or her funds into a number of securities, including stocks, bonds, and commodities.

Therein lies one of the beauties of the ETF – diversification of one’s capital is a thoroughly tested and trusted theory on how to minimize risk in the market.  For example, instead of spending hours researching where to invest money in a specific region or industry, the appropriate ETF can be found quickly to spread the investor’s capital into a professionally managed and diversified pool of securities.

These ETF’s can be broad or quite focused, such as one that attempts to track the prices of crude oil around the world or another that is strategically invested in emerging markets.  You can see an example of this diversity in an ETF I currently own, Vanguard MSCI Emerging Markets ETF (VWO).  Regardless of their scope, melding the flexibility and liquidity of stocks and the diversification of mutual funds, ETF’s have truly altered investing as a whole.

(http://money.cnn.com/galleries/2009/moneymag/0906/gallery.ETFs.moneymag/2.html)

So who runs these funds?  Certainly, there must be a Wizard behind the curtain, pulling the ropes and levers to create wealth for the fund holders.  In fact, many of the financial service companies you have heard about offer ETF’s managed by successful fund managers or highly sophisticated computer programs. These companies, such as Charles Schwab, Deutsche Bank, Merrill Lynch, and the Vanguard Group, run some of the ETF’s offered today.  In fact, according to the Investment Company Institute, there are currently more than 900 ETF’s available on U.S. exchanges.

Now that you understand a little more about the nature of Exchange-Traded Funds, you may be wondering how this influences you or your future.  You, as someone who plans to enter the financial industry, may have no interest in investing at this time.  You are certainly not alone, but know that ETF’s may have the ability to replace the traditional money manager.

If ETF’s proliferate and the average investor feels (and sees results) that their money is safer in the hands of a successful fund manager and that ETF’s offer the same ease of buying stocks, the job market for many financial professionals down the line may certainly be restricted.  At this point, however, young people can only work harder to understand the markets, analyze businesses and execute efficiently, as we have entered a highly sophisticated and technical era of finance.

As always, if you have any thoughts or experiences with ETF’s or the impact of technology on the financial job industry, please feel free to express them in the comments.  Once again, thank you for visiting Bevo Markets and Bear Markets, and I look forward to seeing y’all next week!

Thanks!

Joe Kelly

The Bloomberg Terminal: Elite Technology for Traders

Hello everyone!  Thanks for coming back to Bevo Markets and Bear Markets.  Today’s post is going to talk about an incredible piece of new technology that has taken the financial industry by storm: the Bloomberg Terminal.

To most of those currently working in finance, the term “Bloomberg” has become incredibly common.  However, to those not staring at trading screens on a daily basis, “Bloomberg” will usually bring to mind the current mayor of New York City, Michael Bloomberg.  He is the technology and news service’s patriarch, king of a vast, moneymaking, media-obsessed empire.  Further examination here can shed even more light on the increasing dominance of Bloomberg. For those of you looking for a career in business, plan to hear this last name quite a bit.

The Mayor’s “Bloomberg Terminal” has dominated finance for some time now, and doesn’t look to be slowing up.

(http://paidcontent.org/images/editorial/_original/bloomberg-terminal-o.jpg)

Now the Bloomberg, as it is commonly known, contains more features than Bevo Markets and Bear Markets could ever hope to detail, so this summary will focus on what makes it such an incredible piece of equipment.  Firstly, the terminal itself is different.  With an expanded keyboard and two-monitor visual unit, the Bloomberg looks powerful and intimidating even before you log in.  (Side note: On the hedge fund I worked on this past summer, each of the four traders had FOUR monitors.  That is a ton of data to pay attention to at one time!)  The keyboard has multiple function shortcuts built in as buttons, allowing swift navigation around the software.

As you can see from the picture, the keyboard by itself gives its user a tremendous amount of power to get news, crunch numbers, and even make bids and sales offers with other traders through its chat interface.  According to K.C. Nelson, a lead hedge fund manager for Driehaus Capital Management in Chicago, the price tag of about $1,400 a month per terminal is worth the investment.

A look at one of the commodity information screens in Bloomberg.

(http://web.ccsu.edu/business/images/ftr/oilprices2.gif)

The Launchpad feature is one that thoroughly flexes the muscles of the Bloomberg platform, however.  On one home screen, a trader can get streaming news from hundreds of media sources around the world.  Additionally, streaming stocks, bonds, and any other security’s prices are constantly up to date, down to the most recent trade.  Built into the machine are vast analytic tools, allowing a thorough breakdown of securities.  Oh yes, all of these features, including the resource of ever-increasing financial data, are available on practically every smart phone.  Quite impressive, indeed.

This blog will admit that the first time one uses this machine it can be quite overwhelming.  It seems as if one has so many options that it is difficult to decide where to start.  Additionally, the language and commands of the Bloomberg are certainly not always clear, and mandate a thorough training process that highlights all of its functions (also provided within the Bloomberg).

Despite these growing pains, the usability and command of financial information provided by the Bloomberg Terminal is obvious after only one or two days of exploring its depths.

Certainly, this opinion on the Bloomberg is only one of many.  Have any of you out there in the blogosphere worked with this machine or service?  What were your thoughts?  Did you find is as confusing as I did the first couple of times you tried it?  Please let other readers know what you think in the comments section and Bevo Markets and Bear Markets will see you next week!

Thanks!

Joe Kelly

Welcoming Wall Street to Austin!

Hi everyone!  Welcome to Bevo Markets and Bear Markets, a new blog dedicated to making the next generation of businessmen and women more informed about how online investing is quickly changing the world in which we live.  Every week, I hope to give you all a little more insight into how new technologies are dramatically altering the financial industry.  These changes are crucial for the average businessperson, as financial markets play a huge part in evaluating companies’ successes and failures.

Most young people have little interest in the financial markets.  You cannot be blamed, however.  The stigma of old, rich men yelling into phones is a lasting one.  Fortunately, a youthful, energetic, technology-driven culture is replacing this worn out predisposition.  This blog cannot promise to make you a better investor, but it will show you some of the professional tools that traders use to create huge amounts of wealth!  Additionally, the hope is to give you all some insight into how these tools relate to recent events you may have heard of, such as the Flash Crash of May 6 and the financial crisis of the last 3 years.

 

Some questions this blog hopes to answer are:

How does one get started in investing?

Are there a variety of places one could invest his or her money?

Can young people effectively learn how to benefit from financial markets?

What means are financial professionals to make money from the market?

 

The purpose for this blog is to give you, the readers, some great information over the next few weeks, but also to create a community for your input and opinions.  If you have ever dealt with any of the technologies described, had any experience related to recent financial issues, or simply find a post interesting, please state what you think in the comments!  Until then, take a look at how well Wall Street employees can be compensated.  With some time and a lot of practice, someday that could be you! Again, welcome to Bevo Markets and Bear Markets, and I’m looking forward to seeing you back soon!

Thanks!

Joe Kelly