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In recent years, money market fund investments have become increasingly popular as investors have become increasingly risk-averse. Particularly, during the recent credit crisis, investors have discovered a sort of safer investments in money market funds as opposed to short-term bonds and traditional savings accounts. However, the drop of the share price of Reserve Primary Fund (RFIXX) below the $1 level (‘breaking the buck’) has shown that money market funds are not the safest of options for risk-averse investors.

Money market funds use the invested money to buy into a large pool of short-term bonds that may include corporate bonds, government bonds or municipal bonds. Unlike other investment vehicles such as stock and bond mutual funds that are subject to price fluctuations, money market funds maintain a net asset value (NAV) of $1.00 per share. This gives investors the feeling that money market mutual funds have virtually no risk.

Money market mutual funds were not supposed to lose their value. Their short-term nature (290 days) provides a considerable level of security against default because, typically, corporate difficulties do not arise in such a short period of time. Theoretically, if a company faces difficulties that would make lending to it a risky option, it would take more than 290 days for the money market mutual funds to exchange their securities at full value. Yet, the default of Lehman Brothers in 2008, the Internet bubble and the implosion of Enron are prominent examples of major companies that defaulted on their debt seemingly overnight.

Money market funds are risky because they are subject to different factors that can drive their price below $1 level. Breaking the buck implies that investors’ returns are less than the invested principal. Indeed, the price decline of the Reserve Primary Fund to 97 cents a share has shown that money market funds can lose their value and be as illiquid as any other mutual fund.

For 2010, analysts cannot estimate accurately when and if there will another surprise related to money market investments. However, there are some factors that are likely to contribute to money market funds ‘breaking the buck’ barrier, affecting their value.

In particular:

a)      Company’s declining assets

Since mid-2009, capital markets have been on an uptrend bull rally as many companies reported profits. On the other hand though, the banking sector continued to fail and job losses continued to mount across several industries. For 2010, the uncertainty is likely to limit investment, while new regulation for investor protection are likely to be implement throughout the year. In such an uncertain and turbulent environment, companies may not be profitable enough to sustain a net asset value of $1.00 in their bonds. If the company whose bonds the money market funds owns faces financial problems, the bonds’ value will decline causing a proportional decline in value in the funds owned by each shareholder.

b)      Investors redeeming simultaneously

In majority, money market funds are invested in short-term bonds that have similar maturity dates. If a large number of investors redeem their money simultaneously, it will create a major problem of liquidity in the market that will cause loss in the value of money market funds. Large simultaneous redemptions could lead a money market fund to sell a part of its assets prior to their maturity date. This may cause a decline in the value of fund.

The truth of the matter is that ‘breaking the buck’ happens all the time. Investors may not realize it because it is not obvious, but considering that they spend their after-tax, after-inflation money, it is certain that by factoring in tax and inflation, money market funds lose their value.  However, as this is more a technical thing, investors seek for the confidence level associated with the fact that the NAV will almost never fall below the $1 level.

Money market mutual funds diversify their short-term investments to protect investors against unexpected difficulties. In doing so, even if one company were to unpredictably default on its debt, the other investments would trade-off for those losses. Besides, in case of a widespread fluctuation in the short-term debt markets, the price of all short-term securities could drop considerably regardless of the financial situation of the individual companies that issued the debt. This explains the “breaking the buck” situation of 2008 where several money market mutual funds collapsed.

Investor expectations in relation to net asset value, particularly after years of consistent NAV, are that a major crisis is required to cause a severe fluctuation in the net asset value of money market funds. However, as investor confidence is shaken, it is possible that, in 2010, money market funds are not an option, unless investors feel protected under new regulations that will allow borrowing and investing with evident reassurance. The Treasury temporarily guaranteed money market mutual funds aiming to put off further investor confidence problems in the short-term debt markets. To that end, the Federal Reserve guarantee that was originally scheduled to expire in October, 2009 has been extended until February 1, 2010.

Christina Pomoni has acquired her MBA Finance from the American College of Greece. Her advanced familiarity with financial statement analysis, capital budgeting and market research has been acquired through her professional career at high-esteemed organizations. As part of her long journey, Christina has served as an Equity Research Associate at Telesis Securities (EFG Eurobank) and a Financial & Investment Advisor at ING Group. Besides, having lived at Chicago, IL, Boca Raton, FL and Paris, France has helped her, not only to be a successful professional, but mostly to see life under a more creative and innovative perspective.

Since 2005, Christina provides high quality writing services to numerous websites and research companies contributing her knowledge and expertise. Her areas of specialization are Business, Finance & Investment, Society, Politics & Culture. She also has a very good knowledge of Entertainment, Health & Fitness and Computers & Technology.

Christina currently designs the website of her own writing company. Believing that knowledge is the road to opportunity and development, her mission is to promote her already established knowledge to a growing number of visitors and to provide high quality writing services to meet the most demanding customer requirements.

Article Source:http://www.articlesbase.com/investing-articles/how-safe-are-money-market-mutual-fund-investments-for-2010-1656681.html

You have heard it on the news – the lost decade of jobs or the lost decade of investing for those that invested in the stock market from 1999-2009 and made no return on their investments.  Like you, many have found investing and retirement planning less and less fulfilling and rewarding.

As a day trader, I have found a company that represents a variety of traders that can help with your investing and retirement dilemma,  Many of these traders have over 20+ years experience in their field of trading.  They sell subscriptions services to their trading signals, available to traders like me.  But now non-traders looking for small investment ideas, investment opportunities or retirement planning can open auto-traded brokerage accounts and have the signals traded for you in your own private account.  You will receive a trading statement ever time a trade is placed on your behalf.  These traders average returns between 100% and 300% annually.  Its true!

 Imagine returns of 100% – 300% in your own private account:  E-mini S&P Futures and treasury Bonds, Global ETF Options, Domestic Stock Options a low risk Forex trading accounts are possible.  No longer the avenue solely of  the rich investor, these are safe and consistent returns and the traders have proven, verifiable track records too.

 This article is to emphasis that you can stop the bleeding from poor stock market returns and financial crisis.  I wanted to share what I have learned and alert you to the returns I have personally seen.  Day trading and Swing trading can be fun and profitable; but it is not for everyone:  the small investor like you can now earn over 100% on their monies.

Please see my website:  www.make100percent.com

Steven Kinney is a day trader and internet marketer: www.make100percent.com, www.thetradersalliance.com, www.makingmoneyonamazonb2b.com

Article Source:http://www.articlesbase.com/investing-articles/now-the-small-investor-can-make-100-percent-on-their-money-1642220.html

By Floyd Upperman, Commodities Trading Expert

The U.S. Government provides inside information in the commodity markets

The U.S. government publishes a weekly report called “Commitments of traders” or “COT” which provides a very unique view of the futures and options market from the inside looking out. 

The Commodity Futures Trading Commission (“CFTC”) is the U.S. government agency responsible with policing and regulating trading on U.S. futures and options markets. The agency keeps track of all trading activity that takes place in these markets. The CFTC’s power and authority to oversee all trading activity gives it unique access to inside information in regards to the identities of market participants and their positions.  This information in the hands of futures and options traders can be extremely powerful.  Many people believe this information is heavily guarded and kept out of reach to individual traders, and in most countries that is indeed the case, but not in the U.S. 

The CFTC is mandated to keep the marketplace fair for all participants, big and small, and to prevent price manipulation from taking place. To achieve this, the CFTC releases certain information to the public on a weekly basis. This information is contained in the Commitments of traders (“COT”) report. The COT contains a summary of all positions held by the largest market participants. Making this data public helps to provide market transparency and gives the public a certain ability to police the markets as well. In addition to that however, it also gives traders access to a powerful tool. It helps to level the playing field between large and small speculators, though that may not be the intended effect. Having access to weekly changes in positions held by large commercial producers, processors, and users of the world’s commodities provides the little traders with a wealth of information that can never be obtained through any price indicators!

The weekly COT data provides individual traders with inside information regarding changes in hedging activities by commercial producers as well as speculative activity by the world’s largest money managers and swap dealers. The CFTC releases all of this information to the public weekly via the Commitments of Traders (“COT”) report. 

It still amazes me how few people actually know about this report. And of those who know about it, few really understand the information and know how to put it to use. I’ve spent the last fifteen years studying this data and building entire trading strategies around this information. Recently (2009) the CFTC has begun to improve the report and is now even breaking down positions further in an effort to provide greater clarity into the individual market participants.

I am thrilled that that the U.S. government provides this wonderful service (no other government in the free world provides such a service) and yet I am also still puzzled how few people know the report exists. If you are trading futures, an examination of this report is like turning on the lights in a dark room! The positions are all revealed. The report provides a detailed breakdown of all positions and discloses which market participants (by category) are holding the positions. Amazing!

In 2006 the CFTC began a pilot to provide greater clarity of the commercial category, which had begun to change due to new trading practices (pension funds and swap dealer activity). To address these changes the CFTC began releasing a supplemental report called “CIT” or commodity index trader report in twelve agricultural markets. The CIT report discloses the positions of commercial producers and commercial consumers on a weekly basis. These large commercial institutions utilize the futures market to hedge their cash exposure in the underlying physical markets. For example, an energy consumer (e.g. airliner) may use the futures markets as a form of insurance; to lock in the price they pay for their energy consumption in the future. This is called “hedging” and it reduces a business’s risk to future market fluctuations.

An airline which consumes jet fuel can use the futures market to lock in the price they pay for their fuel over the next five years. This hedges their exposure to the risk of sharply higher prices in the next five years. If an unforeseen event were to occur which causes fuel prices to sky-rocket, the company would not have to worry as they would have their price secured for a predetermined period (in this example five years). These commercial consumers and producers are widely considered to be the most knowledgeable group of traders in the futures markets.

The Trading Groups in the COT Report

 The commercial entities typically know more about the true supply and demand than any other trading group. There are two other categories of traders in the markets and their positions are also disclosed in the COT report. These are Large trader (managed money) positions and small speculators. The large traders are usually funds, such as a hedge fund, which typically use price indicators such as trend following techniques combined with fundamental information. What is interesting here is that most of the fundamental information that gets reported to the government (such as crop reports) all comes from the commercial traders. Thus, that’s why the commercials are widely considered to be the most “knowledgeable” group in the markets.

The COT report is the kind of information you’d be happy to receive once in a lifetime, yet few people are aware that the U.S. government actually publishes this information on a weekly basis. 

This information has provided the public with a ‘heads up’ to massive movement in and out of various futures markets, including the U.S. stock market. Consider the Nasdaq stock index at the height of the internet bubble at the turn of the last century. When the Nasdaq was trading around 5000 (its all-time high at the time) the COT report showed the commercial traders were actually selling off all of their long positions in the futures market and in a little over a weeks’ time had accumulated a record size short position in Nasdaq futures!

This article is an excerpt from the free e-book Slipstream Wealth. Read the full chapter in the free e-book Slipstream Wealth downloadable at http://www.slipstreamwealth.com

Floyd Upperman is recognized as the leading expert and analyst of Commitments of Traders (COT) data. He is the author of the highly recognized commodity trading book “Commitments of Traders” and is one of the world’s foremost authority on this long neglected subject. Read his full article at http://www.slipstreamwealth.com

Article Source:http://www.articlesbase.com/investing-articles/the-us-government-provides-inside-information-in-the-commodity-markets-1642387.html

There are a selection range| number} of different guides devoted to totally towards penny stocks and delivering rewarding picks in the market so all you have got to do is invest exactly in the stocks which they tell you to. Even though it appears too good to be true, the truth is this technology has been used by the major trading houses for years now but only in the near past have they become available to every day traders are smaller scale.

if you’ve been inquisitive about jumping into the stock market but were troubled that you didn’t have the wherewithal or experience that you might put towards it, one of these penny stock guides is an ideal solution for you. This is what you need to understand to find the best penny stocks guide out there today to make a quick but trustworthy profit in the near term.

This article is devoted towards inexpensive stocks and picking them because these are the least expensive investments that may find the market but still offer some of the greatest profit potential overall. It is important to be sure that the penny stock guides you go with only targets these cheap stocks totally. Confirm it says that somewhere as it is a full different process finding profitable picks for cheaper stocks just because of the bigger volatility associated with them.

Just like with any other product you would buy, look for refund guarantee. This may give you peace of mind, but also the opportunity to test the program first hand or in other words get the program, received a handful of its generated picks, and then follow their performances along in the real time market. This is straightforward enough to do and can take you a great distance in a very short time for finding a good picker.

www.wallstpick.com.

Sam Tang is a Trader
and located in North america and Asia.
wallsttwits.com

Article Source:http://www.articlesbase.com/investing-articles/choosing-the-most-profitable-penny-stock-guides-1652200.html

If you’re worried about staying financially afloat as you near retirement, make it your goal to invest in an annuity to offset a fixed income-less future. Purchased through life insurance companies, annuities allow their holders to secure funds for later in life which, if a pension plan turns out to be a dud, can turn out to be your wisest investment.

Annuities come in all different shapes and sizes with each offering its consumers different advantages and disadvantages. The two basic types of annuities are:

1. Immediate. You begin receiving an income from your immediate annuity the moment it is issued. You can also decide how long you wish to receive the benefits.
2. Deferred. This type of annuity is geared toward retirement funds because it is a long term investment that allows you to pay into it over a course of however many years and then receive payment at a predetermined date.

Both types of annuities are available in fixed or variable form. The most conservative form, fixed comes with little possibility for loss. A variable form, on the other hand, is the riskier form of the two because of the increased chances of loss.

Live Comfortably with an Annuity

Investing in an annuity is no easy task and should be taken seriously. With some guidance and planning, however, you could benefit greatly from choosing the right annuity. Talk with your life insurance agent about which annuity type and form is right for you and start planning for the future.

InsuranceAgents.com provides annuity quotes from up to five life insurance agents in your local area.

Staff contribution: Rafael Onak

For more information, read Using Annuities to Offset a Fixed Income Future. Visit InsuranceAgents.com for expert articles and compare life insurance rates from up to five local insurance agents.

Article Source:http://www.articlesbase.com/investing-articles/enjoy-your-retirement-with-the-help-of-annuities-1653496.html