Free Stock Market Investing Tips

The online stock brokers play a significant role in online stock trade for those who want to invest but do not possess a good amount of amount to play. They are different from the traditional stock brokers in terms of investing and managing money.
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The top performing mutual funds over the last five years are dominated by Latin American funds. Of the 13 funds reporting a greater than 40% return after five years, five are mutual funds emphasizing Latin America. More impressively, the top four returns after five years are all Latin American funds with BlackRock Latin America (MDLTX) leading the pack with a whopping return of 49.4%. That means a $1,000 investment in MDLTX 5 years ago would be worth $7443.08 today. Some of the performance of these funds over the last five years can be attributed to the rise of commodity and oil prices. Much oil, minerals, and agricultural products are exported from the region. Another reason behind the Latin American fund surge is many governments have adopted sound macroeconomic policies, especially in Brazil, Mexico, and Chile where greater control over interest rates, inflation, and government spending has come about during the time period. Also, national debts have been reduced. The future does look bright for Latin American funds, but caution must be taken. I’ll elaborate on why in the last paragraph.

There is a different picture if we look at the best performing funds over a ten year period. No single focus area dominates as Latin America does over a five year period but there are several focusing on small cap and ultra-small cap or micro-cap companies. The best return rate is 21.5% for Wasatch Micro Cap (WMICX) which would make that $1000 investment worth $7018.83. The fund is very volatile, at one time gaining 30.5% over a month (July 1998) and another time losing 24.7% in a month (August 1998). However, the 5 year rate of return is 20%, and the one year rate is 20.5%, showing that for this fund, 20% or better can be expected. Averaging rates over 20% for a period of ten years paints an excellent track record for the fund’s management.

The ten year rate of return paints a different picture of the Latin American funds that dominate the five year period. MDLTX, mentioned above, has a return rate of 15.5% over ten years so something drastic happened between 5 and 10 years ago and the fund has rebounded in the last five years. If considering a Latin American fund, do the research on what companies are focused on. There are still some unstable countries in the southern hemisphere with oil-rich OPEC member Venezuela providing a glaring example. Venezuela’s government has been seizing assets of private companies recently.

Global funds are mutual funds made up of firms headquartered outside of the United States versus local funds which are those funds concentrated on American domestic firms. At different times, it has been better to invest domestically or internationally though most of the time it has been more profitable to invest in the former. However, we may be in a time period when investing in the global funds may be more profitable.

Themes that drove the US economy so strongly and pushed local funds to regularly outperform the global funds are now practiced internationally. Even in the union-dominated labor forces of Europe, greater productivity is being squeezed out of the workers where it wasn’t before and lessening government regulations are encouraging competition in the European economy that, in turn, encourages consolidation of European firms. Consolidation ultimately brings a greater efficiency as the larger companies are able to exploit economies of scale. Sound familiar? Think about the booming United States economy in the 1990s.

Asian funds have been taboo investments since the market collapses after the US tech bubble burst in 2000-2001. These economies are now “righting the ship” and emerging from the doldrums. China is evolving from a centrally planned economy to a capitalist market economy as it seems to have learned when gaining full rights to Hong Kong from the UK in 1998.

With market globalization the ultimate buzzword of the modern economy what’s a global fund doesn’t really mean the firm’s focus of business is outside of the United States. Global funds today are “global” in the sense they operate globally with significant revenue portions coming from all over the globe. An excellent example of this is Porsche, the world’s most profitable automobile manufacturer, which is headquartered in Germany but its largest market is in the United States, accounting for 40% of annual sales.

Ultimately, global funds look to perform well as tried and true American market efficiencies take root in other parts of the world. This is not to say local funds will perform poorly but investors should at least look into diversifying their mutual fund portfolios by investing in global funds.

Stock options are perks employees gain from their employers. Basically, stock options give an employee a right to purchase a set amount of shares of company stock during a specific time period at a set price. The strike price (the option price of company stock) is discounted and can be the price of the stock at the time the employee gained options rights or, in the case of privately held firms, it is the internal valuation of the stock at the historical time period that is then voted on by the board of directors.

For example, an employee is hired on at a publicly traded firm and has this perk; the strike price will be the price of the stock on the day the employee was hired. This same company may allow the employee to exercise the option 1 year later in the volume of 100 shares. So, this employee will be allowed to buy 100 shares of the stock, 1 year in the future, at the price it was a year before when the employee was hired. The hope is that the stock price goes up during the period and the employee gains real benefit from exercising the options. Usually the amount of shares the employee can buy is vested over a period of time. If it were 4 years, the employee would purchase 25% the first year at the strike price, another 25% the second year at the strike price, etc.

The tax implications depend upon whether the options can be classified as incentive stock options (ISOs) or non-qualified stock options (NSOs). NSOs are more common than ISOs and carry more of an immediate tax burden than do ISOs. NSOs are far simpler for a company to structure for their employees, but don’t meet all the qualifications for an ISO that are established by the IRS. In the case of an ISO, ordinary income tax is paid when the option is exercised meaning the difference between the strike price and the market price is treated as ordinary income. For ISOs, the tax implications do not come into play until the stock is sold. Simply exercising the options by turning them into stock shares does not carry any tax burden. Capital gains taxes on ISO stock options are only figured when the stock is sold. NSO stock options are effectively taxed twice if the shares are held onto after the options are exercised and when sold capital gains taxes must be paid. Obviously, there is a big difference in the amount of taxes paid between ISO and NSO options and its very important to understand which type an employer is offering.