Investment Articles

Be afraid if you own long term bonds or treasuries. The bond market is getting ready to implode due to Washington’s unquenchable thirst for debt.

Say goodbye to the “good ole days” of high bond income and say hello to higher interest rates and falling bond prices. The bond market is getting ready to get squashed like a fat bug and you don’t want to be nowhere around when that happens.

Why is the bond market crashing and burning? Simple. Washington is running up record budget deficits–$1.6 trillion in 2010– and no one want’s to buy America’s debt-leveraged securities any more. In the last treasury auction, mountains of notes went unsold. The rest of the world has wised up to the fact that the “emperor has no clothes on” and America is no longer the financial super power it once was. Foreign governments and institutions are pulling back from investing in America and that is having a dire impact on the bond prices.

Without the influx of foreign investment, America cannot finance its deficits. That puts more upward pressure on interest rates. As interest rates soar bond prices drop like a rock. The only thing holding back a complete collapse of the bond market right now is that the Fed Chairman is acting like the little dutch kid plugging the hole in the dike with his finger to hold back the onrush of water. The Fed is just forestalling the inevitable because this collapse is going to happen. It is just a matter of time.

So as an individual investor what should you be doing right now?

Getting out of the long term bond market as quickly as you can. In the next couple of months the bond market is going to be a wasteland. Don’t get left behind holding the bag. Escape while you can. There is no surviving the cataclysm that is about to happen, if you hold long term bonds.

George Stark is an experienced business analyst, consultant and writer who holds an MBA degree. For latest insights on stock trading and other investment tips. Visit http://www.stocktradingclearinghouse.com

The best investment guide would cover investment options and investment strategy. This investment guide would be complete and start with basic financial concepts and expand to include the entire universe of investments. That’s a tall order, so let’s just start with a simple version, and talk about all of the investments in the world in plain English.

Your best investment is a good, complete investment guide. I’ve been tuned in to the world of investing for 35 years and have read over 100 books on investments and investing. Most of them center on the stock market or some form of investment technique or get-rich-quick scheme. Many are time sensitive and out of date by the time you read them. Many tell you how to invest money like the author did when he made his millions.

What you seldom get with an investment guide or book is an understanding of investment basics and a simplified blueprint of your many investment options. So, here’s your simplest and free best investment guide to all of the investments in the world. There are only 4 different investments or asset classes out there depending on how you categorize things. Once you bring it down to this level you have a basic framework to work with.

CASH EQUIVALENTS and other safe investments pay interest. Either your principal or rate of interest is fixed for a period of time. Examples include U.S. Treasury bills, money market mutual funds and bank savings accounts. Advantages include high liquidity (access to your money) and safety, low risk.

BONDS are long-term debt instruments and they pay more interest income than the above. Examples include U.S. Treasury bonds, corporate bonds and bond funds of various types. Advantages include relatively high interest income with a moderate level of risk.

EQUITIES or STOCKS represent ownership in a corporation. Examples include blue chip stocks, growth stocks and equity funds. Advantages include ample liquidity, growth and some income in the form of dividends. Risk is significant and profit potential is high.

ALTERNATIVE INVESTMENTS is our final category. Examples include real estate, gold, and foreign investments. Advantages include high profit potential and an alternative to stocks when they are out of favor. Risk can be significant here as well.

That’s about as simple as an investment guide can get. All investment options can be fit into one of these asset classes. The important thing is that you have a perspective, and that you understand the investment characteristics of any investment before you invest money. For example, someone pitches an investment to you. Where does it fit in our above format?

How does it rate in terms of: safety, liquidity, growth and profit potential, income provided and risk? All investment options can be and should be rated in terms of the above to assure that they fit your needs and risk profile.

If you learn how to invest you’ll have a means of supporting yourself for the rest of your life. Once you have a sound understanding of investment basics you’ve built a great foundation for learning how to invest. The best investment guide would cover both.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com.

According to modern law of nations, National Treatment is the fundamental system about foreigners’ civil status, whose original idea is that foreign investors can enjoy the same treatment as the internal ones. With the development of international investment and related laws, National Treatment is applied to international trade gradually. Practically, applying National Treatment into international trade is that the host investing country must provide those who have made international investment and have its own countries’ identities with National Treatment.

In the international investment regulations, there are two different statements about the National Treatment: “no less” and “equal”. Though the treaties of international investment have different statements about the National Treatment, these two definitions are unanimous in law and have no essential difference in practice. To understand the National-Treatment correctly, we must start from its relevance, which is also proved in the international investment. According to the comparative analysis of the international investment regulations, National Treatment is adopted by a large number of bilateral and multilateral treaties, which becomes a trend of the international investment regulations. Developing countries should base on the need of opening-up and their countries’ economic power, and gain the same treatment of the foreign investors.

Meanwhile, the effects and influences of the international laws are taken into serious consideration: taking care of the developed countries’ abuse of the rights in explaining the treaties and using the exceptions of treaties swiftly to protect their countries’ economic authority.

Based on the current foreign Investment laws in China, the situation of the treatment of the foreign investment is “encourage and restrict”, which manifests in the following: seldom promise the citizen the right in the protective agreements of the bilateral investment, or restrict the citizen in the treaties; raise some favorable measures for the foreign investors while restrict them, such as the tax favorable measure. In order to make good use of the foreign investment, what we need to do now is to revise and improve our regulations related to investment treatment.

The revise of the foreign investment law needs reformations in the following five aspects: unit the standards of the whole country, use the favorable measures under the WTO regulations, and gradually cancel the no coincident favorable measures between the current law and the citizen’s treatment and so on. At last the National-Treatment regulations are set up based on the foreign investment laws.

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As a very important role of world economy, China has made a tremendous achievement of utilizing foreign investment since the reform and opening up. China’s agriculture began to utilize foreign investment in the end of 70’s, when the reform and opening up just started. Agriculture is one of the earliest industries to utilize foreign investments. The new government has been paying unprecedented attention to agriculture due to its strategic position in the development of economy in China. Then Documents about agriculture has been issued again by the authorities in 2005. Solving the problems facing agriculture, rural areas and farmers has been the most important task for the government. Therefore, under the background that more and more attention has been paid to agriculture, it has both theoretical and practical significance to study how to expand, introduce and utilize foreign-investment effectively and efficiently to promote agricultural modernization, industrialization and internationalization.

This article is composed of four parts to discuss the central topic “Utilization of Foreign Investments in Agriculture of China”.

1. The background, purpose, significance, content and methodology of this study are introduced and an overview of the past and current studies and researches is presented. Besides, the basic theories of agriculture utilizing foreign investments are summarized.

2. The characteristics of agriculture utilizing foreign investments in China are summarized according to its development, status quo and problems existing in the developing process. Moreover, the model of FDI’s contribution to agriculture economic growth is set up to analyze relations between agricultural GDP and FDI in agriculture. Also, we sets up a multivariate regression model of FDI and its influence factors such as the level of agriculture economic development, human capital, the extent of agricultural internationalization and investment climate, etc. The quantitative analysis can provide the data support for government policy.

3. Through introducing the international experiences and lessons of agriculture utilizing investment in developed countries (America and Korea) and in developing countries (Thailand, India, Brazil and Indonesia), some inspirations have been drawn for investment utilization in our agriculture.

4. Based on the theoretical and empirical analysis of the status quo, problems and the influence factors of agriculture utilizing foreign investments, learning its international experiences and lessons, we comes up with some concluding remarks and policy suggestions as follows: agriculture in China should further strengthen the development and exploit market potential; improve agricultural investment climate and upgrade the superiority of introducing foreign capital; intensify high-quality foreign investments introduction and increase the utilizing efficiency; enhance the supervision and control of both domestic and foreign markets as well as establish and consummate rules and regulations.

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Making a foreign investment might seem like Greek to you, but if you are into stock investing, going international could be a great investment strategy. For the past 10 years the best investment strategy has NOT been BUY AND HOLD American stocks, equities. In fact, the U.S. stock market has been a loser.

Even going back before the crash of 1929, the past 10 years have been the worst 10 year period for stock investing in the USA. Every investment strategy aimed at growth involves equities. So, what’s the average investor to do? How about a foreign investment or two to add diversification and growth prospects to your bleeding portfolio?

The U.S. economy and stock market may recover and lead the world as in the good old days. In case it takes a few more years, you should get into foreign investment now rather than later. Making an international investment is easier than you think, and only makes sense in today’s world. The USA does not dominate the investing scene as it once did. The rest of the world has played catch up; and played it well.

The best investment opportunities may be in China, India, or in South America or Europe. You’ll never know, but that’s OK. You don’t need to sift through all the data when you make an international investment. Let the professional money managers do the heavy work for you by investing in international funds. You have several types of mutual funds to choose from in the international investment category, but I suggest you keep it simple.

For most people the best investment would simply be diversified equity international funds. These international funds invest in stocks in numerous countries, usually concentrating on equities (stocks) of developed nations. You might want to invest a smaller amount in an emerging markets fund that specializes in equities of smaller or less-developed economies.

If you want to get more adventuresome, some funds invest in foreign bonds; and some specialize in specific regions like China, Japan, or South America. The safest way to go is to diversify broadly with international funds that spread your money around.

Foreign investment is not just for the sophisticated investor anymore, nor is going global a risky speculation. It’s a great way for most people to invest for growth and to diversify their stock investing. You don’t need to pick your own individual securities to invest in. Heaven knows, few of us are capable of analyzing domestic stocks, let alone foreign issues. With mutual funds you can join the international investing community with professionals dealing with the details for you.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com.

When the going gets tough smart investors concentrate on asset allocation and diversification. The new investor should too. First we will explain these terms; and then tell you how to put these concepts into action as an investment strategy.

Asset allocation is the process of deciding where to invest and in what proportion. In other words, how do you allocate the money that makes up your total investment portfolio (a fancy word for your list of investments)? For example, you might have an asset allocation of 60% stocks and 40% bonds.

Diversification means spreading your money out across various different investments. For example, the 60% you have allocated to stocks might be diversified or divided among 6 or 60 different stocks. Or, you could get stock diversification by investing in just one stock mutual fund which holds 100 different stocks.

In tough times even the new investor needs to incorporate both financial concepts into their investment strategy to avoid heavy losses in any one area. I suggest you get more conservative in both areas, and at the same time broaden your horizons. Let me explain. Let’s say that at present you are 60% in stocks and 40% in bonds, with emphasis on growth stocks and longer term corporate bonds.

Get more conservative by replacing some of your aggressive stocks with some that are more defensive and pay higher dividends. Cut your bond risk by moving some money into intermediate-term high quality government bonds. Then broaden your asset allocation to include safer and short-term debt obligations like bank CDs and short-term bonds. And expand into alternative investments like real estate, oil, foreign investments and precious metals.

In other words, when uncertainty is high as in 2008-2009, cover all the asset classes and diversify like crazy. Don’t get caught standing flat-footed with a portfolio heavily invested in just one or two areas. Sound pretty challenging for a new investor? Now we simplify.

The new investor can easily solve the diversification issue by simply investing in mutual funds. For example, a conservative value stock fund might invest in over 100 different stocks, and pay dividends of 2% or more. Mutual funds are also the ideal way for a new investor to broaden asset allocation by holding just a handful of different funds vs. a long list of individual securities.

For illustrative purposes, you might put together an investment portfolio that looks something like the following. First, the types of mutual funds are listed, and then the asset allocation percentage.

Money market fund: 10%

Short-term bond fund: 10%

Intermediate-term bond fund: 30%

Diversified domestic stock fund: 20%

International stock fund: 10%

Real estate fund: 10%

Energy fund: 5%

Gold fund: 5%

Total asset allocation percentages must total 100%. In our above sample portfolio you cover a lot of bases with lots of diversification by holding just 8 different investments – all of which are professionally managed for you.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com.

Emerging markets refer to countries, which have opened up their doors to international trade in the interest of developing their own economies. To understand this better, one has to understand the difference between a developed and an undeveloped economy. A developed economy is one, which is able to support itself in entirety, with the possibility of continuous growth due to the development of its own technology. An undeveloped one, of course, is its opposite. Thus, an emerging market economy is one, which is in transition from being an undeveloped/developing economy to a developed one.

For this purpose, emerging markets accept the inflow of foreign influence to enhance their business methods and their technology. This influence comes in the form of business relations and agreements between investors and the emerging market. By allowing foreign investors to establish businesses within the country, these markets gain part of its income, adding to its gross capital income, and in effect allow it allocate more resources. A well-established local business, in the same way, may also opt for expansion in other nations. This chain of trade practices improves the overall capacity of a country to do business, with its goal being able to become at par with already developed countries. This is what also determines the value of a country’s currency is in the world market.

An emerging market is characterized by the increase in both local and foreign investment. Increase in the local perspective signifies that business practices have improved. Foreign investments prove that the global community believes that a country has promise. Neither of these, however, is possible without effective economic reforms. These reforms differ from one country to the other, and these depend mostly on culture and resources. When the culture of a nation is highly conservative (like that of Japan in its early years), the inflow of foreign technology is resisted so change is highly improbable. Japan, in itself however, was a pioneer in many technological feats so it never got left behind. The resources of a country also limit its ability to do business. In history, Russia led the global community in trade before 19th century due to its large population and its vast resources. With the tide of the century, however, there came World War I, and Russia was it’s biggest casualty. To this day, however, Russia is still one of biggest emerging markets there is. The same applies to other emerging markets in the world today, including China, India, Indonesia, Brazil, Mexico, Argentina, South Africa, Poland, Turkey, and South Korea.

Each of these countries plays an important role as an individual market. Eventually studies have been made to develop these markets by coordinating their efforts, and so evolved terms such as BRIC, BRICS, BRICET and BRIMC. BRIC stands for the countries of Brazil, Russia, India, and China. The other terms were derived form BRIC, with the addition of South Africa (S), Eastern Europe (E), Turkey (T), and Mexico (M). The original BRIC thesis proposed that these four countries would eventually become the most dominant countries by the year 2050. This is because of the business network that exists between these countries even in the present day. China and India specialize in manufactured goods and services, while Brazil and Russia are vital suppliers of raw materials. An example of this working relationship is the production and distribution of IBM products.

Frank Collins is an traveler and an editor for Exploring Abroad.com

Sovereign Wealth Funds (SWF) are owned and managed by governments or central banks of various countries around the world to invest their trade surplus globally, usually on a long term basis. They are funded by trade surplus of international trade, foreign currency deposit, International Monetary Fund reserves and other national funds like pension funds and oil funds. With subprime crisis haunting the global financial sectors, several SWFs are being criticized for investing heavily in Citigroup, Morgan Stanley and Merill Lynch which left them gasping for cash infusion. Nevertheless, from $500 million in 1990 to $3.8 trillion in assets today, SWFs have their presence now spread across 27 countries.

Around two-third of SWFs are held by the commodity and oil exporting and gulf countries like Qatar Investment Authority, primarily with the objective of diversifying their revenue streams and reduce oil-related risk and their dependence on oil export revenue.

Over the last decade, large current account surplus enabled Russia and China to build up their sovereign funds. They seemed to have realized (after Asian financial crisis of 1997-98) that it is better to build up their own reserves instead of depending on IMF to bail them out at the time of crisis. Russia and China now manage around $450 million and $1.44 trillion in SWF assets respectively.

Industry experts predict that assets under SWFs’ control could reach $12 trillion by the end of 2015.

The two main purposes of SWFs are short term foreign currency stabilization and liquidity management. The Global Financial Stability Report (2007) classified SMFs into five groups depending on investment objectives of their respective governments. They are:

(i) Stabilization Funds

(ii) Saving Funds for Future Generation

(iii) Reserve Investment Corporate

(iv) Development Funds; and

(v) Contingent Pension Reserve Fund.

During the period of rising oil prices, SWFs of oil exporting nations drastically due to increase in their foreign exchange reserves which are then used to make strategic acquisitions across the world. On the other hand, SWFs of emerging economies like China, Singapore, Malaysia and South Korea tend to grow steadily.

Another point of difference is the SWF to Foreign Reserve Exchange ratio which is used to determine the proportion of reserves which are invested using SWFs. It has been observed that OPEC have higher ratio compared to emerging economies. Last year, ratio for Qatar Investment Authority was 5.9 times compared to China Investment Corporation’s 0.12 times.

For more information, please refer to http://understandingbasicsoffinance.blogspot.com

Geetika

Several countries are keeping their economies away from SWFs due to the concern that some investments are being diverted for political objective to acquire control of strategically important assets. It has been observed that OPECs have been diverting large pool of funds in acquiring strategic assets and investing in important sectors like infrastructure, telecom, energy and media across developed countries. After much opposition from US Congress, Abu Dhabi’s Investment Authority had to withdraw from its ADIA Dubai Port after 9/11 terror attacks.

China Investment Corporation’s $5 billion stake in Morgan Stanley and acquisition of Citigroup by Abu Dhabi Investment Authority for $7.5 billion was severely criticized after the recent subprime crisis.

Lack of transparency continues to be a major concern for nations that are experiencing increasing SWF funding in their economies. SWFs are being criticized for inadequate disclosures regarding size and source of funds, investment objectives and their holding in private equity funds. While in the U.S., these concerns are addressed by the Exon-Florio Amendment to the Omnibus Trade and Competitiveness Act of 1988, European Union preferred to avoid SWF funding. Some experts opine that such a fear is unwarranted if we compare the size of SWFs assets ($2 trillion) with the size of global investment funds assets ($20 trillion) and securities traded in dollars ($50 trillion).

IMG tried to address this concern of transparency and governance by issuing the Santiago Principles in 2007, a set of 24 voluntary principles to ensure transparency and sound governance by sovereign wealth funds (SWFs). However, very few SWFs have been following these principles seriously.

Geetika

Sovereign wealth funds are state owned collections of stocks, bonds and other assets. They are often funds which come about as a result of a significant amount of surplus cash held by the country in question. Not every country has such funds, but those that do are often saving for the future, giving future generations some form of security.

1. The largest of the sovereign wealth funds is called the Abu Dhabi Investment Authority – owned by Abu Dhabi, United Arab Emirates. Much of this country’s wealth is based on oil, a resource they still have a large quantity of. They are saving for the future however, as the oil supplies will eventually run out. The current estimated size of the fund is 627 billion dollars.

2. Saudi Arabia comes in at 431 billion dollars, with the Saudi Arabian Monetary Agency (SAMA), which was formed in 1952. The fund was set up at a time when Saudi Arabia did not have a currency of its own. It is another example of sovereign wealth funds being at the center of very forward thinking in terms of getting a country into a western way of operating as well as planning for a future where oil wealth dries up and other industries have to be developed so the people and state has a way to make money.

3. The third largest of all sovereign wealth funds is that of the Government Pension Fund of Norway, which comes in at 395 billion dollars. Again, this fund takes the nation’s considerable wealth (for a nation of 4.8 million people, this fund is truly massive) and makes investments that will see a return over a number of years. As the name suggests, this fund will provide a comfortable pension for the hard working members of the Norwegian state.

4. State Administration of Foreign Exchange, or SAFE, is owned by the People’s Republic of China and manages the country’s foreign exchange reserves, as well as regulating the foreign exchange market in that state. 347.1 billion dollars is the current value of the fund, which, like the other sovereign wealth funds, aims to solidify China’s position as a financial powerhouse and general global power.

5. The China Investment Company comes in at number 5, currently thought to be worth around 298 billion dollars. The wealth of the Chinese state is considerable and is demonstrated by the fact that there are 2 huge investment funds from this country in the top 5.

Sovereign wealth funds provide nations with a huge surplus to capitalize on this wealth – and ultimately become more wealthy.

Gino Hitshopi is highly experienced in the realm of sovereign wealth funds, having worked in the investment industry for many years. For more information please visit: http://www.preqin.com/section/infrastructure/4