Should I invest in Gold ?

By Tushar Mathur

Looking to invest in Gold funds but don’t know too much about them? Here are some basic facts to get you started.

What are Gold funds?
Gold funds are similar to mutual funds except that they invest in gold instead of debt instruments or equity shares. A unit of a Gold fund is nearly equivalent to a gram of physical gold.

How does it work?
A Gold fund collects money from investors and uses it to buy gold in physical form. Of the total money collected, a major portion is used to buy gold and the rest is invested in low-risk debt products such as bonds and money market instruments. It does not invest in equities. As the major portion of funds is invested in gold, the performance of the fund depends on the price movement of gold. The performance of the fund is reflected in its Net Asset Value (NAV). This gives you a chance to make fresh investments even after the initial offer closes.

Is it suitable for all?

Till date investment in gold has always been through jewelry or coins. But there is a physical limitation to the actual amount of gold you can store. Besides, you cannot take advantage of the price variation in gold. But with Gold funds, you do not have these problems. All that you have to do is buy units in a Gold fund and these units will be credited to your demat account. It is advisable to allocate 5-10 over the long term.

Reasons to say YES to Gold

• The dollar is weak and getting weaker due to national economic policies which don’t appear to have an end.
• Gold price appreciation makes up for lost interest, especially in a bull market.
• The last four years are the beginning of a major bull move similar to the 70′s when gold moved from $38 to over $800.
• Central banks in several countries have stated their intent to increase their gold holdings instead of selling.
• All gold funds are in a long term uptrend with bullion, most recently setting new all-time highs.
• The trend of commodity prices to increase is relative to gold price increases.
• Worldwide gold production is not matching consumption. The price will go up with demand.
• Most gold consumption is done in India and China and their demand is increasing with their increase in national wealth.
• Several gold funds reached all-time highs in 2007 and are still trending upward.
• The short position held by hedged gold funds is being methodically reduced.
• U.S. government economic policies over the past decade have systematically projected the U.S. economy down a road with uncontrollable federal spending and an uncontrollably increasing trade deficits. Both will cause the dollar to lose in international value and will increase the price of alternative investments, such as gold.
• With the recent devaluation of many international currencies, the U.S. dollar was the international safe haven of last resort. We are seeing signs of this ending due to many financial factors, the most important one being a falling dollar.
• There are over One Trillion dollars ($1,500,000,000,000) of U.S. debt owned by foreigners which could be repatriated under certain conditions. This could cause a major decline in the value of the dollar and a soaring gold price.
• If you believe in ‘buy low, sell high’, gold is still low, but climbing.

What is the tax treatment?
Though Gold funds are similar to mutual funds, they are not treated at par with equity schemes. So you don’t enjoy the same tax-free treatment. Both short and long term capital gains tax, with indexation benefits, become payable.

Tushar is the author of 2 blogs.
http://www.everythingfinanceblog.com
http://investmoneyinindia.com

Article Source: http://www.free-articles-zone.com

This is not a substitute for professional financial advice. Seek the guidance of a finance professional if you need help with financial advice.

Gold Investing Resources

Invest In Gold
Gold As An Investment

Forex Trading System

How To Choose a Forex Trading System That Works and Suits You

by: Bret Freak

There are so many different trading systems you could use to trade the forex market, some better suited to certain people than others. For example some people may find it easier to comprehend and take into account fundamental factors as opposed to looking at a screen covered in technical indicators, and vice-versa.

The first logical step in determining what type of trading system would best suit you is actually being aware and understand the widely known methods of analysis used in trading the currency market. Once you are aware of the tools that are available, you can generally tell what type of analysis suits you. For example some of the main technical analysis methods which are popular include:

Pivot points

Chart patterns

Fibonacci retracements

Candlestick patterns

And some fundamental factors which are widely used include analyzing:

Interest rates

Trade balances

Unemployment rates

Gross domestic product (GDP)

You may now actually be able to develop your own system by combining certain methods of analysis together, giving you a method which you are comfortable with. On the other hand you may decide that you would like to trade someone else’s system, either way, that brings us to the next step which is determining the profitability of a trading system.

Determining Profitability

Most people would think that back testing is the best way to determine a systems profitability. However back testing doesn’t always give you a true idea of how profitable a system is. The reason for this is because when you’re back testing your system on historical charts, you are only seeing the obvious setups which have occurred, and not always seeing the ones that are less obvious. These less obvious ones sometimes can produce losses, which is why back testing isn’t always the best method to implement.

A better method of determining profitability is by trading your system in real-time with a demo account. This would give you a true understanding of what your system is capable of. This would also allow you to familiarize yourself with your trading platform at the same time. When determining profitability you must look at it in terms of expectancy and opportunity.

Expectancy & Opportunity

These two factors together will be able to tell you what you could expect to make over a period of time. Expectancy is calculated with the following formula:

(Probability of winning × average win) – (Probability of losing × average loss)

This will give you a figure which is the average amount you can expect to make per trade. This shouldn’t be a negative amount, if it is you should look at some other method of trading since you cannot make money on a system that produces a negative expectancy. Obviously the higher this figure is the better. Now to the opportunity factor.

The opportunity factor is how often you are able to trade using your system. By multiplying your expectancy figure with your opportunity factor it will tell you how much you could expect to make over a period of time. The more opportunity you have to trade, the more money you should expect to make. This now brings us to the last component of a trading system, money management.

Money Management

Without proper money management you will end up as a statistic. In other words one of those 90%+ of traders who loose their money. Money management tells you how much of your account balance to risk per trade. The whole point of money management is to ensure your survival over the long term, and to preserve your capital.

The most common form of money management is the percent risk model which tells you not to risk more than x percent of your account balance on any one trade. A range between 1-3% is generally an accepted amount which has been a reliable percentage to use in order to make money in the long term.

Conclusion

By taking into consideration the above factors you will be able to determine if a trading system best suits you, and with some simple mathematical calculations you will be able to determine its profitability.

About The Author

Bret Freak is the owner of http://www.trading-forex-online.com where you can find information on forex trading systems & strategies available online.