How Free Commissions Change The Game For Small Investors
Why Free Commissions are a Game-Changer For Small Investors
by Tom Konrad, Ph.D. CFA
Last month, Charles Schwab (SCHW), E-Trade (ETFC), and Ameritrade (AMTD) all dropped their commissions for online stock trades to $0. They also dropped commissions on options contract to $0.65 per contract.
The change opens up cost-effective individual stock investing to even the smallest investor, and also allows many more investors to use option strategies. For those wondering if there is a catch, and how these brokers will make money with $0 commissions, see here. The short version is that they make money on your cash deposits, and from...
When Market Calls are Wrong
Tom Konrad, Ph.D., CFA. My recent market call now looks premature. What lessons can we learn? When we make market predictions, we will inevitably be wrong some of the time. I stuck my neck out at the start of June, saying "We're near the peak." I later gave some numbers to allow readers to objectively judge if that call was right or wrong. I said that we should consider it an accurate call if the S&P 500 fell 20% (to 756) before it rose 5% (to 992.) The S&P 500 has not yet come near 756, but it closed...
The Difference between Reality and Pandering
Garvin Jabusch Innovation and increasing economic efficiency have always been the keys to profits and wealth. Getting more value out of systems without commensurate increases in inputs is the definition of growing efficiency, and it has been the engine of human economies since someone figured out how to use energy from a water wheel to grind grain instead of doing it by hand with a stone bowl and pestle. With that development (to simplify), a couple family members could run the wheel, freeing up everyone else for other pursuits. This kind of gain is the hallmark, to greater and...
Will Climate Advocacy Pay for Shareholders?
On Monday, we learned about big coal companies pushing back against the major US corporations of the US Climate Action Partnership (USCAP,) which advocates for mandatory regulation of greenhouse gas with their own lobbyists. Since I have advocated buying companies that take a proactive stance on climate change, I thought it might be instructive to compare the returns of the original ten members of US-CAP with the returns of the big coal coal companies (more companies have since joined,) over the six months since the Climate Action Partnership issued their Call for Action on Climate Change. The Payoff ...
UltraPromises Fall Short
When I first came across ProShares' UltraShort ETFs, I thought they were a brilliant idea. They seem to promise a multitude of advantages for investors: The ability to hedge market or sector exposure without having to go short. (Going short requires a margin account, and US law prohibits the use of margin in most retirement accounts.) They should have a better risk profile than shorting. With an UltraShort, you can't lose more than your initial investment. With true shorting, the potential losses are unlimited. As the underlying index rises, each percentage gain creates a smaller dollar fall, while...
Shorting The Least Green Companies
Newsweek recently released its 2009 Green Rankings for America's 500 largest corporations. Investors would do well to examine the bottom of the list, as well as the top. Tom Konrad, Ph.D., CFA I'm getting more and more company in worrying about a market peak. If you, like me, are Interested in green investing, and hedging your exposure to a market decline, you should probably also be interested in turning Newsweek's Green Rankings upside-down, and use some decidedly un-green companies as a hedge against the market risk of your greener portfolio. If you believe that...
The Big Short and Picking a Money Manager
If you're going to have someone else manage your money, consider their incentives carefully. I just finished reading Micheal Lewis's excellent book The Big Short: Inside the Doomsday Machine on the Wall Street's role in the subprime mortgage meltdown and the few investors who saw it coming. I began with a low opinion of the effectiveness of the vast majority fund managers and advisors who manage other people's money for a living, but the the highly-paid gross negligence and/or incompetence of the people running the CDO operations of the big Wall Street banks in the years leading...
Green Energy Investing for Beginners: A Small Investor’s Perspective
This is a guest post by Brad Wright, who felt that my "Beginners" series was a too high level to really live up to the name. He's probably right about that, so here is his effort to bring it down to basics for the small Canadian investor. The links and section headers are mine. Tom Konrad. Motivation The goal of this article is to assist with your future investments by explaining investment options, how they work and potential alternatives that may be of interest to you. The take away I’m looking for is with a little research you can...
Green Energy Investing For Beginners, Part I: Stocks, Mutual Funds, or ETFs
Tom Konrad CFA Investing in green energy can be good for both the climate and your wallet. How good depends on choosing the right investment vehicles (mutual funds, ETFs, or stocks) and sectors to invest in. This will get you started. More and more investors are investing in green energy. According to the Cleantech Group, the Cleantech sector is now the largest sector for venture capital investment. Green Energy is not just for venture capitalists. Small investors have done well in 2009. Since the market bottomed at the start of March, the average green energy mutual fund topped...
Calling for a Marshall Plan, not a Manhattan Project
Electricity too cheap to meter. For many renewable energy advocates, that is the holy grail… new technology which will not only solve the problem of carbon emissions, but be so transformative that we no longer have to worry about turning off the lights when we leave the room. We could argue for days about the viability of any such technology, be it cold fusion, hydrogen, or photovoltaic nanodots. I personally have strong opinions about the likelihood of any technology to produce energy so cheaply that it would not make sense to use some mechanism...
An Investor’s Reaction to a Trump Victory
See my response here: https://www.greentechmedia.com/articles/read/how-one-clean-energy-investor-is-reacting-to-a-trump-victory Tom Konrad
Money Managers See Value in Clean Energy Sector, but Hesitate to Call the Bottom
Tom Konrad CFA Three green stock specialists see individual stocks at attractive values, but think it's too soon to call the bottom for the sector as a whole. Last month, I wrote that I'm again finding clean energy stocks that I think are bargains, and listed ten. I was not ready to call a bottom for clean energy, and in fact said I expected the market to get worse before it gets better, so investors should keep some money on the sidelines to wait for more opportunities to emerge. In a little over a month...
What Good Is Shareholder Advocacy?
By Marc Gunther. Last week, ExxonMobil added Susan Avery, a physicist, atmospheric scientist and former president of the Woods Hole Oceanographic Institutions, to its board of directors. Shareholder advocates, led by the Interfaith Center on Corporate Responsibility (ICCR), which has been organizing shareholder campaigns at ExxonMobil for nearly two decades yes, two decades welcomed the appointment. Tim Smith, the director of environmental, social and governance (ESG) shareowner engagement at Walden Asset Management, said in a news release: “This action by the board is encouraging for shareowners and we want to commend Exxon for this prudent and...
Five Hedging Strategies for Stock Pickers
Investors who feel the market is overvalued have two options: move into other asset classes (cash, bonds), or hedge their market exposure. Hedging your exposure does not have to be rocket science, but it does require diligent attention to the market and your portfolio. I recently discussed how it makes sense to be out of the market if you expect that there is a good chance of a large decline, even if that means there is as much of a chance of missing a large upswing as there is a large decline. In my estimation, this is one of...
Permaculture Design and Stock Market Investing
by Tom Konrad Ph.D., CFA
Passive Investing And Modern Agriculture: Parallels
Today's stock market is a dynamic and scary place.
Once choosing stocks to invest in based on the fundamental value of the companies they represent (called fundamental or value investing) was the dominant paradigm for investors. No longer. In 2017, JP Morgan estimated that only 10 percent of trading came from fundamental investors. The vast majority of trading now comes from computer based algorithmic trading, and passive investors following pre-defined rules, such as index investors. According to Morningstar, nearly 45 percent of all stocks are owned by passive investors. These should...
Buying Foreign Stocks: To ADR or Not To ADR
by Tom Konrad, Ph.D., CFA
Since my 10 Clean Energy Stocks for 2021 list contains 5 foreign stocks this year, a reader asked about the relative merits of buying a foreign stock compared to a US ADR. Here is a summary of the relative merits (for US investors) of buying a foreign stock directly compared to buying the American Depository Receipt (ADR).
First, let’s look at the tickers for the five foreign stocks in the list. There are four types of ticker in the list this year:
The stock on its home exchange in the local currency. These have the form...
