The price of gold is now in its fourth year of a bear market. It is shocking to many gold bugs that gold, a metal revered since ancient times, could fall so dramatically from its all-time high of $1,920.56 on September 4th, of 2011. The precipitous drop of almost $800 in less than four years was more than most gold bugs could stand as stocks soared to new highs. Many threw in the towel when gold hit $1132.05 on November 7th and moved into stocks. This could prove to be a bad omen in the future. Since reaching a low on November 7th, gold has for the most part moved sideways with a slight upward bias.
You can clearly see on the chart that there is a big divergence that shows. When prices were making their lows, momentum was building for the market to bounce.
If you said stocks, you'd be right. There's a big misconception that commodities or futures are more volatile and risky than stocks. The truth is, what makes commodities or futures appear risky is the leverage factor. You only have to margin up a small amount of capital, usually less than 5%, to control a large amount of capital. What that means is when the market moves even a small amount, you get a bigger return, or in some cases a bigger loss, on your money because of leverage. If you put up the whole value of a commodities or futures contract, you effectively de-leverage your investment and at the same time lower your risk and return.
For example, say you want to buy 100 ounces of gold. At the current price, you would have to pay $123,500 and you would own the gold. Instead, you could buy 1 futures contract of gold worth $123,500 and only margin up $4,400. Now let's say we have a $10 move in gold. On 100 ounces that would be worth $1000. As you can quickly see, the return on $4,400 is a heck of a lot higher than the return on $123,500 if you owned the gold outright. Which would you rather have, close to a 25% return on your margin on 1 futures contract, or have a $123,500 tied up in physical gold and see a return of less than 1%?
That, my friends, is why commodities or futures are interesting and can be very profitable when you approach the market with discipline. Naturally, leverage slices both ways and you could lose just as fast as you make money. The key here is to be diversified like our World Cup Portfolio.
Here's the 6 individual markets of the World Cup Portfolio shown quarter by quarter. As you can see, not every market made money every quarter, but combined every quarter was profitable. This underscores the power of diversification and disciplined trading. Continue reading "What's More Volatile, Stocks Or Commodities?"→
“As we express our gratitude, we must never forget that the highest appreciation is not to utter words, but to live by them. ” John F. Kennedy (1917-1963) 35th US President
Those are words we live by every day here at MarketClub and our parent company, INO.com. Our goal and mission is to help and assist our members get the very most out of MarketClub and all of the services we offer.
With thousands of members around the world in over 100 countries, we take our mission very seriously. Our goal is to provide you with the tools that will help you achieve the kind of results you may have only dreamed of.
Since late 2007, we have been religiously tracking a portfolio that we designed to take advantage of the ever changing world we live in. This portfolio contains six core elements, all of which have performed extremely well in both Republican and Democratic administrations.
It seems money – or, to be more specific, the record rate at which our government is spending it – is once again the center of national attention. President Obama’s budget plan is making headlines all across the nation – in particular, its lack of attention to the two biggest, government money-eaters by far: Medicare and Social Security.
60% of the budget is already slated to bankroll entitlement programs and it’s estimated that spending will rise 71% for Social Security, 72% for Medicare, and 115% for Medicaid (the third gorilla in the room) over the next ten years.
Let’s face it, the pressure is building. And, if something isn’t done, sooner or later they’re both going to blow. I shudder to think of the disastrous financial straits it will leave many American’s in (The collapse of Fannie and Freddie will pale in comparision…)…
Fortunately, whether you realize it or not, you already know the secret to ensuring that money won’t be an issue in your golden years.
Today we are going to take a look at MarketClub's World Cup Portfolio (formerly World Commodity Portfolio) that has been tracking six markets for the past three years. I think it is fair to say that the last 36 months have presented one of the most challenging trading environments in recent memory.
So how do we do it?
I put together this very short video which is only 1 minute 45 seconds long and gives you all the information that you need to decide whether or not this approach is one that could work for you. Bear in mind that the World Cup Portfolio is a leveraged portfolio unlike our "Perfect Portfolio" which is not leveraged.