My Forex Plus500 Review

There are many forex sites out there that let you trade currency. As with most things in life, all are not equal. Some are better than others, some are just average, and some are really bad. One of the better ones that I have come across is Plus500. This forex broker has got its act together and offers a lot of great things for investors. Here is my detailed Plus500 review.

My Plus500 Review

Overall, Plus500 is a great option for those looking to start trading. They are regulated by various agencies, including the London Stock Exchange, which should put you at ease when considering opening an account and trading with them.

When it comes to actual trading, you have various tools at your disposal to help you control some of the risk associated with trading. These tools include:

  • Account Leverage
  • Close at Profit
  • Close at Loss
  • Guaranteed Stop
  • Price Alerts
  • Trailing Stops

By using these tools correctly, you can limit your losses and enhance your gains when trading.

Continuing on with the actual trading, you need to have an easy to understand trading platform where you can find what you need and not have a lot of useless information. Plus500 does a great job at making sure its trading platform is top-notch, providing you everything you need and eliminating everything you don’t. The result is a clean interface that allows you to focus on what is most important to you.

Advantages

The advantages include:

Demo Account: I love this feature because no matter how great of a trader you think you are, nothing prepares you for the real thing. By having a demo account, you can get real-world experience without losing any of your money. And let’s face it, when first starting out, you are at the greatest risk of losing money.

Instruments To Trade: You have the ability to trade a lot of different instruments when you open an account with Plus500. In fact, you can trade just about everything, with the one exception being exchange traded funds (ETFs).

Mobile Trading: Not at your computer? No worries as you can trade via your mobile device. (Not many Plus 500 reviews point this out.)

Low Initial Investment: To get started trading, you only need a small amount of money. Some firms expect you deposit thousands in your account.

Trade Bonus: They offer trade bonuses all of the time, and even bonuses to new customers. Be sure to read up on any current bonuses when you sign up.

Various Funding Options: You can fund your account through a bank transfer, credit card, PayPal or Skrill.

Disadvantages

No Plus500 review would be complete without talking about the negatives. Here are a few disadvantages which include:

No US Accounts: If you are in the US, you are out of luck when it comes to trading here. Currently only UK investors can open an account.

Mobile Alerts: While the ability to trade on your mobile device is great, what is a problem is that you cannot get mobile alerts. This has an impact if you are placing time-sensitive trades and won’t be at your desk.

Overall Thoughts

While Plus500 does have some shortcomings, overall I feel this option is a great choice for those looking to get into the forex arena. This is only increased when you take into account the fact that you can open up a free demo account to dip your toes in and get some practice trading.

When a firm has the end user in mind, you know you found a good company. It is clear after looking into Plus500 that they are a good company. This is seen by all of the great tools they have and the smaller touches all around that makes them stand out from the crowd.

Copyright 2015 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Good Old Uncle Sam Will Be Getting Our Money This Year

The e-mail arrived this past week from our CPA (and family friend), and it started “Welcome to the world of No Tax Refunds.”  I knew it was coming as I had done a back-of-the-envelope calculation before turning our stuff over, but hearing the confirmation still was not something I really wanted to hear.

Our Normal Two-Part Refund

We typically get a refund from Uncle Sam.  For simple years, we have the proper amount taken out of my paycheck that would normally lead to a balanced return, but things like itemized deductions (mortgage interest, etc.), credits for having children, and other various components usually push us to get a refund.mb-money201308

On top of it, we always have a ‘refund’ fund running in our savings account.  Whenever we make any side income, we put a percentage aside.  In addition, if we sell stocks, or do other things that we know will be counted as income, we’ll put a percentage aside.

Typically, the two of these together makes for a nice chunk of change, though usually it just goes toward savings goals, having funded our new roof, built our ‘one day new’ car fund, car repairs, vacation funds, and things like that.

This Year, We Technically Still Get A Refund

Looking at the two part method above, this year we have our savings, and it more than exceeds what we will have to pay, as we’ve faithfully set aside money at every turn.  So, in the end we will still have money ‘left over’.  In all respects, it’s probably better that we did it this way as we basically took a loan from Uncle Sam and earned (paltry as it is) some interest, as opposed to the usual method which gives them an interest free loan until we’d get our refund back.

Still, the net size is smaller, so it’s still a bit less exciting!

One Other Gotcha

Since we had to pay this year, we’re now on the hook to make sure that we don’t underpay again for a second year.  As such, our guy advised that I bump up our contributions from each paycheck to make sure we hit the required amount so that we would avoid the possibility of an underpayment penalty when next year rolls around.

Why We Had To Pay This Year

A few things happened this year that were outside of our normal tax related activity.

  • Savings Bonds – I had some savings bonds that had been purchased years ago that had fully matured.  They were cashed out and re-invested, but the interest earned over the years was taxable income.
  • HSA Deductions – The plan that had previously allowed me to contribute to a health savings account was no longer offered.  The HSA contributions in the past were able to reduce our stated income, but we didn’t have that benefit last year.
  • Stock Market Gains – We have a small trading account that did well for a majority of the year, allowing for some capital gains.
  • Wash Sale Losses – Although we came out positive for the year, we had some losses as well that reduced our income, but because of silly (I could use a stronger word, but will refrain) rules, we couldn’t claim the losses.  Eventually we will once we close out the positions, but effectively, the IRS defers allowing you to claim losses regardless if you actually suffered the loss.  This is effectively what made us end up with a lesser net amount when adding together what we owe and what I had saved, as I did not ‘pay ourselves’ the tax on the losses, though in essence, not being able to claim the losses raised what the IRS sees as income.

What 2015 Holds

We should have a much easier 2015.  I don’t foresee us having to cash in bonds this year.  We’re back to contributing to an HSA plan, though that should really be negligable as my employer coordinates the deductions, thus capturing the effect on our tax rate.  And, as far as our investments, assuming I clear out the ‘wash sale’ stock, we’ll be able to capture all or least a portion of the effect of our deferred loss.  Combine that with the fact that we’re contributing even more via payroll deduction, and we could end up with a hefty return a year from now.

Readers, how did your 2015 tax return shape up?  If you got a refund, what are your plans?

Copyright 2015 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Have You Heard Of Discount Brokers?

With the advent and growth of the Internet over the course of the past two decades, discount brokers have become ever more common. Discount brokers have opened the door to investing in stock to a wider swath of people than ever before. Indeed, with the broad availability of discount brokers in this day and age, nearly anybody with even a minimal amount of money to invest can afford to access the stock market.

In addition to being less expensive than a traditional broker, there is one primary distinction between the traditional derivation and a discount broker. A discount broker does not provide an investor with advice. Rather, an investor must do his or her own research and make his or her own decisions regarding the buying and selling of stock. Although this can lead to an overhaul of information, this also increases your chances of success.

People interested in this type of investment resource need to understand some of the essential elements associated with a discount broker. The following are tips to keep in mind when making your decision:

1. Online Platforms

A fundamental consideration to keep in mind when looking for a discount broker is the online platform provided for an investor. The online platform will be the portal used by an investor when he or she desires to buy and sell stock, to access real time information about the market and to conduct research. As a result this platform needs to reliable, easy to navigate and user friendly on all fronts.

2. Reduced Account Fees

A discount broker charges lower fees than the traditional alternative. There are differences between the fees charged from one discount broker to another. As part of making a selection, “shopping around” is always great advice in order to compare and assesse from one discount broker to another.

3. Analytical Capabilities

Because discount brokers do not provide advice to an investor, you absolutely must have access to reliable analytical data associated with a stock of interest. Although a number of reputable resources exist for this type of data, in the end it is important that the discount broker selected is able to provide an investor with comprehensive sound data to rely on.

Copyright 2015 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Evaluating Historical Financial Asset Class Returns (Part 2 of 2)

I’m off on a little camping trip, so I’m proud to allow Larry Russell, a fellow blogger, to contribute.  Part 1 was published last week.

Post-World War II economic expansion from 1947 through 1968 using inflationary dollars

Inflation was quelled by a post-war recession. The immediate post-war inflation spike ended with a drop in inflation of -1.2% during 1949. This immediate post-war downturn saw the value of stocks fall by 8.3% in 1946. For this reason, the chart below begins with 1947 as stock markets recovered and began an upward march for two decades through 1968.

Post-World War II Economic Expansion 1947 through 1968 inflationary dollars

Between 1947 and 1968, there were four years in which stock values fell measured year-over-year: -1.2% in 1953, -10.46 in 1957, -8.8% in 1962 and -10.0% in 1966. Nevertheless, during the other 18 years of this period, stock values rose. In 14 of those years, inflationary stock values increased by at least 10%. Moreover for those 14 years of double digit stock appreciation, 6 years experienced stock appreciation of 10% to 20%, 4 years experienced stock appreciation of 20% to 30%, 2 years experienced stock appreciation of 30% to 40%, and 2 years experienced stock appreciation exceeding 40%, including one year exceeding 50%.

Clearly this post-WWII economic expansion graph using inflationary dollars, shows that stock returns dominated cash and bond returns. Stock appreciation was dominant to the point that any possible appreciation for bonds or cash hardly registers on this inflationary dollars chart. While the inflationary value of the original stock dollar moved up by a factor of 18, the value of cash rose by just 73% and bonds by just 53% over these 22 years.

Post-World War II Economic Expansion from 1947 through 1968 using real dollars

This post-WWII economic expansion graph uses real dollars, rather than the inflationary dollars presented in the graphic above. Over these twenty-two years, the purchasing power of the initial stock dollar increased by ten-fold, while the purchasing power of both cash and bonds fell actually fell. Over this period, the purchasing power of cash fell by -3% and the real dollar value of bonds decreased by and even greater cumulative -13%.

Post-World War II Economic Expansion 1947 through 1968 real dollars

Escalating inflation and increasing economic stagnation from 1969 through 1981 using inflationary dollars

This inflationary dollar graphic for the 1969 to 1981 period demonstrates the increasingly caustic impact that sustained and increasing inflation can have to all asset classes — especially to stocks. Asset values measured in inflationary dollar increased over most of the period, yet initial one dollar invested in stocks dropped below one inflationary dollar in 1969, 1970, and again in 1974.

The fact that throughout this period that CPI line rises above the cash, bond, and stock asset classes means that all asset class did not maintain purchasing power in the face of consistently rising inflation. Clearly, the real dollar graphic below will tell a more accurate story about asset valuation.

Escalation of Inflation and Increasing Economic Stagnation 1969 through 1981 inflationary dollars

Escalation of inflation and increasing economic stagnation from 1969 through 1981 using real dollars

This real dollar graphic for the 1969 to 1981 period is particularly helpful in understanding the negative inflationary impacts in relative terms between the cash, bond, and stock asset classes. Initially, yields on cash (3 month treasury bill) rose slightly above inflation, but eventually lost a modest amount of purchasing power during the second half of the period. At the end of these thirteen years, the initial dollar invested in cash was worth $.95 in real dollars.

Bonds also rose in value above inflation in the 1971 through 1973 period, but they fell in value more severely from 1977 to 1981, as annual inflation rates escalated. By the end of this thirteen year period, the initial dollar invested in bonds was worth only $.65 in real dollars.

Compared to cash and bonds, increasing inflation had a more substantially negative impact on stocks in the beginning and in the middle of this period. However, relative values for stocks improved during the last several years, despite the escalation of inflation. This trend reversal reflects, in part, the ability of firms to raise prices along with inflation. By the end of this stagflation period, the initial dollar invested in stocks was worth $.78 in real dollars, trailing the purchasing power of cash, but exceeding that of bonds.

Escalation of Inflation and Increasing Economic Stagnation 1969 through 1981 real dollars

Stock and bond bull markets as inflation recedes, including the Dot Com mania, from 1982 through 1999 using inflationary dollars

Inflation was finally defeated in the early 1980s, through harsh monetary policies and an associated recession. A two decade period of relatively high economic growth and high stock appreciation followed. The 1980s and 1990s stock value growth was comparable to the post-WWII expansion period from 1947 through 1968. However, unlike 1947 to 1968, the last two decades of the 20th century was also a bond bull market fueled by falling interest rates and a growing economy.

Stock and Bond Bull Markets, Inflation Recedes, Dot Com Mania 1982 through 1999 inflationary dollars

Stock and bond bull markets as inflation recedes, including the Dot Com mania from 1982 through 1999 using real dollars

When the 1980s and 1990s are viewed in real dollars, it becomes more obvious how stock value appreciation rates differed between the two decades. In constant purchasing power terms, the initial stock dollar grew to be worth $2.89 at the end of 1989 and to $11.30 in 1999.

Bonds and cash appreciated more steadily in inflation-adjusted terms without the “birth of the Internet” growth inflection point that stocks experienced in 1994. For bonds, the initial bond asset class dollar grew in real terms to be worth $2.16 at the end of 1989 and to $3.28 in 1999. For cash, the initial cash asset class dollar grew in real dollar terms to be worth $1.34 at the end of 1989 and to $1.60 in 1999.

Stock and Bond Bull Markets, Inflation Recedes, Dot Com Mania 1982 through 1999 real dollars

Dot Com crash and recovery, Credit Crisis, Great Recession, and recovery from 2000 through 2013 using inflationary dollars

Because we have all lived though the most recent economic period, it is obviously fresh in our memory compared to any of the earlier historical periods discussed above. The dot com crash was followed by an anemic recovery pumped up somewhat by increasingly unsustainable debt. The Credit Crisis — induced by completely irresponsible financial industry mortgage underwriting, deceptively cleaver financial engineering, and toxic mortgage debt derivatives — broke the global banking system and quickly impacted the real economy, leading to the very ugly Great Recession.

Stock prices bottomed in March of 2009 and have recovered to record levels measured by some stock market indexes. The slow revival of fragile economic growth has been facilitated by extraordinary monetary steps taken by central banks around the world. Even though stock markets have recovered, both consumers and investors are generally shell-shocked, and our economic, financial, and monetary systems seem far from whatever “normal” is.

During this period, bonds have been in the ascendancy and falling stock values have generated massive quantities of stomach acid. However, the bond versus stocks relative performance gap had closed substantially by the end of 2013. During the past year or two, one pervasive financial media meme has been the end of the bond bull market and the expected rise in interest rates that will negatively impact bond values. And, oh by the way, cash earned nothing during this period and ended slightly below inflation, if that really needed to be pointed out.

Dot Com Crash and Recovery, Credit Crisis, Great Recession, and Recovery 2000 through 2013 inflationary dollars

Dot Com crash and recovery, Credit Crisis, Great Recession, and recovery from 2000 through 2013 using real dollars

This real dollar chart for the latest period tells a similar story to the inflationary graph above. Because inflation has been relatively low and steady throughout this period of two crashes and two recoveries, making asset value adjustments for changes in CPI do not change the story of what has happened. Most people just hope that we are done with all this financial crisis excitement for a very long time.

Dot Com Crash and Recovery, Credit Crisis, Great Recession, and Recovery 2000 through 2013 real dollars

Conclusion

Viewing the relative 85-year historical performance of cash, bonds, and stocks broken down into these five major thematic periods tells a long-term story of “see-saw” investment performance between the primary financial investment asset classes.

During these first and fifth sub-periods of relatively high economic adversity, bond assets and cash held their purchasing power far better than stocks :

    • Stock market crash, Great Depression, and World War II from 1928 through 1946
    • Dot Com crash and recovery, Credit Crisis, Great Recession, and recovery from 2000 through 2013

During these second and fourth sub-periods of relatively strong economic activity, stocks appreciated in value far more than bond asset or cash assets:

    • Post-World War II economic expansion from 1947 through 1968
    • Stock and bond bull markets as inflation receded, including the Dot Com mania from 1982 through 1999

Only during this middle (third) sub-period of stagflation were comparative asset class returns mixed and relatively close to each other, when compared to the other four major sub-periods:

    • Escalation of inflation and increasing economic stagnation from 1969 through 1981

Several things do stand out, when one looks at the long-term historical data in this manner:

    • There have been extended periods when one or another asset class is generally ascendant or descendant.
    • Even within periods that seemed generally to have favored one asset class over another, there been significant trend reversals in comparative asset class performance.
    • In the two sub-periods when stocks have been ascendant, their appreciation multiples have been very high in both inflationary or real dollar terms. This largely accounts for the cumulative dominance of stock performance across the entire period.
    • A broad, long-term, but unpredictable picture of reversion toward upward trending return averages is presented for bonds and stocks. Obviously, the upward trending performance averages differ dramatically between bonds and stocks, while cash has barely exceeded long-term inflation.

The selection of beginning-points and ending-points for these five periods was arbitrary and driven by historical hind-sight knowledge. Nevertheless, these five periods do present a long-term, cyclical pattern. These previous five extended periods alternated or see-sawed between “good and bad” stock appreciation episodes.

Given that the most recent period exhibited relatively poor performance, going forward can we now expect an extended period of relatively high stock asset class appreciation? The answer is either an emphatic “no” or a perhaps a more wishy-washy “maybe – maybe not,” which really means do not count on it.

A statistician would complain about the paucity of data points, the pitfalls of data mining, etc. The problem is that historical data is solely informative. It can never be predictive. Expecting stocks to continue an extended bull market — beyond the post-credit crisis and Great Recession recovery that we have already experienced — is just one of a range of future scenarios. History knows nothing about the future, and neither do you nor I.

Securities history is not predictive regarding any particular aspect of the future, but historical returns and price volatility do illustrate the varying risk premiums that the various asset classes have paid over time. The only sane response to the uncertainty of investment risk and reward across asset classes is to diversify broadly and thoroughly.

Even then, each investor is challenged to determine how much to allocate to cash, bond, and stock securities. At one extreme, one could hold all cash, but history tells us that cash pays only a very small return over inflation. At the other extreme, one could hold all stocks, but history tells us that one needs a strong stomach and iron will to endure price fluctuations in pursuit of the higher risk premium that has been paid to equities.

Each individual investor and all investors in aggregate must face the future with complete uncertainty. All investment crystal balls are really completely opaque for both professional and amateur investors. Despite theories, models, and firmly held beliefs about the future, any belief in predictability is largely delusional.

The more certain any future event is to a larger number of investors, the larger the shock to the system when an improbable “black swan” presents itself. The factors that gave rise to the mortgage derivatives driven credit crisis of the past decade represent just another major delusion that later was made plain to investors.

Nevertheless, I do hope that this graphical review of the past 85-years of U.S. asset class performance has been illuminating. Understanding the historical context of relative financial asset class performance at least provides some reference points for deciding one’s investment strategy in the face of complete uncertainty about actual future events.

Larry Russell, the author of this investment returns article, is also a very strong proponent of investment cost reduction. While there are no reliable strategies that will beat the market, reducing investment costs to a minimum ensures that investors will keep the highest portion of their gross returns. Individual investors do not need to spend their lives paying tribute to the financial services industry without receiving commensurate benefits. Larry helps investors pull the plug on excessive investment fees through his free and paid personal investing books and articles.

Copyright 2015 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.