Gold-Safe Investment

Gold has always been known as a number one investment option. But is it really that profitable to invest in gold? The gold prices differ each year. Some years are favorable for investments, some are not. Gold has always been considered a safe investment. However, in 1980 the closing price was $ 593.8 per ounce; in 2004 it was $ 442.1 per ounce.

So this rally has come as a relief to the gold bulls, who were all but
extinct. Back in year 2000/2001, few were recommending gold, when it
was trading at about U$ 260 per ounce. Today however, after a 70 per
cent rise in the price of gold, the interest in this commodity has
only increased. Our advice to you, be realistic and invest in gold
only to the extent it suits your risk/return profile.

The comparative table puts in perspective the returns
generated by different asset classes viz. equity, debt and gold over
different periods of time. It is important to note that during these
different time periods, the stock and debt markets have been through
at least one significant instance of erosion in value. Gold however,
has pretty much had a steady run. Despite this, gold, purely from an
investment perspective, does not compare well with the other avenues.
Then, why the persistent interest in gold?

There are a few reasons for the same:

* The increasing uncertainty pertaining to the US economy and fear
that the US Dollar will continue to weaken has led investors to
move some money into real assets such as gold.

* Rising oil prices, coupled with high liquidity, have contributed
to a rise in inflationary pressures globally. Inflation, simply
put, is an erosion in the value of money and therefore in such
times there is a strong case to move money into real assets such
as gold.

* The threat of terrorist attacks has led investors to diversify
into assets such as gold, which is considered to be a good store
of value (an attack on the US may cripple the US economy and
result in lower stock and property prices for example, but will
not have a material impact on the price of gold).

* Then there is a belief that the long-term bull market for
commodities, including gold, may just be taking off. This view has
been underscored by a persistent rise in the prices of other
commodities too.

Indeed, over and above these, there are 'emotional' reasons why you
should have gold in your portfolio. But in such instances, the
'return' is really not that important.

In our view, gold is a "must" in every portfolio as it brings in an
element of diversification. The price of gold is driven by factors,
which are broadly speaking different from those that drive the price
of other assets such as stocks. This results in what is generally seen
as a contrararian trend. To take an instance, even as stock markets
corrected after the 9/11 terror attacks and the worsening economic
outlook, the price of gold spurted.

Another argument in favour of gold is that from time to time, like all
assets, it may present an attractive short-term investment opportunity
(like in 1999 when it was undervalued by a significant margin). So if,
and that is a big 'if', you can identify such an opportunity, an
investment makes sense. Of course it is important that you square off
the transaction when the price has corrected. Such a transaction would
suit few investors as it involves a very good understanding of
fundamentals as well as timing of the purchase and sale.

But having said that, gold should ideally not account for more than 5
per cent of your long-term investment portfolio. The reason is that in
the long term it is likely that other asset classes, including
equities and property, will outperform gold in terms of generating a
return. While this may not hold true for economies like the US which
are likely to slow down in the future, surely for investors in markets
such as India, other investment avenues are more beckoning.

Pros and Cons of Online Stock Investing

Online stock investing has opened up the world of investing to the simple investor. However, with that privilege comes the problem of new investors making mistakes that will cost them money. I personally think many new investors are actually gamblers rather than investors.

In my opinion, anyone who has a desire to trade stocks must absolutely read and learn as much as they can before ever putting one red cent into the stock market. As I browse the web and see some questions by new investors it is sad to know that they are in for a big wake up call. This because they think the stock market is an easy game to play.

The truth is that most new investors will lose money and lose it quickly if they try investing in individual stocks. I truly think new investors need to stick with simple index funds or exchange traded funds as their first venture into the stock market. Nothing will turn a person away from investing quicker than losing a lot of money right off the bat quickly. This will probably happen to most new investors if they invest in individual stocks.

Once you understand how stock prices move up and down then start small with a handful of shares. Nothing is more depressing then buying a large amount of shares in any one stock just to see that stock price go down 10 minutes after you place your buy order. This may sound simple enough, but I personally think the greed factor kicks in very quickly with new investors. New investors need to understand that stocks tend to fall in price much more quickly than they rise. So trust the golden rule of diversification because putting all your money into one or two stocks is going to catch up to you eventually.

While I personally have enjoyed my venture into online investing, I have also learned that it is not always a fair game for the small investor. The boys on Wall Street have a lot more control than anyone sitting in front of their computer at home. If you think you will beat them everyday you will be sadly disappointed. So keep it real when you first start investing and do not try to become rich overnight. Learning both the pros and cons of online investing will prepare you for the mentally challenging world of investing in stocks.

An Introduction to Stock Quotes

Stock quotes provide important statistics about each stock traded in different stock markets, which is very important for technical analysis. Stock quotes can be obtained from many sources as decimals or as fractions. Stock quotes are important for all sorts of traders trading stocks and are the primary tools for executing their trades. Apart from stocks, quote information are also offered for forex currencies, options and future contracts. Getting stock quotes was difficult in olden days, but with the introduction of computers and electronic networks they became so much easier.

In respect to the timing of the quotes, stock quotes can be divided into historical, delayed and real-time stock quotes. Historical stock quotes provide the price details and trend patterns of a particular stock at some point in its trading history. These are provided by some dedicated financial institutions, which keep trading history details. Historical stock quotes are useful for finding stock market trades that occur in cyclical manner or in some special situations.

Delayed and real-time stock quotes are more important for traders. They provide updated stock market information. Delayed stocks quotes, as the name suggest, have a delay of 15 to 20 minutes. Most of these quotes are free and can be assessed from a lot of sources like newspapers, journals, financial portals, television & radio updates, search engines, company websites, daily newsletters, e-mail alerts, etc. They are useful for almost all types of traders and investors except day traders.

Real-Time or live or streaming stock quotes are stock information with a delay of less than a minute. But they are often not free, and are provided by special quote sites and by brokers through specialized platforms. Live stock quotes are most important for day traders, who trade stocks with very small price changes. Many brokers will provide you live stock quotes for free, but you may have to fulfill certain requirements like minimum trading volume, account minimum etc. It has been heard that google and CNBC, through their financial portals, are willing to offer real-time stock quotes for free and have filed a request for it to SEC.

Stock quotes can be simple or complex ranging from only yesterdays closing price to more details like the top and bottom most position of the day, traded volume, traded range, 52 week range, day trading price change, average trading volume, EPS, dividend yield, P/E ratio etc. Also their presentation may vary from single line phase having abbreviations and values to tables and graphs having visual enhancements. Some also have foot notes with useful remarks. Trading systems go beyond these limits and have alerts and triggers to better execute trades.

Foreclosures Are Exploding�Values Are Down�Homeowners Are Stressed�Rates Still Low!

A homeowner holding this hand looks around the room to see if there are any players to help. Personal self-defense is based on fight or flight. The decision then is to stay and fight or choose flight and run away and take off to a safer place. When a borrower is faced with this situation there are three options for additional cash flow. Make more money, reduce expenses or do both. Once a decision is made to keep the home then the strategy must be developed to make that happen. If flight is the choice, decisions must be made to make that happen while perhaps downsizing and reducing the monthly housing expense. One of the best options, IF there is any equity at all, is to refinance to a lower fixed rate, which is now available. This is one of the great positives of the current market, low interest rates can save the day and give borrowers a chance to get into a stable payment situation. If a borrower can't do that then other alternatives must be considered.

Although there is major hand wringing going on with these high risk hybrid subprime (higher credit risks) mortgages there is also an opportunity for many to finance to a lower fixed rate loan. There will be heavy refinances going on with those who can qualify and move into the lower fixed rate loans. This will be an answer for many. If the credit must be tweaked and improved to make that possibility a reality, then so be it. Pay off credit cards, settle collections, pay off judgements, put time and distance from any past bankruptcy actions while improving the debt to income ratios all as a means to better qualify for a low rate fixed rate loan. If a borrower is behind on their payments a lender may offer a "forbearance" option where the payment arrears are set up on a parallel pay back schedule while the normal payment is being made. This is a catch up mechanism. All of these options invoke the stay and fight decision, which comes to the front by selecting these choices. This selection must make sense and there must be a reasonable chance of making it happen. Employment needs to be solid and dependable income steams must be in place. If a part-time job is necessary, it must be done. As far as reducing expenses, trading down cars with large car payments to free and clear transportation may be necessary in the reducing expense mode. Gym memberships may need to be cancelled and settled, any ongoing sundry expenses can be eliminated until the mortgage crisis situation has passed and settled down in a year or two. Cable extras may need to be pared back. Dial up service versus a more expensive high-speed service may need to be likewise pared back. Cell phones may need to be converted to pay as you go throwaways to further cut expenses or eliminate them entirely. Eating out will be a thing of the past for the short term. Packing lunches may be an option. These are all tough options. If after all of this takes place and there is still a desire to stay and a borrower is still under the gun, a Chapter 13 Repayment Plan may need to be selected. This will not cut any mustard with the mortgage lender or other secured debt, but the non-secured debt such as credit cards can be lumped into the BK option. A Chapter 7 Bankruptcy may be selected if the borrower(s) do not make too much money per the new Bankruptcy Law restrictions. This would wipe out all the non-secured debt. It may take a few years to reestablish credit to the point where a new lower rate fixed rate mortgage can be put in place. Over time, values MAY appreciate a bit to assist in qualifying for a loan. If a borrower is not up to any of this, then the flight option can be selected.

The flight option basically comes down to selling the property and taking whatever equity is available and possibly renting or finding a lower priced opportunity in a market populated with the same disparate sellers all begging for offers. When a homeowner gets beat up on the price in selling there is a real possibility in making up the loss on the purchase of a depressed value property. When borrowers select to buy a lower price property then the family budget may be positioned to make a comeback with saving opportunities to stabilize the asset side of their financial statement.

When the stock market is in the full "Bull Market Mode" and keeps running up unabated until finally the "Bear Market" shows up then major corrections are experienced. When the chickens come home to roost and stocks with weak fundamentals, high price earning ratios, low or no dividends, and perhaps bad sales and profit news the stocks fall big time. Some stocks will get pounded more than others. Perhaps it was just a weak quarter or extenuating circumstances with big one time write downs, or it might be a big problem like a Chapter 11 Bankruptcy filing like many of the airlines and other companies are dealing with. When this happens in mass, the Dow Jones Average together with other stocks fall as a group due to fundamentals and consumer perception and confidence. Now, the spill over from the defaults in the Subprime, Fannie Mae and Freddie Mac are impacting the financial markets as well. Investors are nervous. It will be a period of adjustment until this "problem" is handled one way or the other. Much like the RTC fiasco of the Savings and Loans debacle, serious and painful resolutions will be required until these troubled properties get folded back into the housing stock through new family ownership. Supply and demand principles are in full effect.

Much is the same with housing. Stable and steady increases in some communities in the 3% to 5% appreciation ranges have had minor effect in the market depreciation fall with all other things being equal. In other areas where appreciation was hitting 12%-20% per year where investors were flipping left and right and making major hits it was the "new wild west gold rush" of money making opportunities. Many property flippers (buy, fix up and sell) were making $50,000 to $100,000 per deal. Buyers were camping out at builder's offices to get in on the property gold rush. Builder concessions were non-existent. Builders did not have to offer anything to get buyers through the front door, so they didn't. Then "It" hit the fan. Reverses occurred. New homes sat vacant. New and resale inventories swelled. Builders were gone with many seeking Bankruptcy protections. Existing homeowners selling their homes remained mired with no sales activity. Sales prices were adjusted down where homeowners absolutely had to sell and move. If owners found themselves in a situation of being upside down (owed more than the home was valued) only a few options were available. (1) Walks away and move out and let foreclosure take its course. (2) Stays in the house until the foreclosure happened and let the sheriff put them out on the curb. (3) Consider "deed in lieu of foreclosure" where the lender takes the property back and avoids a foreclosure action and moves out and moves on. (4) Consider structuring a lease-option with a buyer at favorable terms with hopes of appreciation that will kick in over a two or three year period. (5) Offer sales concessions to buyers paying all their closing costs and prepaid escrow and even hold a second mortgage for any shortfall behind a new first mortgage. (6) Propose to the lender to consider a "short sale" where the mortgage amount is reduced to accommodate a new buyer that puts a new mortgage in place. This particular option does not put one penny in the seller's pocket, but the property is sold and the buyer can move on. The lender takes the hit, BUT it may be less of a hit for the lender then going to the full foreclosure option. This is by no means an exhaustive list of options but is a few of the more prominent ones.

On the positive side, this is a great time to buy with great interest rates in play. Values are down and good buys can be found. Sellers are motivated and flexible terms can be negotiated. Lenders holding loans on "upside" down properties are willing to make deals to mitigate the loans hanging on the books on a non-performing basis. Much like in the Dot.com era, many investors chasing the "good story" stocks lost big time. Likewise, buyers chasing the "good story" properties with multiple offers on listings and builder inventories will lose as values in many areas have fallen. A real estate value correction is underway. Warren Buffet has made billions seeking out values and taking long term positions. A little of this philosophy will go along way in profiting from future real estate cycles. No one is good enough to determine the absolute bottom or top of the market, but good values will always pay dividends with proper due diligence of the underlying elements. A deal is a deal is a deal. When a deal is found people of action can find rewards and long term returns. There is no reward for overpaying for real estate in the near term. This is a time of incredible opportunities to make sense out of the madness and profit during this period of market correction in this real estate arena.


Dale Rogers
http://www.brokencredit.com

Stock Investing � General Motors, Ford asleep at the SWITCH � Now DaimlerChrysler hits the pillow too!!!

Stock Investing has told us here at StocksAtBottom.com that it has been more than 25 years since Japan's automotive juggernaut served notice on Detroit that we are going to eat your automotive base for lunch. Each successive year since then, our domestic car manufacturers have given away market share to the Japanese. For General Motors, Ford and then Chrysler before the Daimler merger, the only question was how many car sales are we going to lose this year to the Japanese.

Each of the Big Three must put together 3 to 5 year budgets in order to project their cash flow needs. Ford for the next three years in their budget process is showing continued market share erosion in each of the next three years. It is likely that both General Motors and DaimlerChrysler are acting out the same scenario.

UAW Union Caving to Facts of Life

Jerry Sullivan is the head of the largest UAW car worker's union at Ford. He has 36 years with Ford, and the last 10 years as head of UAW Local 600. Sullivan is urging his fellow workers to accept the present Ford buy-out agreement which is on the table for Ford workers to consider.

Ford lost almost $13 billion in the last 12 months. The union recognizes that Ford's back is up against the wall, and it's time to try to save the company. Ford is reorganizing the way it builds cars, more along the lines of Japanese manufacturing techniques. As an example, many of their employees are now working 4 day shifts of 10 hours. These shifts can include weekends. The workers are agreeing to work at regular wages as opposed to overtime rates.

This summer, the national Union will be negotiating health care benefits among other issues. Right now health care costs are at least 50% higher than overseas employees. It's very tough for Ford, or anyone for that matter to make up the incremental difference in these costs, and still sell cars at a competitive price in view of world markets. The Japanese operating under a different pricing structure are in a position to simply put more goodies into the cars, and still sell them at a cheaper price than our domestic products, and then there's the quality issue.

Let's look at it this way. Our stock research shows that the average car Ford produces compared to Japan has about $2400 of additional profits built into the Japanese car compared to the American produced vehicle. About half of that gap is higher labor costs for the American product, and about half of the labor costs are higher medical care costs for retired automotive workers. The Japanese companies have -0- costs, that's right, zero associated medical care costs for their RETIRED employees. This is because in Japan those medical care costs are picked up at the national level by the government, who picks up medical costs for all retired people.

General Motors Delays Filing

General Motors like all publicly traded companies must file its annual report with the Securities Exchange Commission on a timely basis. Would you believe that GM has asked the SEC for an extension for its filing to March 16th of this year? GM continues to be unable to act its financial act together. This coupled with an inability to manufacture cars that people want to buy makes the future not altogether too bright for America's largest car producer.

GM has also expressed an interest in acquiring the Chrysler unit of DaimlerChrysler which is up for sale. This assumes there will be bids for the Chrysler unit. DaimlerChrysler in German has announced that if there are no bids, they will keep the unit, and continue to attempt to turn it around.

It's seems that GM's latest problem is their General Motor Acceptance Corporation (GMAC) subsidiary. The financing subsidiary was partially sold to a group of private equity players last April. The problem is when you do such a deal; you have to put in stipulations that everything is beautiful, or just as it should be. Apparently GMAC has quite a few creditors who are what you would call subprime borrowers.

If you have been reading the newspapers lately, subprime is not so prime anymore. With the housing market still on its back, borrowers with less than super credit seem to be in trouble. Translated, that means they are not paying their bills on a timely basis. This entire huge market is called the subprime market. When the economy has something of a downturn historically, these borrowers surface as individuals who just can't keep up with their debt payments.

A number of companies who have been catering to them, all of a sudden start to take hits. If you are a company doing business with a subprime borrower, you have a certain reserve or cushion built into your numbers for the statistical number of people that you believe will default. It is becoming increasingly apparent in our stock research as stock investors that the subprime companies involved with such borrowers have FRANKLY lost control of their numbers. These companies simply have no idea where their borrowers stand today in their ability to service their debt.

Witness what is happening with Countrywide Financial Corp. which is the largest U.S. home mortgage lender. At the end of 2006, the number of people at least 30 days late is 2.9% of their prime home-equity loans. The number for 2005 was 1.6% and 0.8% for 2004. It is our opinion at StocksAtBottom.com based on stock market information that we use, and stock investing that we do that the subprime industry players RIGHT NOW have no idea where they stand in reference to their loans. The industry is hanging on by their thumbnails hoping that it gets better.

GMAC is in the same position as the subprime industry, and that is why in our opinion they have asked the SEC for a delayed filing authorization. They are literally trying to figure out where they stand. Assuming the situation is worse than what they told the private equity players who purchased a majority of GMAC last year, GM will be responsible depending upon the covenants in the agreement to ante up additional cash to the buyers.

This is just one more illustration of inept management at General Motors. They are a management team that lets things happen to them. They are in a reactive mode as opposed to being out in front of the problems trying to anticipate, and fix them before they get blown out of proportion. At our firm we have been observers of the American automotive adventure for several decades. We know there are Lee Iacocca type individuals out there that can turn around GM, Ford, and Chrysler. These guys just aren't in the automobile industry anymore.

Goodbye and Good Luck

Richard Stoyeck
http://www.stocksatbottom.com

Real Estate Right Now

In the past few years, we've watched housing prices skyrocket all over the U.S. It definitely seems to be a seller's market, but what are buyers supposed to do? Well, if the big names in business are correct, the market is beginning to turn. People who bought homes out of their price range are beginning to water down the market.
Baby Boomers, the biggest group of retirees ever, are downsizing. The older members of the generation are opting for community housing, and even apartments, where upkeep is virtually nonexistent. They're dumping their mortgages and adding to the tide of available houses. This, experts predict, is the beginning of a huge opportunity for people prepared to buy real estate.
Recovery from the recent real estate boom means lower prices for investors. Basic principles of investment realty � buy it for less than you can sell it � still hold true. But if housing prices in the United States are dropping, how long will this trend last and is it still wise to put your money in real estate?
All business trends see peaks and valleys. Real estate, however, is REAL. It has tangible value that may have momentary dips but will always see an up-swing in the long run. Still, smart money managers find property that has plenty of potential and is still cheap enough for its purchase to make sense. Investment property in Latin American countries, such as Costa Rica, shows amazing potential.
While homes are depreciating elsewhere around the world, in Costa Rica, property is appreciating. The tropical forests and exotic wildlife add a specific pull-factor to Costa Rican real estate. But there is a wealth of potential there beyond what is available in American markets. First of all, the property in Costa Rica is prime. The government protected such a large part of the country from development that any property you buy is probably going to have either trees or a water view.
There are other benefits to purchasing land in Latin America, like significantly lower taxes. People are still often reluctant to consider investing in property or building a second home in a foreign country. Concerns about personal crime rates, language barriers, rules and regulations should not deter people from considering great opportunities in Costa Rica.
Real estate is still the most sound investment you can make, and it is becoming more so every day. With retirees cashing in their stock market-based 401ks to relieve the financial burdens resulting from lack of social security, the stock market is subject to it predicted and inevitable crash in upcoming years. Unless you are very adept at trading options in an up, down or sideways market, steer clear of the stock exchange.
When you buy land, you are buying more than a piece of paper. You will actually own something real. While stocks and bonds can't be guaranteed to have a worth beyond the paper they are printed on, property will always have value. In a market like Costa Rica, you can safely bet on a huge return on your investment. Property there has proven to appreciate in rapid record pace.
What's the best part about owning your own land in a tropical paradise? When you go on vacation, you really do feel like you're home � because you will be. Put your money into something you can physically enjoy that will net you large profits when you're ready to move on.

by David Lovendahl, Costa Vista Marketing

Playing the commodities boom

Commodities have become an attractive investment in recent years, even for those who may not know much about them but would like to participate in the profit potential from dramatic price advances posted by energy, grains, metals and other commodities, lifting them to the highest overall levels in more than 30 years.

Fundamental factors based on simple supply and demand account for much of increased price activity, of course, but other factors are behind these price moves as well � factors you should understand if you are one those investors thinking about putting some of your money into commodities. Although commodities are a hot topic for investors, it is also an area where newcomers can get stung if they are not aware of some pitfalls that can trap the unwary.

So let's first look at some of the factors promoting this increased interest in commodities and then, if you are interested in trying to tap profit opportunities in this area, at some instruments you can use to exploit this possibility.

Getting �real'

You are probably well aware of the "dot.com bubble" that took stock market indexes to record-high levels in the late 1990s into early 2000. The stock market was the place to be for many investors, evident by the growing amount of money that poured into mutual funds, 401(k)s and other investments tied to the value of stocks. Investors enjoyed the run of a bull market since 1982 as they focused on investments in paper instruments rather than physical products.

As with most meteoric rises, however, the accelerated rise in stock prices at the end of the 1990s couldn't last forever and they began to fade. Then came the Twin Towers disaster on Sept. 11, 2001, the followup U.S. war on terror marked by armed incursions into Afghanistan and Iraq, accounting and other corporate fraud scandals (Enron, Worldcomm, et. al.) and a slowdown in global economies, all of which contributed to a decline in stock indexes, especially those reflecting technology stocks.

Many investors became disenchanted with prospects in stocks and began to look elsewhere to place their funds. Some put their money into housing and other real estate investments, causing a building boom and rapidly escalating property prices. China's economic growth of more than 9% annually and the rebuilding required after two devastating hurricane seasons in a row along the Gulf Coast added to the huge demand for cement, copper and other building materials of all types (for more on the economic effect of hurricanes, see www.hurricaneomics.com).

Oil's key role

Adding to the expanding worldwide demand for commodities, the ongoing war on terrorism re-emphasizes U.S. vulnerability to disruptions in oil supplies from the volatile Middle East, and prices skyrocketed above $80 per barrel in 2006. The higher oil prices get, the more attractive alternate energy sources look. The favorite alternative that has emerged from the pack is ethanol, produced primarily from corn.

With a big boost from Congressional mandates for ethanol production and usage, prices for corn began to shoot up last fall to the highest levels in more than 10 years, topping $4 a bushel after years of being closer to $2. Ethanol became the buzz word of the day, reinforced by President Bush's comments about energy in his State of the Union message. When the government is pushing something, it's best to trade in line with the government's wishes, as interest rate traders know from watching actions of the Federal Reserve.

As demand for corn for ethanol grows, the higher corn prices may be driven and the more likely farmers will plant more corn at the expense of crops such as soybeans and wheat as crops compete economically for acreage. Livestock and poultry producers will also feel the effect of higher corn prices as will America's grocery shoppers when they go to the meat counter.

With what some describe as a "housing bubble" cooling and investments in stocks still not having overwhelming appeal, investors have turned to where the hottest action is � real things like commodities. Commodities have particularly become the darlings of a rapidly proliferating number of hedge funds, which can trade anything, adding further fuel to the general advance in commodity prices.

Ready or not . . .

Some commodities have backed off from their price peaks, leading some to believe that a "commodity bubble" may be breaking just like the bubbles in stocks and housing. Never has an understanding of intermarket relationships been more important to traders as the domino effect of commodity price moves extends throughout a number of commodities.

Where prices of commodities now stand in the overall economic scenario is just one of the issues investors have to face today. With all the media buzz, is there still time to jump on the commodities bandwagon? If so, should you venture into futures or options based on commodities or get into one of the new commodity-based hedge funds or exchange-traded funds (ETFs) or invest only in stocks of companies involved in raw commodities?

Commodity futures trading involves an agreement by an investor to purchase or sell a specific amount of a commodity for delivery at a specific time in the future. The key points are the price at which you initiate a trade and the time that is left until the contract expires, at which time both parties are obligated to fulfill the terms of the contract unless they have offset or liquidated their position. If you think prices will rise before the contract expires, you buy or go long. If you think prices will fall from the current level, you can sell or go short as easily as you can buy.

ETFs are set up to achieve the same general return as an index � for example, the Spyders (SPY) ETF invests in all the stocks contained in the S&P 500 Index to mimic the results of the index. Commodity-based ETFs can invest in commodities directly through futures or in stocks from a sector influenced by what happens in commodities � a gold ETF based on a basket of gold mining stocks, for example. The advantages of ETFs are that they trade like a stock, don't have the high leverage or risk that futures do and can diversify into a number of commodities or stocks that can dilute the effect of adverse moves in one commodity or stock.

Like any development that capitalizes on the hottest new trend, new ETFs are being offered every day. You have lots of choices so sift through them carefully. Some ETFs may be thinly traded so you need to understand what this investment can do before getting into it.

The commodities-related investment that may be most familiar � and, therefore, most prudent � for many investors involves investing in those companies that are most influenced by prices of commodities. If you think prices of copper will go up, for example, buy those stocks that would benefit most from higher copper prices. Ditto for oil prices or grain prices. Again, you have a number of choices so you will have to do your research to see which prices will mean the most to which companies.

Futures pros and cons

Of the various choices, futures are the most direct play on price movement � and usually carry the most risk. The major lure of trading futures is the ability to make a large amount of money in a short time with a relatively small down payment. For example, to trade a 5,000-bushel contract of corn worth $20,000 with corn priced at $4 a bushel, the Chicago Board of Trade currently requires a minimum margin or good-faith deposit of $1,350 � less than 7% of the value of the contract. If you invest in stocks, you have to put up at least 50% of the value of the shares.

Every 1-cent change in the price of corn amounts to a $50 change in the value of a corn futures contract. If you buy corn futures and the price goes up 20 cents, your profit is $1,000. That's a gain of nearly 75% on your initial margin of $1,350! And a 20-cent move in corn prices in today's market conditions is very possible, sometimes in just one day. No wonder futures trading is so attractive to investors looking at commodities compared to other investment areas.

But beware. There is another side of the corn that a newcomer to futures needs to recognize before becoming involved in this type of trading. While the futures market can boost your account quickly, it can also diminish your account just as quickly. Commodities are generally much more volatile than stocks, making them a rough-and-tumble marketplace for the inexperienced.

Timing is a critical factor in trading futures. In fact, you can be right about the direction of prices but wrong about the timing of the move and lose a significant amount of money. That's true in any market but is compounded in futures due to the larger increments and high leverage involved in futures. Even a relatively small adverse price move against your position can deal a big blow to your trading account.

Still, for those who can tolerate the risk, the possibility of large profits has an obvious appeal for investors seeking more action for their investment money. If you do decide to trade futures, you can improve your odds for success by first learning about and understanding how futures markets operate, then getting reliable information about markets and what is moving them from sources such as www.TradingEducation.com, a free educational web site.