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Are You Ready To Invest Like Rothschild?

For many getting started, understanding how to invest can be a challenge. Knowing what to invest and where can seem daunting. For the very wealthy it is business as usual, and they have devised strategies and tactics to make sure their wealth can really work for them, but it is harder for smaller or new investors. According to Richard Dyson (2012), reporting for This Is Money , the very wealthy have focused on creating portfolios and organisations where generally they own a large share. However, in most cases, small investors were not aware that they could invest in these. However, in recent years, changes to regulations have been made such that these sorts of investments are more suitable for smaller investors as well. According to Dyson, one such company to invest in is RIT Capital Partners (“RIT”) ( OTCPK:RITPF ), in which the Rothschilds, an extremely rich family, has a large share. As explained: “Lord Rothschild and his family own 18% of what began in the early 1960s under the name of Rothschild Investment Trust.” It is cited that growth has been achieved to the position where RIT is now worth £1.8 billion, and the Rothschilds own £324 million of that. This has been extremely attractive as a proposition for investment to other private investors, especially as the investment has a superb record over a long history. The assets included are property and hedge funds, among others. History of Wealth The Rothschilds have been growing their wealth for a time span of more than 200 years, and they are considered one of the richest families of all time. Investor Network explains that the family originally made money from the Napoleonic Wars by supporting the side of the English in battling Napoleon. Rothschild was aware that the battle was lost for Napoleon, and he knew this ahead of other investors. This enabled him to purchase much of the stock market at a very favourable price, and when the news came out about Napoleon’s defeat, the market grew tremendously. In addition, the money lent was repaid, and overall, the family did really well out of the war. They continued to do well, and by 1825 they were in such a strong position that they were able to prop up the Bank of England when there was a financial crisis faced. Following this, the family invested in stocks and made shrewd investments and financial decisions that have led to the wealth accrued today. RIT Capital Partners is a good opportunity because small investors have gained significantly over the time it has been up and running. It is reported that the trust has delivered returns, on average, of 12.4 per cent per year. The approach taken is to make sure that investors’ capital is safeguarded as far as possible in the event of stock market crashes. This is beneficial in terms of risk, as there is lower exposure, but it is detrimental when the stock markets rise rapidly, and the investment will be likely to not perform as well as other opportunities in the markets at those times. Investing in RIT will help you invest like the Rothschilds. The cost of the fund is 1.25% per year. Experts say that it is a particularly good investment for pensions. Alternatively, you can learn from the way they operate. The family uses a multi-asset approach, which spreads the wealth across a range of different investments. This includes anything from gold, to shares in a range of high performing companies like eBay (NASDAQ: EBAY ), Walt Disney (NYSE: DIS ) and Samsung ( OTC:SSNLF ). It has also invested in gold, and it has funds that are focused on commodities, including BlackRock Gold and General and Baker Steel Precious Metals. In taking the approach that it does, it holds onto liquidity appropriately, and focuses on long-term benefits rather than short-term gains. Golden Rules of Contrarian Investing The approach taken by the Rothschilds is known as contrarian investing. Basically, those who follow this approach buy when there is bad news and sell when there is good news. It is thought that this is wise, because when there is good news on the stock market, investors are likely to pay a high price for it. On the other hand, when there is bad news, investors are more likely to get a good deal, as others are in fear of buying at those times. There are 5 golden rules of contrarian investing : When you read about it in the newspapers or see it on the news, it is already all over. Buy when everyone wants to sell, and sell when everyone wants to buy. No one sees a bubble when their income depends on it. Don’t take tips or advice, and don’t believe research notes. What is obvious to you is not obvious to others. Rationality and Risk Although it seems like extremely risky investment strategy, it is based on the principle of “rationality” . It might seem a bit contradictory, but it has a sense, as rationality is based on healthy evaluation of any financial decisions apart from current trends or experts’ advice. The latter, in turn, might be over-reliable, or under/overpriced. Not Contrarian Investment Strategy Contrarian Investment Strategy While efficient market hypotheses are based on stock prices reflecting the financial situation of industry, company or economy in question, the contrarians believe that the market can be beaten by keeping a rational investing viewpoint. They do it by being independent thinkers and controlling their optimistic and pessimistic feelings. To become a contrarian investor, you’ll need to go against the market trends, against the crowd and against social pressures. You’ll need to go for an optimism visible to yourself only. Uncertainty is a right time for investment for a contrarian investor, who will need to have a lot of patience as well as time for such a risky long-term strategy. Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Starbucks Q4 Earnings Show Strength: ETFs In Focus

Leading coffee chain Starbucks Corporation (NASDAQ: SBUX ) ended its fiscal 2015 fourth quarter with lower-than-expected earnings. The softer earnings were driven by higher employee and digital investments. However, the company’s top line saw a strong upside, thanks to outstanding growth in traffic trends in the U.S. Starbucks’ fiscal 2016 outlook was in line with the market as well as our expectations. Shares of the company rose in the trading session following the earnings release but fell thereafter. Earnings in Detail Starbucks’ adjusted earnings of 43 cents per share missed the Zacks Consensus Estimate of 44 cents by 2.3%. However, earnings were on the higher end of management’s guided range and grew 16% year over year as solid top-line growth offset lower margins. Fiscal fourth quarter sales escalated 18% year over year to $4.91 billion, outpacing the Zacks Consensus Estimate of $4.89 billion by 0.5% driven by robust comps. Global same-store sales (comps) growth of 8% was higher than a 7% rise in the previous quarter, driven by increased traffic trends. The comps rise included 4% improvements each in global traffic and average ticket. Higher food/beverage sales, strong comps in the U.S. and Europe and incremental revenues from Starbucks Japan primarily drove sales. The coffee giant opened 1,677 net new stores in fiscal 2015, ending the fiscal year with 23,043 stores in 68 countries. Starbucks expects revenues to grow more than 10% in fiscal 2016, excluding the extra 53rd week. Comps are expected to grow somewhat above the mid single-digit range. The company expects to open 1,800 stores in the next fiscal year. Adjusted earnings (including the 53rd week) are expected in the range of $1.87 to $1.89 per share during fiscal 2016, in line with the Zacks Consensus Estimate. Excluding the extra week, management expects to deliver earnings growth of at least 15%. Starbucks also announced a 25% hike in the dividend to 20 cents per share, which should be welcoming news for income-hungry investors out there. ETFs in Focus Despite lower-than-expected earnings, Starbucks’ growing comps – an important metric in the restaurant industry – make us confident about the company. Strong traffic growth both in the U.S. and China are the key opportunities for the company (read: 4 Solid Reasons to Buy Consumer Discretionary ETFs ). Further, the restaurant industry has been benefiting from cheap fuel and rising income, which along with an improving U.S. economy, better job prospects and increasing consumer confidence are making the segment a great space to stay invested. In addition, with the holiday season fast approaching, investors should keep a close eye on the below mentioned Consumer Discretionary ETFs with a good exposure to Starbucks (see all Consumer Discretionary ETFs here). PowerShares Dynamic Leisure & Entertainment Portfolio ETF (NYSEARCA: PEJ ) PEJ tracks the Dynamic Leisure and Entertainment Intellidex Index, holding 30 stocks with Starbucks occupying the fifth position with 5.13% allocation. The fund includes many other restaurant stocks, such as, Papa John’s International Inc. (NASDAQ: PZZA ), Denny’s Corp. (NASDAQ: DENN ), etc. It has amassed $196 million in assets and trades in a moderate volume of nearly 34,000 shares. The product charges 63 bps in fees and returned 8.9% in the year-to-date timeframe (as of November 2, 2015). It carries a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. Consumer Discretionary Select Sector SPDR ETF (NYSEARCA: XLY ) This top-asset grossing consumer discretionary ETF follows the Consumer Discretionary Select Sector Index, holding 88 stocks. Starbucks occupies the sixth position in the fund with 3.82% allocation. Amazon.com (NASDAQ: AMZN ) and Walt Disney (NYSE: DIS ) are the top two holdings in the fund. The product has garnered a robust $11.5 billion in assets and trades in a strong volume of 6.5 million shares. It is one of the cheapest ETFs in its category with only 15 bps in annual fees. The fund has been up 12.7% so far this year and holds a Zacks ETF Rank #2 (Buy) with a Medium risk outlook. Fidelity MSCI Consumer Discretionary Index ETF (NYSEARCA: FDIS ) This product provides exposure to a large basket of 383 stocks by tracking the MSCI USA IMI Consumer Discretionary Index. Starbucks is at the sixth position holding a share of 3.03%. Amazon and Walt Disney are the top two holdings in the fund. The product manages nearly $286 million in asset base and trades in a solid volume of 129,000 shares per day. It charges a negligible 12 bps in fees and gained 9.5% in the year-to-date period. FDIS carries a Zacks ETF Rank #3 with a Medium risk outlook. Link to the original post on Zacks.com

VCDAX: So Good It Turns Skies Blue

Summary This mutual fund great for investing long term and short term potential for a bullish market. The fund is focused on cyclical market exposure. Features a low expense ratio and a passively managed index. Mutual funds are a great way to improve an investor’s risk adjusted returns. Investing in sectors of the market which sell goods and services is great if it’s indexed. It’s difficult to predict which sectors are going to outperform others and still be able to get a return higher than just diversifying. The fund I will be looking at is the Vanguard Consumer Discretionary Index (MUTF: VCDAX ) which tracks the performance of the MSCI US Investable Market Consumer Discretionary 25/50 Index. Expense Ratio The expense ratio for VCDAX is .12% which makes sense for being passively managed. If I wanted to go the route of active management then I’d go with specific companies in sectors that have a high sensitivity to economic cycles. In this mutual I’m happy to have it passively managed and just mimic a cyclical index. Yield This index has a distribution yield of 1.44%. If you’re looking for funds with a high yield to live on there are better mutual funds. From a performance point of view for yield plus capital appreciation this fund has been top notch. Diversification The following chart gives the top ten holdings: There are 384 holdings in total and normally I wouldn’t want the top ten to be 38.6%, but with so many power house companies showing up I could make an exception. Initially when I was looking into this index I was worried that Walt Disney (NYSE: DIS ) and Time Warner (NYSE: TWX ) were both in the top ten holdings. After seeing Walt Disney at 5.72% and Time Warner at 1.97% I disregarded my hesitation. Disney has been on an incredible streak and I can’t see it doing anything but continuing with their future plans. Specifically, I’m bullish on the Star Wars franchise and opening a new theme park in China. I’m excited to see just how well the $5.5 billion project will perform. Hong Kong Disneyland in 2014 hit record attendance and had a net profit of $42.3 million. When Hong Kong first opened there were issues with long lines and lack of food supply. Executives said they learned valuable lesson in Hong Kong, which had issues with long lines and food supplies at the start. There’s also some fantastic news about the environment. China plans on clearing more than 150 factories for the Shanghai Disneyland; how many they will close down or just plan to move still isn’t clear. This is great news for Disneyland as it wouldn’t be as magical without blue skies. Time Warner is a good stock to invest in, especially with the stock drop recently giving a good buy-in point. My main reason for massively preferring Disney is Warner Bros.’ notorious ability to make films that flop. Even though Time Warner will do well in the long run I don’t like the anxiety I feel wondering if the movie I’m about to see is going to be amazing or praying Johnny Depp will pull off a miracle. Movies aside, Time Warner has also been making plays in the international markets. Turner Broadcasting and HBO are the majority of Time Warner’s total revenue; expanding the two internationally has shown great profit. Here’s a compelling article showing Time Warner’s continued success internationally. Sector exposure Following chart shows the top ten subsectors of the index: Index is well diversified with no sector over 12%. The goal of this mutual fund is to follow the most cyclical industries within the consumer discretionary sector. The current weightings are well placed to achieve the index’s goal. The industry subsectors may be cyclical as a whole but the top subsectors in the fund are representative of the top ten holdings. These companies will take a bump here and there but they mostly have one thing in common and that’s continued performance. The following graph shows just how well this fund has performed: Conclusion Over the past several years VCDAX has performed well. There’s a lot of upside especially if the market continues to do well. I like the diversification in subsectors and the companies chosen to represent a large portion of the holdings. For a long term investment the fund has a decent correlation to the S&P500. As long as you’re not hunting for funds with high yields this fund has great potential. With all the international exposure the top ten holdings already have and are expanding on, I expect this index to be a good investment. There are some arguments for a short term investment here, but if I wanted to make short plays they wouldn’t be in the consumer discretionary sector unless it was a specific company.