How To Invest In China Through ETFs

Investing In China through ETFs

First Published: June 20, 2010 ADawnJournal.com

ETFs, or exchange-traded funds, are considered to be some of the safest forms of investment in the world today. If you are thinking of investing, and don’t mind less reward for less risk, then an ETF is what you should be looking at. Currently, China is a growing giant that will probably overtake the United States midway through the 21st century as the world’s largest economy and that has a lot of investors thinking about getting in on the action. However, China is still a difficult investment because of the chaotic market in the country; so many investors decide to invest in China through ETFs. If this is something that would interest you, then here is how you go about it:

1.   Look at various Chinese ETFs available based on their industry weights, how many holdings are in each ETF, and the expense ratios of the ETFs. Some that you can look at include iShares FTSE/Xinhua China Index, which is based off an index that has 25 companies in it. There is also the SDPR S&P China ETF and this one has more companies than the iShares ETF.

2.   You should consider not only investing in ETFs that are focused in China, but throughout much of Asia, which is currently booming while the rest of the world is suffering through a recession. One example ETF that you can look at is Vanguard’s Pacific ETF. Another one to consider is iShares MSCI Taiwan Index Fund. An index fund is a form of the ETF which is often considered the safest type of stock investment in the world. Another ETF to consider is the iShares MSCI Hong Kong Index Fund.

3.   In Canada, financial institutions like BMO, BlackRock, Claymore offer China and emerging market ETFs. Some of the examples are BMO China Equity, iShares China Index Fund, Claymore Brick ETF etc. A good resourceful ETF site is TMX Money. 

4.   After you have done the research for your ETFs, all you need to do is talk to your investment broker about what you want to invest in, and they will take care of it for you. However, this will cost you commissions and fees so if you want to keep from losing that money, you can invest yourself. The best way to do this is to get the ticker symbols of the ETFs that you want to buy into, go into your investment account and purchase these stocks as you would any other stock.

China is a booming country that is going places in the world. It will soon be the largest economy in the world, and with the world’s largest population it is also a force on the production and manufacturing platforms. That all being said, many feel that China is still a risky investment, and you should decide to invest in China based on your own risk tolerance and unique investment objectives. However, ETFs may provide a better alternative than directly buying stocks and also, it’s  a lot easier to get in on the action as China continues to take the world by storm and generate capital for the investors who can tolerate risk and put money into this growing giant from the Far East.

With some risks, ETFs can be still better but profitable, and may be the best option when investing in China.

Australia Travel Blog: Part 13 - Featherdale Wildlife Park

Sydney Travel Blog: Part 13 – World's Largest Native Collection

2-Day Combo: Sydney City Tour + Sydney Harbour Lunch Cruise and Blue Mountains Day Trip

Australia Travel Blog: Part 12 – Echo Point Lookout

The trip from Echo Point Lookout to Featherdale Wildlife Park travel would take about one and a half hours. After watching spectacular Australian roadside scenes for more than an hour, I arrived at Featherdale Wildlife Park located in Doonside, west of the Sydney CBD or downtown.

Featherdale Wildlife Park specializes in more than 1,700 Australian native birds and mammals from more than 250 different species in a lush bushland environment and it has the world’s largest collection.

My time at Featherdale Wildlife Park was limited. I rushed through all the various sections of the park, but the sections I spent more time in included: the Koala Sanctuary, walk-in enclosures with Kangaroos, Wallabies and Padymelons, and with other Australian favourites such as Wombats, Tasmanian Devils, Echidnas, Emus, Penguins, Crocodiles and Dingos.

The experience was really amazing with these uniquely Australian creatures. Although Featherdale Wildlife Park was not too big of an area, this diverse range of creatures looked happy and healthy. It was obvious that they were well cared for, which you will not find in many other zoos.

I saw some of the Koalas sleeping on the trees. They hold on in such a way that looked like they were going to slip and fall anytime, yet they didn’t fall and looked very comfortable.

The snake section looked rich, with many varieties of snakes. Most of them were Australian natives. Some of the exotic birds or animals with unusual names were: Laughing Kookaburra, Tasmanian Devils, Rainbow Lorikeet, Eastern Water Dragon, and so many more.

Featherdale Wildlife Park was my last stop on the itinerary in Australia. I will be heading to Malaysia next. 

Australia Travel Blog: Part 12 – Echo Point Lookout

Australia Travel Blog: The Blue Mountains & the Three Sisters

Sydney Travel Blog: Part 12 – Echo Point Lookout

2-Day Combo: Sydney City Tour + Sydney Harbour Lunch Cruise and Blue Mountains Day Trip

Sydney Travel Blog: Part 11 – Blue Mountains’ Stunning Natural Beauty

It took only a few minutes for the tour bus to drop us off at Echo Point Lookout. This is a nice facility with lots of restaurants, cafes, and gift shops.

Echo Point Lookout gives you the opportunity the see the Three Sisters from a very close distance. Echo Point Lookout, on the edge of its plateau, also provides great views of the Ruined Castle, Mount Solitary, and a greater panoramic view of the Jamison Valley.

There are many other experiences Echo Point Lookout leads to. The Three Sisters walk, Prince Henry Cliff walk, the Giant Stairway leading to the tracks below the cliff, and many scenic lookouts. The Giant Stairway has 1000 challenging stairs that take you to the valley floor below.

I took lots of pictures and video clips from different sections of Echo Point Lookout. The spot on the edge of the cliff that offers the clearest and closest view of the Three Sisters was crowded by tourists taking photos, so I had to wait to reach the edge. Once I looked at those pictures later on, I was telling myself that the wait was worth it.

I didn’t take the stairs or any other trails due to my limited time. I had a few minutes left over and I decided to browse the giftshop. I bought some tiny gift items at the shop. 

After we were done at Echo Point Lookout, we headed back to Sydney. The last stop on the itinerary was Featherdale Wildlife Park in Sydney.

What Is Time Value of Money?

Understanding Time Value of Money

First Published: ADawnJournal.com June 23, 2010

Everyone wants to know how much their money is going to be worth down the road. Not only that, knowing how much money you may have will help you save better and make more money. Over the course of this article, I will cover four important concepts. They are:

1.   Time Value

2.   Present Value

3.   Net Present Value

4.   Future Value

All of these concepts will center on the value of money. We all know that money is valuable, but what about the time value of it? What is it worth now, how much is it truly worth now, what is its future value? All of these need to be understood if you are going to get the most out of your money.

Time Value

The time value of money is the value that is given to the amount of interest earned by the money over a certain period of time. That means that if the money earns a few dollars interest, then its time value will be based on how much value will be associated with the money and the interest. Here is a simple example to help show what we mean:

Let’s say you have 100 dollars right now and you put it away in an investment that earns you 10 percent over the next year. That means that your original 100 dollars is going to be worth 110 dollars in about a year. So, 100 dollars paid out now, or the 110 dollars paid out in one year will have the same value to the recipient who assumes the interest. However, using the time value of money, we know that the future value of the money is going to be 110 dollars. What makes this important is it allows a person to determine their future annual incomes. That way, annual incomes are discounted and added together to create a lump-sum that is the present value of a total income stream.

Present Value

The present value of money is the value of money on a given date for a future payment, discounted to reflect the time value of money and other factors. In economics, present value calculations are widely used, as well as in business.

If you are given the choice between getting $100 now, or $100 in one year, you will probably take the $100 now because that gives you money immediately. This is where Time Preference comes in. For example, if the $100 is worth $70 in one year, then the present value of the $100 one year in the future is $70. When you have money you have two options, you can save it or spend it. The benefit from saving money is that later on it will incur interest and that will give you more money down the road.

When money is evaluated for its present value in the future, it is called capitalization. So, let’s look at an example.

If you have the choice between $100 today and $100 in one year, you will probably choose the money now but if the money in a year earns 10 percent interest, then you can have $110 in one year, more than you would get now. The present value of the money at the future date is going to be $110.

Net Present Value

The net present value of a time series of money, both incoming and outgoing, is defined by the present values of the individual cash flows. Net Present Value is a central tool in discounted cash-flow and is used when determining the time value of money for long-term projects, such as budgeting within a company. By measuring the excess or shortfall of cash flows, in present terms, it is possible for companies to make good financial decisions.

Companies will use Net Present Value to determine if an investment or project is going to add value to the company. By using the calculations for Net Present Value, it is possible to determine the NPV and therefore, the value for the company as follows:

·   If the NPV is greater than zero, the investment would add money to the company and therefore the project should be accepted.

·   If the NPV is less than zero, then the investment will take value away from the firm and the project should be rejected.

·   If the NPV is equal to zero, then the investment will neither take money nor give money to the company. This means that decisions to accept or reject the project, should be based on other factors.

Future Value

The future value of money is how much a given sum of money will be worth at a specific time given the interest rate and the rate of return. The value does not include things like corrections for inflation.

Here is a brief example to illustrate future value of money. If you are given $100 today, it is worth $100, however in five years it will not be worth $100 because of the changing value of money. You can put the money into the bank and it will either grow or fall in value depending on interest. In addition, if you buy something today for $100, you may not be able to buy that same item for $100 because of inflation increasing the purchase price. Inflation can grow by about half a percent to one percent per year, and that will mean that the item will cost as much as five dollars more in five years.  As a result, economists will evaluate the true value of the money over a given period of time based on future value calculations. Companies and economists will look at the real interest rate to determine the purchasing power change over a period of time.

What Is GDP (Gross Domestic Product)?

GDP Definition

First Published: ADawnJournal.com March 20, 2010

Something that is vitally important for a country, and for the citizens of that country, is the gross domestic product, or GDP. The GDP is a basic measure of the health of a country’s economy because it is a measure of the overall economic output of that country. Similar to the profits of a company, the GDP shows whether or not a country is making money.

The GDP is essentially the market value of all the goods and services that are made within a country during one year and the higher the GDP, the higher the standard of living of that country.

In order to determine the GDP of a country, there are three different ways in which this can be done.

1.   The income approach

2.   The product/output approach

3.   The expenditure approach

The income approach works on the principle of having all the income of the producers in the country being equal the value of their products and the GDP is found by adding together all of the producers’ incomes.

The product approach is the most widely used of the approaches and it takes the sum of all enterprises to arrive at the GDP total for a country.

The expenditure approach uses the principle that products must be bought, so the value of a product must be equal to the expenditures of people when they buy items. This is not often used as an approach for GDP.

Standard of Living

As was mentioned earlier, the GDP of a country is tied closely with the standard of living of that country. While GDP per capita is not a measure of standard of living, it is an indicator of how the citizens of a country are doing financially. The better they are doing financially, the better the standard of living because they can buy more things to live on.

It is also important to note that the GDP per capita is not a measure of the personal income of a country’s citizens. It is possible for a GDP to increase while the income of the majority of the citizens in a country does not change by much, or may even go down. This has happened in the United States where during the 1990s, the income of the citizens went up by less than a percent, but the GDP went up by over three percent.

The biggest advantage of having a GDP per capita as an indicator of the standard of living of the citizens of a country is that it can be measured on a regular basis, often every year, or even every four months.

Of course, there is a disadvantage to using this method to determine standard of living and that is the fact that GDP per capita is not a measure of the standard of living, it is the measure of the economic health and activity of a country. An example of this is a country that can export 100 percent of its production, import nothing because it does not need to and that country will have a high GDP, but it will have a poor standard of living.

Real GDP and Nominal GDP

Real GDP is GDP in dollars that has not changed. This is usually done by taking the prices of a specific or base year. Read GDP is also referred as “constant dollar GDP”, “inflation protected GDP”, “constant price GDP” etc.

Nominal GDP is which has not been adjusted for price changes or inflation. Nominal GDP shows GDP in today’s or current prices. Nominal GDP may increase without increased economic output due to price increases.

The Highest GDPs on Earth

The world’s GDP is $60,971,477,000,000, which is $60.9 trillion, and of that, the European Union accounts for $18.3 trillion and the United States accounts for $14.4 trillion. Added together, the EU and the USA account for almost half of the world’s GDP. In terms of countries, not political groups like the EU, the United States has the highest GDP on Earth. The next highest is $10 trillion less, with Japan bringing in $4.9 trillion.

The top ten for GDP is as follows:

1.   United States   $14.4 trillion

2.   Japan    $4.9 trillion

3.   China    $4.3 trillion

4.   Germany   $3.6 trillion

5.   France   $2.8 trillion

6.   UK    $2.6 trillion

7.   Italy    $2.3 trillion

8.   Russia   $1.6 trillion

9.   Spain    $1.6 trillion

10.   Brazil    $1.5 trillion

The Lowest GDPs on Earth

Of course, there are plenty of countries that do not make much money in terms of GDP, and many of these countries make less in a year than some companies, and some of the richest people on Earth.

The bottom ten for GDP is as follows:

1.   Kiribati  $137 million

2.   Sao Tome  $176 million

3.   Tonga   $258 million

4.   Dominica  $364 million

5.   Guinea-Bissau $461 million

6.   Solomon Islands $473 million

7.   East Timor  $499 million

8.   Comoros  $532 million

9.   Samoa  $537 million

10.   Vanuatu  $573 million