Business Ideas

Fidelity Investments has just expanded by five the number of foreign markets in which its customers can trade, for a total of 17. And it will be the first retail online broker to open up its entire cross-border menu to all non-retirement-account holders—formerly the preserve of only high-account-value customers and high-volume traders.

Other mainstream brokers, such as E*Trade (www.etrade.com) and Charles Schwab (www.schwab.com), give direct international-market access to a subset of their customers. TD Ameritrade (www.tdameritrade.com) allows limited access to Australian and Canadian markets.

Formerly at Fidelity (www.fidelity.com), only those with $1 million or more in their household accounts got access to international markets. Now, cross-border trading is open to all levels of brokerage customers.

THENEW CROSS-BORDER VENUES are: Mexico, New Zealand, Singapore, Sweden and Switzerland, along with their associated currencies. That’s in addition to Australia, Canada, Hong Kong, Japan, Norway, the U.K., and six European countries: Belgium, France, Germany, Italy, the Netherlands and Portugal. And customers can now trade in 13 foreign currencies.

Jim Burton, president of Fidelity’s brokerage services, says of the expanded offerings, “I like to think of this as proof of our commitment to continuing to make user-friendly services available to people.”

Burton thinks that, in general, most investors should have 30% of their stock portfolio in international equities, in order to benefit from diversification and tap into growth advantages.

There are a number of ways to attain that 30%, such as exchange-traded funds (ETFs), mutual funds, and American depositary receipts (ADRs).

ETFs and mutual funds are, by far, the easiest ways to get into international markets. Many ETFs have the advantage of being optionable as well, allowing the investor to generate additional income through covered calls, among other strategies.

Access to ADRs can get tricky; although approximately 1,500 international firms have ADRs available for trading—mostly over the counter—not all brokerages allow access to all of them.

We’ve seen online brokers expand their international-trading capabilities significantly in the past few years. Interactive Brokers, which focuses on very active traders only, was the first major online retail broker to let its customers trade internationally, and still has the widest range of international offerings www.interactivebrokers.com).

Fidelity customers who hold non-retirement brokerage accounts can check out the international trading details by selecting “Accounts & Trade” on the top-level home-page menu, then click “International Trading” to see the offerings displayed. Click those you’re interested in, and you should get a message saying that your account is ready for international trading. Fidelity does require that you chat with one of its international trading specialists prior to placing your first international stock-trade or currency-exchange order, to see if you’ve understood the educational information on international trading and are aware of the risks.

So, once the switch is flipped, you can trade straight through to any of the 17 marketplaces, in either the local currency or in dollars.

If you prefer to use the local currency, Burton says you have a number of choices in foreign exchange. For example: If you want to trade on Mexico’s bourse, but you hold only dollars, you can convert some to pesos (fees are sliding-scale, and lower-percentage for bigger transactions) to make the trades, or just to hold the currency. Or if you want to buy one or two positions and don’t want to hold excess foreign currency, you can hold the position in dollars. When you exit the position, you can exit to dollars or hold pesos.

Fidelity’s international trading platform also lets you hold foreign currencies—even if you don’t trade in those markets. Unlike many forex brokerages, however, Fidelity doesn’t allow the use of leverage. That reduces your risk considerably—but also can dampen your gains. Says Fidelity’s Burton: “What you’re paying [for foreign-exchange transactions] is basically a fee, which we think is very reasonable, on top of the interbank rate.”

Costs range from about $14 to $40 per trade, net of currency exchange, depending on the market. Burton notes, “There’s a lot of plumbing here, so $14 to $40 is very reasonable, I think, for all the work to execute and settle a trade.” To keep trading costs down, he recommends limiting your number of currency conversions.

You’ll find a great deal of information about Fidelity’s international offering at www.fidelity.com/internationaltrading.

Bon voyage!

WE’VE SEEN LOTS OF INNOVATION from Barron’s 2011 online-broker survey winner, TradeStation (www.tradestation.com). And many of its new offerings appear to be aimed at the mainstream trading market.

We’ve long thought of TradeStation as a great place for very frequent traders to back-test their strategies on its huge database. Now, TradeStation is aiming to bring less-experienced traders into the fold without abandoning the needs of the established customer base. These projects include a first-time user’s walk-through on their recently (and now, seamlessly) redesigned Website, and one-on-one sessions with customer-service representatives who will help newbies use its extensive tool kit.

Another area where TradeStation has improved its offerings is in portfolio reporting. After acquiring the technology from Rina Systems in 2010, a new feature called Portfolio Maestro—a portfolio-testing and optimization tool—was launched. Portfolio Maestro considers the overall performance of all of your holdings across asset classes, and offers risk assessment and optimization to help you improve your game.

Most trading-strategy optimizers consider a single item at a time, such as a stock, an options strategy or a forex pair. Portfolio Maestro considers portfolio-wide constraints, such as funds committed to other investments, to help protect profits and limit downside risk. The resulting reports can be viewed in a variety of tabular or graphical formats. The goal of acquiring Portfolio Maestro and incorporating it into the TradeStation platform was to offer traders a realistic and complete perspective on their portfolios. It’s worth a look.

E-mail:
electronicinvestor@yahoo.com

By DIANA RANSOM

Many small businesses got lean over the last few months. They scrapped fruitless projects, renegotiated costly contracts, introduced more efficient policies and laid off workers. But after the latest employment report revealed that job losses moderated in July, some owners may be thinking about hiring.

“Thanks to layoffs, there are some real talented people out there,” says Ken Esch, a partner with PricewaterhouseCoopers’ private company services practice in Chicago. “A lot of small-to-medium-sized businesses see this as an opportunity to trade up and make additional investments to help the business move forward.”

And although many business owners are deferring their hiring plans — aiming to squeeze more productivity out of their existing staffs — aggressive companies attempting to position themselves for future success are bolstering their work forces now, Esch says.

The decision to add staff should be weighed seriously because overall economic activity is expected to continue to decline, albeit modestly, for next several months, says Joel Prakken, chairman of Macroeconomic Advisers, an economic forecasting and advisory firm in St. Louis.

Here’s how to calculate whether or not you can afford to add workers:

Estimate future sales

Before thinking about hiring more workers, estimate your company’s future sales. Sit down with customers and ask them how much they plan to buy from your company, says Chris Carey, a small-business pricing consultant in New York. The longer the time period you can project, the better, he says. “Most companies know month by month how much they’ll need for the next 12 months.” If you’re counting on reeling in new customers or you have several promising projects on deck, estimate how much those activities will return.

Pinpoint jobs to add

Identify which jobs to fill based on your company’s needs, says Gregg Landers, the director of growth management at the accounting firm CBIZ MHM in San Diego. This can be relatively easy. For example, if your firm recently experienced a surge in product orders, you may consider adding manufacturing personnel. However, if you’re trying to drive demand, brining on more salespeople may be the way to go, Landers says.

Project added revenues

Estimate how much those workers will contribute to the company, Carey says. If they’re helping build products or performing services, estimate how many products they can build or services they can perform in a given period. For an easier way to gauge their contribution, think in terms of units per hour, Carey says. If one worker can build five units per hour and you can sell a single unit for $40, that worker will add about $52,000 of revenue a year.

Add up expenses

Add up the costs associated with those new workers. Factor in their salaries, recruiting and training costs, as well as the cost of providing benefits, Esch says. In addition, estimate how much added employees impact your company’s variable and direct costs, Carey says. If you need to purchase more manufacturing materials or computer equipment to accommodate added workers, factor in those costs as well, he says.

Figure your profits

Based on your firm’s projected cash flow, determine whether your profit margins can support hiring more employees, Landers says. Let’s say it costs $40,000 a year to employ that worker who can build five $40 units an hour. Because your company estimates that it’s able to generate $52,000 in sales as a result of that person’s work, you can dust off your help-wanted sign confidently.

On the other hand, if you’re looking to add sales staff, the equation is a bit foggier, Esch says. In this case, estimate at what point your investment in these workers likely will return a profit. “Many businesses these days are going to want an immediate, one- to two-year payback on this investment,” he says. So, if it costs you roughly $65,000 to add a salesperson, you should plan to be able to recoup your investment in a year or two, Esch says.

Get temp help

If your company’s projected profit margins don’t leave you enough wiggle room to hire more full-time workers, you’ll have to find another way to meet demand, Landers says. He recommends looking into temporary workers or outsourcing certain tasks. This way, “you can avoid laying someone off if the work ends up disappearing in the next few months,” he says. “But if you keep those temporary employees around for two to three months, working more than three days a week, you should seriously consider hiring full time.” (For our story on outsourcing business tasks cheaply, click here.)

Write to Diana Ransom at dransom@smartmoney.com

By SARAH MORGAN

Mutual-fund managers who actively trade—and pile up fees in the process—have long been punching bags for investors. But suddenly they look like heavyweight champs.

After being trounced by the stock market for years, so-called active managers are on a hot streak. In January, 70% of large-cap stock pickers outperformed the S&P 500-stock index, according to data from Bank of America Merrill Lynch. Not even a quarter of them could make such boasts for all of 2011.

Yet even the recent winners are reluctant to declare a return to a stock picker’s market. “Knock wood, six weeks isn’t a trend, but it has been a better environment,” says Bill McVail, manager of the Turner Small Cap Growth fund. His $271 million actively managed fund gained more than 7% in January, beating the S&P 500′s 4.5%.

Others in the field say it is the market that has changed, not the managers. “Some might say we have a hot hand this year, but in fact our hands have largely been idle,” says Whitney Tilson, co-manager of the $16 million Tilson Focus fund, which gained 14.32% in January.

The business of picking stocks is fraught with risk and long positive streaks are rare. The fees don’t make it any easier to beat the competition, given that the average active fund charges 1.29% in fees while the average index fund charges 0.59%, according to Morningstar.

Between 2000 and 2009, on average less than half of active funds beat the broader market each year once fees are taken into account, and over five-year periods, most active funds in every category lag their benchmarks, according to data from Standard & Poor’s.

That performance is one reason investors have been flocking to low-cost index funds and exchange-traded funds. Consider that only 41 ETFs—out more a total of more than 1,400—are actively managed, according to fund tracker Morningstar Inc.

But some fund managers and analysts say this year’s stable market plays into the hands of stock-pickers. After a year of intense volatility, with stocks moving largely in lock-step based on big-picture economic fears, stocks have been less correlated in 2012.

This is considered beneficial to active management, which focuses on company fundamentals more than momentum and broad market sentiment. “The world got a bit safer, and all of a sudden the earnings growth and power of a company is starting to matter more,” says Larry Rakers, manager of the $8 billion Fidelity Dividend Growth fund.

If active managers continue to outperform—making those higher fees a fair price to pay—many financial advisers will be in awkward positions after steering their clients into other options. But most are urging caution, suspecting that the strong performance is unlikely to last. “I don’t think last year was an anomaly,” says Kevin Mahn, the chief investment officer at advisory firm Hennion & Walsh. “That’s becoming more the norm.”

Write to Sarah Morgan at Sarah.Morgan@dowjones.com

By NEIL SANDS

MELBOURNE—Westfield Group, the world’s largest owner of shopping malls by value, posted its first net profit in two years and said it has weathered the financial crisis, with signs of retail improvements in key markets.

The Sydney-based group, which has 119 malls in the U.S., Australia, the U.K. and New Zealand, said Wednesday that net profit for the six months ended June 30 was 961 million Australian dollars (US$870.2 million), compared with a net loss of A$708 million a year earlier.

It was the first time Westfield has posted a profit since the first half of 2008, as the property value of its malls plummeted and retailers inside the centers experienced lower sales due to the global economic downturn.

Westfield said there are signs that both trends were reversing, with property values increasing and retail activity finally picking up in the U.S. and the U.K.

“We have weathered the crisis and are focusing on operations to create the platform for growth,” Joint Chief Executive Peter Lowy said.

He predicted growth was set to resume, forecasting earnings per security of 90 Australian cents for the full year, ahead of analyst forecasts.

The value of Westfield’s properties rose A$349.4 million to A$47.4 billion, compared with a A$2.47 billion fall last year.

Revenue for the six months ended June 30 was A$1.8 billion, down 13% from A$2.07 billion in the same period last year.

The group restarted A$1 billion of development projects this year due to increased activity in the Australian retail market.

It said demand in the U.S. and U.K. hasn’t yet reached a level that justifies a similar investment in large new development projects but the signs in both markets were positive.

“In the first half of the year we have seen improving performances from our United States, United Kingdom and New Zealand businesses and a continuation of the strong performance from our Australian business,” it said in a statement.

Westfield’s preferred measure of profitability, net operational earnings, which excludes property revaluations and other noncash items, was A$1.03 billion, down 2.6% from a restated A$1.06 billion in the year-earlier period. The company said the result was impacted by the strength of the Australian dollar and would have been up 1.6% on a constant currency basis.

Even so, it exceeded expectations. UBS expected net operational earnings of A$955 million, with Citi forecasting A$905 million and Macquarie A$1 billion.

Macquarie said in a note to clients that it was maintaining an outperform recommendation on the company’s stock. Westfield rose 2.2% to A$12.57 Wednesday in Sydney.

The company has 55 shopping centers in the U.S., 44 in Australia, 12 in New Zealand and eight in the U.K.

Westfield said it had signed Costco Wholesale Corp. as a tenant in three U.S. centers and would be interested in similar deals in the U.K. and Australia.

By NATHALIE TADENA

Assets in money-market funds fell by $1.89 billion in the week ended Wednesday, as steep withdrawals from institutional funds more than offset inflows to retail funds, according to the Investment Company Institute.

The latest week reverses an eight-week streak of fund inflows reported by ICI. The performance for money-market funds tracked by ICI had been mixed for much of 2011, as concerns about exposure to Europe’s debt woes and weak domestic growth rattled investors.

Total funds settled at $2.693 trillion in the latest week, according to ICI.

Retail funds had net inflows of $6.31 billion, putting asset levels at $945.23 billion. Taxable-government funds increased by $610 million to $198.51 billion, while nongovernment funds rose by $2.4 billion to $548.23 billion. Tax-exempt funds increased by $3.31 billion to $198.49 billion.

Meanwhile, assets in the institutional class decreased by $8.2 billion to $1.748 trillion. Taxable-government funds slid by $7.49 billion to $761.94 billion, while nongovernment funds slipped $3.1 billion to $887.76 billion. Tax-exempt funds advanced by $2.38 billion to $98 billion.