A Strategy For Stock Hunters
Once the decision has been made to look to stock markets as a place for investment dollars, all retail investors face the same choice – decide for yourself what individual stocks in which to invest or delegate the decision to others. The latter option does involve some research and decision making choosing exchange traded or…
Monetary policy
Since monetary policy affects the rates levied on our borrowings and savings, and pretty well underpins every financial transaction we make on a daily basis, it’s worth understanding the basics. It works simply enough: just as you hold an account at a bank, every bank in turn holds an account at the RBA, technically termed…
Take a dispassionate approach to investing
Investing legend Warren Buffett said to “be greedy when others are fearful”. Or as the 18th century British nobleman Baron Rothschild put it: “buy when there is blood on the streets”. Both billionaires referred to contrarian investing. That is, buying stocks when they are undervalued because of panic selling. And selling overvalued stocks when hype abounds. That…
The Only Thing Certain About Investing Is Uncertainty
Donald Rumsfeld famously called them ‘known-unknowns’ – things we sense are important but don’t fully understand and cannot predict. Bob Dylan put it well, too, when he sneered ‘there’s something going on here, but you don’t know what it is, do you, Mr Jones’. Both point to the investor’s greatest challenge, the absence of a…
Indicator Overload – How Many Are Too Many?
When it comes to technical analysis, the range of indicators available means there’s bound to be one to suit every trader. While this is true, most traders unfortunately take this to mean that more is better, which is not often the case. Technical traders are generally divided into two groups – price action traders and…
Protecting your portfolio from major downturns
It is nine years after the global financial crisis but we still have ultra-low interest rates. This is great if you are a borrower, but not if you are a saver. If you avoid risk today and invest in interest rate products (cash, term deposits etc), your returns will almost certainly be very low and…
How to take some risk out of your portfolio
Diversification is the key to reducing risk in a portfolio. Holding stocks across business sectors allows the superior performance of stocks in “hot” sectors to counter balance poorer performance in stocks not doing as well. Sounds good enough but some studies indicate it takes a portfolio of 25-30 stocks to achieve a maximum level of…
Bond yields and what they tell us about the economy
When the Australian Office of Financial Management borrowed A$4.25 billion for 20 years at an interest rate of just 2.865% this week, economic commentator Peter Martin called it “the deal of the century”. Governments issue bonds to raise funds to pay for general expenses and projects such as the stgelopment of infrastructure. Investors buy government…
How to spot a winning IPO, we backtest some stocks
Retail investors looking to cash in on the burgeoning Australian IPO market are constantly warned of the dangers of jumping on board without reading the Investment Prospectus of a company they are considering. Professional analysts have the time and are paid to wade through a weighty prospectus as part of their jobs. Consequently far too…
What is your investment wealth ratio?
Absolute measures of net worth and net investment wealth don’t, on their own, tell us much about financial independence. For example, net investment wealth of $2 million may be more than enough if you only spend $60,000 p.a. but totally inadequate if you want to support a $150,000 p.a. lifestyle. Charts 2-6 serve to collectively…
