Monthly Archives: April 2021

Investing in a Volatile Environment

Guest Article By Wendy Peterson

The volatility that we recently experienced in the market is very troubling to some investors. Unfortunately, those investors who hit the panic button and sold off are recognizing large losses in their portfolios only to turn to investments that are perceived as safer places to invest.

The fact of the matter is that we invest our money to earn long-term rates of return that will exceed the rate of inflation and help us preserve our purchasing power. Historically, cash has been the worst place to invest over the long term.

Losing Investment Capital in a Volatile Market
According to Fidelity Investments, investors who sold their 401(k) holdings while the market was crashing between October 2017 and March 2018, and then stayed on the sidelines, have only seen their account values increase by about 2%, including contributions, through June of 2019. This compares with those who held on and saw account balances bounce back by around 50%. During periods of extreme volatility, wealth managers will often tell clients to stay invested rather than sell and lock in large losses in a seesaw market.

Building confidence in your strategy is a way to keep from making the mistake of buying high and selling low. Having the mental conviction to tell yourself that you have a carefully planned portfolio of high quality investments goes a long way toward getting through the toughest days of market volatility. If you are unsure of how to select high quality investments, consult with an financial manager or registered investment advisor.

The question is; how do you reach that state of mind? It’s not easy if you are the type of person that tends to get knots in your stomach when the market drops. We outline some steps below that might be able to increase your level of confidence.

Conquering the Fear of Volatility
One step you should take to better handle volatility is to make sure you have adequate cash reserves for a financial emergency that might arise. This way you are not depending on your portfolio for unforeseen expenses and your anxiety level will be lower, knowing that you don’t need to sell your investments when they have declined in value.

Make sure you have a mix of investments that fits in to your risk tolerance and time frame. This can be accomplished by considering how you have felt when past market declines have occurred. Your wealth management advisor should be able to provide you with a thought provoking questionnaire that will give you a score when completed. The score on the questionnaire will have a corresponding asset allocation that you can use to determine the split you will have between stocks, bonds and cash.

Once your allocation has been determined, stick with it. It is a good practice to reallocate your assets on a regular basis to keep your risk level the same. This means that a portion of those investments with better performance will be sold (sell high) to purchase in order to purchase shares in those that have not performed as well (buy low).

Other ways to hedge volatility can be through the use of options. Two simple strategies can be applied. One is the sale of covered call options against underlying stock or ETF positions. In this strategy you (the seller of the option) collect money from a speculator (the buyer of the option) in exchange for an agreement to sell your stock only if it reaches a specified price (higher than where it trades at the time of the transaction). The option must hit the price target (strike price) within a predetermined time frame (expiration date). If it does not, the contract expires you keep the money paid and are free to sell more options against that stock position.

The other strategy is to simply buy a put option. This gives you the right to sell your position in a stock or ETF that you own at a predetermined price within a predetermined time frame. For this privilege you will pay money (a premium) to the potential buyer (seller of the put option) of your stock. This strategy should be implemented in periods of low volatility, as the cost of the transaction will rise as markets begin to fall.

Buy With Conviction
Let’s say you’ve owned a stock that has done well over time. The stock has had a history of increasing revenue, profits and dividend increases. It seems like the stock is usually going up when the market goes up, only now there has been a big selloff in the market, and the stock has dropped dramatically due to market conditions. It may be time to do some homework on the company and make sure that the drop is due to just a generally bad market. If it that turns out to be the case, maybe it is time to buy more of the stock. Great companies often go on sale in market declines, only to have dramatic upturns once the market decline is over.

Speak With Your Wealth Management Team
You should also consult with your financial manager when markets are volatile. Investment professionals are in the business of understanding what is causing the market volatility and can often provide some insight. Often times your investment professional can help ease your anxiety and remind you of your commitment to your allocation and financial goals.

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Article Source: https://EzineArticles.com/expert/Wendy_Peterson/2200877

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Setting Your Money Goals

Guest Article By Robert Alan Stewart 

3 Factors which determine your investment strategy

You may be wondering what is the right investment strategy for you, but without knowing anything about you, any advice on which investments are right for you may in fact be the wrong ones. There are basically three factors that determine which are the right investments for you, they are:

1. Your age

2. Purpose for the money

3. Your risk profile

Starting with your age. It would be rather silly of you to invest all your money in growth funds if you are aged 65 because if the market takes a dive such as was the case during the 1987 sharemarket crash and to a lesser extent, the Global Financial Crisis during the early 2000s you have less time to recover from these setbacks whereas the young ones have time on their side.

The purpose for the money is the second factor.

Decide whether you require the money in the short-term, medium-term, or long-term.

Short-term would be up to a year.

Medium-term is 1-5 years

Long-term is longer than five years

Short term expenses would be, a bank account for emergencies, a holiday within a year, dental expenses, or t pay for the kids schooling for a year.

Medium-term would be savings for a car.

Long term would be your retirement fund, saving for a house deposit, or saving for the trip of a lifetime.

Your risk profile is a determining factor in where you invest your money. If the thought of the sharemarket taking a dive will give you sleepless nights then investing growth stocks in the sharemarket is not for you. A better option would be managed funds where you will be given a choice between growth, balanced, and conservative funds.

It is important not to get into debt for there is a cost to debt and that is interest. Interest adds to the cost of goods bought with borrowed money, and this adds up to a fortune during a lifetime of borrowing for consumables. This is called bad debt because the value of the item declines over time.

There is such a thing as good debt though and this is your first home because the value of the property increases during the lifetime of the loan but even this is not always a good option for some people if you live a kind of transient lifestyle.

“Everyone is to their own,” so only you know what makes you tick so your personal circumstances are the determining factors which govern where best to invest your savings.

You must do your homework before you invest in anything, whether that is the sharemarket, managed funds, or gold. There is so much information available on just about everything, and that includes finance. It is just a matter of learning the ropes and having a financial strategy which suits your personal circumstances.

Most people are able to save money but having goals and selecting the right investments for your savings can help increase your assets and enable you to reach your goals quicker. In life one size does not fit all as far as deciding where to invest your money. My site has several finance related articles, visit: http://www.robertastewart.com

Article Source: https://EzineArticles.com/expert/Robert_Alan_Stewart/2287449

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Discretionary Income Choices

Guest article By Robert Alan Stewart

Making the most of your discretionary income

Discretionary income is what you have left over after paying your fixed costs. It is yours to spend on whatever you choose.

But…
How you spend this money can make a difference to your financial situation, but before this we have to ascertain what is discretionary income.

Rent/rates

Car running expenses

Power

Debt

Groceries etc.

People who have an addiction of some kind will prioritize their spending so that the addiction is included among their fixed expenses.

Everyone as an adult has freedom of choice unless they have debts which means their freedom is being eroded away in relation to their level of debt.

The old Proverb, “The borrower is a slave to the lender,” sums it up.

We all have some control over most of our fixed expenses such as groceries and power;we can cut down on these but with items such as rates/rent are fixed but even then we can choose to live in a more modest apartment or downsize.

The excess to your expenses is called discretionary income.

Another way of increasing your disposable (discretionary) income is to increase your income by getting a part-time job, getting a higher paying job, or selling stuff online.

Saving your discretionary spending for some greater purpose instead of frittering it away gives your life some meaning. Instead of just letting things happen you are making things happen. Many people in 10-20 years time wondered what happened.

There is a major difference between saving your money and investing it. Astute investors use their discretion to increase their wealth by investing in higher risk stocks and shares, gold, and cryptocurrency. There are enough online platforms where you are able to drip feed money into these things if you are still climbing up the investment ladder.

But then you may prefer to save for a holiday and tick off one or two items on your bucket list. The border closures will restrict your choice of places but here in New Zealand there are so many fantastic places to visit it is an opportunity to discover your own backyard.

Among the more popular activities in New Zealand are landing on the Franz and Fox Glaciers, going for a dip in the Hanmer Springs hot pools, visiting the wine region of Marlborough, or attending one of the sports meetings around the country. One thing I have to mention here is the Tranz Alpine Express train journey between Christchurch and Greymouth. It is rated one of the finest train journeys in the world and having experienced it I do not disagree. It has to be on everyone’s bucket list.

Setting financial goals are personal to you gives your life a sense of purpose and deciding how to spend your disposable income can help you achieve your financial goals. My blog http://www.robertastewart.com has lots of articles related to finance.

Article Source: https://EzineArticles.com/expert/Robert_Alan_Stewart/2287449

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Best Online Investment Account Info: Tips for Getting Started With an Online Broker and Trading

Guest Article By George Botwin

If you want to really get involved in stock investments, then it’s a good idea to hire a broker to help you create an account. Most people handle everything online these days. There are online brokers you can go through who often charge less than the traditional broker since they don’t have a physical office to maintain. Most people do all of their buying and selling online as well. How can you make sure that you choose the best online investment account?

Commissions are always a top priority for internet investors. You shouldn’t have any problems finding a brokerage firm that only charges a few dollars on a commission. What you really look for are the fees. Even if the commission is advertised as being very low, you could end up paying tons of money on fees. Transparency is essential in an online broker account. Some companies even may even try and charge you inactivity fees and maintenance fees.

You’ll always need versatility. Only choose a brokerage firm that offers a broad range of investment types, and not just stocks. Take the time to investigate your options with a particular broker. In addition to stocks, there should be different types of futures, bonds, EFTs, etc.

How to Start With the Best Online Investment Account

To start the best online investment account possible, you’ll need useful resources and tools to educate you and optimize your trading efficiency. More advanced users can take advantage of market scanners, EFT scanners, detailed macro-economic event calendars, bond scanners, and other tools and metrics that they can use on any public company in the world.

If you need help with your portfolio, look for tools that will assist you with portfolio management offered by online brokers. These types of tools can come with features such as automatic notifications for when it is time to rebalance your portfolio and “what-if” analysis for each trade you are considering.

Go mobile, if possible. That way, you’ll have 24/7 access to your portfolio, accounts, and all of the tools you use at your disposal, no matter where you are. The best brokerage companies will offer a workstation that is available via app and web. Ideally, the app should have a lot of positive reviews, be updated frequently, provide time-delayed intra-day quotes, the option to add certain stocks to your “watchlist”, and more.

How can you create the best online investment account possible? As you start to educate yourself more and get the hang of the basics, you might want to turn towards Zacks Trade. This platform is a very affordable alternative than outright hiring a traditional broker. It comes with plenty of useful tools, apps, resources, and a fully-featured workstation.

To get closer to financial freedom, visit George’s website: https://www.financiallygenius.com/zacks-trade/

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Waiting on the DIP

It’s been a while since I published an article here. The reason for that is very simple, I haven’t been doing any major investments. Months ago the word around was that the market was going to drop. At that time I just started accumulating funds to wait for the DIP. I figured that it would be an excellent time to expand my holdings.

Well, for me, the DIP never materialized, My portfolio increased an average of 29%. I’m not complaining but I was looking forward to picking up some larger quantities of the EFT’s I own. But they’ve been going up steadily. My REIT’s have been my best performers. ABR & ACRE have increased in market value by 84% & 46%, respectively. And all of my holdings are still paying dividends at the same level as before or better, and I’m still reinvesting those dividend funds.

Even my 401K has been doing well. VFIAX has had a gain of 30% while VVIAX has gained 12%. And my money market account gained 27% since I purchased them. It’s great to see those gains but I have a long way still to go to reach my goal. But I’m happy my investments are going in the right direction.