Traditional wisdom suggests that when it comes to investing, timing is everything. But is it?
We’ve witnessed shock after shock in the political arena over the past year, which has repeatedly jolted the markets into action.
For investors, it’s difficult to sit tight amid all this noise, and you might feel encouraged to sell out of stocks to try to protect yourself from the falls. But by selling out early, you could end up missing out on the gains.
Timing the markets is effectively a double whammy in crystal ball gazing, because not only do you have to predict the outcome of these events (and just note how shocked most of us were about the Brexit vote), but also how the markets are going to react.
Disaster domino effect
Mark Northway of Sparrows Capital says the events which have transpired over the past year have provided opportunities for fund managers to “test their mettle” and trade in and out of the turbulence.
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ICICI Lombard General Insurance Co. Ltd. (ILGI) is a general insurance arm of ICICI Bank group. The Bank is in the process of unlocking value of its arms via public issues and listings. Last year the group came with first life insurance sector arm ICICI Prudential Life Insurance IPO that after initial hiccups surged and continues to do well. Now it is coming out with a maiden offer for its general insurance arm which is ranking first among private sector general insurance companies with better product mix and having better business on all fronts.
ILGI is the largest private-sector non-life insurer in India based on gross direct premium income in fiscal 2017, a position it has maintained since fiscal 2004 after being one of the first few private-sector companies to commence operations in the sector in fiscal 2002. The company offers its customers a comprehensive and well-diversified range of products, including motor, health, crop/weather, fire, personal accident, marine, engineering and liability insurance, through multiple distribution channels. It was founded as a joint venture between ICICI Bank Limited, India’s largest private -sector bank in terms of consolidated total assets with and Fairfax Financial Holdings Limited, a Canadian based holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management.
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In this post I will present a simple 8 step fundamental analysis template which can be used to analyze if a a stock is investment-worthy or not.
For any stock to merit investment, the most important thing is the financial stability of the business. It is important that a company has manageable debt levels and generates enough operating profits to easily pay interest on its loans and has sufficient cash for day to day operations while delivering decent growth in revenues and profits.
I use the first four ratios described below to assess the financial stability of a company when i consider investing in its stock.
- Long term Debt/Equity Ratio –
Debt/Equity Ratio is a debt ratio used to measure a company’s financial leverage, calculated by dividing a company’s total liabilities by its stockholders’ equity.
Companies (excluding financial institutions) with D/E of less than 1 to be stable and can easily cope with short term downturns as they have higher reserves than what they have borrowed.
D/E= Sum of non current debts/Shareholder Funds.
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This article is for those traders (new or experienced) who have trouble booking profits. Do you often see large profits evaporate as the market reverses against you, leaving you feeling powerless and confused? If so, you know how frustrating it can be and you know exactly what I’m talking about.
Poor target placement, lack of experience, greed, arrogance and stubbornness are all issues that can cause traders to not take profits off the table.
I appreciate this article may conflict with some of my core beliefs and teachings on taking profits since typically I encourage people to aim for a 2 to 1 risk reward or greater and to set and forget stops and targets. In theory, this makes sense, but in the real world, as you likely already know, there are still a great number of trades that almost hit your profit target or where a trade has moved quickly in the right direction and you’re staring at a giant profit… and then the next day or week, the market goes the other way and your once giant profit has become a much smaller profit or even a loss.
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Anne Scheiber was born in 1893. Her father died when she was very young.
Due to poverty, she began to work in her teen years, saved money and graduated from law school. She joined IRS. IRS is ‘Internal Revenue Service’. It is the income tax department of US government.
Being a Jew and a woman in the early part of last century, she faced a lot of discrimination. She excelled in her work. But during her 23-year career, she never got a promotion due to discrimination. She retired in 1944 with a retirement corpus of $5000.
Though she retired at the age of 50, she lived until the age of 101; passing away in 1995.
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We’re all susceptible to confirmation bias – paying more attention to our own preferred data and largely ignoring contradictory evidence. For investors, this psychological blind-spot can be very costly.
In every-day life, we like to think that our decisions are logical, rational and objective but often they are anything but.
Balanced analysis frequently goes AWOL as our pre-conceived beliefs take over. Let’s take a General Election as an illustration of this point.
Voters often seek positive news that shows their favoured candidates in a glowing light while paying scant attention to information that casts the opposing candidate in a good light.
Objectivity
If their existing belief is that their party is always strongest on say, maintaining law and order, they may place greater emphasis on campaign speeches reinforcing this claim than independent figures showing cuts in police or army numbers.
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There is nothing more frustrating than getting stopped out of a trade only to watch the price go back to the initial direction you were trading in the first place.
It’s grating, I know.
Assets, like animals, have different types of characteristics. Some are fast, some are slow, some jump high, some jump low. Understanding the behaviours and patterns of your chosen assets will help you set your stops at reasonable levels.
With this post, I’ll share a simple method of placing your stops in a way that is realistic and decreases the chances of getting hit every single time.
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This week’s question comes from John, who asks:
When should a trader move a stop loss order to breakeven?
This is one of the more common questions among Forex traders. It’s also one of the most challenging to answer because it depends on several variables.
And it makes sense that it’s a common dilemma. After all, who doesn’t want to be in a risk-free trade?
But believe it or not, moving a stop loss too soon can be more harmful than taking a full loss.
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The global investment landscape today looks quite unexciting. Consumers in developed countries have been maxed out for the better part of a decade. Notwithstanding the recent optimism in the US, it is highly unlikely that consumption growth will reaccelerate. The best scenario one can hope for is that consumption growth settles at a 1% to 2% rate and that fears of contraction subside.
Emerging markets face a completely different problem: China. China has been the engine of growth in emerging markets for the last two decades but the Chinese engine is now sputtering. China made a miraculous transformation of its economy by building infrastructure that is the envy of even the developed world. It fueled this growth with massive amounts of debt (most of it domestic, thankfully) and by borrowing growth from the future by conspicuous overbuilding. The problem with a capital or fixed hyper-investment model is that one cannot stop. If one stops then the entire economy stalls and crashes.
China has been adding capacity in roads, railways, ports, power, steel, aluminum etc. Each of these sectors depends on the other sector’s “growth” to keep itself going. If one sector stops adding to capacity, the feedback loop stalls capacity addition in all other sectors. China has reached the point where the discourse has shifted from growth of capacities to utilization and shut down of capacities. For example, Chinese steel capacity exceeds 1 billion tonnes or about 50% of global installed steel capacity. China produces 825 million tonnes of steel. Chinese aluminum capacity exceeds 45 million Continue Reading →
Loss Aversion – Cut Losses Short & Let Winners Run
If you’ve been trading for a while, you’ve probably heard the following ubiquitous mantra of trading: “Cut Your Losses Short & Let Your Winners Run”.
Why Should You?
Stocks can literally go to zero. It happened many times before and will happen in the future, regardless of how big the company is.
MANY oil and coal companies recently filed for chapter 11 bankruptcy and their stocks got delisted. You may also remember Lehman Brother and General Motors. What happens when your stock falls off a cliff and gets delisted? You simply lose all the money you invested in that stock.
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