Investment Basics
Key Economic Indicators
Interpreting the economy's movements in direction can be quite complicated. Though it has been moderately simplified by studying certain economic data to derive to key economic indicators. Some of the common statistics that an analyst will monitor, such as gross domestic product and the key measure of the economy's overall output from quarter to quarter, which is a good indicator of how the economy is performing.
Gross Domestic Product
The barometer of a nation's production of goods and services, GDP, is the broadest of the nation's economic measures. Despite a raft of problems globally last year the U.S. economy managed to post strong growth.
Job Growth
The key to understanding consumer sentiment. Consumers feel more at ease when the job market is expanding. Likewise when the job growth market contracts the economy could be headed for a slow down.
Consumer Confidence
The rating of Consumer sentiment based on a monthly sample of interviews with 5,000 households randomly chosen to measure their discretionary spending habits.
Monthly Retail Sales
The sales numbers based on a census taken of store managers through a wide variety of retail stores compiled by the Census Bureau to identify certain consumer trends and spending habits.
Earnings Growth Rate
Corporate earnings are a key factor in determining share values (prices). As of late this correlation has been less pronounced, but these numbers give investors a sense of the economy's strength.
Investment Strategies
Asset Allocation
Is a tool to accomplish a diverse portfolio; therefore to figure out how much of ones portfolio should be invested/allocated in different types of securities such as common shares, preferred shares, mutual funds, bonds, cash and cash equivalents.
In developing the proper asset allocation strategy one should take into consideration an individual age and the current objectives that they are looking to accomplish in their portfolio. A simple rule of thumb is that younger investors tend to be more risk tolerant to receive more aggressive capital gains while the more mature investor becomes more conservative and secure, therefore enabling them looking to protect their capital and receive a modest income.
Diversification
Is the art of spreading your investments around, therefore not to be weighted too heavily in one sector or in one security. In simple terms 'not having all your eggs in one basket', an example being the new economy high tech internet boom of a few years back, investors were caught up in a frenzy of internet go-go stocks and forgot to balance their investments in other more traditional bell-weather securities.
Having the ability to trade off a portion of risk for balance gives you a higher degree of security. Therefore you accept a slightly lower return but are less susceptible to volatile market fluctuations.
Dollar Cost Averaging
Investing equal increments of funds on a consistent basis to the same security, sector, mutual fund etc. Therefore the ability to price averaging the cost on downward and upward swings in the market and achieving the average mean trading acquisition price. This allows the markets historic rate of return factor benefit your overall portfolio growth.
Hedging
Limiting the risk associated with some investments. Stock investors may use options to hedge their potential losses or lock-in their profits in certain positions. A sophisticated strategy used by larger investors to absorb volatile market swings.
Risk Reward
Knowing how much risk one is willing to assume for a certain level of capital gains. Understanding the risk involved in every investment that one undertakes and having set objectives in the amount of returns that they are looking to achieve when assuming a degree of risk. The higher return one is looking for, the higher risk one is willing to assume. Therefore pre-set the level of returns expected in a portfolio, and limit the risk accordingly.
Investment Basics
Here at ECA we pride ourselves upon the ability of molding the right management mix to suit the individual portfolio needs of our clients. The comprehensive services we provide in the market place include full research coverage on all major exchanges in Asia, Europe and North America, also a wide variety of investment products such as stock, bonds, mutual funds and term deposit. The expertise of our full service retail division pride themselves on accurate research and timely anticipation of the markets direction.
Objectives
Short-Term Capital Appreciation
Speculation for higher anticipated gains, higher risk in expectation for capital gains that will out perform the market growth. This is suitable for the aggressive investor that can assume a higher degree of risk in return for exceptional gains. The usual investment product to achieve this investment objective is common share ownership.
Long-Term Growth and Income
Conservative secure, investment, therefore to preserve principal and receive an interest income through dividends, also the potential for modest capital gains. Suitable for the conservative investor who seeks wealth preservation and maintains their buying power against inflation. Investment goals are annual income as opposed to capital gains. The usual investment product to archive this investment objective is preferred share ownership.
Please feel free to contact an Investment Consultant here at ECA to discuss a mix of investment objectives that are suited to meet your needs.