Showing posts with label investment strategies. Show all posts
Showing posts with label investment strategies. Show all posts

Tuesday 7 December 2010

MAAKL holds ‘Wealth Talk’ on market outlook

MAAKL holds ‘Wealth Talk’ on market outlook
by Ko Ping How kopinghow@theborneopost.com. Posted on December 7, 2010, Tuesday

KUCHING: The recently concluded ‘Wealth Talk’ on December 4 at Grand Continental Hotel was an inaugural event in the city organised by MAAKL Mutual Bhd (MAAKL). The talk aimed to help the public to make informed investment decisions entering the year 2011.


INAUGURAL EVENT: (From left) Senior general manager of MAAKL, Patrick Nge, Ng and Devadason. The ‘Wealth Talk’ is an inaugural event in the city organised by MAAKL.

MAAKL invited two professionals from the investment and financial planning fields who briefed participants on the stock markets’ outlook for 2011 and explained how good financial planning would help achieve short and long term financial goals.

Chief executive officer of Meridian Asset Management Sdn Bhd, Nicholas Ng, presented the talk on ‘Stock markets supported by liquidity but entering high risk zone’.

Ng stated, “What we are seeing since November for the US dollar was a technical bounce. The US really needed to sort out its economy and the huge amount of borrowing and printing of money is actually very bad for the US.

“There’s very little justification for a strong US dollar due to the recent rebound which is attributed to the weakness of the euro. At some point in time, the US economy will go back down to a weaker half next year and that’s where I think it will be a real challenge for the US dollar,” he added.

In response to where the FTSE Bursa Malaysia KLCI (FBM KLCI) would be heading in the upcoming year, Ng commented that, “We have an index of roughly 1,643 and I think it will have an eight per cent upside next year.”

He pointed out that investors could still make money in Malaysia but relative to North Asia, the risk would go up and ratio would be higher next year. Nonetheless, he opined that growth in the merging market would not be an issue and Malaysia would be recording roughly 5.2 to 5.4 per cent growth in 2011.

“North Asian countries like China would probably come down a little bit but will be at seven to maybe 8.2 per cent. Generally, in Asia, growth will not be a major concern,” viewed Ng.

On the topic of investment options, Ng expressed that Sarawakians were more localised that they focused only on local markets.

He stated, “Ideally, the way going forward is to diversify their investments especially into Pacific Mutual funds.”

He proposed Malaysians to look beyond national equities and go offshore to diversify their investments.

When queried on what stocks would have more importance in the future, he said that the election theme would be one area that could be focused on. Investing in large caps, goodwill and high dividend stocks would continue to do well even if markets were to correct in the first half of next year.

The second speaker, Rajen Devadason, chief executive officer of RD WealthCreation Sdn Bhd, a Certified Financial Planner and a Securities Commission-licenced financial planner with MAAKL talked on ‘Financial planning, asset allocation and the future of your wealth’.

Devadason said, “Based on the world wealth report published by Capgemini and Merrill Lynch, there are five asset classes that the very wealthiest put their money into. These are equities, investment real estates, fixed income such as bonds, cash in the bank and alternative investments.

“The smartest thing a normal individual can do is to see what the wealthiest people in the world are doing and learn their skills from them,” he added.

To answer whether foreign companies’ investment in FBM KLCI would have a positive effect, Devadason said that “If foreign companies come in and just pump money into Bursa Malaysia in a hurry, what happens is the market would take off like a rocket and this is hot money. So, Malaysians as serious investors should track and know the stocks. If we get to the point where the valuations are excessive, to get rich, you must buy low and sell high,” he enthused.

“If foreigners coming in pumped in lot money and our stock prices start to escalate, maybe it’s time for us to take some money off the table and to re-allocate. However, if the trend reverses, investors can get hurt badly. So, it can be a double-edged deal,” he pointed out further.

In conclusion, Ng noted that for higher risk-taking investors, alternative investments were good options. They included derivatives, options, futures or even arbitrage funds and commodities funds.

“There are lot of options and the most common with a cheaper entry cost is the exchange traded fund (ETF) that has also grown tremendously. There are many avenues now whereby new investors can take higher risks and at the same time use some of these instruments to hatch their underlined investments.”

http://www.theborneopost.com/?p=79189

Real returns with smart investment strategies

Real returns with smart investment strategies
Posted on November 27, 2010, Saturday

SEE your nest egg flourish with smart investing. It’s all about how much you invest and how often.

Successful investing is not about taking big risks, but more about being able to balance risk and return by investing in a meaningful portfolio.

Use investment strategies that do work: a balanced allocation of your portfolio’s assets among securities that suit your individual needs, the use of Cost Averaging (CA) to lower the cost of overall investments and dividend reinvestment programmes, and a well disciplined, long haul approach to investing.

Most important factor you have in reaching your goals is time. The more time you have, the more chance you have of success. If you’re thinking of embarking on an investment strategy like CA, know your facts first.

For example, CA involves the regular purchase of units in a managed fund or shares over a period of time. It can be done automatically via an investment plan and you may reduce the risk associated with market fluctuations while giving your portfolio the best chance of long term profitability.

Here are options for you to choose from when it comes to investing in your future:

1.Direct investing

You invest directly in the share market, property or real estate investment trusts (REITs). The downside is that it generally requires market knowledge, plus regular monitoring of market trends, tax and legal changes. Many working adults don’t have access to the right market information or expertise to do direct investing well.

2.Buying bonds

The general principle of bond investing is that when you buy a bond, you are lending your money for a certain period of time to the issuer, be it a listed company or not. It’s a good choice for investors who require fixed horizon and steady income.

However, investing in bonds are usually for the high- net-worth and institutional investors as bonds are usually offered at a high entry cost, in hundreds of thousands or millions of ringgit.

Additionally, investors are advised to pay attention to total return, not just yield as bond prices fall when interest rates rise. An option for the retail investors to access the asset class will be to invest in unit trust bond fund due to its low entry cost and diverse holdings which allows for diversification.

3.Stocks/equities

Historically the best, but most volatile way to grow your money is through the stock market. On a short-term basis, stock prices fluctuate based on everything from interest rates to investor sentiment, to the weather. But on a long term basis, you could potentially make (or lose) a lot of your money in stock market. Bear in mind that risk and return come hand-in-hand.

4.Managed funds

If you only have a small sum to invest, a good option is to put your money in a managed or unit trust fund. These are funds which pool the investments from a number of investors, enable you to access markets and assets that may be expensive or difficult to buy directly into, such as the China’s restrictive A-share market, emerging markets and even the fixed income space such as government bonds.

Additionally, unit trust funds are a good alternative to buying individual stocks, where in exchange for a small fee you will have the advantage of participating in several stocks within a fund. What happens is that the fund manager trades the fund’s underlying securities, realising capital gains or losses, and collects the dividend or interest income. The proceeds are then passed along to the individual investors. Most funds require only moderate investments, ranging from a few hundred to a few thousand Ringgit.

This article is brought to you by HwangDBS Investment Management, your Asian Financial Specialists. Log on to www.hdbsim.com.my or call 1-800-88-7080 to find out how you can cost average your investment via the HwangDBS Smart Save Plan.

http://www.theborneopost.com/?p=77325

Wednesday 27 October 2010

Are you planning invest in the equity markets now?

24 OCT, 2010, 07.09AM IST, VIKAS AGARWAL,ET BUREAU
Are you planning invest in the equity markets now?


The domestic stock markets have had a dream run this year. Good returns have increased the enthusiasm and risk appetite of investors. Strong inflows from foreign institutional investors (FIIs) remain the key factor behind the bullish sentiments in the market. Investments from domestic institutions and individual investors have also increased. 

The recent over-subscription of the Coal India IPO is a classic example of positive investor sentiments in the markets. The market undertone is quite bullish at the moment and this is reflected in the strong bounce-back after every minor correction. Analysts believe the markets are consolidating at the current levels before taking to newer highs in the short to medium terms. 

The important factors to track are the movements of FII funds and sentiments in the global markets. The markets may have a deeper correction triggered by negative sentiments in the global markets. In general, individual investors should stick to the strategy of 'buy on dips'. Investors should identify favourably-placed sectors in the current economic conditions and invest in selected fundamentallygood stocks. 

These are some of the important points investors should keep in mind while investing in the markets: 

Strategies for primary market investments 

The primary market is attractive with many IPOs listing with attractive gains. However, individual investors should invest only their risk capital in IPOs. It is not recommended to borrow money and invest in IPOs for the sake of listing gains. 

The introduction of ASBA (application supported by block amount) makes investments in IPOs more attractive as the money does not get debited from the investors' account at the time of application. It just gets blocked. The money is debited from the investor's account only at the time of allotment and meanwhile the investor keeps earning interest on this blocked amount. Also, it avoids the hassles of tracking refunds. However, the ASBA scheme is applicable only if the investor applies to an IPO through the bank's e-filing route. 

Strategies for secondary market investments 

The stock markets are close to their all-time high and consolidating over the last couple of weeks. There is strong buying support at the lower price levels and some profit booking at the higher levels. A deeper correction cannot be ruled out as the markets have moved in a single direction over the last couple of months. 

Some analysts believe the markets may go through many small corrections rather than a significant deep correction. Therefore, it is advisable to stay invested in the markets and play safe by booking profits at regular intervals. A periodic review of the portfolio based on the current macroeconomic and business conditions, and quarterly results is needed. Investors should take necessary steps and make the required adjustments in their portfolios based on the macroeconomic conditions and company results. 

Investors looking at investing fresh money in equity should first identify the stocks and invest in small lots to average out the entry price. Since it is not possible to time the markets, it is advisable to stagger investments by buying in smaller lots at regular intervals. Small investors should invest in large-cap stocks and selected mid-cap stocks that have good liquidity. It is advisable for investors to invest only their risk capital in equity, and track the market movements and developments related to stocks of their interest regularly. Equity mutual funds are a good alternative for investors who do not have enough knowledge about the markets.




http://economictimes.indiatimes.com/features/financial-times/Are-you-planning-invest-in-the-equity-markets-now/articleshow/6798783.cms

Sunday 17 October 2010

Know the best Stock Market Investment Strategy of all times

The best stock market investment strategy is to give your self time to learn the process of investment. To learn the details of the stock market investment strategy one needs to be patient. Successful investors are like scholars and it takes time to become a scholar. this article aims at providing stock market investment strategy tips to its readers by listing below top three (3) steps of investment.


Stock Market Investment Strategy one (1) – start Investing form today
Best investment tip that can be given to a budding investor is that the stock investment is learnt best while implementing. Encountering mistakes and learning form ones bad decisions is the best stock market investment strategy. Staring the journey of investment with a plan is ideal. Setting up goals, organizing resources for investing and setting up time bound targets are basics of stock market investment strategy. the most common form of investment plan is linked to retirement form job. Suppose a man is 35 years of age and he wants to retire in next 20 years, then he must know how much ($) he shall have before retirement.

Stock Market Investment Strategy two (2) – know the business before buying its stock and keep your self informed about other investment options available.
Taking a course on financial investment is not such a bad idea. But of course not many will agree with me and rather my advice will go to deaf ears. So better I will share something which is more practical and usable. Before one starts investing in stocks it is important to know about what alternative investment options are available in the market. in order to set up a fool-proof stock market investment strategy it is most important to know what other options. until an investors know about other options he can never appreciate the magnitude and dignity of stock market investment. I can tell you there are majority of people who are in this business of stock market investment without even knowing the basics of investment. These are the people who have made this stock market investment strategy look more like a gambling than a profession. I will still repeat, investment are a profession of scholars and this is the reason why so many mediocre claim to know stock market investment. in reality, to invest like a champion investor, stock market investment strategy shall be developed only after one knows the key concept of business. and the best way to learn business is to read the financial statements of companies. Tell me how many so called investors have ever read a balance sheet and income statements of a company before buying its stocks. if one asks them about the importance of cash flow in evaluating the value of stocks they will give a blank mysterious look. But this is the difference between a champion investors and part time stock traders. Investors read financial reports for investing and traders reads morning dailies for some quick tips. Knowing a business before buying its stocks is the best stock market investment strategy.


Stock Market Investment Strategy Three (3) – Be a disciplined investor.
A disciplined, focused and a long term investor has been observed to outperform the market better than even the qualified investors. a disciplined investor can also be the one who has continuously invested in the diversified mutual fund. his value addition to investment in only limited to starting a systematic invent plan (SIP) and rest in done by the fund manager. a disciplined investor is also the one who keeps an eye on each and every market dips more than 15% and is prompt enough to pump his money in.

Conclusion
The best stock market investment strategy is to keep the process of investment as simple as possible. Invest with a strategy that complements your personality. if you are one who does not believing in taking lot of risks in life, then you are one to invest in blue chip companies. if you are more dynamic and has some spare money, then you can invest in mid cap stocks and funds. these stocks are very volatile, but if invested for long term then it may give above average returns.

http://forex-trading-store.com/investments/know-the-best-stock-market-investment-strategy-of-all-times.html

Friday 8 October 2010

Contradictory strategies

For almost any strategy that's been proposed as a good one with shares, there's also a contradictory one.  And the interesting thing is that a strategy may work in certain circumstances whereas in different circumstances the contradictory strategy may work just as well.  There are several important conclusions from this:
  • There's no one strategy with shares that works in all circumstances.
  • The most important factor is to decide on a strategy and stick to it.  Chopping and changing at the spur of the moment and not sticking to your strategy is the cause of most problems in share investing.

Tip

When you've decided on a strategy, stick to it. Give it a fair trial, and change only if the fair trial convinces you that your strategy needs to be adjusted (or abandoned).

Thursday 29 July 2010

****Desired Characteristics for Potential Investment (Investment Philosophy of Magellan Infrastructure Fund)



Magellan Infrastructure Fund - Investment Philosophy


The Magellan Funds have two principal Investment Objectives:

  • to minimise the risk of permanent capital loss; and
  • to achieve superior risk adjusted investment returns over the medium to long-term.

Our Investment Philosophy is simple to state. We aim to find outstanding companies at attractive prices. We consider outstanding companies to be those that have sustainable competitive advantages which translate into returns on capital materially in excess of their cost of capital for a sustained period of time. While we are extremely focused on fundamental business value, we are not typical value investors. Securities that appear undervalued on the basis of a low price to earnings multiple or a price to book multiple will often prove to be poor investments if the underlying business is fundamentally weak and exhibits poor returns on capital. We will buy companies that have both low and higher price to earnings and price to book multiples provided that the business is outstanding and the shares are trading at an appropriate discount to our assessment of intrinsic value.

An outstanding company will usually have some or (ideally) all of the following characteristics:

WIDE ECONOMIC MOAT
An economic moat refers to the protection around an economic franchise which enables a company to earn returns materially in excess of the cost of capital for a sustained period of time.

Outstanding companies are unusual as capitalism is very efficient at competing away excess returns, in most cases. A company’s economic moat will usually be a function of some form of sustainable competitive advantage.

A strong indicator as to whether a company possesses an economic moat is the historical returns on capital (both including and excluding intangible assets) it has achieved. If a company has earned returns materially above the cost of its capital for a sustained period, it is a good indication that a company may have an economic moat. In some cases, a company may be developing a strong economic moat, but its historical returns on capital are low reflecting the investment in building a business with long-term sustainable competitive advantages. The key lesson is that historical returns on capital do not necessarily indicate whether a business has a wide economic moat and it is critical to fully understand the competitive advantages and threats which protect and threaten a company’s economic franchise.

Identification of companies with wide economic moats involves consideration and assessment of the barriers to entry, the risks of substitutes, the negotiating power of buyers and suppliers to a company and intensity of rivalry amongst competitors.

The following are illustrations of sustained competitive advantages:


  • Where it is very expensive for consumers to shift from the incumbent provider (that is, where there is a low threat of substitutes) because of, for example, cost, inconvenience and/or regulatory restrictions.
  • Where the leading market participant has material economies of scale which gives it a significant cost advantage over competitors or new entrants.
  • Where the business has a strong and unique brand name or is protected by long-term intellectual property rights such as copyright, patents, trademarks and/or regulatory approvals.
  • Where a company has a very strong network (ideally monopoly or proprietary). For example, where it is the vital intermediary between buyers and sellers, a market maker or even a ring road that tolls workers and businesses use as they move people and goods. We are particularly interested in networks where access, pricing and volume are subject to market forces and are not regulated in a materially adverse manner.
  • Where the use of psychological imperatives (such as, safety, exclusivity and quality) drives customer loyalty and enables companies to charge a premium for their products or services.

Each of these sustained competitive advantages is relatively unusual and it is particularly valuable where a strong competitive advantage prevails over a long period of time. Market-based monopolies and proprietary networks can provide the strongest and most sustainable competitive advantages, but are extraordinarily rare.

RE-INVESTMENT POTENTIAL
We seek companies that have a moderate to high potential to continue to re-invest capital into the business at high incremental returns.

We believe that conventional investment analysis fails to properly assess the potential of a business to deploy material amounts of additional capital into the business at attractive rates of return. This is a fundamental driver of value over time.

The most attractive types of companies are either:

  • Companies with wide economic moats which can continue to grow materially with very limited additional capital.
  • These companies will exhibit rising returns on capital employed. These types of businesses are extraordinarily rare and extremely valuable.
  • Companies with wide economic moats which have opportunities to deploy material amounts of capital into the business at high incremental rates of return. Examples include a strong retail franchise with substantial roll-out opportunity, or a retail banking or financial services franchise that can continue to grow its lending activities at attractive margins.

These types of businesses are rare and can be very valuable compounding machines. It is more usual to find businesses with wide economic moats which can only deploy very modest amounts of capital and exhibit modest growth potential. These businesses, while attractive, are less likely to be compounding machines than those with material high return re-investment opportunities.

We are therefore very focused on assessing a company’s ability to continue to re-invest free cash flow at high rates of return. It is factors such as, store roll out potential, global expansion potential, the size of the market and market share potential, and market growth rates, which will drive this re-investment potential.

We judge re-investment potential as low, medium or high depending on the level of re-investment over the medium term as a percentage of net income, and the rate of return expected to be achieved.

LOW BUSINESS RISKS
The purpose of assessing business risk is to determine the predictability of cash flow and earnings projections. Businesses which are difficult to predict or could exhibit large variations in cash flows and earnings have high inherent business risk.

We assess business risk taking into account factors such as cyclicality, operating leverage, operating margin, financial leverage, competitive strength, regulatory and political environment and profitability.

We assign each company a risk assessment: low, medium and high. This is not an attempt to measure the volatility of the shares, but rather the predictability and strength of the underlying business.

LOW AGENCY RISK
We term the risk surrounding the deployment of the free cash flow generated by a business as €˜agency risk’.

A fundamental assumption inherent in a standard discounted cash flow valuation (DCF) is that free cash flows are returned to shareholders or are re-invested at the cost of capital. The reality is that this assumption is often flawed as free cash flow is often not returned to shareholders but, rather, cash is re-invested by companies at returns below the cost of capital. In these cases, businesses can end up being worth substantially less than implied by a DCF analysis. We term the risk surrounding the deployment of the free cash flow generated by a business as agency risk.

A company which can deploy a substantial amount of free cash flow back into the business at attractive returns for a sustained period of time will almost certainly carry lower agency risk than a company which has limited opportunities to re-invest capital at attractive returns, unless the company is explicit about returning excess cash flow to shareholders via dividends and/or share buy-backs.

In assessing agency risk, we look at factors, including the structure and level of incentives offered to senior management, the level of share ownership by senior management and directors, the track record of management in pursuing acquisitions, the desire of management to grow their empire and the track record of management and the Board in acting in a shareholder friendly manner, including returning free cash flow to shareholders via share buy-backs and/or dividends.

The assessment criteria we apply in evaluating potential investments are depicted in the diagram here.



An ideal investment will normally have a number of combined favourable attributes operating together which would illustrate what Charlie Munger of Berkshire Hathaway describes as a Lollapalooza effect (which is a term for factors which will reinforce and greatly amplify each other).

MARGIN OF SAFETY
We will only purchase an investment when there is a sufficient margin of safety. The margin of safety is the discount we require before buying shares of a company. The bigger the assessed discount, the wider is our margin of safety.

The available margin of safety, we believe, is driven, in part, by prevailing market psychology. While not a driver of a company’s quality or intrinsic value, the markets can have a profound, albeit rarely long-term, effect on the pricing of a company’s shares. When short-term issues or concerns are worrying investors or other factors are resulting in excess enthusiasm (that is, irrational exuberance), shares will often be mis-priced relative to intrinsic value. While our process can make us appear to be out of step with trends, investing contrary to consensus thinking has the potential to provide investment opportunities. Understanding where current market sentiment lies and assessing the company within the context of whether the concern or excitement is being appropriately priced, is an important step in investing.

There are some exceptional businesses where the Lollapalooza effect is truly at work and the moat is so wide and the risks are so low that we will invest with a very modest margin of safety. It is more usual to find companies which do not have all the reinforcing factors at play which results in a higher level of risk and requires a higher margin of safety.

Thursday 3 June 2010

Investment Strategies and Theories You Must Know for Greater Investment Success!

Warren Buffett once said, "To invest successfully over a lifetime does not require a stratospheric I.Q., unusual business insight or inside information.  What is needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework."

Posted here are some basic foundations to help you develop your own investment strategy and to help you make better investment decisions.  These are also the investment strategies and theories you must know for greater investment success!


Investment Styles
"Your 'Basic Advantage' is to be able to think for yourself."  Wisdom from Benjamin Graham.

Different Investment Styles
Value Investing
Growth Investing
Core/Blend/Market-oriented
Stock Pickers
Market Capitalisations
Value and Small Cap Stocks
Top-down Approach
Bottom-up Approach
Benchmark Investing vs Absolute Return Investing

Methods of Securities Selection
Fundamental Analysis
Technical Analysis
Techno-fundamental Analysis
Limitations of Fundamental and Technical Analysis

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Investment Strategies and Theories
"You need a strategy and sound approach before you invest."  Anonymous

Short-term Strategies
Short Selling
Margin Investing
Momentum Investing - "Buy High, Sell Higher"
Sideway Trends

Long-term Strategies
Buy and Hold
Dollar-cost Averaging
Ladder Investing

Managing Risk 
Diversification
Danger of Owning Too Many Stocks
Modern Portfolio Theory
Limitations of the Modern Portfolio Theory
Asset Allocation
Criticism of the Asset Allocation Strategy

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Portfolio Management Strategies
"Successful investing is more than buy, hold and forget."  Anonymous


Static Asset Allocation
(i) Buy-and-Hold
(ii) Strategic Asset Allocation

Flexible Allocations
(i) Tactical Asset Allocation
(ii)  Dynamic Asset Allocation

Core-satellite Portfolio Management

Alternative Strategy - A Trader's Approach
Short Term Trading

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Limit Your Losses
"Survive first and make money afterwards."  George Soros


The Evolution of Buy-and-Hold Advice
Efficient Market Hypothesis
Random Walk Theory
Merits of the Buy-and-Hold Method
Weaknesses of the Buy-and-Hold Method

Forgotten History of a Sideways Market
Futile Asset Allocation Strategies

The Easy Way Out?
Transaction Costs
Limitation of Traditional Investment Funds

Market Anomalies
Value Investing
Neglected Stocks
Low-priced Stocks
Small Cap Stocks
Investors' Irrationality

How to Prevent Big Losses
Rule No. 1 - Set and Apply Stop-Loss Rules
Rule No. 2 - Do Your Homework
Rule No. 3 - Look for Margin of Safety
Rule No. 4 - Do Not Bet Too Much at One Go
Rule No. 5 - Do Not Over Diversify
Rule No. 6 - The Trend is Your Friend, Until It Bends
Rule No. 7 - Avoid Deadly "Price Bubbles" When They Pop


Ref:  How to Be a Successful Investor by William Cai