So far 2012 has been a good year for equities, but many potential investors are still scared of the markets and are holding their cash in money market type accounts as a result - earning almost nothing.
Research shows that recent events determine our immediate thinking, and hence the crisis of 2008/9 means many are still very nervous of the stock market. While a new crisis is certainly possible (in fact it is guaranteed at some stage, but nobody knows when), the secret ingredient is time. The local market is already trading above the levels from before the worst financial crisis of our time and investors are doing just fine. The point is that if you have time, and that's five years at a minimum, then a crisis is not the worst thing that can happen to your investments.
In the week ahead we have a live webinar on Tuesday at 13h00 on Investing in debt instruments. Typically one shies away from debt, but it is a viable asset class that has various levels of risk and reward, so the investor is able to find debt to match their risk profile. Importantly, most of these assets trade on the JSE, so they're easy to access and nothing like the CDOs that helped create the recent financial crisis.
In the past week we had a video on International Commodity Futures. From your JSE account you're able to trade a number of US originated futures such as gold, silver, copper, WTI, platinum and a series of agricultural commodities. Being traded on the JSE means we trade them in Rands and they're a great product for traders who are looking for uncorrelated products to trade.
Tuesday 21st at 1pm - Investing in debt instruments
Tuesday 28th at 8pm - Identifying Trading Ranges
Monday 12th at 8pm - Valuations: EV/EBITDA Model (Theory)
Week that was
International Commodity Futures
Valuations: Price to Book Model (practical)
Single Stock Futures (SSFs)
Don't put all your eggs in one basket is a cliché as old as the hills (and there's another one - we're full of them today). Spreading risk is one of the cornerstones of sound investing. For the smaller investor, an Exchange Traded Fund does this perfectly, as the ETF sees you invested in numerous different shares. A larger portfolio could be split between a number of different shares in different sectors. But be careful that you don't over diversify. Investing into 80 different shares means you've essentially just bought the market, but with 80 different purchase transactions the only person making money is your broker. A smart way to diversify is to put a significant portion of your money into an ETF, giving instant diversification and market performance; and then use the rest of your portfolio to select a dozen or so individual stocks to give your market outperformance.
All the best
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