Monthly Archives: December 2016
Fundamental analysis and technical analysis are the two valuable tools available to the investor. Technical analysis is now well established as a technique and yet there remains a bias against it despite ample evidence for its value as an investment tool. In my experience to get the best result as an investor needs to take advantage of both fundamental analysis and technical analysis.
An important application of technical analysis is its use in timing the market. There are two components to timing the market.
- To control market risk. Which simply means that an investor avoids buying stocks in a bear market or during a market correction.
- To control specific risk. Specific risk refers to the risk associated with a specific stock. If an investor uses technical analysis to avoid buying stocks which are in a downtrend, then specific risk is significantly reduced.
Perhaps one reason that investors do not use… Continue reading
Investors who have interests in offshore securities or travel overseas need to be aware of trends in the Australian dollar (AUD). The value of the AUD is affected by a variety of factors. The more important of these are interest rates, commodity prices, the strength of the United States dollar (USD) and the Chinese economy. But other factors include national growth numbers, consumer and business confidence, labour and housing markets, the equity and bond markets and inflation figures, all of which contribute to the valuation of the AUD.
It can be seen from the monthly chart of the AUD below, that the AUD has fallen significantly from its high of $1.10 against the USD. At its current value of 71 cents it is now at about its long-term average so there is considerable room for further falls when one considers that most of the factors that affect the value… Continue reading
Many people find that after some failed attempts at investing they make the decision to give up and turn their funds over to a professional investment manager. This is even though the performance of the professionals is poor, with more than 70% of fund managers underperforming their benchmark over a five-year period.
By contrast, the small investor has the advantage that he/she can move quickly, invest in small cap stocks which potentially provide much higher returns and can avoid being invested during a bear market. So potentially the small investors can do better than most professionals so why do so many small investors fail? There are three things that prevent the novice investor from succeeding
Lack of planning. Surveys show that about 70% of investor have no investment plan. The first essential is to have a plan which when implemented provides not only the roadmap but also the discipline… Continue reading