After the global financial crisis, many investment portfolios were badly hit and many fortunes were greatly dented. However, there were people who made a big pile of money when they started to invest around March 2009. Nobody knew that it was the bottom of the bear market.
So how do we decide when to buy low and sell high? What do we look at before we decide to invest our hard earned money?
We at IPP, use the acrynom “VEST” to study the markets.
V is for VALUATION. The market valuation tells us whether it is is under valued, over valued or reasonnably valued over the a 6 to 12 months period and over a three year period. This valuation will indicate the probability of the equities returning above, at or below the historical average.
E is for ECONOMIC DATA. The Economic Data tells us the health of the countries that we are investing in. We can look at GDP figures, unemployment rates, inflation figures and interest rates. These figures will generally affect overall sentiments in the markets.
S is for SENTIMENT. Market sentiment will generally react negatively when economic data is discouraging. High inflation rates will hit consumers pockets affecting sentiment. Weak but recovering sentiment will boost the markets in the absence of any sudden shocks like terrorist attacks, civil wars or great natural disasters.
T is for TECHNICAL ANALYSIS. Using various technical charts to plot the trend of the investment markets does help but it is not a fail safe method. It does gives a general guideline of where the markets are heading in a trend up or trend down situation. Good and reliable technical charts does help fund managers make wise decisions which we the layman do not have access to.
Do not gamble your money away by listening to friends who tells you to buy certain stocks and shares for a quick profit. Yes, sometimes they may be right, but when they are wrong, can you afford to lose?
Investment is about returns versus the risk taken. Be aware of your risk appetite before you invest, Your tine horizon is also very crucial in deciding whether to invest or not. Keep liquid cash of at least 6 months of your income to buffer any financial storm in your income.
Most importantly, consult your trusted independent financial advisor before plunging head on into the investment market hoping to make a fast buck.
No independent financial advisor? No worries, just give me a call at 90011082 for a non obligatory discussion on whether you should invest or not.