The entry point is very important and can determine the end of your trade both in losses or in profits.
Having a good entry point is the first round in reaching a prosperous trade. What is the entry point? It is actually the price investors have to pay to buy/sell a stock. The exit point, on the other hand, represents the price at which investors exit the trade with loss or in profit.
While the entry point has been extensively examined from the divergence/convergence aspect, the exit point has not got full attention.
Why is that? Well, exits may have hidden tendencies.
But let’s stay on a good entry point.
Traders’ successes or failures depend a lot on trade entries. One wrong entry can destroy your trading, for example. Yes, traders are using stop-loss to lessen the risk in case the market makes big moves. But let’s talk about how the risk-reward potential can be enhanced by a better trade entry.
First of all, never enter the trade when the market is near to extreme highs or lows from the recent position. That fault may ruin your trade. We already have seen traders that decided to enter the trade when the trend broke the final high with the hope that the stock price will continue running up. That was the wrong decision because when the price reaches its highs, in most cases the only way it can go further is down. The price will drop into the previous range. So, you will make a loss. The reason behind this is that markets never move in one direction forever. Especially after the trend reaches extreme highs and lows. If you place the entry point when the trend reaches the highest, it will always result in losses. But if you like to take more risks in trading you can do that but be sure where you want to set the stop-loss to lower your losses when exiting the trade. The wrong entry may occur if you are trying to enter the trade at the point where a large move is, but you are not sure what caused this move is. The direction may shift quickly in the opposite direction and your trade will end in losses.
Reversal strategy for a good entry point
Some traders like to set entry using reversal strategy. What does that mean? In this entry strategy, the traders are taking the trade with the hope that the market will make changes its trends. They are using pivot point levels, so-called Fibonacci levels. This entry is useful only when the market isn’t trending in an obvious, clear direction. Don’t use this in all trading.
The real role of a good entry point
The role of a good entry point is to allow you to identify high probability trades. You need the confirmation that you have an edge by reducing emotions. You need a trading strategy that makes sense and where you can execute entry orders with confidence. It is very important and your good entry point should provide you that. Otherwise, it isn’t good. Eventually, with a good entry point, you are more likely to enter the profit target or stop-loss. And the chance to look for other opportunities is here also. A good entry will help you to repeat your trades and increase your advantage. But don’t be too focused on your entry point. Overoptimizing is never good.
Bottom line
A good entry point is very important for the success of your trade. But the exit point is what will control your profit. So, you will need to optimize it. To be honest, the best way is backtesting and finding out what works best for you. There are two ways to do that. You can use complicated calculations, charting, etc. or you can use Traders Paradise’s unique and simple app for optimizing your exit strategy. It’s up to you.
Remember, all is important. But as you can see, you can enter the trade in many situations but you can end your trade with only two: profit or loss.
Trading is a game, you have to make the best move at the right moment.
Stevie Wonder wrote in his famous song: Very superstitious
Writing’s on the wall
Very superstitious
Ladder’s about to fall
Thirteen-month-old baby
Broke the looking glass
Seven years of bad luck
Good things in your past
Superstition is so live in the stock market that you can barely believe. Imagine that it is Friday 13, just like it was in April, September, and December this year. Some people, especially scientifically-minded, would roll the eyes. But, despite the fact that Friday 13th is just a day in the calendar and it may occur several times in one year, some investors truly believe that it is a bad-luck day.
When enough investors share this foolish belief, stock prices can be changed but not in the investors’ favor.
But do superstitions really affect the stock markets?
Some studies revealed that people are more risk-averse when thinking about Friday13. One study from 2005 discovered that hesitation to do business on this day ends in a loss for the US economy of almost $900 billion. Does this scare affect stock prices? Believe or not, yes.
First superstition: Friday 13th
According to a study, returns on Friday 13th are lower compared with other days.
This Friday 13th effect was broad spread among numerous investors until 1980 but has disappeared. The reason is simple: automated trading erased the “Friday 13th effect”.
But it so funny to talk about Wall Street superstitions. So let’s proceed.
Superstition In the stock market No2:Did you know anything about the witching hour?
Several years ago I found an article written by the man who worked as a broker on Wall Street. I am sorry, I didn’t remember his name. But what I remember is the witching hours are between 2 and 3 PM. Superstition linked to this part of the day (notice, it was on a daily base) was related to market close. If the market sold off at that time, it was a sure sign that the market will be closed on a positive mark. In that interval, from 2 to 3 PM, he and his colleagues were maniacally buying stocks. Just to provide a stronger close.
It worked until it didn’t. They didn’t leave the stats.
Superstition In the Stock Market No3:Sell on Rosh Hashanah and buy on Yom Kippur
The superstition works like this: on Rosh Hashanah, which is the first day of Jewish New Year investors should sell some of their positions and buy them back on Yom Kippur. This year Rosh Hashanah began on the evening of Sunday, September 29 and ended on the evening of Tuesday, October 1.
Do you believe that this trade works? Well, yes. More often than not. But for Jewish. Maybe you should try to sell some of your positions on January 1 or on Christmas or on Islamic New Year. In 2020 it will begin in the evening of Wednesday, August 19 and ends in the evening of Thursday, August 20
But I am not so sure, dates may vary.
Chinese new year will begin on Saturday, January 25, 2020.
Did you know that for one part of Orthodox the New Year actually begins on January, 14? Confused? It is just a calendar. But if it works for Jewish why it doesn’t work for others? There is no reason. The only thing to consider is, do you have to trade according to the Jewish calendar or you can use any.
What I learned during my life is: about superstition and taste is worthless to argue. Take it or leave it.
Superstition No 4: Super Bowl theory
This theory goes that the Dow Jones will have a good year if a National Football Conference (NFC) team wins the Super Bowl. But if the American Football Conference (AFC) team wins it will end the year lower.
For those with a lack of knowledge about American football, the American Football Conference (AFC) and National Football Conference (NFC) are parts of the National Football League (NFL). Honestly, European football is simpler.
From 1967 to 2003 this superstition showed it was accurate 68%. Several years in a row AFC teams were winning the Super Bowl and that was a period of economic growth, but who cares?
Let’s ask the stats.
It was 1967 when one AFC team won the first Super Bowl. During the following period, AFC teams have won 11 times, if you check the stock market result you will be surprised. In 6 of those 11 years, the stock market was dropped. On the other side the stats aren’t so favorable, NFC won Super Bowl more than 30 times and Dow Jones didn’t advance in each of them.
October Effect
This one is a bit harder to rebut.
The October effect is a market anomaly. The stocks tend to decrease during October. Honestly, it is mainly a psychological effect rather than a real wonder. The stats show something different than this theory.
But…
October has this reputation thanks to Panic in 1907, Black Monday, Black Tuesday and Black Thursday in 1929, and Black Monday in 1987.
Black Monday, 1987 that happened on October 19. The Dow fall 22.6% in one day. It was possibly one of the most unlucky days for investors and the stock market.
Despite the scary title, this effect is not statistically exact. From a historical view, October has seen the end of bear markets more than it witnessed the beginnings. But, investors see this month as dangerous and they are selling, and that sentiment creates possibilities to buy on the other side. So, superstition or not, while one sees the end, the other will see the beginning.
Bottom line
Irrationality and superstition in investing will always cause lower returns. Traders, whether they admit it or not, are superstitious. Some will have a happy pen, the other lucky shirt or underwear (hard to believe), some will have some other talisman. Superstition in the stock market is broad spread.
Luckily, many investors and traders are devoted to science, education, and knowledge.
How to know if a stock is worth buying? Let’s assume you are new in this field and how you can decide what stock to buy. For some investors, it is a tricky part. To be honest, it is hard for everyone. The risk is involved, the volatility of stock or market, the investment goal. Everything is on the table. But if you follow some rules connected to the estimation you can figure out how to know if the stock is worth buying. Yes, many people will tell you stock investing is like a wheel of fortune. And they are wrong. Investing is like solving the problem. Everyone has its own way, own style, but the goal is the same: solving a problem.
Prudent investors must enter the stock investing as if they have to solve a problem. Step by step.
Buying stock isn’t like buying a new sofa and when you find it isn’t for your room you can take it back. When you buy stocks, you have to be convinced they will hold their value, increase in value, and you will gain profit when you sell or deliver to you notable dividends over time. The main point is to know when a stock is worth buying.
Look at the price
When you have to decide if some stock is worth buying the first thing you will find is its price. You have to figure out how much the ownership of shares in some companies will cost you.
The amount of money you have in your hands will determine how many shares you can buy but the most important is to know historical data about particular stock prices. If you find the stock has steadily increased over time you will know that you can expect a good value in the future.
Pay attention to revenue growth
Share prices will grow if a company is growing. A company is growing when rising its revenue. Increasing revenue will show you if the company is strong. We can say it is a major indicator often called top line. The important part is not looking at revenue isolated. You have to observe all rise and drops in each quarter and year. And here is the tricky part. The positive trendline is good for the stock price but the revenue may be dropping or be flat and it is important to understand why that is.
You should check the company’s current holdings, projections for future operations and stability. If you hear or read some news, no matter if they are local or even rumors that the company is doing bad, it is better to step back. You wouldn’t like to hold stocks with so much stress. Your money is involved and you could lose everything invested. So, check the company’s revenue, it is easy since almost all companies have their official websites where you can find all this info.
But keep one thing in mind. If it is a temporary situation and historical data shows its stock was good in price that can be good for you to buy a stock at a low price and wait for it to rebound over time.
Some stocks may temporarily drop in price and it can be a good deal to buy them now because they have the potential to recover.
What is the company’s earnings per share
This info is important and you can easily count it. Just divide the leftover amount at the end of each quarter by the number of shares the company has sold, and you get the earnings per share. For example, if a company made $100 million in profits in the prior year and has 52 million shares, the earnings per share is $1.92. As an investor, you should pay attention to this since the higher earnings per share (EPS) shows you that the company is in good shape. And the tricky part again arises. Some companies can manipulate with EPS. The process is simple. They do it by buying back their shares. In that way, they are boosting EPS but not increasing profits.
Use the technical and fundamental analysis to know if a stock is worth buying
You will have some idea about stock’s quality if you check the prices over the past 200 days, for example. And you will see the trends. Trends are repeating.
Analysts think that by observing the movement over a determined period, you can define the baseline, the point where the stock should recover. Here the advice, don’t buy the stock at its highs, wait to come close to the baseline or to hit it. Some may ask how is good stock if hits the baseline. Well, when the stock hits the peak it is expensive, the price is increased, and the stock has no more space to run so the only possible scenario is to go down. If you buy a stock at its peak you will lose your money. So, it isn’t a good time to buy a stock.
Also, perform fundamental analysis. That will show the current and projected financial aspect. Use that info to discover now’s value. Use the company’s statement and balance sheet to determine the business strength. It isn’t a 100% indicator, but it is enough good sign of what you can expect from the company in the foreseeable future.
How to know if a stock is worth buying
One thing is sure and you must have that in mind when you are trying to know if a stock is worth buying.
A company can’t manage every single thing that might affect the business. The general economy can influence the health of a company and its stock play. For example, consumer prices, the changes to interest rates can affect how a company is doing. That is not in connection with its own business. But, the stable economy produces companies’ wealth and share increases come with that. And opposite, share prices can stumble during times of economic uncertainty.
You will find many analysts that issue reports and tips about individual stocks. These tips appear with “buy” or “sell” ratings. But analysts often disagree, so it isn’t recommended to depend on one report. Always compare several to know if a stock is worth buying.
Getting started investing can be very easy and smooth since you need a little money to start. Investing is better than savings accounts because it can shorten the period of earning.
Getting started investing isn’t a big deal, it shouldn’t fright you. Honestly, it’s so easy.
You know what, when I was just a little girl (my grandma used to sing this) my parents gave a lot of effort to teach me how to save money. Grandparents would like to give me money for some holidays with advice to keep it for rainy days. I had my savings account. From time to time, they would put some money there but most of the time they insisted I have to put. And I did it. Not frequently, I have to admit, but still. With time that habit got strong roots. Every month I’d put 10% of my earnings on my savings account. I am still doing the same. That first savings account is my 10%-account.
No matter how big or small portion is. 10% would every time end there.
I can only speak from personal experience but I am sure that other people could easily find themselves in the same situation.
I am not going to give you advice because I know that is almost impossible to put anything on your savings when you are living paycheck to paycheck. Yes, the amount of money that the majority have available to spend every month is insufficient to put something aside. Despite the old saying about money: If you save me today, I’ll save you tomorrow.
But we all know how important is to have something aside. And it is possible. Let me show you how.
How getting started investing
Okay, do you know the rule “pay yourself first”?Yes, starting this is hard. But do you understand the meaning of this rule? Of course, you do but why not tell it again. This means you have to put on your savings every month some amount of money. It doesn’t matter how much it is. A few dollars, or other currency you have. Just when you get your salary, put aside several coins. Every month. And you will see, that amount will grow with time. Try this. I am not going to tell you how should you spend this money. You may have enough for exotic travel, or to buy a car, or after some time you may have enough for house buying deposit. Just start.
No, I will never tell you to live below your means.
Sacrificing isn’t a good way to save anything except life. If you try this method, living below your means, you will be unhappy and you will always have the feeling that something was taken from you. It can be a trigger for something more serious. But, anyway, try not to purchase the famous brands, too expensive things. Do it occasionally if it makes you happy. But don’t let it be your goal. Life is a lot more than brands.
Create a budget
What you can do is to make a budget frame. It is a smart idea to write down the amount of money you have every month. You can do that in some excel spreadsheet, or just in some memo. Also, there is a lot of money management apps you can use. OK, that’s the first step. The next is to subtract all the costs you have, for example, taxes, debts, loans if you have (don’t worry, we all have), etc. What you have in your hands after these deductions is your net income. This is the amount you have to use as a base for creating your budget. So, track your spending to be able to make some adjustments if it is necessary and possible, of course. You should review your budget from time to time to be sure you are on a good track.
Getting started investing
Do you know that your money can work for you? Yes. Let’s assume that after one year of saving you have enough for exotic travel. Why do you need to make it right now? Go somewhere else and save e.g. $1.000 on your trip. That amount is more than enough for getting started off investing. You can do that with less money, here you will find how. You can choose to invest in some mutual funds (it is probably the best for starting), or stocks, or real estate. By investing you will generate a greater return than your money sleeping in your savings account. If you invest in something you will let your money work for you. The whole process may be done with your banker’s help. Your bank has financial advisors, investment advisors, they will tell you where to invest. Or you can engage some brokers.
What are the advantages of investing
One of the main advantages of investment is that you can have your money work for you to earn more. Let’s say this way. You don’t need to work more to earn more. Your investment will that for you. Investing could bring you a higher living standard, for example.
Further, you can apply investment plans for saving and growing money. The best part of investing is that you can be a long-term investor and money earned from investments can be spent to cover future expenses, for example, for your retirement, or buying a house, new car, your children’s higher education costs, or just you want to have more.
It is important for you to understand that investing isn’t gambling.
You can make a profit on investment due to research and careful choice of a suitable investment vehicle. It isn’t betting. The truth is that you can make losses in the market. That’s the reason to make less risky investments. Never mind if they have lower returns. Stay on them until you find yourselves capable to play riskier. That time may never come. You can stay in safe investments for your whole life. It is OK.
In that way, you will protect your property in the long run.
So, you can see that getting started investing isn’t always the hardest part. It can be very easy and smooth. You just need a little money to start. At least if you have some targeted amount you have to save in some period, investing will short that period. You’ll be able to gain it sooner. Sounds good, don’t you think?
A stock bull market means that investment’s price rises over a long period. Investors’ faith in stock prices lead the prices themselves in a self-fulfilling prediction. A bull market means profits for investors who own stocks.
What exactly is a bull market? If you are like me several years ago, you are confused with all these terms, conditions, maths, evaluations, or estimations of the stock market.
May I be honest with you?
The truth is that I know nothing about the stock market when I entered. I was foolish, I know. But my desire to earn, to be investor was something I never have had before. It was like this…
A personal story
A friend of mine had a grandfather. Extremely interesting figure. He came from Italy to the US as a kid. OMG, he was just 12 when he bought a ticket and came with nothing except dreams about fortune. To shorten this story, after several years of struggling he made his first success. He became a clerk in the office of some broker. Step by step, that wonderful man became very rich. People, listen. Very rich!
I wanted the same. ASAP! I asked him for the recipe. Oh, how I would like I never did such a thing! The first lesson was: You know nothing, have to learn a lot. C’mon, man! Give me something else to start. I thought I know everything. I have just finished university. With a diploma in the hands, I thought I know everything possible about anything. Of course, I was wrong.
That blessed man told me I had to learn. How to, where to go? I spoke with some friends. No help. So, I decided to start. I found a broker, put some money (not a lot) on my trading account, and started to find a stock. That was a nightmare! My first trade was totally a disaster! I placed another trade. The result was the same. In two trades I lost everything.
Ok, at least I tried. Then I went back to my friend’s grandfather and asked him to teach me.
“You get your first lesson, my son.”
OK, I understand. I have to go for basic. And I started to learn. You must learn to have a chance to earn.
The bull market was the point where I started. I can’t explain why, but I felt I needed to know what it is.
The term “bull market” indicates a stock market is rising. Of course, every single investor supposes the market to rise. Better say, has a hope it will rise. But having only hope means to stand in the mud. You can slide in a moment and fall. Having my previous experience in the mind, I needed more facts.
Nice from this zoological term
So, I learned that the bull market occurs when the prices rise for 20% or more.
Further, I learned that a bull market systematically produces higher highs and higher lows. A stock bull market happens in a strong economy. Nice again, thanks bulls. But what can drive a stock bull market, that I wanted to know?
And I found (with a little help from my friend) that great revenue, profit, and P/E ratio are the most important.
The revenue should be in line with the economy, meaning revenue should grow by the speed of economic growth. Here is some interesting part. As consumers spend more on goods and services rise the economy will rise. Super!
And I came to the companies profit.
The revenue must generate profit.
But some knowledge defeated me. I thought that great profit is a wonderful thing and it is good when the company can generate more profit from the same revenue money. But it is not so simple.
And the P/E ratio! The stock price is just the amount of money it will cost to buy a share of a company. But stock prices can vary. If the demand for the stock rise, its price will rise too. The P/E ratio estimates the relationship between a stock price and its earnings per share.
I was confused just as you are now, I believe.
In a bull market
In a bull market, you’ll notice powerful demand and limited supply for securities. This means that more investors want to buy securities and less want to sell. What will happen? The stock price will rise, right. Let’s go further! Let’s observe investors’ psychology.
In the stock bull market condition, investors have the hope of earning a profit. They are positive and optimistic. Oh, how I wanted to have that experience. Instead, I was scared to death. I needed more knowledge to sure what I am doing. My first trade was so stressful and, by the way, I wanted to show my older friend that I can learn.
In the periods of the bull market, people have more money.
And they are spending. In turn, it stimulates the economy to grow. My old friend told me something important and let me share that with you.
When it is the bull market, you should buy stocks in the early stage, while they are not too expensive. As the price goes up, just wait for its peaks and sell your stocks. And don’t worry if there are some losses in price. It is temporary. Just invest in more stocks with a higher chance of getting a bigger return. I am grateful to him for this lesson. But there was one piece of advice that sounded the most important to me: “Play the market like toreador plays his wonderful performance in the arena. Peaceful, with confidence, elegant. Tickling the bull. You have to know where the limits are, don’t get surprised.”
The U.S. Treasury announced in a Saturday statement that the administration “is not contemplating blocking Chinese companies from listing shares on U.S. stock exchanges at this time.” Following this news, Dow Jones futures grew a bit on Sunday evening, the same happened with S&P 500 futures and Nasdaq futures.
Only one day before, Bloomberg reported the Trump administration is thinking about limiting the exposure of US investment to China. Such a decision would have an impact on public pension funds’ exposure to China’s market and limitation for Chinese companies in main stock indexes.
The information about delisting Chinese stocks from U.S. exchanges frightened investors. The consequences of the trade war spillover were that Alibaba stock dropped 5.1%, slipping through its 50-day and 200-day moving averages. JD.com stock dropped 6% to a bit over its 200-day. Two Chinese IPOs, Pinduoduo slipped 4.2% and Huya stock 9.4% due to trade war spillover. New Oriental Education stock, dropped 6.55%, which is under its 50-day line.
Beijing described possible limitations on U.S. investments in China “the latest attempt at a decoupling,” published in Global Times on Sunday. All reports of Chinese state-owned media stated that the delisting Chinese companies from US stock exchanges would have deep impact on both, Chinese and US economies.
Monica Crowley’s, U.S. Treasury assistant secretary for public affairs, stated this weekend that US administration is not thinking to block Chinese companies: “We welcome investment in the United States.”
The trade war between the US and China lasts almost one year. The next round of discussions will be held one week after China’s National Holiday, 70th anniversary of the founding of the People’s Republic of China on October 1.
The Chinese economy is the second-largest in the world. Its progress in the field of artificial intelligence and chips is notable. Also, robotics, 5G, energy storage could lead China to be the most powerful in advanced technologies.
What to watch in the stock market in the week ahead?
The next few days will produce some earnings releases, which could give some individual stocks moving.
Its earnings report appear this week. It looks that Costco had benefit throughout the quarter. The analysts estimated they have earnings of around $2.54 per share. Last year it was $2.36. So, the expectations are a 7.6% increase.
Costco will reveal its results on Thursday. The investors are expecting to see good news. This warehouse retailing giant has enjoyed a nice increase in customer traffic lately. In the fiscal fourth quarter, it grew 6% in the U.S. market and over its global sales.
This company’s earnings release will be revealed on October 1.
Its stock has dropped more than half of its value during the past 12 months. But this online service that gives clothing services has built solid annual income growth in the past 3 years.
Client numbers rose 16.6% in the fiscal third quarter. This is, of course, assuming Stitch Fix keeps its pricing in check. The analysts estimate is calling for $0.04 per share this week. Good news for shareholders.
The company’s earnings release will be public on October 3.
The company has succeeded to keep a very constant sales trend within an alcohol industry. In the last 5 years, Constellation Brands has grown its earnings from sales. Its investment in Canopy Growth was a weak move since the Canopy didn’t show some good results this year. But the company’s beer segment may show better condition. For now, that is the best part of Constellation Brands’ business.
The value of investments is falling and you are worried. Don’t be, it’s normal from time to time but also, you may profit from it. Let me explain this.
In stock investing, you have to respect a few general facts. You may face the value of investments fall, as first. What you have to do? To find the reason behind. When you determine the reason you will have a powerful weapon in your hands: you will be able to decide should you sell or hold your stocks. Moreover, you’ll be able to buy a new stock of shares. Well, you can see it isn’t the end of the world. Just think about other opportunities and try not to panic.
So, when (notice there is nor “IF”) the value of investments falls, don’t jump immediately to sell them. Yes, the news comes, but just stay cool because it can be temporary. Do you know how many investors lost their fortune reacting impulsively?
It is painful to watch at stocks are falling in price, that’s true. But take a closer look at historical data of stock you hold. Maybe you can notice some patterns. When and why their value has had fallen before?
When the value of investments is falling, identify the pattern
Yes, it is very important to identify the pattern.
Past performances don’t guarantee the future behave but at some point, you will figure out the causality. Most stocks respond to market movements in a logical pattern. And you’ll be ready for the next move.
Besides, just looking at the charts can make you more nervous. You must have more information. You must have a clear picture of how the whole industry is performing. Industry in which your beneficial company is working, of course. You are holding its stocks and you have to know something about the sector it is working on. What is about the overall market appearance, what is happening there? Is the market volatile maybe? Moreover, did you read at least one quarterly report from the company whose stocks you hold?
The value of investments is falling don’t get panicked
Okay, let’s talk about this a bit more. Let’s assume you have all the info. So, what would you do with this?
The key is to recognize what forces the value of your investments to fall. If you cannot identify the reason behind, you should exit your position.
Sometimes the gap in the market can cause the value of investments to fall. Or it can happen due to the market’s weakness. If you find this case, you should stay in a position. It isn’t rocket science, it is just market: supply and demand relationship. If you are on the market it is reasonable to have a diversified portfolio, right? This is very important, especially in today’s market. A diversified portfolio will produce a positive return to you. But more importantly, it will allow you to have a return higher than the inflation rate is. So, if you are a long-term investor, just stay cool when the value of investments is falling. Your investment horizon is what is really important.
Temporary drops shouldn’t concern you.
The question is, what is the main goal of any investing strategy? To gain returns bigger than the overall market for some level of risk. It is always a good concept to check how the performance of your stock is in comparison to the overall market.
But what if the value of investments is falling suddenly and it different from past performances? The company is still good as it was when you bought your stock! Think! Maybe the reason for the value of investments falling is exactly there. The company is too good and maybe many investors are willing to buy a stake of its shares. If you are not among them, leave your position and invest in some other company.
Investors are worried due to the economic recession. Traders have invested a huge capital into bonds over the past 3 months. Actually, they invested a record $155 billion into bond funds during the past three months.
So, what’s going on? This activity shows that traders and investors are looking for safe assets and the global crisis is on the door. Traders are purchasing sovereign debts. If they continue as it seems they will, we can be pretty sure we will have a huge recession. This trend isn’t good.
Investors prefer bonds as increased global economic difficulty induces a need for safety.
According to data collected by Bank of America Merrill Lynch, investors put a record $155 billion into bonds during the last three months. And we all know what is the safest investment when crisis knocks on the door. The government bonds are the safest assets.
Worries expressed in money
In just one week, the week behind, the bonds lured $7.1 billion. For one week only. By the way, it was one of the biggest inflows ever.
Investors have a risk aversion. They don’t like to see their capital is at risk. And as they recognized the symptoms of this financial illness called the economic recession they started to invest in safer bonds. But their action caused another problem. Everyone in the markets feels anxiety, the trade tensions are rising along with worries the global economy is worsening.
The markets are volatile and everyone would like to put money in assets that perform better during the crisis.
“What we’re seeing from a risk standpoint at this point in the market is really investors that are seeking haven in longer duration US treasuries,” Charlie Ripley, a senior investment strategist for Allianz Investment Management, said Markets Insider in the interview.
What does stand behind this traders’ action?
Fear! Fear of a coming economic recession. Fear is a powerful force. And that fear is caused by an inverted yield curve. It appears for the first time since 2007, and traders and economists noticed it several days ago.
That’s important because such an inversion has happened before every economic recession since 1950.
The yield curve is inverted again. Meanwhile, China ramped up its trade war with the US. The previous developments in trade war have pushed companies of an economic slowdown. The new situation added more stress to investors.
Trump’s “Sorry”?
President Donald Trump, at a press conference at the Group of Seven summit in Biarritz, France, said he was not concerned that his more volatile attitude toward China would threaten stability in the global economy.
“Sorry! It’s the way I negotiate,” he told reporters. “It’s done very well for me over the years. It’s doing very well for the country.”
This comment occurred after a woozy week of economic announcements from the White House. These reports have caused uncertainty among businesses and investors.
Trump said that China asked the US to restart consultations and negotiations. He also said about President Xi Jinping that he is “a great leader who happens to be a brilliant man”. Yes, only a few days before, he called him “enemy”.
The Global Times, an organ of the Chinese Communist Party, also disputed Trump’s enthusiasm.
“Based on what I know, Chinese and US top negotiators didn’t hold phone talks in recent days,” the Global Times editor Hu Xijin wrote in a tweet. “The two sides have been keeping contact at the technical level, it doesn’t have significance that President Trump suggested. China didn’t change its position. China won’t cave to US pressure.”
All of this caused great uncertainty among investors. We will follow what is next.
Startups and corporate venture capital are yet underestimated and discredited category. The entrepreneurs are broadly seen as capricious and attached with dishonest strings. In some people’s minds, startups take the money and have protection from a powerful partner.
Is it true in real life?
Some researches show that corporates are becoming more skilled at working with startups. It is a kind of out-sourcing. The fact is, big companies invested more than $50 billion last year into startups. The year before their investment was about $36 billion.
It’s similar to Europe. You can read about very powerful companies like Bosh or Daimler that investing in innovative startups. The point is to stay in the game and it is easier to financially support some small startup than to develop the whole new section inside the corporation.
Many big companies began as startups
For example, Lyft is one of those startups, also Monzo, Bolt, etc. You just have to look at the giant’s investment portfolios.
But, it isn’t the main subject. It is good to have such big corporations ready to invest in venture capital. The problem is if you are an entrepreneur, which company is ready to invest in your business, what is their interest, how to contact them. If you want to invest in Europe you will need some valuable information. So, Traders-Paradise recommends Dealroom, where you can find fantastic data.
We will present you with the list of three but with the promise that we will update.
Robert Bosch Venture Capital
Its headquarters are in Stuttgart, Germany. As the sub-organization of Robert Bosch, it is normal that engineering technology is their focus. Its investments in AutoAI, Actility, Movidius, etc are well-known. With offices in Stuttgart, Frankfurt (both Germany) and Tel Aviv, Shanghai, and Sunnyvale in California, US we can say it covers almost all continents.
The company says about itself:
“With offices in Europe, Silicon Valley, China, and Israel, we are working with Deep-tech companies worldwide. Having our investment sweet spot at an early stage we are also looking into later-stage companies, as well as seed-stage in selected cases. We prefer to syndicate our investments with existing or new investors in the company and can take the lead, co-lead or follow as necessary. Beyond the financial commitment, startups receive access to our vast network and support in commercial collaborations. Up to EUR 15m per company for 5-25%, Equity Position and 100% Commitment”
When they are investing in startups and venture capital their focus is on AI/Deep Learning, IoT, Distributed Ledgers, Analytics, Next Generation Computer Architecture, AR / VR, Mobility Solutions, Autonomous Driving, as we found on their website.
Novartis Ventures is one of the startups
Their headquarters are in Basel, Switzerland and they operate as sub-organization of Novartis, a multinational pharmaceutical company also based in Basel. They already have been invested in Nabriva Therapeutics, Proteus Digital Health, Galera Therapeutics, etc.
The essence of their investment strategy we found on their website:
“Our primary focus is on the development of novel therapeutics and platforms. In our investments, we look for unmet needs and clinical impact, novel proprietary science, and understanding of the mechanism, management, and board experience and capital efficiency in the program. Foster innovation, drive significant patient benefit and generate superior returns by creating and investing in innovative life science companies. NVF is stage agnostic, engaging in investments from seed- to later-stage life sciences companies across Biotechnology/Biopharma. NVF manages over $800m in committed capital and more than 40 portfolio companies across North America, Europe, Israel, and Asia/Pacific. We invest in North America, Europe, Israel, and Asia/Pacific with approximately USD 800 million under management in committed capital and more than 40 portfolio companies. We continue our strategy of making larger focused investments and anticipate total investments up to USD 30 million per company over its life. We make equity investments in Biotechnology/Biopharma life sciences companies. NVF is stage agnostic and engages in seed investments as well as later-stage investments. We typically lead or co-lead an investment and play an active role on company boards.”
So, you can see that health is their focus while investing in startups.
Swisscom Ventures
With headquarters in Zurich, Switzerland operates as a sub-organization of Swisscom. Their business focus is on communications. Since now, they have already invested in startups like SimpliVity, Symetis, Quantenna Communications.
What they say about their investment strategy Traders-Paradise found on their official website:
“We are investing in Swiss and global technologies to foster digital transformation. More than 40,000 new companies are set up in Switzerland every year. We look in particular at the Swiss high-tech companies and University Spin-offs as they are fundamental contributors to the economic growth and innovation of Switzerland. We are typically leading or co-leading financing rounds from the early beginning and also take board seats. As a strategic investor, we offer entrepreneurs to access a broad range of portfolio services in addition to financial support. Those comprise the use of Swisscom’s technical infrastructure but also access to market channels and key experts in the lines of Business.”
They say about their investment focus:
“Artificial Intelligence – Digital applications utilizing artificial intelligence technologies and that are deployable across various industry sectors including data-driven internet services
Cybersecurity – Advanced applications and tools to protect the integrity of networks, programs and data from attack, damage or unauthorized access
Telecom and IT Infrastructure – Next-generation IT and cloud technologies that constitute the backbone and underlying enabler to the digital transformation comprising software, hardware, and services”
How to start up your own bussines
Just take a look at the list of supported startups and you will see how good is to have the strong arms behind you when starting your own business. Sometimes it looks really hard to find an investor to give life to your good idea. But, did you try? How many contacts you have? On how many doors were you knocked?
Just don’t sit in your room and don’t cry how nobody understands you.
Take the initiative. Be proactive! And have confidence in your abilities. Who never try, never knows. Try! And the door will open to you. Find an investor!
Traders-Paradise will update the valuable information of this kind.
Have you ever asked yourself who are the best Australian investors of all time? We are going to introduce you just a few of them. They are the best Australian investors of all time. They are unique, specific and extraordinary.
Richard “Dick” Fish
Richard “Dick” Fish, one of the best Australian investors
Richard “Dick” Fish is one of the best Australian investors. He is retired now, but while he was an active trader, he was a legendary pairs trader.
He holds a 10-year track record that is extraordinary and no one has such record before.
He was trading over Listed Investment Company, so-called LIC.
LIC is a listed investment vehicle that gives investors access to a diversified portfolio of shares in some other companies also listed on the stock market. LICs are listed on the ASX.
Richard “Dick” Fish had a very specific and risky strategy of the fund. How does this fund’s strategy operate?
The fund performs this by trading pairs of stocks. They are betting on one and betting against another (well-known shorting). The returns are provided based on how the stocks perform relative to one another.
Here’s an example.
A pairs trader saw that company ABC was a better stock than the company XYZ. So the trader would take a long position in ABC shares and short sell XYZ.
If the market fails off and both shares drop, the trader will still make a profit if XYZ falls more than ABC, because the short position profits will be larger than the loss of keeping the ABC shares.
If the market grows and ABC earns more than XYZ, again the trader will profit because the gains in the “long” ABC position will more than cover the losses from betting against XYZ.
In short, if both stocks are moving in the proper direction, that is ideal, but the investor will make a profit even if just one stock goes up.
This strategy is extremely risky but Richard “Dick” Fish was the master of this game.
The “pairs trading”, is a risky way to make money but very powerful when it serves.
The downside, of course, is that both stocks could move in the opposite direction to what was formerly expected.
The strategy is liberated from the limitations of an index benchmark and the vagaries of global markets.
This the reason why this strategy is defined as stock-picking in its absolute form.
“It sounds trite, but investing is simple and one way of simplifying it is to take out the risk you can’t control,” said Fish.
Sam Shepherd
Sam Shepherd, one of the best Australian investors
The LIC was managed by Richard Fish and Sam Shepherd who were the fund managers behind the highly successful Bennelong Long Short Equity Fund. That fund produced annual net returns of 18.14% between February 2002 and September 2015. The fund was only open to institutional investors.
Sam Shepherd joined the team in May 2012, after 21 years of Australian equities experience.
Just before he joined the Bennelong Long Short Equity Fund, he was Head of the Melbourne institutional equities desk for Credit Suisse. On this position, he held the research sales, account management, and execution. Earlier, Sam Shepherd was a sales trader and research salesman at JP Morgan.
The first seven years of his career he worked at Norwich Investment Management. He was a dealer, analyst, and portfolio manager. Sam Shepherd has a Bachelor of Commerce and a Graduate Diploma in Applied Finance and Investment.
Portfolio Manager, Sam Shepherd, retained portfolio management responsibilities and the management of the team after Richard “Dick” Fish departure. Sam has 24 years of Australian equities experience, with the last five workings alongside Richard at Bennelong Long Short Equity Management (BLSEM).
Led by Sam Shepherd, BLSEM has a highly experienced team.
On BLSM official website we found
“There is no change in the approach to the day-to-day management of the portfolio. Portfolio management is clearly defined and is managed in a highly disciplined way. Decision making is team-based, and that has been the case for a number of years.”
Richard “Dick” Fish and his business partner Sam Shepherd are an Australian investors dream-team.
Kerr Neilson
Kerr Neilson, one of the best Australian investors
Kerr Neilson is an Australian investment manager, the co-founder and managing director of Platinum Asset Management. He was born in Johannesburg, South Africa and earned a Bachelor of Commerce degree from the University of Cape Town. Also, one of the best Australian investors.
Neilson began his financial management job in the investments division of Courtaulds in London.
But he returned to South Africa in 1973. Ten years later he moved to Australia to become the head of retail funds management for Bankers Trust Australia. Today it is BT Australia.
Georg Soros provided him initial backing to establish the Platinum Asset Management fund in 1994.
Platinum concentrates in international equities and has an estimated $US16 billion in funds under management. Kerr Neilson is a managing director and portfolio manager.
In 2007, Neilson set 20% of Platinum Asset Management on the Australian Stock Exchange. The 57% of the company’s shares he held were valued at A$2.9 billion. That made him one of Australia’s wealthiest people.
Neilson is frequently compared to Warren Buffett for his talent to consistently pick high-performing stocks.
However, in business, not everything is spring and flowers. Bad results during 2012 produced a 16% drop in net profit, essentially due to a 14% decrease in investment income. Neilsen was forced to abstain from a bonus and an increase in his salary. As the major shareholder of Platinum, Neilsen yields A$42 million in dividends during 2012.
The accent was on renewing the prosperous investment strategy he had used before. This required structuring portfolios of the companies that were experiencing change or mispricing. The reasons can be different, the temporary factors or biases practiced by market participants.
By investing in such companies around the world, Platinum held really differentiated portfolios and delivered excellent investment returns.
When his investment philosophy was totally implanted within the team, he resigned as the Chief Investment Officer in 2013. Over time Kerr Neilson stepped out of his various duties and delegate them to other global portfolio managers in the team. With the full approval of the Board, Neilson handed over the role of Chief Executive Officer of the Platinum Group to Andrew Clifford in 2018.
Proceeding to work as a full-time executive director of the Platinum Group and a member of Platinum’s investment team, he is completely involved in the business.
Robert Dobson Millner, one of the best Australian investors
Robert Dobson Millner was born 4 September 1950.
After leaving the school he acted as a stockbroker for two years. Almost 14 years he farmed in Cowra, New South Wales. In 1984 he entered the family business, Washington H.Soul Pattinson, as a manager. In 1997 he was named deputy chairman of Souls and since 1999 he has been Chairman of the company.
He is the leader of many big Australian organizations. For example, he is chairman of Washington H. Soul Pattinson, as we mentioned, further, New Hope Coal, Brickworks Limited, Choiseul Investments, and NBN Television.
Robert D. Millner is a director of Milton Corporation Limited since 1998 and appointed chairman in 2002. Chairman of the Investment and Remuneration Committees. Millner has vast experience in the investment industry.
Milton Corporation Limited is a publicly owned investment manager. The firm conducts separate portfolios. It invests in the public equity and fixed income markets of Australia. The company also invests in trusts, real estate, and mortgages. Milton Corporation Limited was founded in 1938 and is based in Sydney, Australia.
He is been called the hardest-working man in corporate Australia.
Robert D. Millner is also the head of Pitt Capital Partners Ltd. It provides business consulting and advisory services. The Company offers a range of corporate finance advisory services in relation to mergers and acquisitions, equity capital markets, private equity, restructures, and debt funding. Pitt Capital serves customers over Australia.
