Tag: Portfolio

All investing and trading portfolio articles are found here. Educative, informative and written clearly.

Asset Allocation Models – Protect Your Investment

Here is how to protect your investment with different models of asset allocation

By Guy Avtalyon

Asset allocation models are the way to split your investment into different asset classes: stocks, mutual funds, bonds, private equity, etc. That will give you the possibility to lessen the risk of your investment. Every asset class carries some level of risk but different. For example, if the value of bonds rises, the stocks will fall. When the market is falling, real estate may provide you a nice return.

The point is to have a diversified portfolio built by the asset allocation model among asset classes. Every investor has its own model of asset allocation. It is based on individual investing goals and risk tolerance.

Also, personal asset classes can be separated into different sectors.

You can use different types of asset allocation models.

Asset allocation model created by your needs

For example, for some investors equities are more favorable than other asset classes. Or if you are in serious ages you may prefer to put your money in some source of fixed income that can provide you stable retirement income because your goal is to save what you earned during your working life. Thus, you are not worried about market fluctuations. So, you may have the majority of your portfolio in stocks.
But if you are a younger investor you may prefer some investment with faster returns.

What are the different models

Most asset allocation models come into four models: growth, preservation of capital, income, balanced.

The growth asset allocation model is suitable for beginners interested in long-term investments. If you are at the beginning of your professional career you will be interested to deposit some amount every year in long-term investment such as common stocks that may not pay you dividends but can be good in the long run. Fund managers could advise you to invest in some foreign equities to diversify your portfolio.

But if you want to preserve your capital you will like some other model of asset allocation, like preservation of capital. This model will suit you if you want to avoid risk to lose even a small part of your investment because you would like to use it in the next 12 months, for example, to buy a house. In this case, your investment portfolio will have about 80% in treasuries or commercial papers. There is some risk in this model of asset allocation due to the inflation that can lessen your buying power. Think about that.

Income as an asset allocation model

The usual income investor comes from a group of people near retirement because the need for cash in hand is of essential importance.

The balanced model of asset allocation is kind of halfway between income and growth. It is a compromise between long-term growth and current income. This mixture of assets that can provide cash but also the growth of principal value.

Balanced portfolios is built of medium-term investment and stocks of well-established companies.

The investor’s needs may change during the time.

The asset allocation will follow that change. For that reason, it is always smart to switch a portion of your investments before the important life changes. Do it occasionally. For example, you could move 10% of your investments to the income allocation model yearly as you are approaching retirement. So, you will have the whole of your portfolio adjusted to your new goals.

8th September 2019
How to structure your stock portfolio?

The structure of the investment portfolio depends on many factors but risk appetite is maybe the most influential one.

By Guy Avtalyon

How to structure your stock portfolio? The answer to that question depends on your attitude to risk. Here are three sample portfolios.

What is the best structure of a portfolio?

Laith Khalaf, a senior analyst at UK wealth adviser Hargreaves Lansdown suggests this model of your stock portfolio structure:

Adventurous investor
20%: JPM Emerging Markets
20%: Legal & General International Index
20%: Man GLG Japan CoreAlpha
20%: Threadneedle European Select
20%: Standard Life Global Smaller Companies

Balanced investor:
20%: Invesco Perpetual Tactical Bond
25%: Newton Global Income
10%: Stewart Investors Asia Pacific Leaders
25%: Legal & General UK Index
20%: Baillie Gifford Managed

Conservative investor:
25%: Newton Real Return
20%: Investor Perpetual Tactical Bond
10%: Legal & General Global Inflation-Linked Bond
20%: Threadneedle Equity Income
25%: Troy Trojan

How you will structure your portfolio depends on are you a defensive, middle-of-the-road, or aggressive investor. This will partly determine where you invest.

What is a portfolio structure?

The portfolio construction is the process of organizing your investments as a whole, rather than piecemeal.

How can you have the best chance of constructing a portfolio that meets your investment goals?

At a broader level, portfolio construction should be about structuring your portfolio in a way that stands the best chance of meeting you have stated investment aims within your acceptable level of risk.

But be careful, well thought out structuring of your assets will have an enormous impact on your long-term wealth creation. Conversely, the wrong structure could cost you in both ongoing charges or unexpected tax liability.

What factors do you have to consider in deciding on the combination of stocks, bonds, and perhaps commodities to use in building up your retirement portfolio?

Let’s say that the further one is from retirement, the more risk one can take. Thus at 30, you might have a portfolio of 70% stocks, and 30% bonds. At 50, the ratio might be half stocks and half bonds and at 70, 70% bonds and 30% stocks.

This model of stock portfolio structure allows for a more predictable and more stable income from bonds. But it does not take into account the characteristics of the individual or the nature of the stocks and bonds. Moreover, not all stocks are equal.

Structure of the stock portfolio based on risk tolerance

Find how the structure of the stock portfolio matches your risk tolerance.

If your stock portfolio at 30 or 50 is loaded with, for example, half small caps with no dividends, mining stocks with low dividends then the need for bonds is higher. Or if the bond portion of a portfolio is loaded with high-yield bonds subordinated debt, the fixed-income portfolio needs to be rebuilt for security.

As we move from working years during which it is possible to raise savings and make up for investment losses into retirement, the need to cut volatility grows. A mixture of short and long government bonds and corporate bonds can’t compete with the potential of small companies’ stocks to rise. But it does have fundamental security.

But you can implement some other model of structuring your portfolio. For example, you can buy stocks from developed and emerging markets around the world. And you can own real estate through a low-fee fund as a part of your portfolio.

If you live in the USA, Treasury inflation-protected securities, or TIPS are a very good choice. Some of these parts will possibly increase and drop and increase again. It will happen at different times and at different rates. So you can rebalance at least once a year to maintain your target allocation in your portfolio.

David Swensen, chief investment officer, Yale University suggests this, take a look at the image below.

How do the fees influence the structure of the stock portfolio

Fees can make terrible damage to your investment returns.

Even if you hold the higher-risk, but also, higher-return asset classes. In case of, for example, stocks, you can expect high but one-digit or low double-digit returns over a long time. In fact, Swensen said you can end up losing more than half of your returns. The math is simple, you’ll have to pay 1% for your financial advisor, the additional costs are mutual funds fees which are approximately 1-2%. Finally, you’ll have to adjust your returns for the percentage of inflation.

The odds, he said, are in favor of index funds. In his opinion, very-low-fee index funds make the most sense for individual investors.

When it comes to investing there is no such thing as one size fits all.

Speaking about how to structure your stock portfolio, your portfolio has to be well-diversified, equity-oriented for long-term investors, and efficient in the sense that it is as good or better than other alternatives.

Portfolio structure depends on how long you want to stay invested

When you’re investing for the long run, for example, 20 or 30 years, you are expected to make more money holding a fairly large part of your portfolio in stocks or some other assets that have a high rate of return. That’s because historically, stocks offer greater returns than safer alternatives over the long term.

But in the short term, stocks tend to be much more volatile. So as you approach retirement age, investment advisers suggest moving more assets to the “safer than stocks” class.

Let’s say the stock market crashes and you need to spend money out of your portfolio as income in retirement. So, you don’t want to lose 20 – 30% of your savings and to sell your stocks at a lower price. If you’re younger and market crash, you can just stay invested and wait for the market to recover.

But it isn’t all about age

How to structure your stock portfolio is also about the appetite for risk. Risk tolerance is different for each investor. Risk-averse investors will prefer to hold a mixture of the stock portfolio and cash. Cash could reduce overall risk. When wealth increases, it could happen a tolerance for risk to increase also. But when you grow older, tolerance for risk could decrease. Each investor needs to find his/her own stock portfolio structure that suits their risk tolerance. That’s the main point.

18th January 2019
Avoid Bad Investment Moves – Strategies that work
2 min read

It is possible to avoid many bad investments.

If you know what “catches” to look out for and which clarifying questions to ask.

Most bad investment scenarios can be avoided by following simple rules.

First of all, you have to avoid emotional and personal investing mistakes, wisely avoid.

Many investors, even the well learned, can confirm they made a rushed and impulsive decision and didn’t avoid a bad investment.

Also, many have made decisions while high on emotions so as to score instant satisfaction.

The danger of making bad investment choices cannot be overemphasized. You can use an extensive set of control strategies that people use to limit bad decisions.

What are some of the bad investment choices you can make?

* Failures of rationality – This represents the lack of possibility to see the bigger picture. The investor considers decisions in isolation and doesn’t include their impact on an entire portfolio.

The consequence is that you can invest too much in a single asset class, industry, Or geographic market. Yes, because you know a lot about it and are comfortable with such decisions.

* Using a short-term decision horizon – when an investor is ignoring the appropriate goal of long-term wealth accumulation.

The favor is short-term returns.

But you are here to stay. Right?

The consequence is that losses are more likely in the short run. Much more than over longer time periods.

People are twice as sensitive to losses as to gains. This behavioral phenomenon is known as “myopic loss aversion”. And their inclination to take short-term risks is too low. So they often make the wrong investment decisions.

* Buying high and selling low – means doing what’s comfortable amidst either bullish or bearish market conditions. The consequence is that when you are buying while markets are high or selling when markets are low is a risky strategy that fails to take advantage of market opportunities. A buy-and-hold strategy turns out to be superior.

* Trading too frequently – this is the result of multiple emotional and personality-driven characteristic. That produces an irrational tendency toward action.

The consequence is that investment costs are higher. As the frequency of making the other types of poor decisions is increased.

The experts recommend these seven self-control strategies. They can help counter your tendencies to make bad decisions and avoid a bad investment. The use of these strategies was not limited to investments and often included other behaviors and other important lifestyle decisions.

Here are the seven strategies and their application to financial decisions:
1. Limiting options – Purchase illiquid investments to avoid the urge to sell investments when the market is falling.
3. Avoidance – Avoid information about how the market or portfolio is performing to stick to a long-term investment strategy.
4. Rules – Use the rules to help make better financial decisions, such as only spending out of income and never out of capital.
5. Deadlines – Set your own financial deadlines aiming to save a certain amount of money by the end of the year.
6. Cooling off – Wait a few days after making a big financial decision, before executing it.
7. Delegation – Delegate your financial decisions with others, allow your investment advisor to manage your portfolio.
8. Other people – Use the help of other people to reach their financial goals. Make some appointment with your financial advisor to make and execute a financial plan. Certainly, you don’t want all your money in just one kind of investment. So you can safely choose a single advisor or firm to handle a range of investments.
The stock market’s tendency to produce large gains and losses. So there is no shortage of faulty advice and irrational decisions.

As an investor, the best thing you can do to pad your portfolio for the long term is to implement a rational investment strategy. The one you are comfortable with and willing to stick to.

If you are looking to make a big win by betting with your money, try the casino.

You should be proud of your investment decisions in the long run. In that way, your portfolio will reflect the solidity of your actions.

You would this: Bargain Hunting – The Holy Grail of Investing

Risk Disclosure (read carefully!)
26th July 2018
Stock Market Is Going To Crash? Where Could You Put Your Money?

Do you believe that the market will crash or you know? There is a big difference between what you believe and what you know.

2 min read

Market crash or market not crash. If you truly believe the market is going to crash, there are a lot of sorts of places where you can put your money.

You could buy gold or real estate or you could take an aggressive approach. And try to capitalize on stocks’ by loading up on investments designed to rise when the market falls or you could move it all into cash.
But be honest.

Do you really believe in such a scenario? Market, crash!

There is a big difference between what you believe and what you know. Do you know that the market crash is close? When? Tomorrow? Next week?

On the other hand, I can understand that someone can recognize market crash in this uproaring and uncertain times.

We all remember, OK most of us, March 2009 and market crash.

Everyone was extremely agitated about the falls in the stock market. And people were feared that the stock market might continue falling. Many people wanted to sell the holdings in his investment portfolio, move the proceeds to cash and sit out the market turbulence.

And you know that emotions have an important influence on investor behavior and how do they make decisions.

This can often lead to investors failing to capture the returns that are there for the taking. And as a result, suffering poor financial outcomes and according to some research, we are twice as sensitive to financial losses as we are to making gains.

But is it so today?

Is this the same situation? Will the market crash? Or it may not be. Think about it.

The ones who like to predict disasters pointed to any numbers of reasons why they believe the market is headed to a crash.

You have the choice to pick. From the growth-slowdown scare in China that sent stock prices down 12% in the summer of 2015; Brexit and the election of Donald Trump. Anything is supposed to be catalysts for a market rout. Obviously, some prediction of the market’s downfall is going to turn out to be right. But after the turnaround began in March 2009, it’s not as if investors knew the bear had run its course.

While we believe we know where stocks are headed, we actually don’t.

The same goes for market pros who may speculate and prognosticate (sometimes even provide valuable insights into what’s driving the market).

But they don’t really know what the financial markets are going to do in the near term. They don’t know will the market crash.

I don’t think it makes sense to shift your money around in an attempt to outguess the markets, whether that means going to cash to avoid a setback or moving to an investment you think will thrive while the market drop.
That doesn’t mean you should sit back and do nothing.

You can do the following things:

The most important thing you want to confirm is your asset allocation or the percentage of your holdings that are invested in stocks.

That will determine how your portfolio holds up if the market takes a major dive.

Take this time to go over your holdings and tally up how much you have in stocks and how much in bonds and you’ll see how your portfolio is divided up between stocks, bonds, and cash.

Second, figure out where your asset allocation should be.

I’m sure you want a blend of stocks and bonds that will generate high enough returns so you can reach your financial goals but at the same time isn’t so risky that you’ll sell stocks in a panic during a major stock rout.

Think back about how you handled past downturns or how you reacted when stocks began to dip and dive. You want to come as close as you can to a blend of stocks and bonds that you’ll be okay holding in a variety of market conditions. And then make all necessary adjustments.

Then you feel you’ve got a portfolio that will provide sufficient gains during rising markets and enough protection during routes.

You’ll be able to hang on until the eventual recovery, regardless of what’s going on in the market. The idea is to make sure your portfolio doesn’t become too aggressive during market upswings. Or too conservative when stocks take a hit.

Making dramatic changes such as fleeing to cash or switching to different investments altogether, may be challenging at times when every news story or TV show you see seems to suggest that the market is on the edge of Armageddon.

But you don’t want to let fear and emotions dictate your investing strategy and lead you to make impulsive decisions.

Can I guarantee that this approach can provide you with the best results during the long – term? Of course not.
This is just another ”what would be if it were” scenario.

Risk Disclosure (read carefully!)

13th July 2018
The Dangers of Emotional Trading And How to Avoid That

2 min read

Trading is less a business and more psychology from which your success or vice versa on Forex market depends. Even if you have decided to switch to systematic trading, this does not diminish completely the dangers of emotional trading and emotional pressure when you are deciding a trade.

Often, Forex traders have the belief that only a complete absence of emotions can help during trading. Still, fear, uncertainty, greed, hope, faith, regret, and happiness inevitably follow the process of trade and may cause the dangers of emotional trading.

Combating emotions at the moment when your feelings overwhelm, means ignoring the sixth sense, intuition, and finally insight. And what happens? You have brain fog!

Why? It is known that emotions also transmit the flow of information to us. We are guided by this information, we behave under their influence. But this is given to us to control our emotions and to replace one’s feelings with others.

There are many ways to control emotions and avoid the dangers of emotional trading:

First, it is possible to change your emotions by concentrating on another object. As a rule, this method is very effective. The thing that attracts our attention becomes real for us. You can consider the suffering of losses, or vice versa, examine the possibility of making a profit.

Second, by changing your views and beliefs you can change your emotions. Every belief we gain over our lives is, in a way, a filter for us, which is affecting the knowledge of all information. All points of view accumulated throughout life have an impact on the interpretations we receive in our mind.

Finally, the third way to change your emotions is by modifying physiology. Change in breathing, mimics, body position, color and speed of our voice, all this has a direct impact on the emotional part of not only Forex traders, but any person.

Concentrate attention to avoid the dangers of emotional trading

The concentration of attention is one of the most important components of our emotional state. The fact that you are focused on the Forex trading process becomes not only the subject of reality but also the acceptance of the facts. All activities influence the interpretation of events and therefore affect our emotions. All this guides our behavior, and decisions get an emotional connotation. In this case, it is necessary to define the priorities: what are you waiting for? Do you think about the possibility of losing? Or expect a profit?

Those who see only losses are likely to hesitate to invest in the market for too long and may even miss the transaction. But once they decide to enter the market, they quickly earn profits. Trading is an attempt to balance the contradictions. The trader should focus on profit and loss and try to balance them. The trader should focus on the likelihood of his/her methods and information provided by the market because they are the only ones that are correct and reliable.

Physiology and the dangers of emotional trading

It has been proven that our body manages our emotions and that emotions influence our thoughts. The easiest and most effective way to change your emotional state is to change your physiology – speed, and depth of breathing, voice or even your pose.

Pay attention to your attitude, how you sit, breathe, and whether the muscles of your face, shoulder, or whole-body tense. If you feel sick, you should sit more comfortable. Fully simple physiological manipulation can be an effective way of controlling your feelings.

Control your emotions, this will definitely make you a more successful trader!

Understanding Fear

When a trader gets bad news about a certain stock or the general market, it’s normal for the trader to get apprehensive. But at the same time, you must be clever, you must avoid the dangers of emotional trading.

You need to understand what fear is: a natural reaction to what they perceive as a threat. In the case of traders, to their profit or money-making potential. Quantifying the fear might help. But you as a trader should consider pondering what you are afraid of, and why you are afraid of it.

Yeah, I know! This is not easy, and you need practice, but it’s necessary for the health of an investor’s portfolio.

Greed Is Worst Enemy

“Pigs get slaughtered.” is an old saying on Wall Street.

This means that greedy investors are hanging on to winning positions too long, trying to get every last tick. Greed can be devastating to returns. A trader with greed always runs the risk of getting whipsawed or blown out of a position.

Greed is often based on an instinct to try to do better, to try to get just a little more.

The first instruction is: A trader should develop a trading plan based upon rational business decisions, not emotional caprice or potentially dangerous instincts. A good trader should have trading rules and plans.

Why are trading rules and plans so important?

Before traders feel the emotional or psychological crunch, they need to create trading rules. That will keep your heads in the right place. You should lay out guidelines based on your risk-reward tolerance for when you will enter a trade and exit it, whether through a profit target or stop loss. The emotion is not part of the equation. It would be also wise to consider setting limits on the amount you are willing to win or lose in a day. If the profit target is hit, you can take the money and run. But if losing trades hit a predetermined limit, you can roll your tent and go home, preventing further losses.

Every single trader should be able to read a balance sheet or a chart. But there is a psychological component to trading that shouldn’t be overlooked. You have to know how fear and greed can impact trading. That’s why you should exercise discipline, and develop trading rules and plans. Never forget that part of trading.

If you have any experience with this, let us know. Share it all.

Risk Disclosure (read carefully!)

9th July 2018
How To Follow Trading Portfolio?
There you are! You are a proud owner of crypto or stock and have a trading portfolio! So, what is the next step?

By Guy Avtalyon

How to follow your trading portfolio? Let me remind you! Without clear goals, there won’t be any way to really measure your success.

A great, one-time win can look good, but this is not necessarily a barometer for your overall trading success. This can lead you to delusion very easily.

The most important is to have a set of rules to manage any possible scenario. Even more important, you must also have the discipline to follow these rules.

This means you MUST follow the trading portfolio.

How to follow a trading portfolio

Never, but remember NEVER in the heat of battle throw out your own rules and not play by ear. That usually finishes with disastrous results.

Did you ever ask yourself how professional traders see the market differently?

So, what exactly you have to do?
1. Do not create excuses to break the rules.
2. Separate your planning from your execution.
3. Lower your losses according to the plan.
4. Always make your profits run according to plan.
5. Skip your emotions.
6. Focus on trading well.
7. Be patient. Do not rush with trade.
8. Predict the future, but trade in the present.
These are just general rules for each trading.

But truth is that you bought a billion altcoins and got yourself into a thousand ICO’s and now you’re not even sure how much money you have.

Is that correct?

So, you need a system to follow a trading portfolio in real-time, on many platforms. There are plenty of free trading platforms you can use easily. You need one reliable with auto sync with exchanges and wallets and with the ability to add tax.

And fast too.

And you are on the non-technical side and know nothing about trading but you are a bitcoin and cryptocurrency enthusiast.

Most of all, you are the owner, for God’s sake! 🙂

Now, when the money on crypto started getting real you definitely have to treat it as an investment and keep track of its performance.

You need software!

What is the simplest way to follow a trading portfolio?

The simplest way is to choose one of the platforms to follow the portfolio. But even if you are using some software you MUST have something on your mind when trading questions.

You are not a kid and you know that you can expect losses.
Losses are part of trading you have to accept them. If you have this on your mind, you will reduce emotional resistance when the time comes to do so.

Do not take a trade unless you are willing to accept the risk that accompanies the trade, and it is the possibility of loss.

Accept that you will lose money on some trades and try to take your losses easily when they come.

That is the rule. But remember, don’t bend your rules! Stay stick to your portfolio!

Of course only if your goals are realistic.

Goals demands to be specific and they need to be achievable. Not just once, but consistently. When you think of goals, think long-term. That requires a certain level of patience that only comes with strong discipline. Once you have a long-term goal, you need a timeframe for its achievement.

Avoid emotional trading

You have to manage your emotions. When you have some doubts or you are unsure, get out! Never act based on greed or fear. But never give up!

Do not expect to become an expert overnight! Trading takes time to build experience! I repeat! The best way to follow your trading portfolio is to use some of the advanced software and platforms.

And it is smart to use Google Sheets.

This online spreadsheet application is on a list of cryptocurrency portfolio trackers because it is one of the most versatile and customizable tools for cryptocurrency analytics. You can do what you want with it, to whichever extent you want.

If you’re only tracking Bitcoin, simply set up a sheet with the GOOGLE FINANCE ticker. That’s how you will update BTC prices in a number of currencies instantly. Also, you can download one of the many available Google Sheets plugins which give you access to a plethora of cryptocurrency prices in real-time. The most popular one is Cryptofinance.

Keep records of your trades and thought process, analyze your mistakes, then move on. But be a good student, don’t make the same mistake again.

Improve yourself continuously. “Success consists of going from failure to failure without loss of enthusiasm,” said Winston Churchill.
23rd June 2018