All about investment

by: Steve Hill

The FTSE 100 made a gain of around three percent in 2007, this may not seem a lot but with all of the bad news that was floating around, including the credit crunch, this was not too bad. In this article I will be writing about how I think it will perform in 2008.

Firstly it is important to note that what I write in this article should not be seen as recommendations or financial advice, I am not qualified to do that. They are merely my opinions and the way in which I will be investing.

I believe that 2008 will prove to be a very challenging year; this is likely to be especially for the case for companies who depend on borrowing money and on consumer's spending money. We have already seen retail companies reporting poor sales figures for the Christmas and new period. It may therefore be worth avoiding these areas for now.

I actually think that financial stocks are looking quite cheap at present. Investing monthly into a fund which solely invests in these types of companies may prove prudent.

I like to invest in different funds on a monthly basis to take advantage of pound cost averaging; this is where your premium is able to purchase more units when the price falls.

The stock market in Japan has had quite a poor run in recent years and may well be due for an upturn. This is one region that I will be investing in 2008.

I am a person who likes to take a risk with my money and whom invests for the long term. I am also going to invest in the regions of China , Emerging Markets, Latin America and Asia for 2008. Wish me luck.

Steve Hill helps to promote a number of websites including:

http://www.stammering-stuttering.co.uk

http://www.adaptatech.co.uk

http://www.coach-life-london.co.uk

The Mutual Fund offer document and the fact sheet carry certain information that can give a great deal of detail about the fund, its past performance in terms of returns. Most of the fact sheet or offer documents published by the Asset management companies are of similar standard and the data provided by the AMC in these fact sheets are of importance to the investors. The investor should know what to look at in these fact sheets and offer document. Since the fact sheet act as a guide, the investors should take its guidance to get more information on the schemes of mutual fund companies.
If the mutual fund investor is informed, the probability of him getting good returns is very high. So for the uninformed investors of mutual fund we had put certain points and notes that they should look at when they are going through a fact sheet.
Under the category of mutual funds the Equity fund fact sheet and debt fund fact sheet both need to be properly analyzed on the basis of certain points which are mentioned below.

POINTS TO LOOK AT IN EQUITY FUND FACTSHEET.

1. Investment objective: The mutual fund’s investment objective states what it aims to achieve i.e. capital appreciation, income generation among others. It could also inform the investor about the investment style of the fund and the kind of risk it is prepared to take for achieving its investment objective. Ideally, an investment objective should be pointed enough for the investor to understand whether his own investment objective fits well with that of the mutual fund. For instance, an investment objective that states that the fund will ‘attempt to generate capital appreciation by investing significantly in the mid cap segment’, it tells the investor that it is likely to be a high risk – high return investment. If the investor has the risk appetite for such an investment he can consider investing in the fund.

2. Allocation of stock: Allocation of stocks by the Asset management companies are shown in the factsheet, the composition of portfolio are shown properly so that all those investor who have invested in the mutual fund or those who wish to invest in the fund can get an proper view of the style of mutual fund management by the AMC'S. When we look at the stock allocation of the AMC's we can judge the level of diversification by taking into consideration the top 10 stocks in their portfolio. We believe that if a fund has more than forty percent in the top 10 stocks than it is not properly diversified. In a volatile situation a mutual fund which is well diversified will be more effective then sectoral flavor funds. Many times it is noticed that the whole portfolio is well diversified but one single stock is holding such a high investment that the balance of diversification cannot be maintained. This can turn out to be risky proposition for a pure diversified equity funds.

3. Allocation of sectors: A well diversified equity fund need to be diversified not only on the basis of stocks but it need to be well diversified across sectors too. When we evaluate or analyze a mutual fund it is not enough to evaluate the stock allocation but also the sectoral allocation. If a mutual fund is not well diversified across sector it may get into trouble if there is a sudden crash in the market. While calculating the sectoral allocation, the investor must combine like-natured sectors to understand the level of sectoral diversification.

4. Allocation of asset: Asset allocation let you know how the funds assets are diversified across stocks, sectors, and current assets/cash. With the detail of stocks and sectors, this is another thing that need to be taken care of. A fund manager had to decide the allocation to cash. The allocation to cash is in itself an important decision. By looking at the factsheet we can note down the allocation to cash by the equity fund. If the fund manager is holding to cash for some time, this means that he is waiting for the right opportunity or it means that he is not getting enough stock-picking opportunity at this point of time. Allocation to cash can be beneficial if the market takes a down turn, as a good portion is in cash which is not affected by the crash, where as stock allocation will take a beating. But a good allocation to cash can go against the mutual fund at the time of market upswing.

5. Portfolio Turnover Ratio: A portfolio turnover ratio tells the investor how much churning the mutual fund has witnessed over the period of time. The basis of this calculation is the number of equity shares brought or sold by the equity fund over the review period. High turn over indicates high churning by the fund house. Churning of funds should be in line with the funds investment philosophy. High churning can be good or can be bad for the fund, as I said it depends on the investment philosophy. For example a growth fund will witness high turnover as the churning is high where as a value fund will have low turnover because the churning will be low as the fund manager invest for a long term.
The portfolio turnover ratio is not given much importance by the fund houses in their factsheets as it will open their stock picking decisions in front of the investors, who can further compare it and find out the weight age to their decisions.

6. Expense Ratio: The expense ratio shows us the expensive nature of the mutual fund. It shows us how expensive the mutual fund is for us. If an expense ratio is high it tells us that the mutual fund is expensive. In this expense ratio the fund management expenses form a large part. This fund management expense should decline with increase in net asset of the fund. The fund house as per regulation has to declare the expense ratio so that the investors can come to know the expensive nature of the fund.

7. Information on the Fund manager: Fund manager is the person who is managing the mutual funds. Some of the companies go for individual fund manager rather than a team of fund manager i.e. an investment team. But over a period of time it is better that an investment team managers manages your money rather than a individual star fund manager. Individual fund manager can quit the fund house any time thus affecting the stability of your fund. Therefore you need to check out the detail of the fund manager of the fund house or detail of their fund management team, so that you can verify and compare the fund houses on the basis of it. It is better to go for the fund house which has got stability in the fund management process.

POINTS TO LOOK AT IN DEBT FUND FACTSHEET
8. Average maturity: In a debt fund factsheet this is on of the most important aspect to look into. In order to understand the fund manager’s view on debt market the investor has to go several months behind to see how the average maturity has moved. If the fund manager is maintaining a higher average maturity for quite sometime, it implies that the fund manager is expecting the interest rate to fall over the period of time. But if the average maturity is lower it means that the fund manager is expecting the interest rates to go up.

9. Credit Rating Profile: Credit rating of the securities in which debt fund invest varies. Therefore investors should check out the credit ratings of the securities of their debt funds. Most of the debt funds do not take much of credit risk. They invest in high rated securities. AAA/Sovereign paper which carry the lowest credit risk, attract the highest investments. Where as AA+/AA carry high credit risk.

10. Allocation to asset: Asset allocation in debt funds are again very important for the investors to look at. This will help him understand the risk a fund manager is taking and also the kind of approach the fund manager is taking towards the investment. The debt funds invest mainly in government securities and corporate bonds. Both of them carry varying risk.

About the Author:
Dipendra Nathawat Godmind Mutual Fund Advisory Services, Mutual Fund Advisors +91 9913859679 TRACKING ACCOUNT by Godmind Advisors , to track all your mutual fund investment, e-investment with with complete upto date knowledge. dipendra@godmind.co.in

How you use it can be critical to your trading future.

Stop loss orders are great insurance policies that cost you nothing and can save you a fortune. They are used to sell or buy at a specified price and greatly reduce the risk you take when you buy or sell a futures contract. Stop loss orders will automatically execute when the price specified is hit, and can take the emotion out of a buy or sell decision by setting a cap on the amount you are willing to lose in a trade that has gone against you. Stop loss orders don’t guarantee against losses but they drastically reduce risk by limiting potential losses.

With my system the only stop I use is what I call an emergency stop. My stop loss is automatically made when I make my initial trade at two points. It is only for emergencies, like news I wasn’t expecting, or anything that will make the market gyrate drastically and I never enter a trade without it. However I never expect to use this stop loss to exit my trade. I simply will not let the market move against my trade entry more than a tick or two. If I find that I exited the trade too soon I just reenter the trade but if the trade continues to move against me I have saved the loss of one or two points per. contract. Usually I will only have to exit and reenter a trade one time if I have entered a trade to early. This means I only lose a small commission per contract instead of fifty dollars per point- per contract, when trading the e-mini, and taking what many consider a normal loss.

Trading the futures markets is a challenging but profitable opportunity for educated and experienced traders. However it is not easy, without a great trading system, and even traders with years of experience still incur losses. Finding a good trading system and trading in small increments with an emergency stop loss in place will allow those relatively new to futures trading to be successful. Once you have learned the skills you need to trade with consistent profits it will not be a problem but until that time it is absolutely critical that you do not take unnecessary losses. If you are new to trading futures you should never trade until you have a mentor with a trading system that gives you consistent profits.

A great way to protect profits if you have not established an exit strategy is the trailing stop. The trailing stop loss is an order that is entered once you enter your trade. Your stop price moves at a specified distance behind the market price. Trailing stops are raised when a price rises, in a long trade, but will remain stationary when it falls. Trailing will only occur when the market price moves in favor of the trade to which the order is attached. The trailing stop order is similar to the stop loss order, but you use it to protect a profit, as opposed to protect against losses. Trailing stops are designed to lock in profit levels and they literally trail along your increasing profit and adjust your stop loss levels accordingly. Often traders will find tailing stops confusing because they change them while in an open position. This is not a wise practice, and should be avoided. It is an indication that you are not sure of your trade and if one is not sure of a trade it would be wise to exit immediately. Trailing stops are ideal because they allow for further profit potential to enter due to momentum, while limiting risk. Trailing stops are an important component to a trader's risk management unless they have an exit strategy in their system that might serve them better.

The market order is the simplest and quickest way to get your order filled to enter a trade or to use as a stop loss. A market order is a trade executed at the current market price and they are often used to exit trades to ensure that the order has the best possible chance of execution. A market order to exit is simply an order used to exit the trade immediately. Be aware that in a fast-changing market sometimes there is a disparity between the price when the market order is given and the actual price when it is filled.

Stop loss orders are used to exit trades, and are always used to limit the amount of loss, but some day traders use them as their only exit, while other traders use them as a backup exit only. If one uses them as their exit they will risk more than is necessary and might want to find a better system to trade. Stop loss orders allow you to define your risks before you open a position and in my opinion that risk should be minimal. Stop loss orders are one of the easiest ways to increase your chances of survival when trading commodities and futures and they are a powerful risk-management tool.

Jim Canter is a day trader and developer of The Precise Day Trading System, reading charts without the use of indicators. For further information go to.. http://www.futurecommodityonlinetradingsystem.com

By: Leroy Rushing

There’s a wonderful quote that goes something like "Don’t learn the tricks of the trade. Learn the trade." That rings especially true when it comes to trading. That’s simply because there are no tricks, or shortcuts, when it comes to trading. The trading environment is a very unforgiving one that does not discriminate. Each and every one of us can fall victim to the ways and unpredictability of the market, and the moment you think you beat the system, think again, because chances are you didn’t.

Fundamentally, successful trading requires very clear and easily identifiable skills and habits. They must be thoroughly established, constantly and consistently in place. Otherwise, your trading experience will be very short or painful, or both. First and foremost is controlling your emotions. Anybody who knows anything knows there are no shortcuts when it comes to controlling your emotions. You either control them or you don’t. Not being able to control your emotions - whether it’s fear, greed, frustration, confusion, elation, etc. - when trading may very well be the primary reason behind trader failure.

Detaching yourself emotionally from your trades is much easier said than done. Something that has helped me tremendously in removing emotion from my trades is gaining a high-level of confidence in my trading strategies and execution, and the only way to do that is NOT to take shortcuts! I’ve worked hard and become very logical with my trading because I had to. I had to develop a trading plan and have the discipline to follow that plan, trusting that all the research, strategies, risk and money management plans in the trading plan are right for me and my trading.

Not far behind controlling your emotions might be lack of preparation. Can you imagine not being prepared when it comes to taking off for the moon, cutting your first incision for major surgery, singing and dancing on Broadway, or going to court for your first criminal trial? Imagine it. Pretty frightful sight, yes? I can almost guarantee you that anyone in any of the above situations prepared themselves through many years of education, study sessions, rehearsals, and practice. My guess is that they did not take shortcuts!

That’s not to say that people don’t take shortcuts, because obviously they do. I say "obvious" because the standards of those who take shortcuts are usually pretty low, so the quality of their work and/or performances is subpar and pretty obvious. Therefore, it would follow that those who take shortcuts very quickly separate themselves from the pack - from those with potentially long, successful careers.

So, why should trading be any different? It shouldn’t. Taking shortcuts when it comes to trading will most certainly shorten your trading career. Take the steps to Trade Smart and develop a trading plan, incrementally add to your arsenal of trading strategies, utilize the proper hardware/software for charts and analytics, acquire the skills and tools to execute your trades, and record everything you do. That way, you will have taken the long road to learning how to trade, but it’ll be the right road to a long trading career.

Leroy Rushing is an active, professional day trader; trading coach; and eBook author. He is the Founder and CEO of Trading EveryDay, a distinguished provider of educational trading products and services that are available worldwide.