Time Horizons: Reasons Why You Should Re-evaluate Your Investment Strategy

“The individual investor should act consistently as an investor and not as a speculator.” – Ben Graham

The ongoing global turmoil continues to play a significant role in the current financial market volatility. This situation does not mean that investors should sell off their investments and withdraw their money from the capital markets or stock exchanges. However, it is advisable that investors re-evaluate their time horizons and trading strategies.

Time Horizons and Investment Strategies

Before we look at reasons why you should relook at your trading tactics, let’s look at what a time horizon and an investment strategy are:

Trading/Investment Strategy

Wikipedia defines an investment strategy as a “set of rules, behaviours or procedures, designed to guide an investor’s selection of an investment portfolio.”

Not all traders have the same end goals and profit objectives. Furthermore, different strategies suit individual investors as each person has different strengths and skills. The common denominator is that all investors have to decide where their line between risk and return is. Traders can take the middle road; while, others accept a higher risk for the expectation of higher returns and vice versa.

Time Horizons

Simply stated, a time horizon is the “length of time over which an investment is made or held before it is liquidated” or closed.

A short-term trading strategy’s or day-trading’s time horizon will range from a few seconds to an entire day. The takeaway factor is that the trading position must be opened and closed within a single day. On the other hand, a long-term strategy’s time horizon can be indefinite. Finally, investment time horizons are determined by the investor’s goals and not by the mechanism.

Reasons to re-evaluate your investment strategies

As described above a time horizon or trading tactic is determined by your reasons for placing the trade in the first place. Not all deals have to have the same strategy. Ergo, all underlying assets are different and react to the market conditions differently.

A Lionexo financial analyst notes that “it is important that every time you place a trade, you first need to evaluate the current market conditions rigorously to determine your trading strategy.” Thus, it is not a good idea to decide on your trading tactics when you first start trading and continue to use the same trading strategy. Furthermore, the analyst goes on to state that the company “believes that to trade successfully in the continued market volatility; it’s wise to employ a short-term strategy.

Therefore, let’s have a look at the reasons why you should relook at your trading strategies:

Your exposure to risk needs to change

It is normal for your risk profile to change several times during your life. For example, when you just enter the workforce, it is a good idea to execute a trading strategy with shorter time horizons; ergo a higher risk. The consequences of losing money are not so dire when you are younger. On the other hand, when you are close to retirement, it is wise to change to a low-risk trading strategy.

Your personal or financial circumstances have changed

During the course of your life, the amount of money that you will be able to invest in the financial markets will change. For example, you will not be able to invest as much money when you marry and have a family as the majority of your income will be spent on looking after your family.

The market conditions have changed

Your trading strategies should be very different between a bull and a bear market. Furthermore, if market conditions are relatively stable, you can consider a medium- to long-term trading strategy with a long time horizon. However, if market conditions are volatile, as they currently are, then you need to consider day-trading or a tactic with a very short time-horizon. It is not a good idea to let trades extend overnight as it’s hard, if not impossible, to predict what will happen to the markets while you are sleeping.

Final thoughts

It is easy to perceive that the takeaway point of this article is not to invest in one of the global financial markets when they are very unstable and volatile. It is not. It is still possible to grow your investments during the current market instability. However, it is vital to consider the longevity of your trades and adjust their time horizons according to the socio-economic and geopolitical climate.

Invest in Lowering Your Daily Expenses

Invest in Lowering Your Daily Expenses

Apart from big, one-time expenditures, or perhaps expensive “habits” like collecting shoes or smoking cigars, a large portion of the population ends up spending the majority of their income on essentials. This includes expenses like housing, utilities, food, professional certifications, cleaning products, toothpaste, and the list can go on and on.

We often don’t stop to think about how to lower this base cost of living, usually overlooking that option and going straight to hacking off the things that give us pleasure, like golfing, traveling, or dressing like a fashionista.

There are ways, however, in which you can lower your cost of living and perhaps be able to continue to thoughtfully spend time and money on those “bonus” activities or items which keep you thriving or allow you to be more “you”.

It might take an initial investment on your end at first, but here are some “hacks” you can use to lower your base cost of living and boost your “fun fund”.

  1. Buy Food in Bulk

Being intelligent about your grocery shopping can save you thousands of dollars a year- talk about funding that adventure trip to Thailand! The trick is to buy things in bulk when they are on sale, store them in the appropriate manner, and use them in your everyday cooking. From items like chicken breasts, to your favorite cereal, or even spices, you won’t run into as many situations when you buy regular price just because you suddenly need that product for one of your meals. By stocking the cupboard with sale items, you can shop first in your pantry and use weekly grocery trips for selecting fresh fruits and vegetables that won’t keep otherwise.

  1. Invest in Your Personal Health and Hygiene

It’s time to put our long-term thinking caps on and consider the costs it takes to maintain ourselves- everything from basic health, like doctor’s visits, to supplementary services like physiotherapy, down to basic routines like shaving.

Is there anything we can do to minimize the time and expense that it takes to keep us in good shape? Consider joining a gym or committing to a fitness program as a way of cutting down on treating your health problems and funding health care visits, or getting braces in order to correct your bite and avoid a slew of dental issues down the road. You can even eliminate a lifetime cost of shaving accessories when you sign up for treatment with an IPL device that provides permanent hair removal results 4 to 5 times faster than diode laser, and is certainly more convenient than everyday maintenance.

  1. Retrofit Your Home

Good bye high utility bills- it’s time for you to meet your match. You can significantly lower the cost of your bills when you invest in energy-saving technology in your home. Start with replacing your lightbulbs for LED alternatives, purchase high efficiency appliances, and research methods in which you can better heat and cool your home during the different seasons. From simple fixes like replacing your windows to reinsulating your roof, by doing it “right”, not only will you appease your inner environmentalist, you will delight your inner economist who won’t have to wait long to see the payback on these investments.

When attempting to balance the budget in your household, we often lean towards depriving ourselves of those “extras” which keep us happy and satisfied. However, that’s just one option that we have to choose from. Though attempting to lower our base cost of living can be difficult, it can be more rewarding in the end since we don’t have to sacrifice that which makes us feel like ourselves.

5 Signs That the Time is Ripe for Investing in Real Estate

Investing in Real Estate

When it comes to investing in real estate, timing is key. Ideally, real estate investors should buy when the prices are low, and reap benefits when housing prices go up again.

A good time when prices were low was back in 2008, after the recession hit. However, it was also a time of economic crisis, and foreclosures were at a near-decade high. But, if you had bought a house back then in a lucrative commercial area, the price of that property would have doubled by now.

It’s not always easy to say when exactly it would be the best time to put your money in the real estate business. Sometimes when prices are high, the sector is in a bubble, as it was in 2007.

Investing in Real Estate

You shouldn’t invest in real estate just because a deal superficially looks amazing. There are several other factors to consider, namely the potential for growth and return. Higher cap rates can indicate higher risk. The risk could involve local instability like dangerous neighborhoods, or it could have something to do with the overall market in general.

There are three types of markets that matter for real estate: growth, stable, and declining markets.

  • Growth markets occur in places that are experiencing an influx of population, rising income, and other factors, and make a place appealing to live in.
  • Stable markets are places that aren’t growing so fast, but are unlikely to experience decline anytime soon.
  • Declining markets as the name suggests, are going downhill with people moving out of the area. When investing in real estate, you should look for either growth or stable markets.

With the above in mind, let’s look at five factors that say the time is right to investing in real estate in an area:

1.     Home Prices are Rising

Rising home prices indicate a growing market. Right now in the U.S., house prices are rising overall. Compared to 2015, the national home prices in 2016 rose by an impressive 5.7 percent, according to a CoreLogic study.

Some states—namely Oregon, Washington, and Colorado—saw rather amazing house price hikes by as much as 9 percent yearly. Since 2009, the median prices of homes in the U.S. have risen significantly. The numbers for 2017 are not available yet, but it is highly unlikely that the streak will be broken anytime soon.

Aspiring real estate developers should buy right now to enjoy high rentals and resale values in the future. But it’s also noteworthy to keep in mind that national rates may not always indicate local data for select markets.

When you buy, you should always check the median housing prices for the local market. For example, while housing prices for Denver have been rising astonishingly, the same is not true for Chicago. So, always do check local data without solely depending on national data.

2.     Millennials are Starting to Buy Houses

The time when everyone was hotly anticipating millennials to start buying houses has finally arrived. Millennials are reaching their late twenties and early thirties.

In 2016, a whopping 61 percent of all home buyers were under 35. In the coming five years, it’s expected that more and more millennials will be looking to buy houses as they get married and settle down. It’s the 21st century baby boomer market.

Wages have also been rising for most professions, so it’s unlikely that highly-educated millennials would put off buying. Even if millennials shun buying, they will definitely rent, which is also another great sign for real estate investors.

3.     The Rental Market is Growing

Renting is at an all-time high. In urban areas, people, especially young people, are more likely to rent than buy. There are now fewer distress properties thanks to the real estate market having bounced back. And that has raised the price of rentals.

If you are a buy and hold real estate investor, now is the best time to prepare a property for rent. It should be noted that single-family rental marketing is remarkably growing, according to Dennis Cisterna, the CRO of Investability.

As mortgage rates are rising, the lower income bracket is increasingly renting, and the trend will very likely continue into 2017 and beyond.

4.     Inventory Remains Low

In many cities and areas in the U.S., there are more home buyers than sellers. The inventory levels are tight, which makes the current real estate market a seller’s market.

Many realtors across hot markets like Denver are saying each home for sale gets multiple offers. It’s not unlikely to sell above the listed price considering the tight inventory.

Also, the recession shut down the market for low-priced entry-level homes. New homes are still being built. This is a great opportunity for savvy real estate investors to take advantage.

5.     Interest Rates are Still Quite Low

Earlier this year, the Fed raised the interest rate by 1 percent to stall the possibility of inflation. However, mortgage interest rates remain below 5 percent.

In fact, consumers can receive a 20-year fixed conforming loan for under 4 percent! The maximum rate right now is for a 30-year fixed FHA mortgage for 4.7 percent. In addition, foreclosure levels are also at a low since the year 2000.

All this is great news for homebuyers as well as people who invest in real estate. Low rates make it easy for people to purchase homes without the risk of foreclosure in the future. As many young people are already moving to buy new homes, the low rates only mean that there will be great demand in the market in the coming two years.

This year, home sales in the U.S. have been rising. January and February are traditionally slow months for real estate, but there are more people buying now to avoid higher interest rates in the future. Because of the interest rate hike, home buying will be slower than in the previous two years.

Yet, the market is embodying great potential to grow in the coming years. Millennials will definitely be driving the sales and rentals. As millennials age and become earners of a higher income bracket, the demand for real estate will grow. Foreign purchases have also seen a spike in areas like Texas where rich Chinese are driving the demand.

All in all, it has never been better since the recession to investing in real estate.

4 Ways To Be A Better Investor

4 Ways To Be A Better Investor

Intelligent investors are always looking to learn new things. The stock market can’t be perfected, which means that there are always new strategies to practice and habits to adopt. Even the world’s most successful financial traders would back this up, even if they’ve developed some of their own methods to get where they are today.

Keeping all of this in mind, we wanted to briefly cover a few steps you can take to be a more effective investor. These tips don’t deal with charts and numbers so much as habits and psychological strategies, but they can help you to manage any money you might have in investments more effectively all the same.

1. Learn Assets, Not Charts

Don’t misunderstand this as a claim that it’s not necessary to learn how to read patterns and charts if you invest in the stock market. Rather, it’s an assertion that learning about the actual asset or company you’re investing in is the foundation for good financial decisions. Legendary investor Warren Buffet has made this claim, saying that people should buy into businesses they understand.

As he explains it, you should think about each asset as if you were going to put your entire family’s net worth into it. Does that inspire confidence? Or would you prefer to find a business or asset you know more about? This is a simple thought process that should guide you through investments, but also inspire you to learn more about a broader range of assets.

2. Keep A Trading Journal

Commonly recommended for forex traders, but helpful for any type of investor, a trading journal is a tool to help traders learn from past successes or failures. It’s not a complicated idea, but it’s one that more investors ought to be taking advantage of.

There aren’t exact standard parameters for a trading journal, but the idea is that it’s a log of buying and selling activity that can help to illuminate one’s own habits for purposes of learning and improvement.

3. Guard Yourself From Advice

This doesn’t mean that advice is bad, but it does mean you should judge each tip on its own merits. Venture capitalist Mark Cuban has made the point before that if a broker could make every client a millionaire, she’d be charging a lot more.

A lot of people who speak from a position of expertise in finance may not necessarily be experts on your own situation—or even in general. Advice is invaluable given the aforementioned fact that investors should always look to learn new things, but you still need to be careful about who you listen to and when and why.

4. The Market Is Wild; Stay Calm

Finally, don’t get hung up on volatility. Financial markets are always moving, and a lot of inexperienced traders and investors can become frustrated trying to track movements and time their transactions perfectly. The longer you stay involved with this sort of financial practice, the more you come to understand that the markets are always volatile and wild. The most important thing you can do as an investor is to keep calm and carry on.

5 MNCs That Started With Small Investments

In the contemporary corporate world, the blooming successes of multinational corporations (MNCs) have captivated our minds, and we want our businesses to be just like them – famous and worthy. But what we often forget is that everything big was once something small. So without further ado, here are 5 MNCs that started with small investments:

Small Investments making it HUGE!

  1. Apple Inc

apple-inc

Founded in 1976 by Steve Jobs, Steve Wozniak and Ronald Wayne, Apple Inc started with the production of a personal computer kit called Apple I. What makes Apple Inc worthy of being mentioned here is not just the minor start-up capital of $1,020 but also the fact that all Apple I kits were solely built by Wozniak. Over the years, hard word and dedication paid off which is why it’s operating in around 17 countries with 478 retail stores as of now.

  1. Adida

adidas-originals-img

Since Adolf Dassler’s father was an ordinary worker in a shoe factory, Adolf and his brother – Rudolf began making their own sports shoes in 1924. Their venture started in their mother’s laundry in a time when electricity supplies were inadequate. Despite the hurdles, Dassler Brothers Shoe Factory AKA Adidas prospered and is currently serving its products worldwide.

  1. Ford Motor Company

ford-motor-company

Rendering its services worldwide and currently valued at approximately 28.64 billion USD, this automotive tycoon was founded by Henry Ford in 1903 with a capital of $28,000 from just 12 investors. Back then, only a handful of cars were produced per day with 2-3 men working per car in the factory. And now? Its manufacturing operations are performed worldwide from the USA to Africa, suffice it to say!

  1. Hewlett Packard

hewlett-packard

Although now defunct, HP is still worthy of being mentioned due to its long history that’s packed with lessons to learn. The pioneer of IT business, HP was established by William Redington Hewlett and Dave Packard in 1939 with an investment of a mere 538 USD. Then, the scale of operations was confined within Packard’s garage and after successfully flourishing till 2009, HP’s worth eventually began to decline to the point where it split into two companies in 2010.

  1. Cadbury

cadbury

Cadbury, a confectionery tycoon was established in 1824 by the Cadbury brothers namely John and Benjamin. Although the amount of their initial investment is unknown, it can be fathomed that Cadbury began with a small investment since its operations were limited to selling tea, coffee and drinking chocolate in Birmingham. Also, when it was taken up by John’s sons in 1861, only 11 employees were still working. After skyrocketing progress, Cadbury was finally bought for 11.9 billion pounds by Kraft in 2010.

So if you’re hoping to start your own business venture but are being laughed off because you don’t have sufficient capital, follow your heart and pursue your ambition! Eventually with hard work and dedication, your success story will become their moral for years to follow!

The Power of the Dollar: Solid Performance from a Leading Currency

forex market profitsThe forex market is never the most stable or reliable entity, as its derivative nature is susceptible to volatility and rapid change. This was drawn sharply into focus recently by the Greek financial crisis, as a potential default by the stricken nation and subsequent negotiations with the International Monetary Fund (IMF) has caused huge fluctuations in the market.

This has triggered a difficult past week for the forex market, with the Euro gaining after months of decline after it was announced that an agreement had been reached between Greece, the IMF and a selection of European creditors. It subsequently pared against the dollar, while traditionally strong currencies such as the dollar and the pound have rebounded.

A Secure Haven in a Challenging Market: The Strength of the Dollar

In this respect, the last week has seen the dollar in particular emerge with its reputation as an investment safe-haven intact. Even though it may have edged away from the two-month highs recorded against the six major world currencies just weeks ago, it has remained on track to deliver a solid performance at the end of a turbulent 96-hour period. This has primarily been triggered by a shift in investor focus, as thoughts turn away from the Greek crisis and towards a proposed hike in U.S. interest rates.

This is to be expected, as investors cannot act authoritatively on the recent Eurozone events until the Greek authorities accept the terms of their proposed agreement and commit to tough austerity measures. Positive and robust data sets from an improving U.S. economy offer far more security to investors, especially those who are active in a volatile space such as the foreign exchange. With interest rates set to soar and the job market performing well, the USD / EUR is set for considerable games in the coming weeks.

The Bottom Line for Currency Traders

To support this, the dollar index was up by an estimated 1.5% at the end of last week while the Federal Reserve confirmed that interest rates would rise later in the year. Listed at 97.496 on the index and 0.2% down on previous highs, it is important to note that a subsequent break above 97.775 would recapture these gains and re-establish the dollar as the world’s primary currency.

In terms of basic forex trading, this is relatively good news at a time when the market is experiencing more pronounced volatility than usual. While the Euro may have pared and remains likely to fall further until a firm resolution is achieved in Greece, the Dollar and to a lesser extent the British pound have rebounded and create a strong option for investors. This is also good news for businesses, as it is likely to drive positive sentiment and create greater economic growth.