26 Jan 2015
Making the most of your investments can be more difficult than it sounds, especially in today’s volatile economic climate. For starters, investments are speculative, so you have as good a chance of losing all or part of an investment as you do growing it into a profitable venture. And if you are like most investors, you don’t claim to be an expert at managing stocks, bonds, real estate and other holdings. On the contrary, your primary goal is simply to ensure security and financial stability for yourself and your family.
Regardless of the scale of your individual investments or your experience level entering financial markets, protecting and growing savings and income is vital to your ongoing financial health. But where are we headed in 2015? And what are the best ways to maximize returns in coming years?
Professional financial advice aids novice investors, so your investment strategy should be conceived with the help of a recognized expert in the field. By following authoritative investment recommendations and contributing to your own success, your aim is to establish savings and retirement income, without sacrificing your current standard of living. Use these tips to help propel your investments into positive territory.
Pay Attention to Economic Forces
Unfortunately, accurately predicting how the stock market and other investments will perform is not an exact science. You can, however, track economic conditions and take counsel with advisors along the way. The increasingly global nature of economics means outcomes hallway across the world can have a direct impact on your bottom line. As a result, maintaining a cursory understanding of the big picture helps investors anticipate money making opportunities closer to home.
According to some analysts, the UK economy will grow by approximately 2.5% in 2015. The figure is disappointing for some, who see political uncertainty and other forces holding back growth. During the fourth quarter of 2014, Bank of England Chief Economist, Andrew Haldane pointed to four limitations facing the country’s economy. According to Haldane, growth is slowed by:
1. Weak Global Growth
2. Low Wage Growth
3. Political Risk
4. Financial Risk
For investors, slowed growth indicates interest rates will probably remain low, as the Bank attempts to head-off stagnation. The cost of borrowing is also predicted to remain low, creating opportunities for capital investors.
Although you cannot be sure how any investment will perform, some are more risky than others. A balanced investment portfolio, spreading holdings across various investments, hedges against catastrophe in any single sector and protects investors in the long run. Your age, income, and current holdings are all considered when crafting a balanced investment scheme, which accounts for long-term stability, rather than immediate gains.
Some strategies rely on repeating stock market trends, which lead to consistent positive gains. The following approaches, for example, lean on past stock market performance to guide investors into profitable schemes.
• Buy 10 worst UK stocks during first quarter, sell three months later – Seventy-seven percent of the time, January – April buyers investing in the ten worst performing FTSE 350 stocks yield profits by selling them three months later.
• Buy a tracker fund when FTSE 100 rises in January – Traditionally, when posting gains in January, the FTSE 100 ultimately posts profits for the entire year. When the January uptick is seen, investors committed to the philosophy are encouraged to buy tracker funds, which reflect the fate of the FTSE 100.
• Sell in May, buy in September – In the past, conventional wisdom dictated slow summer trading seasons, followed by sell-offs and buying opportunities in September. Detractors say the economy has globalized, so this no longer works. In fact, it only proves prudent 42% of the time.
• Buy Chinese stocks at start of July – For the past five years, China has rebounded in July, posting gains for investors willing to jump in to this tight window.
• Ride the “Santa Rally” – Is it possible that Britain’s stock market consistently rallies during December, as the country embraces winter holidays? In the previous 21 years, it has happened 90% of the time.
New Year’s optimism prompts many investors to assess their holdings at the start of each year, seeking better returns. As financial analysts look ahead to 2015, global economic health and historic stock market performance are two key indicators offering clues for the coming year. For the highest possible investment returns, account for global economic impacts and consult with investment professionals familiar with stock market trends.