Earlier this week I was speaking to a friend about his portfolio and some options he was considering taking to reduce volatility. Put simply, he wanted to sell out of a number of positions which were rapidly declining, move into cash and then buy in again at a lower level. When I asked him why, […]
Reader Question: How often do you sell positions? Read More »
If you consider yourself an investor then no doubt you’ve heard the story of ‘Mr Market’ – the emotionally unstable, totally illogical neighbour that comes to your house and offers to buy your shares or sell you new ones at a different price every day. Some days, he offers a high price and other days
Anyone with an ear tuned to global financial markets will know that central banks around the world are winding up their decade-long programme of quantitative easing. Although originally designed to support banks suffering a credit crunch following the 2008 financial crisis, these have ballooned and extended over the last ten years and with interest rates
In a recent article, I made a reference to the price of Amazon shares reaching a ridiculous 150 forecast earnings. The price of a company is an indicator of the market’s confidence in its abilities to generate cash and return this to shareholders. The higher the P/E ratio is, the more confident that investors generally
Have tech valuations lost all semblance of reality? Read More »
Having covered a number of company fundamentals that demonstrate how a company is operating (Turnover, Profitability and Leverage), this article will examine the Balance Sheet, which provides an overview of a company’s assets and liabilities, as well as the shareholders’ equity at a given point in time. Each of these sections includes many sub-accounts which
Understanding Company Fundamentals – Balance Sheet Read More »
Leverage, or debt as it is more commonly known, is a term that refers to money that a company has borrowed. When a company wants to invest in new assets, it needs cash to pay for them. That cash can come from one of three sources – sales and investment returns, equity capital or debt
Profit is an economic concept which occurs when the income from an economic transaction exceed the costs of carrying it out. For example, if a company sells windows that cost £500 in material and, plus £100 in labour and transportation costs, but they receive £1000 from the sale of the window, then their profit is
Understanding Company Fundamentals – Profitability Read More »
Turnover is a financial term which refers to how much cash has entered a company’s bank account in a given period. In most companies, it reflects the value of its sales in that year, either of goods or services, but before costs such as salaries and taxes. Most investors like to see an increasing turnover
In my previous article, I wrote about my approach to portfolio risk management and the steps I take to reduce my risk profile and qualify potential opportunities. Underneath the hood of any investment engine is a financial model of factors which affect a company’s performance. My ideal portfolio is one which is high yield (compared
A few days ago it was put to me that investing requires little skill and is essentially no different to gambling. If that’s the case, then why do I bother investing in equities (which takes up quite a lot of my time to research and manage), rather than just buying hundreds of pounds worth of
If you’ve been following global financial news, you’ll have noticed the increasing wave of emerging market crises that are spreading around the globe. From South Africa to Turkey, Argentina and Venezuela, emerging markets are facing a torrid time. Add Indonesia, Saudi Arabia and China to the list, and what started out as a currency crisis
When it comes to investment assets there are lots of ways to categorise them. You can categorise by asset type, geography, sector, and so on. One of the most commonly overlooked is liquidity. Generally speaking, assets fall somewhere on a spectrum of liquidity, which refers to how easily convertible they are into cash. Large, listed
Does your portfolio contain sufficient liquidity? Read More »
Earlier this month I was speaking to an old colleague who had discovered my blog and wanted to know about the biggest hurdles that I faced when building my portfolio. Truthfully, the biggest challenges I’ve faced are ones which I’ve only partially overcome and I’m pretty sure I’ll always face them. Building capital. When I
Three things that people won’t tell you about building your portfolio Read More »
Not all that long ago, Neil Woodford was slated as one of the UK’s leading investment success stories. Featured by multiple press publications as ‘one to watch’, retail investors flocked to him as he made generous returns at investment house Invesco Perpetual. When he moved to establish his own funds in 2014, hundreds of investors
The danger of not understanding your investments Read More »
Any savvy investor worth their salt is aware that diversifying your portfolio is a key way to reduce your risk. You might have also heard of the concept of ‘hedging’ your investments, which is a method of reducing the risk of declining prices in an investment. A ‘hedge’ position usually refers to an something which
