Finance forum: Financial strategy and management

The financial sector is a complex industry in which investors’ savings and assets are processed, launched, sold and bought like products. Production and management chains are run with the same strategy and management logic as in the real industry.

Looking for equity income? Explore how investing is changing and alternative investment sectors

Posted on 22.09.2021

As investors search for income, they traditionally look to utilities, banks, oil and gas, and healthcare for attractive buys. Even with the dividend cuts announced after the pandemic hit, these sectors have been reliable for years. Investors are becoming pickier, though, and looking at alternative investments to diversify their income sources.  What’s changing within traditional UK income investment sectors? 1. Banks The financial sector has been a target for UK income investors fo ...

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What is value investing and how it differs from growth

Posted on 30.08.2021

Value investing is buying stocks that may be unloved or overlooked. Such companies could be trading below their valuation and could provide upside potential once the market catches up. The idea started back in the 1920s by professors Benjamin Graham and David Dodd from Columbia University. Their strategy was to look for stocks priced lower by 66% than their underlying asset value.  Warren Buffett is one of the most successful investors adopting value investing. He applies a set of rules fo ...

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How to generate portfolio income despite low dividends and interest rates

Posted on 25.08.2021

The pandemic blew up income investors’ revenue sources. Regulatory restrictions resulted in dividend cuts to ensure companies could overcome any profit loss. Plus, countries brought interest rates to their lowest levels, wiping bond yields. But, the situation is shifting now with dividends back on track. In Q2 2021, UK dividend payouts increased by more than 60%.  Still, Link Group reported that UK equity income distributed by investment trusts declined for the first time in 10 years ...

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How to use capital losses, PRR, and tax-efficient investments to reduce CGT

Posted on 17.08.2021

Capital gains taxes (CGT) appear to be vulnerable to an increase. They usually apply to a small number of taxpayers. They also aren’t included in the triple lock that prevents national insurance, income taxes, and VAT rates from rising. Given the recent uptick in residential property sales and rising prices, you may face higher CGT payments. A potential rise in the CGT rate would also incur higher payments in the future.  You have one of 3 ways to scale back your CGT payment. Since C ...

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Are bonds still an effective way to reduce your portfolio’s volatility?

Posted on 06.08.2021

An investment strategy includes investments that reduce volatility and cushion losses when markets are turbulent. That means investing 60% of funds in equities that provide the return. Then the fund manager allocates the remaining 40% to less risky investments, mainly government bonds, that provide this cushion.  Historically, equities and bonds were negatively or lowly correlated. So when a recession or other factors stress the markets, investors buy government bonds. That drives prices u ...

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Investing in dividend stocks to hedge your investments against imminent price declines

Posted on 05.08.2021

The market uptrend is invigorating, having many investors wanting in on the action. But the pace at which markets are rising could signal an imminent correction. How can you shield your investment from price declines? A good option is to buy dividend stocks and benefit from the income they offer.  A look at the current price-to-earnings ratios shows UK stocks trading at 23x. Europe is slightly lower at 21x, while the US is trading at 31x P/E. These figures are alarmingly high, signalling a ...

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Active vs passive portfolio management: which do investors prefer?

Posted on 29.07.2021

You have two investment strategies to choose from, active versus passive portfolio management. You can venture into both alone or enlist the help of a portfolio manager. But what does each involve? And, which do investors prefer? Active portfolio management This strategy aims to outperform the market. That’s why investors make frequent buy and sell transactions to outperform an index like the S&P 500 or the Russell 1000. Often, you’ll have a team of portfolio managers making in ...

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What are hedge funds?

Posted on 28.07.2021

Hedged funds gather funds from many investors to accumulate capital. That capital is then invested to earn a targeted profit that is shared between investors. Investors expect hedge funds to earn strong returns regardless of market performance.  They take advantage of market events like mergers, interest rate announcements, or shares that are undervalued or overvalued. They even target returns that can’t be explained by a standard risk-adjusted rate of return of a market portfolio.&n ...

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Misinformation and lack of risk awareness threaten new investors

Posted on 28.07.2021

The stock market saw a new wave of young investors this past year as those in lockdown joined in on the action. Having so much free time on their hands, many turned to trading to try to generate extra cash. Some millennial investors even started dabbling in day and swing trading, concepts they were previously oblivious to. Some investors managed to turn enormous short-term profits. But for some, the risks of their daring ventures are becoming increasingly apparent. Online brokers TD Ameritrade, ...

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