Changes come fast, that’s right. What most people are kinda slow to realize that the changes don’t only relate to our money or market state. There are too many changes in biotech and human life expectancy. 50 years ago or even 20 years ago nobody could imagine that people will postpone marriages and kids till their 40’s or expect to live to their 100 or even more! That assumes we’ve got to get more responsible about out savings. Many people start new careers in their 50’s and 60’s nowadays. They plan to live long and happily but can’t rely on previously planned pension plans. The earlier you start to save - the better.
What do you think of risk-mitigation efforts provided by ISEC WM? I’ve read a bunch of articles about possible inflationary pressure in the upcoming months if not years. That might be a concern for the interest rates, no?
Well, this is what diversification is needed for. ISEC WN does not sell a single investment product, the efforts are aimed at allocating client funds to a whole portfolio of assets. You as a client can take part in the decision-making process as the range of investment models is wide. They differ by the percentage of asset classes present in the portfolios. The main part is related to government bonds, which are the most stable assets you may find.
Central banks should be concerned about the inflationary pressure but not retail investors. Moreover, if major regulators will have nothing to hike the interest rates to tackle the inflation, investors in the fixed-income market will be the biggest winners. There’s a strong correlation between nominal and real interest rates, and expectations of a rate hike should only support the bullish trend of government bonds and other safe-haven securities.
This is a very interesting conversation you have here.
What do you think of alternative assets like equities? Does ISEC WM offer access to them in the investment models? I see stock indices constantly rising, so why not invest in this type of financial instrument?
Well, if you have a long-term planning horizon and a deep buffer of the available funds, then you can consider investing in equities. But you should be aware that this type of securities is vulnerable to significant drawdowns, in contrast to government bonds or other assets in the fixed-income market. ISEC WM has alternative solutions to form the investment portfolio, and you will be the person to make the final decision about its allocation. But I’m sure that the company experts will warn you about the risks related to the equities market.
The recent growth of stock indices is related to supportive measures imposed by monetary regulators. But if (or when?) inflation will rise, central banks will react by hiking the interest rate, and the pace of growth of the equity market might decline. This scenario does not take into account a potential sell-off in case of another wave of panic related to the recent crisis of the global economy.
Thanks for your comments, they are very informative. As far as I understand, the recent pullback of the stock market could deliver opportunities to jump in? I mean the buy-dips approach, the mean-reversion trading strategy, or how they call it.
In theory, you are right. The general trend of the stock market is still bullish in the long run. However, there might be several issues related to an aggressive method of entering the market. The first question (and the main probably) is how far the bears will push stock indices in the sell-off related to profit-taking flows and the wait-and-see approach. Technical analysis might help you in defining important support levels and strong entry points. Still, you should be ready to stay under the water for some time as the market could be very volatile near significant support or resistance levels. I think you should get in touch with ISEC WM specialists to consult about this question in detail.
Secondly, changes of the interest rates structure could lead to changes of government bond yields, and the fixed-income market could be even more attractive for long-term investment compared to equities. Anyway, ISeC WM has several investment models with different risk-to-reward ratios.
Look, ISEC WM clearly states that some sectors of the economy could be more stable and thus less risky to invest. For instance, the energy sector. Tech sector could be attractive as well. So instead of investing in the whole stock index, you might be interested to allocate funds in some separate sectors.
You were right about the opportunity. US stock indices kept declining for a while and then reversed and went up rapidly. I can see that NASDAQ printed a new all-time high recently. However, I can understand the concerns related to the depth of a possible drawdown. You never know how far the sell-off will go. So instead of losing money or being nervous because of possible losses, even temporary ones, I’d better turn to stability. Government bonds are the most stable assets, while the income is guaranteed by the state. In the European Union, things are even more stable, so that’s a great opportunity to save funds and arrange a stable income.
Indeed, such securities as government bonds are good to invest in. But it’s not like you should focus on them only. You can have a portion of alternative assets in your portfolio. The main idea is not to put all the funds in volatile and risky assets. That’s a diversification in the way it should be. Remember, the essential factor is long-term planning and safety of funds. This is why it’s better to entrust your funds to professionals, they know what to do, and how to keep your investment portfolio stable and safe.
You guys sound knowledgeable enough to invest yourself using you own tading account. Why all this trouble with ISEC Wealth Management or some other management? Isn’t it a good idea to avoid all these management fees. I bet they don’t do it for free there, huh?
LOL I just tried looking at this conversation from your point of view. So much knowledge about how markets work, what interest rates do, how to buy lows and that kind of stuff.
The tuth is that forum talks are VERY different from real life. We make hundreds of assumptions here, but when the time comes to act, that’s when the trouble normally starts.
Hesitation kills profits.
Look at how we’ve been discussing the possible threat of SnP500 drawdown. So where is the index now? Correct, getting ready to make new highs! Where are our purchases on individual accounts? ISEC WM combined a nice investment basked for me as soon as I deposited the money. Did I do any purchases myself on any other account at the time of any of the multiple pullbacks that happened since we’ve started talking about the idea? Nope.
That’s all you need to know about investing VS investing talks.
HAHAHA. I don’t even know whether I should laugh or cry at this point, but this is so true. So damn true! Who invested with a pro manager got his basket full now, and those who talked - got more postings at babypips.
I wonder how the managed portfolio will perform under the circumstance of falling market indices?
Better to make bank deposit into your local currency or buy bonds return will be similar. Too low return for all the risks that can surround them
The good thing about managed balanced portfolios is that they can resist the challenges that economics face better than some index longed separately.
Bonds that normally constitute a significant part of a balanced portfolio don’t bring as much profits as S&P500 when markets roar. Yet when markets get depressed bonds keep yielding profits while the stock part of the portfolio goes on a diet.
That’s quite a primitive explanation cause apart from bonds and stock indices there are many other things managers may pick to invest into. That’s actually why fixed-income instruments can’t compete with portfolios.
Hope you’ve got the idea.
Summing it up: nice balanced portfolio may earn not as much as simple index ETF investments when economics feel good but they also won’t lose as much when recession or, God forbid, depression comes. That’s the basics of the risk management.
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I didn’t really think about it this way.
Investments must yield returns - that’s the point. Fixed income instruments should.
I see it this way.
Fixed income instruments will never yield more than they offer from the beginning. Some risks are still there but they are relatively small so can be neglected.
Other asssets are riskier, yet they represent the overall tendency to build up on value. Some of this profitability comes from the growth of these assets value. Some reasons relate to overall cash devaluation.
Economics keep turning this wheel. All risks relate to short term threats. Given the scope is long enough these risks can too be neglectet.
I suggest subscribing to ISEC’s FB or Instagram. They often cover these issues there.
m’kay… maybe so. Still, we get back to the necessity of getting a balanced portolio with some share of fixed income instruments present there.