Tips for Diversifying You

Tips for Diversifying Your Portfolio

Investors are warned to never put all their eggs (investments) in one basket (security or market) which is the central thesis on which the concept of diversification lies.

To achieve a diversified portfolio, look for asset classes that have low or negative correlations so that if one moves down the other tends to counteract it.

ETFs and mutual funds are easy ways to select asset classes that will diversify your portfolio but one must be aware of hidden costs and trading commissions.

What Is Diversification?

Diversification is a battle cry for many financial planners, fund managers, and individual investors alike. It is a management strategy that blends different investments in a single portfolio. The idea behind diversification is that a variety of investments will yield a higher return. It also suggests that investors will face lower risk by investing in different vehicles.

5 Ways to Help Diversify Your Portfolio and Trading Signals 

Diversification is not a new concept. With the luxury of hindsight, we can sit back and critique the gyrations and reactions of the markets as they began to stumble during the dotcom crash and again during the Great Recession.

Here are five tips for helping you with diversification:

1. Spread the Wealth

Equities can be wonderful, but don't put all of your money in one stock or one sector. Consider creating your own virtual mutual fund by investing in a handful of companies you know, trust and even use in your day-to-day life.

But stocks aren't just the only thing to consider. You can also invest in commodities, exchange-traded funds (ETFs), and real estate investment trusts (REITs). And don't just stick to your own home base. Think beyond it and go global. This way, you'll spread your risk around, which can lead to bigger rewards.

People will argue that investing in what you know will leave the average investor too heavily retail-oriented, but knowing a company, or using its goods and services, can be a healthy and wholesome approach to this sector.

Still, don't fall into the trap of going too far. Make sure you keep yourself to a portfolio that's manageable. There's no sense in investing in 100 different vehicles when you really don't have the time or resources to keep up. Try to limit yourself to about 20 to 30 different investments.

2. Consider Index or Bond Funds

You may want to consider adding index funds or fixed-income funds to the mix. Investing in securities that track various indexes makes a wonderful long-term diversification investment for your portfolio. By adding some fixed-income solutions, you are further hedging your portfolio against market volatility and uncertainty. These funds try to match the performance of broad indexes, so rather than investing in a specific sector, they try to reflect the bond market's value.

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These funds are often come with low fees, which is another bonus. It means more money in your pocket. The management and operating costs are minimal because of what it takes to run these funds.

 

One potential drawback of index funds is their passively managed nature. While hands-off investing is generally inexpensive, it can be suboptimal in inefficient markets. Active management can be very beneficial in fixed income markets, especially during challenging economic periods.

 

3. Keep Building Your Portfolio

Add to your investments on a regular basis. If you have $10,000 to invest, use dollar-cost averaging. This approach is used to help smooth out the peaks and valleys created by market volatility. The idea behind this strategy is to cut down your investment risk by investing the same amount of money over a period of time.

 

With dollar-cost averaging, you invest money on a regular basis into a specified portfolio of securities. Using this strategy, you'll buy more shares when prices are low, and fewer when prices are high.

 

4. Know When to Get Out

Buying and holding and dollar-cost averaging are sound strategies. But just because you have your investments on autopilot doesn't mean you should ignore the forces at work.

 

Stay current with your investments and stay abreast of any changes in overall market conditions. You'll want to know what is happening to the companies you invest in. By doing so, you'll also be able to tell when it's time to cut your losses, sell and move on to your next investment.

 

5. Keep a Watchful Eye on Commissions

 

Understanding Fundamentals

 

Understanding Fundamentals

In business and economics, fundamentals represent the primary characteristics and financial data necessary to determine the stability and health of an asset. This data can include macroeconomic, or large-scale factors, and microeconomic, or small-scale factors to set a value on securities or businesses.

 

 

Analysts and investors examine these fundamentals to develop an estimate as to whether the underlying asset is considered a worthwhile investment, and if there is fair valuation in the market. For businesses, information such as profitability, revenue, assets, liabilities, and growth potential are considered fundamentals. Through the use of fundamental analysis, you may calculate a company's financial ratios to determine the feasibility of the investment.

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While fundamentals are most often considered factors that relate to particular businesses or securities, national economies, and their currencies also have a set of fundamentals that can be analyzed. For example, interest rates, gross domestic product (GDP) growth, trade balance surplus/deficits, and inflation levels are some factors that are considered to be fundamentals of a nation's value.

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Macroeconomic and Microeconomic Fundamentals

Macroeconomic fundamentals are topics that affect an economy at-large, including statistics regarding unemployment, supply and demand, growth, and inflation, as well as considerations for monetary or fiscal policy and international trade. These categories can be applied to the analysis of a large-scale economy as a whole or can be related to individual business activity to make changes based on macroeconomic influences. Large scale, macroeconomic fundamentals are also part of the top-down analysis of individual companies.

 

 

Microeconomic fundamentals focus on the activities within smaller segments of the economy, such as a particular market or sector. This small-scale focus can include issues of supply and demand within the specified segment, labor, and both consumer and firm theories. Consumer theory investigates how people spend within their particular budget restraints. The theory of the firm states that a business exists and makes decisions to earn profits.

 

Fundamentals in Business

By looking at the economics of a business, including the overall management and the financial statements, investors are looking at a company's fundamentals. Not only do these data points show the health of the business, but they also indicate the probability of further growth. A company with little debt and sufficient cash is considered to have strong fundamentals.

 

Strong fundamentals suggest that a business has a viable framework or financial structure. Conversely, those with weak fundamentals may have issues in the areas of debt obligation management, cost control, or overall organizational management. A business with strong fundamentals may be more likely to survive adverse events, like economic recessions or depressions, than one with weaker fundamentals. Also, strength may indicate less risk should an investor consider purchasing securities associated with the businesses mentioned.

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Fundamental Analysis

Investors and financial analysts are interested in evaluating the fundamentals of a company to compare its economic position relative to its industry peers, to the broader market, or to itself over time. Fundamental analysis involves digging deep into a company's financial statements to extract its profit and growth potential, relative riskiness, and to ultimately decide if its shares are over, under, or fairly valued in the market.

 

Often fundamental analysis involves computing and analyzing ratios to make apples-to-apples comparisons. Some common fundamental analysis ratios are listed below.

 

The debt-to-equity ratio (DE) measures how a company is financing its operations.

The quick ratio measures the company’s ability to meet its short-term obligations.

The degree of financial leverage (DFL) measures the stability or volatility of the earnings per share (EPS).

The price-to-earnings (P/E) ratio compares investment to earnings dollars.

The DuPont analysis looks at return on equity (ROE) by looking at asset use efficiency, operating efficiency, and financial leverage.

Fundamental analysis should be carried out with a holistic approach, utilizing several ratios and including a bottom-up as well as a top-down analysis to come to specific conclusions and actions.

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Real World Example

In the fourth quarter of 2018, according to Market Watch, large-cap tech companies Microsoft and Apple had similar market caps for the first time since 2010. Although the two companies had similar market caps of about $850 billion, they had very different fundamentals. For example, Microsoft was trading at 45X earnings while Apple was trading at 15X earnings.1

 

 

What is the book value of the common share?

What is the book value of the common share?

Book value per common share (or simply book value per share - BVPS) is a method of calculating the book value per share of a company based on the equity of the common shareholders in the company. A company's book value is the difference between that company's total assets and total liabilities, not its market share price.

 

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In the event of the dissolution of the company, the book value of each ordinary share indicates the remaining dollar value of the ordinary shareholders after all assets are liquidated and all debtors are paid.

 

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Understand the book value

 

The equation for the book value of a common share is:

Book value per ordinary share (formula below) is an accounting measure based on historical transactions:

 

What does BVPS tell you?

The book value of ordinary shares in the numerator reflects the original returns that the company receives from the issuance of ordinary shares, which are increased by profits or decreased due to losses, and decreased by dividends paid. Company share buybacks reduce the book value and the total number of common shares. Stock buybacks occur at current stock prices, which can lead to a significant reduction in the company's book value per common stock. The number of common shares used in the denominator is usually the average number of diluted ordinary shares of the past year, which takes into account any additional shares other than the number of underlying shares that could arise from stock options, guarantees, preferred shares, and other convertible instruments.

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Example of BVPS

As a hypothetical example, suppose XYZ Manufacturing's common stock balance is $ 10 million, and one million shares of common stock outstanding, which means that BVPS is ($ 10 million / 1 million shares), or $ 10 per share. If XYZ manages to generate higher profits and uses those profits to buy more assets or reduce liabilities, the company's common stock increases. For example, if a company makes a profit of $ 500,000 and uses $ 200,000 of the profits to purchase the assets, the common stock increases along with the BVPS. On the other hand, if XYZ uses $ 300,000 in dividends to reduce liabilities, the common stock also increases.

 

The difference between the market value of the share and the book value of the share

The market value per share is the company's current share price, and it reflects the value that market participants are willing to pay for their regular share. Book value per share is calculated using historical costs, but market value per share is a forward-looking measure that takes into account the firm's future earnings strength. With increases in the company's estimated profitability, projected growth, and soundness of its business, the market value per share grows higher. Material differences arise between the book value per share and the market value per share due to the ways in which accounting principles classify certain transactions.

 

For example, consider a company's brand value, which was created through a series of marketing campaigns. US Generally Accepted Accounting Principles (GAAP) require marketing costs to be spent promptly, which reduces the book value per share.1 However, if the advertising efforts enhance the company's product image, the company can charge premium rates and create brand value. Market demand may lead to an increase in the share price, which creates a large discrepancy between the market and the book values ​​per share.

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The difference between book value of common stock and net asset value (NAV)

Whereas, BVPS considers the residual equity per share of the company's shares, net asset value, or NAV, to be the value per share computed for a mutual fund, exchange-traded fund, or ETF. For any of these investments, the net asset value is calculated by dividing the total value of all fund securities by the total number of fund shares outstanding. NAV is created daily for mutual funds. A number of analysts consider total annual return to be a better and more accurate measure of mutual fund performance, but net asset value is still used as an easy-to-use interim valuation tool.

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BVPS limits

Because the book value per share only takes into account book value, it fails to incorporate other intangible factors that may increase the market value of the company's shares, even upon liquidation. For example, high-tech banks or software companies often have very little tangible assets in relation to their intellectual property and human capital (workforce). These intangible assets will not always be taken into account in the book value calculation.

 

Personal capital financing

 

Personal capital financing

Platform: iOS, Android, AmazonCost: Free

Over 2.4 million people track their finances using personal capital, which includes more than 22,000 investment clients in all US states (as of December 2019). 1 Sync almost any investment account, including retirement and taxable accounts, then track Performance and customization, and graphics with easy-to-read graphs and charts. Track investments by account, asset class, or individual security. The You Index tracks your holdings and measures their performance against major market indices, so you can see your progress in stocks, cash, ETFs and mutual funds positions.

 

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The portfolio check feature determines whether you can save money on mutual fund fees, and the asset allocation review reveals diversification opportunities. Work with a personal wealth management advisor to discuss your investment needs via FaceTime, email or phone. Bank-wide app security uses a two-step remote authentication process.

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The main concerns

Mobile portfolio management apps can provide information on your investments from 401K (s) to IRAs.

Some wallet management apps can sync with your existing accounts, and most are free.

Some of the more popular apps include SigFig Wealth Management, Personal Capital, and Stocks Portfolio Manager.

SigFig Wealth Management

Platform: iOS, Android Cost: Free

Use the wealth management app of investment company SigFig to track all of your investment accounts for free. SigFig automatically pulls your investment accounts from more than 50 leading brokers into a single dashboard to provide you with a real-time view of every stock, mutual fund, ETF, and option you own. 2 In addition, it provides snapshots of the 401 (k)) plan. And IRAs. You'll get weekly email summaries of account performance, news affecting your portfolio, and alerts focused on the top gainers and losers.

 

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The app automatically analyzes your portfolio to find hidden charts and overexposures for a single stock / industry. For a fee, users can improve their returns through automated investing. SigFig will optimize your portfolio and provide daily monitoring to keep it on track through rebalancing, profit reinvestment and tax-efficient strategies.

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Tape: a stock portfolio manager

Platform: iOS, cost: free

Ticker lets you manage multiple equity portfolios - think growth, technology, and retirement portfolios - from one dashboard. Color charts, graphs, and detailed analyzes display real-time account values, daily profit / loss, daily profit / loss, customization, money weighted return rate (MWRR), time-weighted rate of return (TWRR), plus news related to symbols. Manually enter trading information for stocks and currency pairs such as EUR / USD, mutual funds and ETFs, including dividends, splits, buy / sell orders, indicator symbol, trading volume, price, date, and brokerage fees. Track stocks with multiple watchlists, and create alerts to notify you if a stock is trading above or below the stimulus level you selected, based on price, volume, and percentage of changes.

 

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Hey ho! Financial

Platform: iOS, Android Cost: Free

Hey ho! Finance has an easy-to-use design, so you can easily track your stocks, commodities, bonds, and currencies.4 Get personalized news and alerts and follow market movements in real time. Set watchlists and get live quotes while monitoring your portfolio performance.

 

Hey ho! Finance is one of the largest business news sites in the United States with data, comments, and press releases within its daily content. Of course, Yahoo! Finance app users also have quick access to this urgent information at a glance.

 

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Portfolio management apps easily track your investments from anywhere, anytime. Some apps sync with your existing accounts, while others require you to manually enter information about your assets. Either way, these apps provide the most up-to-date information - so you know where you stand now - as well as provide tools to help you get where you want to be in the future.

 

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Margin trading

 

Margin trading

Margin trading makes it easier for traders to enter into trading opportunities as you don't have to worry about spending a lot of cash to acquire an asset.

 

 

Margin is the interest owed on loans between you and your broker in relation to the assets of your portfolio. For example, if you short sell shares, you must first borrow it on margin and then sell it to the buyer. Or, if you buy on margin, you will be offered the ability to leverage your money to buy more shares than the cash you spend.

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For example, with a margin of 10%, you can buy up to $ 1,000 worth of shares with only $ 100 subtracting. You are given an additional $ 900 in the form of a marginal loan, on which you will have to pay interest. If you have a margin account, it is important that you understand how this margin interest is calculated and be able to calculate it yourself manually when needed. It is just as important as the interest on your savings account.

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Before making a calculation, you must first know the margin interest rate your broker charges for borrowing money. The mediator should be able to answer this question. Alternatively, the company's website may be a valuable source for this information, as well as account confirmation and / or monthly and quarterly account statements.

 

 

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Usually the broker will list their margin rates alongside other disclosures of fees and costs. Often times, the margin interest rate depends on the number of assets you have with your broker, the more money you have with them, the lower the margin interest you are responsible for paying.

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Margin interest calculation

Once you know the margin interest rate being charged, grab a pencil, piece of paper, and calculator and you'll be ready to find out the total cost of the margin interest payable. Here's a hypothetical example:

 

Let's say you want to borrow $ 30,000 to buy a stock that you intend to hold for 10 days where the interest margin is 6% per annum.

 

In order to calculate the cost of borrowing, first, take the amount of money borrowed and multiply it by the rate charged:

 

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$ 30,000 x .06 (6%) = $ 1,800

Then take the resulting number and divide it by the number of days of the year. Typically, the brokerage industry uses 360 days, not the anticipated 365 days.

 

$ 1,800 / $ 360 = 5

Next, multiply that number by the total number of days you've borrowed, or expect to borrow money on margin:

 

5 x 10 = $ 50

Using this example, it would cost you $ 50 in margin interest to borrow $ 30,000 for 10 days.

 

While margin can be used to amplify profits in the event that the stock rises and a leveraged purchase is made, losses can also be amplified if the price of your investment falls, resulting in a margin call, or the need to add more cash to your account to cover those paper losses.

 

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Remember that whether you win or lose on a trade, you still owe the same margin interest that was charged in the original transaction.

 

The bottom line

Margin trading is a risky business, but it can be profitable if managed properly and, most importantly, if the trader does not get over himself. It also makes accessing specific asset values ​​easier as the trader does not need to pay the total cost of the asset when he sees an interesting trading opportunity. When entering into a margin trade, it is important to calculate the cost of borrowing in order to determine the true cost of the deal, which will accurately indicate profit or loss.

 

 

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What is constant proportion portfolio insurance (CPPI)?

 

What is constant proportion portfolio insurance (CPPI)?

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Understanding Constant Proportion Portfolio Insurance (CPPI)

Constant Proportion Portfolio Insurance (CPPI) allows an investor to maintain exposure to the upside potential of a risky asset while offering a capital guarantee against downside risk. The result of the CPPI strategy is somewhat similar to buying a call option, but it does not use option contracts. Therefore, CPPI is sometimes referred to as a convex strategy, as opposed to a "concave strategy" as a constant mix. Financial institutions sell CPPI products on a variety of risk assets, including stocks and credit default swaps.

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KEY TIPS

CPPI is a strategy to combine the advantage of exposure to the equity market with investments in a conservative financial instrument. This is done by assigning a specifically calculated investment percentage to a risk account.

A multiplier is used to determine the amount of risk an investor is willing to take.

Investors can rebalance their positions on a monthly or quarterly basis.

How Constant Proportion Portfolio Insurance (CPPI) Works

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The investor will make an initial investment in the risk asset equal to the value of: (Multiplier) x (value of the cushion in dollars) and will invest the rest in the conservative asset. The value of the multiplier is based on the investor's risk profile and is obtained by first asking what the maximum loss in a day of the risk investment could be. The multiplier will be the inverse of that percentage. As the value of the portfolio changes over time, the investor will rebalance according to the same strategy.

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CPPI consists of two accounts: a risk account and a security account. As their names indicate, both accounts serve specific purposes in an individual's overall investment strategy. The risk account is leveraged with futures holdings to hedge against the downside of significant exposure to equities. The funds are dynamically transferred between the two accounts based on the economic environment.

 

The schedule for rebalancing is up to the investor, with monthly or quarterly examples being frequently cited. Typically, CPPI is implemented over five-year periods. Ideally, the value of the cushion will grow over time, allowing more money to flow into the risk asset. However, if the buffer falls, the investor may need to sell a portion of the risk asset to keep the asset allocation targets intact.

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One of the problems with implementing a CPPI strategy is that you do not immediately "de-risk" your holdings when markets move in the opposite direction. A hypothetical CPPI strategy on a five-year investment time horizon would have underperformed the S&P 500 for several years after the 2008 financial crisis.

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CPPI example

Consider a hypothetical portfolio of $ 100,000, of which the investor decides that $ 90,000 is the absolute floor. If the portfolio falls to $ 90,000 in value, the investor would move all assets to cash to preserve capital.

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If one decides that 20 percent is the maximum chance of "falling", the value of the multiplier will be (1 / 0.20), or 5. Multiplier values ​​between 3 and 6 are very common. Based on the information provided, the investor would allocate 5 x ($ 100,000 - $ 90,000) or $ 50,000 to the risk asset, with the remainder going to the cash or conservative asset.

Confirmation Bias part one

Confirmation Bias part one

Central to the fields of both psychology and behavioral finance, cognitive biases describe the innate tendencies of the human mind to think, judge, and behave in irrational ways that often violate sensible logic, sound reason or good judgment. The average human – and the average investor – is largely unaware of these inherent psychological inefficiencies, despite the frequency with which they arise in our daily lives and the regularity with which we fall victim to them. While the complete list of cognitive biases is extensive, this article focuses on eleven of the most common tendencies, chosen for both their prevalence in human nature and their relevance to investing in the financial markets. The purpose of this article is to educate you on these psychological predispositions so that you can better recognize and overcome them in your own decision making.

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Anchoring

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Also referred to as focalism, anchoring is the tendency to be over-influenced by the earliest information presented to us when making decisions, thereby allowing oneself to be driven to a decision or conclusion that is biased towards that initial piece of information. This earliest piece of information is known as the “anchor,” the standard off of which all other alternatives are judged. Thus, subsequent decisions are made not on their own, but rather by adjusting away from the anchor.

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 For example, in price negotiations over a used car, the first price offered by the salesman sets the anchor point, from which all subsequent offers are based. By offering an initial price of, say, $30,000, a used-car salesman anchors the customer to that price, implementing a bias towards the $30,000 level in the subconscious of the other party. Even if the $30,000 offer is significantly above the true value of the car, all offers below that level appear more reasonable and the customer is likely to end up paying a higher price than he or she originally intended.

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 While the used car example may seem somewhat harmless, psychologists have captured the effects of the anchoring bias in other more significant settings. For example, researchers have shown that court decisions of judges can be swayed significantly by anchoring effects. In one setting, judges were presented with details of a court case and asked to award damages to the appropriate party. Some of the judges were provided with a low anchor (a low damage estimate) while others were provided no anchor. On average, damages awarded by judges who were given the low anchor were 29% less than those awarded by the non-anchored judges. In a similar study, judges were provided details of a case and asked to determine the duration of an appropriate prison sentence. The anchor given to the judges was set by rolling two dice on the table directly front of them. Even when the anchor was set completely randomly in this fashion and its source was witnessed by the judges, the study showed that their

sentencing decisions were still subject to the anchoring effect and biased when a high dice number was rolled.

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In a financial market setting, anchoring is at play anytime the estimates or expectations of another party are allowed to influence your own judgments. For example, if a price target for a stock that you are considering is set by a particularly vocal Wall Street analyst at $200.00, your own estimates for that security’s potential price movement can be easily swayed towards that figure, potentially blurring your clarity of thought, inflating your expectations and dragging you into a poor decision.

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 Aversion to loss and the effect of the stay

First appeared by prominent psychologists Amos Tversky and Daniel Kahneman, the notion of loathing loss to human inclination indicates a preference for decisions that allow us to avoid losses over those that allow us to gain. Hating a loss, for example, means that the pain of a $ 500 loss is much greater than the satisfaction that it will get from a $ 500 gain. Numerous studies on aversion to loss commonly suggest that human perception of loss is twice the gain strength. This forms the basis of what is known as probability theory, and it is the concept of behavioral economics that describes the way people choose between potential risk alternatives. In essence, Prospect's theory shows that loss is more important than equivalent profit. On the graph, the value function of the Prospect Theory developed by Tversky and Kahneman forms the following curve, whose unequal form shows the unequal value of identical gains and losses:

 

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Aversion to loss is discussed at length not only in psychological studies of how humans make decisions, but also in economics. In economics, aversion to loss is a basic concept at work when looking at how individuals behave in risky scenarios. Since individuals prefer avoiding losses over making gains, loathing the loss causes us to avoid risks when assessing results with similar gains and losses.

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 Hate of loss was first proposed by Kahneman and his colleagues in 1990 as an interpretation of a closely related concept known as the endowment effect. The endowment effect describes the human tendency to place more value on a commodity that we possess than we do on an identical commodity that we do not possess. Together, aversion to loss and the impact of the endowment violate the fundamental economic principle known as the Coase Theory, which states that "resource allocation will be independent of the assignment of property rights when trade is at no cost possible". Research has shown that even when the trade involves no cost, ownership still creates discrepancies in the perceived value between the parties due to the effect of the moratorium.

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For example, the researchers demonstrated the effect of the moratorium by distributing a cup of coffee to each study participant and then giving them the opportunity to sell or trade the cup for an alternative good (in this case, pens) of equal value. On average, the compensation that participants requested to dispose of the cup (their willingness to accept) was almost twice higher than the amount they were willing to pay for the cup (their willingness to pay). In only a few minutes, the participants who obtained a cup attributed the property to the object, which raised their awareness of its value. Another popular study on the effect of a moratorium found that the default sale price of NCAA Final Four basketball tickets was an average of 14 times higher than the participants' default purchase price. Even when it is completely fictional, the ownership (stopping) of tickets enhances its perceived value.

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 By linking the concepts of aversion to loss and the effect of a moratorium again on financial markets, it is easy to see how these trends can affect an investor. A loss aversion has a clear effect on our risk tolerance before and after the transaction is executed. Besides other cognitive biases, our tendency to move away from loss can lead to denial where losses accumulate in a vulnerable position, for example, causing neglect of weak situations in an attempt to reduce their emotional impact. Likewise, if the endowment's influence leads us to place more value on security just because we feel a sense of ownership over it, that emotional attachment can lead to a vague judgment when it is time to sell.

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Random walk or Non-random walk for forex

 

Random walk or Non-random walk for forex

 

Introduction

The great debate continues between random walkers and non-random walkers. Two competing books best represent these theories. Originally written by Burton Malkiel in 1973, A Random Walk Down Wall Street has become a classic in investment literature. Malkiel, a Princeton economist, argues that price movements are largely random and that investors cannot outperform major indices.

 

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Written by Andrew W. Lo and A. Craig MacKinlay in 2001, the appropriately titled A Non-Random Walk Down Wall Street provides the counter-argument. Lo, a professor of finance at MIT and MacKinlay, a professor of finance at Wharton, argue that price movements are not so random and that there are predictable components. Let the battle begin!

 

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With "random walk," Malkiel claims that price movements in stocks are unpredictable. Due to this random walk, investors cannot consistently outperform the market as a whole. Applying fundamental analysis or technical analysis to market time is a waste of time that will simply lead to poor performance. Investors would be better off buying and holding an index fund.

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Malkiel offers two popular investment theories that correspond to fundamental analysis and technical analysis. On the fundamental side, the "Firm Foundation Theory" argues that shares have an intrinsic value that can be determined by discounting future cash flows (earnings). Investors can also use valuation techniques to determine the true value of a security or market. Investors decide when to buy or sell based on these valuations.

 

On the technical side and Forex Signals  the "castle in the air theory" assumes that successful investing depends on behavioral finance. Investors must determine the mood of the market: bull or bear. Valuations are not important because a security is only worth what someone is willing to pay for it.

 

The random walk theory agrees with the semi-strong efficient hypothesis in its claim that it is impossible to consistently outperform the market. This theory argues that stock prices are efficient because they reflect all known information (earnings, expectations, dividends). Prices adjust quickly to new information and it is practically impossible to act on this information. Also, the price moves only with the advent of new information and this information is random and unpredictable.

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In short, Malkiel attributes any superior performance success to the lady's luck. If enough people try, some are likely to outperform the market, but most are likely to underperform.

 

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A non-random tour of Wall Street is a collection of essays that provide empirical evidence that valuable information can be gleaned from security prices. Lo and MacKinlay used powerful computers and advanced econometric analysis to test the randomness of security prices. Although this book is a great read, the findings should be of interest to technical analysts and cartographers. In summary, this book documents the presence of predictable components in stock prices.

 

Just before this book, Andrew Lo wrote an article for the Journal of Finance in 2000: Fundamentals of Technical Analysis: Computational Algorithms, Statistical Inference, and Empirical Implementation. Harry Mamaysky and Jiang Wang also contributed. The newspaper's initial comments say it all:

 

“Technical analysis, also known as charts, has been part of financial practice for many decades, but this discipline has not received the same level of academic scrutiny and acceptance as more traditional approaches like fundamental analysis. One of the main obstacles is the highly subjective nature of technical analysis. The presence of geometric shapes on historical price charts is often in the viewer's eyes. In this paper, we propose a systematic and automatic approach to technical pattern recognition using non-parametric kernel regression and apply this method to a large number of EE stocks. USA From 1962 to 1996 to evaluate the effectiveness of technical analysis. When comparing the unconditional empirical distribution of daily stock returns with the conditional distribution conditioned by specific technical indicators, such as head and shoulders or double bottom, we found that during the 31-year sample period, several technical indicators provide incremental information and may have some practical value. Find more Free Forex Signals at https://www.freeforex-signals.com/

 

The best forex trading signals live

The best forex trading signals live

The best forex trading signals live presented by free forex signals

GBP USD

SELL from 1.2460

Take profit 1.2300

Stop loss 1.2540

type order Market Execution is entering this trade at any price from 1.2460

technical analysis and forex signals for GBP USD

waves in the same direction will tend toward equality SO GBPUSD WILL resume bearish wave to level 1.2130

Riding Wave C in a Zigzag

Trend continues till gives a reversal signal

on hourly chart the Last wave determine the end of the pattern and Consists of zigzag that generate sell GBPUSD forex signals

reversal candlestick pattern on daily chart is shooting star

The price behavior is the result of Environmental pattern

Current surrounding Repetitive pattern is zigzag Wave C = 1.618 Wave A

History Repeats Itself that the future is just a repetition of the past

The bearish movement from level 1.3510 to level 1.1410 appeared before on price chart at 19-6-2015 and followed with bullish movement equal the current bullish movement from level 1.2240 to 1.2520 that give forex trading signals to sell GBP USD and according to this movement GBP USD will decline to 1.0580

Also The bearish movement from level 1.2650 to level 1.2240 appeared before on price chart at 9-7-2018 and followed with bullish movement equal the current bullish movement from level 1.1410 to 1.2650 that give forex trading signals to sell GBP USD so the gbp usd will decline near to level 1.1970

 surrounding Repetitive pattern before this movement expanded flat Wave C = 1.618 Wave A

We expect price will repeat the same movement again and gbp usd price will go down toward 1.1970

Maybe the correction equal only one wave of previous correction

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