In case of short term investments that are held for trading, it is highly important for an investor to know whether he should sell his investments, hold them, or whether he should acquire new investments. This decision may not be easy to make and there is always some risk involved, but there are certain factors that can help an investor make this decision. The historic market performance of the company is the biggest indicator of the prospective performance. Therefore, the trend in the market performance of the company can help an investor make this decision.
Following are the factors that indicate when to buy, sell, or hold the investments:
When to Buy
Shares can be bought when the company shows very promising financial performance in the future periods. Mostly, when the share price of a company is low and the company releases exceptionally promising financial results, this may set the share price on an upward track which may go on for a substantial period of time. Therefore, this may also be an opportunity for the investors to buy the shares in the company. Recent examples may be the stock of Qualcomm. The stock of the company was undermined due to the lack of the company’s ability to meet its demand. However, as soon as the company announced favorable financial results along with the disclosure that the supply chain issues have been dealt with, the stocks of the company were revived. This gave the investors an opportunity to buy the stock to earn high returns in a short term. Continue reading
Swap options hold particular importance for companies that intend to extend their business internationally. One of the risks related to international business expansion is the fluctuation of interest rates. Changes in interest rates influence the financial performance of an organization in a major way because the extent of the borrowing cost to be paid or received by an organization depends upon the prevailing interest rates. If an unanticipated rise or fall occurs in the interest rates, this may have a significant impact on the cash flow of the organization.
An organization projects its future cash flows in order to evaluate its performance. However, if the interest rates change frequently, the projected cash flows of the organization may not be valid therefore the comparison of the actual performance of the organization with the projected performance may not provide valid results. If an organization holds a loan which is subject to the floating interest prevailing in the market, the finance cost to be paid by the organization will depend upon that prevailing interest rate. The organization will have to bear a lower finance cost if the interest rate falls, however on the other hand, the organization will have to pay a higher amount if the interest rate rises.
Following are some of the swap options that can be utilized by a company to mitigate the risk related to fluctuating interest rates. Continue reading
It is every investor’s goal to receive high returns from his investments while keeping the risk at its minimum, but one factor that every investor is not aware of is the role played by the diversity in investment portfolio in maximization of the returns and minimization of the risk.
The success of investments does not only depend upon the extent of capital invested or the investment avenues invest in, it depends mainly upon the way the investment portfolio is maintained. It is highly important to maintain a well diversified investment portfolio in order to ensure that the investment risk is managed efficiently.
Diversified Investment Portfolio
Investors can maintain a well diversified investment portfolio by making investments in numerous investment avenues that are not related to each other. This way, a negative trend in one investment will not influence the other investment. Many experts have tried to define a perfectly diversified investment portfolio but not all of them agree with the outcome. However, there is one factor that remains the same i.e.; the investment portfolio should hold securities that belong to independent groups and are not influenced by each other. Following is a brief introduction to the types of securities that can be included in a diversified investment portfolio: Continue reading
In order to maximize the earnings from investments, it is highly important that the investment portfolio is maintained wisely. You can maximize your earnings and minimize your risk by developing a good investment portfolio. There are a number of factors that must be considered while maintaining an investment portfolio. Following are the things you must consider:
Diversity in the Portfolio
Diversification in the investment portfolio is the best tool to minimize the risk associated with investment. You can diversify your investment portfolio by including a mix of equity shares, bonds, and government securities. It is important that the portfolio reflects investments in different sectors that are independent from each other. This is because companies in a single sector are influenced by the industrial factors at the same time. For example; if a new regulatory requirement requires an industry to increase environmental clean-up costs, this will affect the financial performance of all the companies operating in that industry.
Evaluate the Financial Health of the Companies
Doing proper research from making an investment is highly important. Placing a complete reliance on the analyst reports may not prove to be a good idea at times as there are certain trends that may be overlooked in the reports. You should conduct your own research on the companies. You can use ratio analysis to evaluate the trends in profitability and EPS of the companies. Continue reading