What Should Everyone Know About Investing?

What Should Everyone Know About Investing?

Before making any decision regarding investment, knowingly or unknowingly, you should ask yourself three questions. One is if your money would be safe. Second is if you would get your money back when you need it, and the last one is what return you would earn from it. These questions are about three important part of investment: safety, liquidity, and returns. These are what you should worry about while going through investing news and looking for a profitable asset to invest into. 

Keep in mind that you should consider all three elements at the same time. Let’s see what the result would be if you focus on just one. If you are after the most liquid options, then it is best to keep cash in the locker or in your savings or current account. However, when it is time to consider what would give the highest return, a conflict appears. In most cases, investments with the best returns do not offer the highest safety or liquidity. 

As you may have already realized, investing compels you to make tradeoffs. When you are investing in real estate, you trade off liquidity. By investing in stocks, you take on market risk and trade off safety. When you go for fixed deposit, you trade off high returns. 

There are three broad choices in financial investments: cash, equities, and bonds. Cash is the safest and it is also very liquid but the return is very low. Bonds or fixed income or debt brings moderate risk and it is less liquid, but offers a better return compared to cash. Equities have higher risk but it is easy to avail liquidity through markets. 

The returns are also expected to be higher than cash or bonds. Within the three classes, you can rely upon further sub-classes. Liquid funds are as good as cash but provide better returns than cash kept in the bank. Government bonds are more liquid and safer than corporate bonds, but provide lower returns than the latter. A diversified mutual fund is comparatively less risky than investing in just a couple of stocks or a sectoral fund. 

So, what should you choose for investment? 

The answer lies in your financial goals. So, first understand your objectives, and assess the time available for your investments to work and what return you need to meet your goals. Your investment choice would be decided based on these three factors. A good investment portfolio optimizes the three essential elements to obtain financial goals and build wealth.

Apart from knowing how to choose your investment, you should also pay attention to common investment mistakes. To avoid making those mistakes, know what they are:

Mistake 1: Not paying attention to asset allocation

A lot of random investments based on the advice from family and friends are what you build your investment portfolio with. So, one finds various fixed deposits, money-back and endowment insurance policies, mutual funds or stocks. However, it is not a smart decision to invest in all of these. You may think that you are investing a decent amount of money in right places, but all options may not be ideal for you. It is important to consider facts like your age, financial asset, and more. Asset allocation is the biggest weapon of an investor to create wealth. 

Mistake 2: Counting lots of activity as an investment strategy

Many young investors treat stock markets as a sort of a roulette machine to make money. However, it makes them lose money. It is also not wise to buy a new set of mutual funds every month as it causes over-diversification. It does not make sense to add another product instead of backing the winning products in your existing portfolio. If you find yourself spending a lot of time with your investment, then there is definitely something wrong and you need to get your investment strategy right. 

As a broad guideline, you can have long term goals to benefit from a mix of equity and bonds, while short term goals are better taken care of by cash or liquid investments. It is not that financial goals cannot be achieved by investing in fixed deposits or stocks. The only downside is that you may have to work a lot harder in these investments. Overall, if it is too much for you to decide, you can always consult your investment advisor. 

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Dollar Returns on Rising U.S Yields, Gold Falls As German Zew Boosts Euro

Dollar Returns on Rising U.S Yields, Gold Falls As German Zew Boosts Euro

The dollar is hitting back today, fueled by rising US yields. Besides, the dollar also maintains stronger than expected manufacturing figures. While European stocks are in the thick, US futures opened higher. The yen is now the worst, followed by the Australian and Canadian. Overall, it remains to be seen if the dollar will be able to withstand the rebound.

Overall, market dynamics have not changed, as a strong risk appetite remains. Today the focus is on whether the economic sentiment of the ZEW in Germany and the GDP of the eurozone can lift the euro. Otherwise, the current trend should continue shortly. Meanwhile, gold fell, but technically the fall in gold is in line with a rebound in the dollar.

Germany’s ZEW economic sentiment index rose to 71.2 in February from 61.8, well above 60.0 expectations. The current situation index fell to -67.2 from -66.4, surpassing expectations of -67.0. The Eurozone ZEW Economist Sentiment Index rose to 69.9 from 58.3, well above expectations of 59.2. The current situation index rose 4.3 points to 74.6.

Financial market experts are optimistic about the future. They are confident that the German economy will return to a growth trajectory over the next six months. In particular, consumption and retail trade are expected to rebound significantly, which will be accompanied by higher inflationary expectations, ”comments ZEW President Achim Wambach.
Gold Corrects Lower on Rising U.S Yields
For gold, any gains from the general risk environment were offset by higher US yields. Gold’s overall technical position remains fragile and will come under further bearish pressure this week if US yields continue to rise.

Gold dropped to week and a half lows early in the North American session, and bears are now looking for a sustained break below the $1800 round mark.

The precious metal struggled to capitalize on its intraday positive move, but instead met some fresh supply in the $1826-27 region and now appears vulnerable to further declines. The prevailing risk environment, as evidenced by the continuation of the recent bullish gains in equity markets, held back the early rally for the safe-haven XAU/USD.

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Pound Sterling Surges on UK Yields As Dollar’s Selloff Continues

Pound Sterling Surges on UK Yields As Dollar’s Selloff Continues

The dollar remains generally weak in today’s trading, although overall sentiment is stabilizing. Risk trading is taking a breather to some extent after earlier US stocks hit new intraday gains.

Meanwhile, the dollar sell-off continues at the beginning of the American session and continues after weaker-than-expected values ​​of the core CPI. Sterling rallies today amid rising UK yields, with 10-year yields currently hitting 0.494. It could try to break the pre-pandemic low of about 0.50%. Foreign exchange markets in other countries are relatively heterogeneous, with notable resilience in the Swiss franc but not in the yen. Commodity currencies and the euro are stable, but there are currently no impulsive follow-up purchases.

The dollar continued its decline as markets remain largely bullish, awaiting stimulus news and welcoming vaccination prospects. Data on inflation in the US and a speech by the Chairman of the Federal Reserve System Jerome Powell are expected. The yield on 10-year US Treasuries stabilized at 1.15% after a preliminary increase. The current lull in the bond market has been replaced by a mood of risk-taking.
Pound Sterling Soars to Fresh Highs
The British pound sterling continues to rise, with the price rising to a new high in three and a half years. The gain occurs as the GBPUSD approaches the level of 1.3866. The pound is once again winning the hearts and minds of investors as the UK’s success in spreading the coronavirus vaccine improves the chances of an economic recovery.

The pair has been one of the most profitable G10/USD currencies for the day as the fundamentals underlying the pound remains positive. Meanwhile, the US dollar is mixed compared to its G10 peers, and softer-than-expected consumer price inflation data for January is not helping. The pair is currently trading at around 0.2% gains or 30 pips per day.

The market remains optimistic about the prospects for a massive US budget spending plan. This comes amid progress in the rollout of vaccines for the highly contagious coronavirus disease and is fueling expectations for a strong global economic recovery while maintaining the prevailing risk environment.

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Dollar Awaits US Stocks, Yields As Pound Sterling Rebounds From Daily Lows

Dollar Awaits US Stocks, Yields As Pound Sterling Rebounds From Daily Lows

The US dollar is recovering as the risk appetite cools slightly in the American session. Nonetheless, US stock futures are heading to new all-time highs today, while yields remain steady. Looking forward to seeing the dollar continue its rebound trend shortly. The Canadian dollar is currently a stronger commodity currency, fueled by oil prices. The sterling is bouncing off daily lows against the dollar.

GBP/USD bounced higher after the start of the American session and climbed to 1.3749, hitting its highest level in a week. It remains near the highs on the back of a weaker US dollar across the board.
The US dollar index rebounded from Friday’s fall and reversed down to 90.89, a six-day low. During the American session, risk appetite and declining US bond yields weakened the dollar.

British Cabinet Minister Michael Gove said on Monday that there are concerns in Northern Ireland about the Northern Ireland Protocol and added that it needs to be improved to ensure its effectiveness. The GBP/USD pair showed no immediate reaction to these comments and most recently gained 0.05% on the day to 1.3740.
Dollar Awaits US Stocks and Yields
Global stocks made a strong start in February after being rocked by the frenzy of day trading at the end of January, causing previously disliked stocks like GameStop to skyrocket.

Data released last week suggests that the US economy may recover faster than analysts predicted. The country’s private sector added 174,000 jobs in January, surpassing forecasts of 70,000, according to the ADP’s monthly report. The survey data also showed that the service sector is recovering well.

The data supported bond yields, which rise as investors anticipate growth and inflation. The yield on 10-year US Treasuries is approaching its highest level since March 2020. President Joe Biden’s $1.9 trillion U.S. stimulus plan has also bolstered market confidence in recent weeks. Democrats in Congress have moved forward by taking steps to implement the package without Republican support.

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The Footsie retests yesterdays lows as bulls enter the market

The Footsie retests yesterdays lows as bulls enter the market

The footsie has been in a massive rally since the beginning of November 2020 with no real deep pullbacks.

We are now above the December 2018 lows which were the big key level to the upside and are looking for a long opportunity.

My real buy zone is lower around the 6670 but if price holds these lows inside the flag and breaks with the immediate structure the probability of a continuation rally is high.

Super strong hidden bullish divergence detected.

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Halfords pandemic share boost to continue with green mobility gains

Halfords pandemic share boost to continue with green mobility gains

If you bought Halfords stock (HFD) at its March 2020 nadir (51p), then today (280p) you would be sitting on a gain of 449%.

The UK auto and cycle product and services group is without a doubt one of the pandemic winners, but investors on the outside looking in might be wondering if there’s more juice to be squeezed out of this stock.

The answer is yes. Our affirmative response rests at least partly on the assumption that the shift to cycling during the pandemic is not just a passing fad but a trend that will become ingrained as government support in the UK for carbon-neutral mobility takes hold.

Its outperformance during the pandemic was certainly helped by its designation as an “essential retailer” by the government, which meant it has stayed open throughout the lockdown periods, albeit with controlled socially distanced entry combined with click-and-collect service product delivery.

And it’s not all about bicycles.

Another allied trend is the growth in sales of electric scooters and similar micro-mobility options relying on electric propulsion, such as electric motor-assisted cycling, where riders can call on motorised assistance when, for example, cycling up hill.

Halfords could reasonably be considered a renewable energy stock – or at least a green infrastructure play – as it successfully exploits its leading position in the UK market for bicycles and escooters, even if it is still reliant on the legacy internal combustion engine business.

Price-to-free cash flow is impressively low at 2.2 and share price momentum excellent, with a Stockopedia ranking of 93 out of 100.

Its price-to-sales ratio is also excellent at 0.47, which is the basis of its strong value ranking.

Operating margin (5.13%) and return on capital (8.6%) places Halfords in the top third for its industrial sector of speciality retailers (comprised of 37 companies).

In its October trading update for the 26 weeks to 2 October, the company raised guidance on its fiscal first half outlook, with pre-tax profits expected to come in at £55 million, an upward revision from the previously stated £35-40 million.

In particular cycle sales were expected to be up 46% year-on-year in the five weeks to 25 September, which was responsible for its impressive like-for-like cycles segment sales growth of 22%.

the interim results reported in mid-November confirmed the company’s optimistic view, with overall group like-for-like revenue coming in at 9.6% and pre-tax profit beating revised guidance by a whisker at £56 million.

Halfords online sales up 148%

Online sales grew an impressive 148% and group services growth was 166%. That, combined with improving customer satisfaction and the rollout of training across stores and cycling services, shows it is continuing to invest in strategic growth areas.

The one area of its business that has slowed is the Autocentres and motoring accessory sales – both directly related to the fall in car traffic during the lockdown periods of the pandemic. But even with those headwinds, the company still managed to grow business in the motoring division.

Indeed the company continues to invest in motoring, and has an eye on the future with plans to train a further 100 electric car technicians for a total for this year (2021) of 470.

Back on cycles, Halfords is boosting the headcount for ebike and escooter services from 400 to more than 1,800. The aim is to ensure that each of Halfords’ service garages will have at least one electric car technician and every store an ebike and escooter servicer.

On a trailing twelve month basis EPS growth is 67% for a P/E multiple of 6.6 and a dividend yield of 2.18.

Pulling all those metrics together, Halfords combines both growth prospects with exceptional value credentials, making it a candidate for GARP strategists – growth at a reasonable price.

To confirm that, Stockopedia gives Halfords a 96 out of 100 Value Ranking. Allied with its strong price momentum, it means the share price has plenty of scope for further appreciation.

Entry price range 280p to 264p

The stock was down yesterday (Monday 11 January) and on Friday, and is down again today on continued profit-taking, currently priced at 280p. however, this could prove a good near-term entry point for new investors, although traders might want to await further decline towards support at 264p (see chart below).

halfords 1-day chart

The trend line above underlines near-term support at 264, and is confirmed by 50-day SMA on the 1-month candles chart (below). The Ichimoku cloud indicates resistance ahead but we expect this to be overcome, with fiscal year-end results at the end of March 2021 to confirm continued strong trading (see chart below).

halford 1-month price chart

Halfords’ share price is still a long way off its 2019 high at 389, not to mention its all-time high printed in 2015 at 562 (see chart below).

The stock is a buy with a calendar year-end term price target of 389p.

halfords 1 week price chart

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Author : Gary McFarlane

Gary McFarlane

The author is the financial editor at Finixio, the publisher of buyshares.co.uk, stockapps.com, learnbonds.com and insidebitcoins.com. Gary was the cryptocurrency analyst at the UK's second-largest investment platform, interactive investor, from 2017 to August 2020. Gary is the winner of the Best Cryptocurrency Writer 2018 ADVFN International Awards