Jun 17, 2019 | k1zepbq659 |
Momentum Investing and Trend Following: The Secret to Significant Portfolio Returns Two popular terms which often confuse investors are “trend following” and “momentum investing.” Perhaps the most glaring commonality between these two is their blatant defiance of “buy and hold,” the practice of selecting an investment and holding it indefinitely, believing that over time the market goes up, and therefore any investment will appreciate. Although the buy and hold approach has been touted for years by academics as the best method of investing, in reality it has its shortcomings, which are apparent in every Bear market. Despite being the antithesis of buy and hold, both momentum investing and trend following strategies are predicated upon a disciplined investment approach that’s designed to buy when the price of an issue is increasing and sell when the price is declining. Additionally, an exit strategy is normally incorporated to override the human tendency to hold losing positions much too long. Yet despite the distinct characteristics that these two terms share, in reality they are quite different. What is Trend Following? Trend following, in its most basic definition, is a systematic investment approach predicated upon buying and selling securities based on the sustained price movement of the issue. It’s important to point out that trend followers don’t predict the future price movement of a stock; rather they examine the issue using technical analysis to determine which direction, if any, the equity is currently moving. If a bullish trend is emerging, the trend follower will likely buy a position in the stock and hold it until the trend begins to weaken or change direction. If the equity exhibits a bearish trend, the trend follower can short the position, wait until the trend reverses, or merely find another issue. But there’s much more to being a successful trend follower than just selecting and buying securities. In fact, it can be argued that the most important aspect of trend following isn’t when and what to buy, but rather when and what to sell! Often times, successful trend followers establish a “sell rule” that must be violated prior to selling the issue. These sell rules vary depending on the risk tolerance of each investor, but they typically consist of a trailing stop loss coupled with a confirming indicator. The overarching benefit of sell rules is that they provide a disciplined, mechanical methodology which the average investor should seriously consider implementing into his investment philosophy. What is Momentum Investing? Momentum investors are constantly searching for companies that are moving faster than the market. They believe substantial returns can be realized if they find, buy and hold onto those issues for as long as the price continues to go up. The old axiom, “if it isn’t broken, don’t fix it” illustrates the shared philosophy of momentum investors; those companies with the biggest price changes over the last few months are more likely to continue making substantial gains. Fundamental analysis plays a much bigger role in momentum investing than it does in trend following. Momentum investors believe that buried within a company’s earnings statement is the reason why the price has been increasing so dramatically. And if that underlying reason is uncovered, the opportunity presents itself to capitalize on that knowledge in the future. In the case of trend following, investors want to identify where a security may be within the performance cycle. For example, how close to the âm đạo giả 52-week high or low is the current market price and what is the short-term direction of the issue? For the momentum investor, the key criteria may be the relative strength of the security versus the market or more importantly the peer group of the particular security in question. How to Develop a Successful Investment Strategy Investors often ask why go through all the effort of actively managing a portfolio. The simple answer lies in the proven behaviors of economic cycles and sector rotation. Independent studies have proven that over time the largest percentage of a securities’ price appreciation is driven by the industrial group within which the company is classified and not the performance of the individual company itself. However, the real reason why investors should actively manage their portfolios is a concept called the “Time Value of Money,” also known as “Compounding Rate of Growth.” Many financial professionals will use the example of how a penny, if doubled every day, is worth over $10 million after only 30 days. A very impressive and eye opening number given the small amount of initial capital outlay. What would happen if instead of doubling the penny every day, it were to grow by only 75%? The investment would be worth slightly over $195,000 rather than $10.7 million. Reducing the growth rate further to 50% and the end value is now $1,917.51. A 25% growth rate for 30 days produces a value of only $8.08. How does the concept of compounding growth translate into the selection of an investment strategy? Investors who actively manage their portfolios, either through trend following or momentum investing, have the ability to take modest gains and re-invest the profit in other trending securities over and over again. Buy and hold investors are not awarded this luxury since they rarely sell when the price is at the top. Rather, they buy a position when the price is low, ride the position all the way up in a bull market, and then watch as is loses value in a bear market. It’s a very frustrating strategy, equally hard on the stomach as it is on the wallet. Both strategies, trend following and momentum investing, demand a certain level of self-discipline in order to be successful. A portfolio risk-management system that uses the current market price and equity level of a position and some form of market volatility measurement is recommended. An example of such a system could be a proprietary market model focused on technical indicators, back tested over time, coupled with a volatility indicator. The system might employ either the Average Directional Movement Index (ADX/R), the CBOE Volatility Index (VIX) or the more traditional Advance Decline Line, Breadth or Volume indicators. Taking Portfolio Risk Management Systems One Step Further One noted management system authored by William O’Neil is CANSLIM. The CANSLIM approach combines both fundamental and technical analysis much like the Core Equity Portfolio available at QMA Investment Management, LLC. The weakness in the CANSLIM approach, along with many other similar systems, is that they stop short of providing a truly utilitarian system for the investor. The user ends up with a list of stocks, all of whom have meet the systems criteria, but no method for distinguishing between the good, the better and the best. To address this problem, Alpha Advisor Service, LLC created the AAS Rating Score. This number is a time-weighted risk-adjusted alpha value used to rank each of the 1700 investments analyzed daily by AAS. The purpose of the AAS Rating Score is to create a level field to measure all investment alternatives. The highest AAS rated securities provide the greatest risk-adjusted return compared to the lowest rated securities. This approach is superior to other forms of alpha analysis since it is time-weighted, thereby identifying those stocks or funds that are providing greater returns for the risk taken. A tool of this caliber, which is available for any investor via the Alpha Advisor Service Newsletter, provides the means of not only developing a customized portfolio risk-management system, but also a disciplined method of buying and selling the securities within the portfolio.
So…you’ve been searching to invest in a high quality tanzanite on the web and you will need some assistance identifying what traits try to be trying to find in a top quality gem. This information is intended like a resource that will help guidebook you thru An effective tanzanite acquire by avoiding lots of the common pitfalls that some people turn into entangled. These pitfalls can often leave a bitter taste in your mouth and make you slightly head-shy about purchasing tanzanite on-line.
I'm knowledgeable that many of our happy tanzanite purchasers have had negative former tanzanite acquiring encounters, and a few, in my opinion, ended up downright terrible. The popular themes within their communications include:
Didn’t actually “know” the vendor as good as I ought to have…
Shade in hand was noticeably diverse as opposed to picture revealed on the net…
Didn’t read the “high-quality print”…
Wanted to return the tanzanite and the vendor billed a hefty re-stocking rate…
Didn’t comprehend the significance of clarity, tone, hue and saturation before making my tanzanite purchase…
As well as the list goes on and on… When you have not been through an practical experience such as this, both you’re a very World-wide-web-savvy shopper or you have got just been plain lucky. Numerous tanzanite people have thrown lots of their hard-gained pounds into gems which might be of substantially much less price than The cash they have got invested. That is unfortunate for them and very disappointing for the “fantastic fellas” in the gemstone business.
How many times have you planned to know you are creating the correct assessment of a possible tanzanite that you intend to order online? I are questioned this issue frequently And that i am stunned that a sizable proportion of people only don't do the required homework prior to making a getting conclusion. Undoubtedly not mainly because of the lack of credible means that are available to The buyer, Many of us simply Enable the “want” of a direct acquire get forward in their very good judgment.
Permit’s start with a generic listing of points to look at in the entire process of making a tanzanite purchase. The “generic listing” involves this sort of things as the “five W’s,” specifically, Who, What, The place, Why, When. In case your inquiry handles quite a few or even every one of these questions, you have built a good start off in getting the required info you'll need in creating a clever getting choice on your subsequent tanzanite.
Who you are looking at undertaking organization with and where by they can be found can tell you A lot a couple of tanzanite retailer. Would be the tanzanite retailer headquartered domestically or are they a international business with a web-based presence? This reality is generally regarded/disclosed at enough time you make payment, although not normally. The full foreign vs. domestic challenge is an additional discussion entirely, but you must make your mind up in your own personal thoughts That which you’re most at ease with. Some overseas organizations utilize a domestic mail fall to ship their tanzanites. About the surface area, they appear to be a domestic company, which would willingly post to FTC principles and rules, a lot of which shield you as The customer, but some foreign providers couldn’t care considerably less about these guidelines. So, it hardly ever hurts to inquire the concern. This will help you to avoid the smoke-and-mirrors game that a lot of international sellers apply within their internet marketing technique. I am aware of 1 organization, especially, marketing and advertising gemstones which has a lot of concurrent reincarnations, as I wish to phone them, over the internet simultaneously. They have got a lot of Web sites, all with various looks, and provide primarily within the exact same stock. When such a masked advertising and marketing will not be in and of by itself “terrible” nor “dishonest,” it confident makes it challenging to get The solution to these to start with couple of issues and generates confusion For numerous tanzanite customers. Who am I looking at undertaking enterprise with and exactly where are they Situated? You might want to cat all over on google a tiny bit to seek out readily available information and facts and maybe even get some references. Recommendations and referrals stand for A significant part of our organization and we willingly share our customer references/experiences on our web page to create our name “authentic” for would-be shoppers. Great things! So, being familiar with who you happen to be going to do enterprise with and the place they can be found provides you with a foundation of information from which to move forward in the whole process of acquiring your initial/upcoming tanzanite.
The What dilemma may very well be answered by simply looking at the general high-quality range of tanzanites the retailer is featuring on their own website. Does the tanzanite retailer have lower-grade tanzanites, superior-grade, or a wide variety of high-quality? This should communicate volumes to you. There are many retailers that simply carry the decreased grades of tanzanite for a cheap value and clearly show out the ideal of these grades as major-top quality stones. When you check out the photographs of such stones, you may Feel that you are investigating “AAA” coloration, relative to other tanzanites shown, when in actual fact you should still taking a look at run-of-the-mill tanzanites Which might be slotted a little better in the color selection in comparison to the Other individuals. And Of course, There are many of a lot of these stones obtainable for all around $300/ct by a rising quantity of suppliers. The statements relating to the caliber of this substance are often exaggerated and the photographs on these stones may not even be near to symbolizing the actual merchandise. Caveat Emptor, that's a Latin phrase which means: “Purchaser Beware!” Very good guidance for us all. Other considerations related to What consist of an intensive understanding of the retailer’s “good print.”
The Why concern is basically self-explanatory…. because you want to very own a top quality tanzanite. Suitable? On top of that, you most likely wish to try to realize why the organization, whose tanzanite you are viewing, is within the tanzanite company. What I mean by That is…besides the plain motive, to provide a product to get a profit, do they appear to have a fantastic small business fascination in tanzanite or does the vendor just provide it as An additional line of gemstones on their web page. Your interests might be best served by purchasing by using a retailer that features a good stake and enormous common emphasis in tanzanite. This will likely present you with your best likelihood at viewing a nice selection of gems from which to settle on and aggressive pricing. On top of that, I recommend that you buy from sellers which might be greater than joyful to operate with you on the custom order. If they are hesitant To do that, it may well suggest that they're getting their tanzanite from other retailers (vs. a tanzanite sightholder or provider) and don’t want to mess with the order like yours because they basically can’t turn all over a personalized purchase rapidly. It can be then doable that you should end up buying a stone which can be only near what you truly want. Why accept a thing “close” when you're getting ready to fall a piece of really hard-earned transform on a tanzanite?
And finally, the When issue promotions with this sort of inquiries as: When will my get ship and by what approach (provider)? Are there any additional service fees when delivery gemstones? When would you restock your tanzanite inventory? When is the greatest time of calendar year to acquire? You will get The thought. By asking these types of queries, you have to understand your retailer improved and can pave how for a lengthy-time period, thriving romantic relationship with all your tanzanite vendor.
In summary, it is crucial you have a good understanding of the organization from which you would like to create a gemstone invest in As well as their good quality and price tag are In step with your Over-all anticipations. Within our organization’s expertise, we have discovered it incredible just how much repeat enterprise Now we have completed with our valued consumers over time simply by furnishing responses to those simple thoughts.
With any luck ,, you will make numerous clever tanzanite purchases in the times, months and yrs to come. Tanzanite is A very extraordinary gemstone, however, you owe it to yourself to find the points Very first before incorporating a gorgeous tanzanite to the assortment. I motivate you to put this “getting product” set up to stay away from the frequent pitfalls and disappointments of making incorrect shopping for conclusions with your future tanzanite acquire.