Category Archives: Investing

Bear Market Investing

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If you are watching the prices of shares dropping by the day and are wondering about the best way to start investing in a bear market, there are several ideas that may help you both survive and thrive in this uncertain economic environment. Due to the nature of the stock market, however, there is no surefire method of investment that will guarantee a profit.

Fortunately, with the right frame of mind, you can make the correct decisions when it comes to deciding how to safely invest your money. First, know how much risk you can actually handle when investing. This is termed your risk tolerance and is useful when determining what types of investments to make. During a bear market, you will need a high risk tolerance to confidently invest in stocks. If your tolerance is low, you may be better off investing in bonds or simply keeping the cash.

Second, you must have clear investment goals. A long-term aim of procuring enough cash by the time you retire or a short-term one of increasing your capital by next year will have a big effect on what investments you choose to make. In the current market, stocks may not be a great idea for short-term investment since the risk is high. On the other hand, the stock market looks like a very attractive place for long-term investment due to its past performance and the high chance that stock prices will eventually rise if given enough time.

A third tip on how to invest in a bear market is diversification, which is an excellent method of reducing the risk and increasing your returns. By relying on numerous sources of investment, the overall variance will average out and the chances that you actually make some money will increase. In today’s market, this is especially important to smart investors. It’s the investment version of the lay mans term, “don’t put all your eggs into one basket.”

Fourth, doing some research about investing in an unstable market will enable you to get rid of your fears and actually make some smart choices. Believe it or not, now is a good time to purchase shares. You know that the stock price is low right now but you also know that it will turn around sometime in the future.

This is the key to gaining the confidence to choose stocks as a way to increase your capital. This is also a great reason why stocks are not currently a great short-term investment. It may take a long time for the market to get back to how it was a few years ago meaning that it is better to purchase the stocks now and then simply sit and wait until the current market trends reverse before you sell them. Smart investors know that the best deals can be had in a down market.

Of course, the fundamentals of how to invest in a bear market are much more complicated than can be described here so some further research will be required before you take the plunge.

What To Do If Your Mutual Fund Changes Managers

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What is a mutual fund manager?

The individual or individuals who are responsible for implementing a mutual fund’s investing strategies and the management of portfolio and trading activities is known as a mutual fund manager or more simply, the fund manager. Additionally, mutual funds can be managed in a number of ways such as:

• by one person
• two persons or co-managers
• a team of three or more persons

Typically, fund managers are compensated by a fee which is oftentimes a percentage of that mutual fund’s managed average assets. In order to qualify for the position of fund manager, there are certain requirements including:

• high levels of both educational and professional credentials
• appropriate experience in investment management

Anytime you are considering investing in any mutual funds, you should always look for a long term, positive performance history and a fund manager whose track record mirrors the fund’s performance.
How to handle a change in fund managers

What most fledgling investors don’t realize is that the decision on investing in a particular mutual fund is to purchase the fund or the manager. That is the biggest challenge encountered when a mutual fund changes managers. Although this is not always the case, a change in fund management typically signifies a “red flag” and investors will need to put on their detective hats.

In most cases questions will need to be answered, answers will need to be deciphered, and a decision will need to be made regarding selling the fund or sticking with it. Naturally, it is simpler to stick with the fund manager since they have been responsible for some or possibly all of the fund’s performance. However, many fund companies will dictate a fund’s investment strategy and style, oftentimes demanding that the fund manager follows those mandates. This results in many transitions becoming relatively seamless.

In recent years, increasing numbers of fund companies have shut down the guru-making machinery which was their driving force in the 1990’s. Instead they are hiring management teams that may not be negatively or positively impacted by losing a single member. However, the departure of a fund manager is usually an indication or a warning and not so much an indication for you to sell off your fund.

What you want to remember is that a fund manager usually weighs the pros and cons when a top level executive departs a fund that is in their portfolio. So you need to be very critical and methodical as well as avoiding those knee-jerk reactions that you may regret later. Some things that you want to consider are:

• why the change in management was made
• if the transition was one that raised a lot of eyebrows or did it go smoothly?
• did the change equate to promoting a talented analyst or manager within that company?
• will that new manager make a positive difference in the performance of the fund?

In most instances, considering the above will help you in the decision making process.