Month: May 2024

Indices

DARKTRACE, VISTRY INDICATED TO JOIN FTSE 100 INDEX OCADO, ST JAMES’S PLACE INDICATED TO LEAVE FTSE 100 INDEX submitted by /u/XGramatik [link] [comments]

Free Cheese

To start with a surprise: investment management, when boiled down to basic principles, is very simple. If you look at your investment portfolio as lifetime capital – meaning you set a planning horizon of at least 10 years (preferably 20) and think about what is good for that time frame and what is not – you’ll come to the same conclusions: 1) an emphasis on stocks makes sense, as they tend to grow over the long term; 2) diversification is very important. Anyone who has read even a little about finance, or even just invests recklessly at their own risk, understands deep down that the principle of diversifying eggs into different baskets is absolutely fundamental. The famous portfolio theory theorist, American economist Harry Markowitz, called diversification “free cheese”. In the mid-20th century, he wrote an article titled “Portfolio Selection” about the risks, returns, and correlation of investment instruments. Its main idea was that risk should be considered in relation to the portfolio as a whole, not in relation to individual securities. The article became the starting point for modern portfolio theory, and Markowitz received the Nobel Prize. We’ve spent our whole lives proving and explaining that “the only free cheese is in the mousetrap”, but the fact is that with diversification, you can reduce risk for any chosen level of return, and for any level of risk, you can try to increase returns. Cool, isn’t it? submitted by /u/FXgram_ [link] [comments]

Germany IFO Surveys (May)

Business Climate: 89.3 vs. 90.4 exp. (prior 89.4) Current Assessment: 88.3 vs. 89.8 exp. (prior 88.9) Expectations: 90.4 vs. 90.8 exp. (prior 89.9) submitted by /u/XGramatik [link] [comments]

A lesson in history

The Dow Jones average is one of the most-watched stock indexes in the world. It was named after Charles H. Dow and Edward Jones and is used as a key indicator of general trends in stock and bond prices in the United States. submitted by /u/XGramatik [link] [comments]

From Boom to Bust: The Dangerous Dance of Stock Valuations

Profit is a figure that changes from year to year and shows how well the company performed in a given year. The stock price is many times higher than the annual profit per share, and it is a much more volatile thing. In the 20th century, the price-to-earnings ratio tended toward 15, meaning people were willing to pay about 15 years’ worth of earnings for an average company, but there was no clear trend. In years of economic growth, people were willing to pay more, and during a crisis, the value of businesses fell. Plus, there are also factors like future prospects, technology, and monopoly position. For example, Facebook was valued at nearly 100 years’ worth of earnings at its IPO. Some analysts thought investors had completely lost their minds. And they weren’t wrong. Back in 1929, this ratio rose to 35, and even then, people started to get nervous. Others, however, began to think that the market could only go up. There was a lot of optimism among traders. Before the 2000s crisis, it reached an even higher number – 46, but then it suddenly corrected itself so sharply that traders started jumping out of windows. submitted by /u/FXgram_ [link] [comments]