Stocks and the dollar fall after Fed rate move

“President Trump’s trade barriers are causing concerns for the Fed, where policymakers believe [such measures] will put a break on growth and the market seems to agree,” says Paul Flood, portfolio manager of the Newton Multi-Asset Income Fund.

Hot topic

The dollar is slipping, stock markets are under pressure and there is sustained demand for US government debt after the Federal Reserve stuck by forecasts that it will lift interest rates by a total of three times in 2018.

Meanwhile, worries about the impact of a potential trade war on global growth is deepening a sense of unease, knocking stocks and adding to the appeal of safer assets.

As expected, the US central bank lifted the target range for the federal funds rate by a quarter point to 1.75 per cent. Policymakers’ projections pointed to an extra rate increase in 2019 and further tightening in 2020, and said inflation would accelerate. Nonetheless, talk that they would signal a total of four rises for this year proved wrong.

That left the dollar looking exposed, and the index tracking it fell to a 10-session low on Thursday to 89.524, taking it down 1 per cent over the last two sessions and leaving its fall over the week at 0.8 per cent.

The yield on the 10-year US Treasury is falling as investors buy into the debt. It is down 4.6 basis points at 2.861 per cent. That on 2-year Treasuries is down 1.7bp at 2.299 per cent.

Equities

European stocks are falling, with selling gathering pace after mixed showing in Asia.

Frankfurt’s Xetra Dax 30 is down 1 per cent, with London’s FTSE 100 0.6 per cent weaker. The Europe-wide Stoxx 600 is down 0.8 per cent.

Japan’s Topix swung between gains and losses to rise 0.7 per cent overall.

Hong Kong’s Hang Seng fell 1.1 per cent. The CSI 300 index of Shenzhen and Shanghai stocks fell 1.1 per cent as the latest threats of trade curbs from the Trump administration were said to be designed to stop China from stealing the intellectual property of American business, and after the Chinese central bank raised short-term rates.

US stocks are expected to fall further after weakening over a choppy session on Wednesday. Futures trade is pointing to losses of 0.7 per cent for the S&P 500 after a 0.2 per cent slip.

Forex

The pound is up 0.2 per cent at $1.4170 ahead of a rate call from the Bank of England, at which it is expected to leave interest rates on hold, with analysts thinking the next increase will come in May.

The euro is up 0.4 per cent at $1.2384, while the yen is 0.3 per cent stronger at 105.68.

Despite cryptocurrency mania, just 8 percent of Americans are invested in them

Cryptocurrencies are in the headlines every day and some say are powerful enough to take down the stock market as well as threaten the role of century-old banks and governments.

Turns out, demand for the digital coins is still pretty low though.

Less than 8 percent of Americans own cryptocurrencies, according to a new study by personal finance website Finder.com.

The site surveyed 2,000 adults in the United States in February.

The results show the hype around cryptocurrencies is not yet mirrored by reality, said Aswath Damodaran, who teaches finance and valuation at the New York University Stern School of Business.

“Bitcoin has taken over the public imagination,” Damodaran said. “But it’s a very small phenomenon.”

He pointed out that the market capitalization of all cryptocurrencies (below $400 billion) is less than half the market cap of one company: Apple, which has a market capitalization of more than $900 billion.

The most popular cryptocurrency is bitcoin, with an estimated 5 percent of Americans owning some.

The share of Americans who own several other well-known digital coins underscores how far these currencies have to go: Less than 2 percent of Americans own Ethereum and less than 1 percent own Ripple, the survey found.

More than 40 percent of Americans who hadn’t purchased cryptocurrencies said their reason was disinterest or believing there is no need to do so. Another 35 percent said the risk is too high, according to the survey

To that point, 27 percent of people said it’s too difficult to understand and another 18 percent said they believe it’s a scam.

“We’re spending so much time on [cryptocurrencies] as if half of Americans have their wealth in bitcoin,” Damodaran said

10 Tips for Successful Long-Term Investing

There are essentially two strategies for boosting savings and investments: Increase your income and cut your spending.

Whether you’re a young adult ready to start saving for retirement, a 50-something ready to pay off your mortgage or a senior citizen living on a fixed income, these tips can help you build savings, reduce debt, boost income and invest smartly.

1. Review your needs and goals

It’s well worth taking the time to think about what you really want from your investments.

Knowing yourself, your needs and goals and Your appetite for risk is a good start, so start by filling in a Money fact find.

2. Consider how long you can invest

Think about how soon you need to get your money back.

Time frames vary for different goals and will affect the type of risks you can take on. For example:

  • If you’re saving for a house deposit and hoping to buy in a couple of years, investments such as shares or funds will not be suitable because their value goes up or down. Stick to cash savings accounts like Cash ISAs.
  • If you’re saving for your pension in 25 years’ time, you can ignore short-term falls in the value of your investments and focus on the long term. Over the long term, investments other than cash savings accounts tend to give you a better chance of beating inflation and reaching your pension goal.

3. Make an investment plan

Protect yourself

Once you’re clear on your needs and goals – and have assessed how much risk you can take – draw up an investment plan.

This will help you identify the types of product that could be suitable for you.

A good rule of thumb is to start with low risk investments such as Cash ISAs.

Then, add medium-risk investments like unit trusts if you’re happy to accept higher volatility.

Only consider higher risk investments once you’ve built up low and medium-risk investments.

Even then, only do so if you are willing to accept the risk of losing the money you put into them.

4. Diversify!

It’s a basic rule of investing that to improve your chance of a better return you have to accept more risk.

But you can manage and improve the balance between risk and return by spreading your money across different investment types and sectors whose prices don’t necessarily move in the same direction – this is called diversifying.

It can help you smooth out the returns while still achieving growth, and reduce the overall risk in your portfolio.

5. Decide how hands-on to be

Investing can take up as much or as little of your time as you’d like:

  • If you want to be hands-on and enjoy making investment decisions, you might want to consider buying individual shares – but make sure you understand the risks.
  • If you don’t have the time or inclination to be hands-on – or if you only have a small amount of money to invest – then a popular choice is investment funds, such as unit trusts and Open Ended Investment Companies (OEICs). With these, your money is pooled with that of lots of other investors and used to buy a wide spread of investments.
  • If you’re unsure about the types of investment you need, or which investment funds to choose, get financial advice.
Read our independent guide on Popular investments at a glance

6. Check the charges

If you buy investments, like individual shares, direct, you will need to use a stockbroking service and pay dealing charges.

If you decide on investment funds, there are charges, for example to pay the fund manager.

And, if you get financial advice, you will pay the adviser for this.

Whether you’re looking at stockbrokers, investment funds or advisers, the charges vary from one firm to another.

Ask any firm to explain all their charges so you know what you will pay, before committing your money.

While higher charges can sometimes mean better quality, always ask yourself if what you’re being charged is reasonable and if you can get similar quality and pay less elsewhere.

7. Investments to avoid

Avoid high-risk products unless you fully understand their specific risks and are happy to take them on.

Only consider higher risk products once you’ve built up money in low and medium-risk investments.

And some investments are Usually best avoided altogether.

8. Review periodically – but don’t ‘stock-watch’

Regular reviews – say, once a year – will ensure that you keep track of how your investments are performing and adjust your savings as necessary to reach your goal.

You will get regular statements to help you do this. Find out more below.

However, don’t be tempted to act every time prices move in an unexpected direction.

Markets rise and fall all the time and, if you’re a long-term investor, you can just ride out these fluctuations.

9. Be Open-Minded

Many great companies are household names, but many good investments are not household names. Thousands of smaller companies have the potential to turn into the large blue chips of tomorrow. In fact, historically, small-caps have had greater returns than large-caps. From 1926 to 2001, small-cap stocks in the U.S. returned an average of 12.27% while the Standard & Poor’s 500 Index (S&P 500) returned 10.53%.

This is not to suggest that you should devote your entire portfolio to small-cap stocks. Rather, understand that there are many great companies beyond those in the Dow Jones Industrial Average (DJIA), and that by neglecting all these lesser-known companies, you could also be neglecting some of the biggest gains.

10. Be Concerned About Taxes, but Don’t Worry

Putting taxes above all else is a dangerous strategy, as it can often cause investors to make poor, misguided decisions. Yes, tax implications are important, but they are a secondary concern. The primary goals in investing are to grow and secure your money. You should always attempt to minimize the amount of tax you pay and maximize your after-tax return, but the situations are rare where you’ll want to put tax considerations above all else when making an investment decision

Cryptocurrencies drop after Google bans them in its advertising

Bitcoin and the rest of the cryptomonedas have not been pleased with Google’s decision to ban all advertising related to them and the ICOs from next June. Following the decision announced yesterday, the value of all the cryptomonedas has fallen again strongly just as they were beginning to recover from the latest falls.

At this hour, if we look at indices like CoinMarketCap we can see that the value of Bitcoin has fallen by 13.45% compared to yesterday, and its value is already down from $8,000. In the rest of the most used kryptom currencies according to this index the fall is even more marked, with falls of 14.72%, 16.58% and 14.25% for Ethereum, Ripple and Bitcoin Cash.

Fall Crypts
As usual, the most logical thing is that in the next few days the value of cryptomoney will start to grow again. But what is clear is that, with so many ups and downs, it does not seem easy to find a short-term stability that will make them grow back to the levels they had at the beginning of the year. Even so, we will have to wait and see what happens in the medium and long term.

It should also be remembered that Google is not the only one charging against this type of technology either. By the end of January, Facebook had also decided to ban ads related to cryptom coins and initial coin offerings (ICOs) on all its services. In addition, celebrities like Bill Gates are also strongly criticising it, and some governments are threatening to ban it.

The measures taken by Google or Facebook have not ceased to cause some controversy among those who support the chain of blocks. The decisions come, according to the companies, to protect the users, and it is true that there are many deceptions trying to capture misled with keywords like Bitcoin or Blockchain. But what they are doing is generalizing and punishing everyone equally, including legitimate product advertisements that strive to do things right.

Governments like Spain are swimming against the tide
While European countries such as Germany, France, or Italy, as well as others such as the United States, do not yet seem willing to enter into the regulation of cryptomoney, there are still some who decide to swim against the tide and to position themselves in favour of this technology. This is the case in Spain, where the Treasury is studying their impact, and the ruling party is drafting a bill to try to favour them.

Spain’s idea is to offer benefits such as possible tax breaks to attract companies that use block chain-based technologies or opt for initial currency offerings (ICOs) as a financing tool. In doing so, they may want to position themselves in Europe alongside countries such as Switzerland as one of the Blockchain capitals of the world.

In any case, the debates surrounding the cryptomonedas and the chain of blocks have only just begun, and it remains to be seen what will happen after this storm of instability subsides, if it does, once Bitcoin and the company normalise the bans and countermeasures that are being imposed on them.

Why you should invest in index rather than stocks?

Getting an investment right is often a matter of luck, but most of the time, and resulting in an average of all investment decisions in the medium/long term, most of the time the return obtained is a matter of a well-planned investment strategy.

Investing in stocks, or their collective equivalents such as mutual funds, requires time, knowledge and dedication; at least so that we know with some guarantee what we are investing in, and whether we really have options to see a juicy return in the form of revaluations. But there is another option that, although it may give lower returns than some stocks in particular, offers a much safer return, at least 100% safe from bankruptcies or corporate extinctions. The option is to invest in indices.

Any investment decision requires a thorough analysis: if not, it is better to go to the indices
These Are The Reasons Why It May Be Preferable to Invest in Indices Rather Than Stocks 2
Statistically, for most people, it’s not usually good investment decisions to make when you use the heat of a bubble. Neither are those who simply have the money raising dust (and other people’s profits) in the bank account. And while it is true that each type of investor at each moment of his life has some needs for his savings, which must be translated into a different way of investing them, it is no less true that in the markets, the safest return is in the long term. Security is out of gold fevers that leave more and more victims than the new rich, and requires taking the time to analyze every balance sheet, every company, every market.

But not everyone has the time (or the will) to scrutinize every accounting entry of listed companies that are a potential investment destination. Something similar happens with investment funds that often also require in-depth analysis, at least to know if they are well managed and if their management style is adapted to our needs. Focusing on analyzing for that average investor, with no time or knowledge to analyze beyond a few minutes a day, we always have the indices there.

And how to invest in indices? Well, the truth is that to invest in an index as such, the best option is the quoted funds or ETFs that replicate them. This financial product, which revolutionised the investment market a few years ago, combines very low management fees, real-time trading such as shares, and dividends. Indeed, in addition to today’s topic, index ETFs are an exceptional formula for optimizing the profitability/effort+time equation.

In order for profitability to come to your statement of securities account, all that is needed is for the index to take the bullish path. On this last point in particular, which is the crux of the matter in the end, we can only recommend in general terms that you frequently read serious salmon halves like us, so that you can measure the pulse of the market at any time you need to make an investment decision.

Well, there is an empirical basis for this, but always under the previous premises of needing an investment formula that optimises this exchange of profitability/effort+time. Because obviously, a good investment in the shares that are most revalued in the market will always yield more returns. After all, indices are only a weighted average of the shares that make up the index, and mathematically there will always be stocks with a higher return than the index, but don’t forget: there will also be as many stocks with a much poorer return as the selective (and not selective) ones.

What is more, there will be stocks (and even whole companies) that will disappear from the face of the markets, resulting in a sinister balance sheet of 100% losses for the hardest-hit and most suffering investors. And that is precisely where we would like to focus on today’s issue: it is precisely by investing in indices that you are completely safe from this fateful (but not infrequent) event of corporate deaths.

And to return to the question that led to the last title: yes, there is an empirical basis for affirming that indices are the best neglected investment formula. The empirical basis requires a somewhat lengthy analysis of the life cycle of a selective index. And although we really need a senior index for the temporary sample to be somewhat rigorous, the results are going to be equally worthy of consideration.

The crises we are talking about may no longer be so fresh in popular memory, but I can assure you that both of them have been very dramatic for our socioeconomy (I hope you will at least keep the last one in mind). We are talking about that”.com” crisis that devastated the markets, and the most recent and terrible Spanish real estate crisis.

In the first of these debacles, the”.com” crisis, we must remember how there were prices related to technology that rose like a real rocket: Telefónica was the first of them, despite being a giant. But there were other protagonists in this disaster. Due to the size of our domestic selective, we can only speak of one of these”natos.com” players, unlike other markets such as the US and its large NASDAQ.

This”nato.com” star is Terra, the unsuccessful company that led the.com bubble in Spain, and which even surpassed ENDESA in terms of market capitalisation with hardly any assets and little more than a generic Internet portal. The company, once the flagship of the new economy, was de-listed in 2005 with a 98% drop from highs, and having volatilized the savings of countless small investors. However, the Ibex-35 is still there.

The other major crisis that the Ibex-35 has survived with revenues is the already”fresh” Spanish real estate crisis. Due to the generalization of the bubble within the Spanish economic reality, in addition to the always important relative weight that the construction sector has had in the economy of Spain S.A., in this case we have many more protagonists. The star of this bubble was the vibrant real estate bubble Astroc, overheated where they were, but that gave yields that seemed to be the result of a rocket that was never going to stop rising (like the price of flats). But it ended up going down (and how they did it!), just as some of us predicted.

Astroc’s travel companions were most (if not all) of the rest of the construction and real estate companies. After years of drought in the real estate market, there have been several victims. Disappearances, bankruptcies, mergers for survival have populated the sector of both listed and unlisted companies. Companies such as FCC, which was once a business example of management and profitability, have ended up impoverished and in a situation of weakness, which has taken them out of the selective market in one way or another.

We have analysed the national case of the Ibex-35 because we have to do so, but this temporary sample we spoke of earlier, in the case of our relative Ibex-35, does not meet the minimum standards of statistical rigour that some of us demand of ourselves: it is too young an index. In fact, as I was saying, the Ibex-35 as such saw the light back in 1992, which distances us from its creation for a mere 26 years.

This is really not much in relative terms when compared to longevity and business lifecycles, nor for the average return cycle for savings accumulated over a full working life. The point is that this comparison is so fair in timing that it does not allow for a more extensive comparison, so that cyclical and/or random market and economic events can be ruled out. And it is precisely today that we are dealing with the issue of investment in the long term, with a time horizon of a working life.

But the”truncated” sample of the Ibex-35 becomes revealing in other more senior selectives
These Are The Reasons Why It May Be Preferable to Invest in Indices Rather Than Stocks 7
Fortunately, we have around us other indices with more history than ours, and which are listed in an economic system very similar to the European and Spanish ones. Indeed, I’m talking to you about Comrade Dow. The DWIJ, or Dow Jones Industrial Average, is a selective that was created at the end of the 19th century, more specifically in 1896. Apart from the fact that it is undeniable where the cradle of popular capitalism lies, it is interesting to analyse those 12 companies that were included in the index at its launch, and to know what has happened to them today.

Business Insider recently did this informative analysis exercise in this article. As you may have seen, and as expected, the economic and business reality shown by the analysis of the composition of the index smells like naphthalene. And it is entirely logical, since that original Dow reflects a socioeconomy of almost 125 years ago. This is indeed a truly historic composition. But let’s move on to today’s analysis, and see if it would have been more appropriate to invest in the index, or in stocks, in this sample period.

Fixed-income funds can also fall

It is more than common for many small (and not so small) investors to see fixed income as a safe haven in which to save their savings. Sometimes you can even find certain financial advisors who sell it as such. But neither of us is right.

This erroneous concept of fixed income investment is induced by its more intrinsic nature, which basically consists of receiving the interest agreed upon in the issue year after year until the maturity of the security. But the truth is that, although it may not seem a priori, fixed income is also low. Today we analyze this paradoxical behavior that is about to reach the markets.

After the last meeting of the European Central Bank, during the subsequent press conference, Mario Draghi once again said that the ECB would maintain interest rates at the current 0% rate, while maintaining the marginal lending facility, the rate at which it rewards excess reserves held by European banks at -0.4%. In other words, the central bank will continue to charge the banks for saving their money in order to stimulate the circulation of money and loans in the Eurozone.

Needless to say, both rates, interest rates and the marginal lending facility, are currently at completely abnormal levels. And they have been there since they historically hit bottom in the first quarter of 2016. The current figures are part of the ultra-expansive monetary policy that was launched by the ECB, after other central banks such as the Fed and the Japanese central bank, in response to the Great Recession that began after the fall of Lehman Brothers in 2008.

But as we have been warning from these lines every time we have the opportunity, interest rates are not going to remain at these levels indefinitely: take this into account in your financial decisions, and especially when you’re counting on a mortgage application. In fact, the light is already visible at the end of the rate tunnel at 0%, and there is less and less time left for rates to return to their upward trend. The ECB believes that the storm in Europe is already breaking out, and that the herd can therefore now be removed from the shelter.

The truth is that, as it could not be otherwise, the financially orthodox Germany was the first European corner from which they began to demand a rate hike from the ECB quite a few quarters ago. In fact, the famous German”five wise men” have already urged the Draghi to do so.

The ECB’s response has been to state that it will not only maintain current interest rate levels, but also seek to maintain psychological stability among market participants. The aim is to help the business climate in the Eurozone, so as not to”scare” it off” prematurely: for European economic operators, a rate hike would be a significant turning point marking the end of an era.

But at the ECB, what they say is one thing, and what they think is another. In Frankfurt they are well aware of the current economic situation, and in fact behind the scenes there is already something moving in terms of interest rates. Thus, it is common knowledge that the ECB has already begun to discuss the end of monetary stimuli, including ultra-expanding interest rates. In fact, strong hands and smart investors, which often include the”professionalised” bond market, have already begun to discount this scenario, and bond prices have picked up.

Fixed’ income is also falling, so they are not surprised when they see a negative return on their fixed income funds. In fact, fixed income is falling precisely in the upward cycles of interest rates, in one of which we are about to enter Europe. The obvious question that I hope is being drawn in their minds is: And how is it likely to come down? We analyze it for you in the following lines. You’ll see how it has all the market logic.

Obviously, if you as an individual investor buy a fixed income security, whether it is a bond bond or a letter, in the fixed income securities market (or primary market), you will agree to a return in exchange for lending your money to the state (or a large national company). If you hold this security in your portfolio until maturity, you will not see any negative returns at any time, and will end up receiving the initial capital invested, in addition to the return agreed upon at the time of purchase.

WHAT ARE MIXED FUNDS?

Mixed funds are one of the broadest, most flexible and discretionary categories of investment funds available.

They could be classified as suitable for moderate profiles, but only within this category can funds be found for all tastes.

It is necessary to know what types of mixed funds exist, what characteristics they have and what average returns they are presenting. This information together with an adequate study of our risk profile as investors will open the way for us to choose a mixed fund wisely.

Let’s see how this financial product, due to its wide extension and room for manoeuvre granted to the manager, can be ideal for any type of saver.

However, it is necessary to fine-tune the shot before shooting and this is what we will learn today.

Mixed funds can be defined as those that combine both fixed and variable income portfolios in their portfolios.

We say”roughly speaking” because there are actually multiple subcategories within mixed funds, hence the problem of choosing one.

It is not as simple as simply combining the two types of assets, it is also necessary to decide in what proportion.

Objectives of the mixed funds

But let’s start at the beginning. A mixed fund was created to provide stability to an equity fund by including fixed income assets in its portfolio. In this way we create a product that is halfway between fixed income and equity funds, in terms of risk.

From another point of view, one might also think that the intention is to incorporate equities into a fixed-income portfolio in order to increase returns while maintaining an adjusted level of risk.

Which of the two visions is the right one? Is a mixed fund set up to protect a portfolio of equities or is it intended to increase the return on a portfolio of bonds?

The percentage of each of the two types of assets included in the fund’s portfolio can be used to determine the manager’s view of these issues.

In principle, it should be clear to us that a mixed fund is a category of investment funds. The categories were created jointly by the Comisión Nacional del Mercado de Valores and Inverco (Association of Collective Investment Institutions) to offer a criterion to savers and to be able to choose a tailor-made investment fund.

What the category of the fund indicates to us is the investment vocation.

In other words, the fund’s guidelines for deciding which assets to include in its portfolio and the percentages thereof.

The investment vocation defines the level of risk that the fund can assume and this information is very useful to fund managers.

Thus, a mixed fund will have more return and risk than a fixed income fund, but less than a variable income fund.

But this is all we need to know?

Of course not, of course not.

This information is very general, it does not indicate the percentage of each type of asset, and therefore, the manager’s vision, or the specific risk profile.

For this reason, different subcategories have been created within the universe of mixed funds.

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Types of mixed funds

It should be noted that mixed funds are very flexible products. In reality, all investment funds are flexible products, this is one of their advantages. However, this category is characterized by being particularly ductile.

There is no fixed percentage to determine the types or subcategories. There are ranks and the fund manager has ample room for manoeuvre in setting his or her criteria for the strategy.

We should also point out that there are other factors for defining the categories of mixed funds. Depending on the geographical area in which the selected assets originate and the exposure to a particular currency, multiple rates are set.

According to Inverco, the categories are:

Mixed fixed income euro

Characterized by not being able to have a percentage of equity exposure greater than or equal to 30% of the total portfolio. They must also have an exposure to foreign currency assets of less than or equal to 30% of the total.

International mixed fixed income

They must have an equity exposure of less than 30% of the total portfolio, but have more than 30% in assets issued by entities located outside the euro area and denominated in foreign currency.

Euro mixed equities

They must have a percentage of equity in their portfolio of between 30% and 75% (inclusive). They cannot have more than 30% exposure to assets issued in currencies other than the euro.

International equities

The distribution of the portfolio is the same as for mixed euro equities, but in this case they can have a percentage of exposure.

Investment advices

All analysts point in the same direction: a year marked by volatility and the normalisation of monetary policies. Here are some investment tips for 2018.

As for fixed income, the truth is that it should not be a priority for 2018. However, we have provided some strategies and products to balance our global portfolio with these types of assets.

As far as equities are concerned, experts still have their eye on Europe. This 2018 may come with a few surprises of volatility. For this reason, the best advice is basically active management and diversification.

Interestingly enough, these principles now apply more than ever to bonds.

Debt securities are marked by an expected rise in interest rates in the United States and the start of the normalisation of European monetary policy. This will cause bond valuations to fall.

It is recommended to be very cautious in fixed income this year. This may not be the best time and our portfolios should be focused on equity assets.

Although, without a doubt, a small exposure to this type of assets can provide an added stability in the architecture of the global investment basket.

Several analysts recommend a very active management in this scenario, as if it were equities. Those were the days when bonds could be included in the investment portfolio, time could pass and coupons could be collected, without worrying that the valuation of the assets could damage the assets.

2018 is marked by changes. Changes in monetary policy and the fear of rising inflation.

Strategy and prudence are the best advice that can be given in fixed income for 2018.

But what fixed income strategies work best in such a scenario?

Fixed income investment strategies for 2018

Long-term fixed income exposure is not recommended. These types of assets are more sensitive to inflation and will suffer more from stated intentions to change monetary policy.

There are certain managers who have a clear preference for corporate debt, leaving aside sovereign debt. The objective is clear: if we juggle credit risk, we can achieve greater profitability.

High yield” bonds are an option for those who can afford less risk aversion. Once again, however, we see diversification as the best weapon to combat credit and duration risk.

Let’s see an example of this.

Examples of fixed income products for 2018

Good management and diversification is what defines one of the best fixed income funds. Exactly the recipe so that fixed income (the little exposure we can have in favor of portfolio stability) can be of some use to us during 2018. We’re talking about Gam Star Credit Opportunities.

This fund has an annualized appreciation of 7.72% over the last three years (accumulated return over the same period of 21.93%).

How do you do it? Management, management and more management. Necessary more than ever for fixed income.

With a volatility of only 2.72%, the Gam Star Credit Opportunities, denominated in euros, is investing globally. With a maximum of 20% of the portfolio in securities issued in Emerging Markets (one of the best fixed-income strategies in the scenario described).

Government bonds, subordinated debt securities, preferred stock, convertible securities, corporate bonds and contingent capital notes make up your investment portfolio. Playing this way with credit risk; in other words, diversifying.

The fund has what fixed-income investors need for 2018, a good managerial capacity.

Management capacity and diversification is the best recipe. As the CEO of Tressis Gestión, Jacobo Blanquer, states:”Our clients do not pay us for losing money”. Perhaps this is why the mixed fund it manages, the Adriza Global FI, has little exposure to fixed income and an accumulated return of 36.86% over the last five years.

In short, fixed income is not going through its best times. A small contribution to our portfolio in search of stability is not a bad idea, as we can see from the investment policy of Adriza Global FI. Greater exposure makes it necessary to manage the portfolio with equity strategies.

Investment advice on variable 2018

In line with the above, for 2018, active management of this market is also recommended.

This year has seen a marked increase in volatility, which could jeopardise our profitability if we lose sight of the situation.

How Blockchain is transforming financial markets


Blockchain technology offers great alternatives in the field of stock brokerage, and its influence on the markets is already significant. From the establishment of intelligent contracts to the reduction of defaults in the negotiation limit.

Some of the main international financial institutions are betting on the implementation of blockchain technology as a technological alternative, benefiting from improvements in technology-based processes that allow for the reduction of time, costs and increased transaction security.

How can blockchain help manage information from financial institutions?
Banks and other financial institutions have increased their investment in technology and innovation in recent years, aiming to simplify and reduce the costs of back-office processes.

Proof of this is that the Australian Securities Exchange (ASX) has announced that it will change its clearing and settlement system to a new system based on blockchain technology. This will reduce costs for your customers and the development of new services. In addition, you will achieve greater market efficiencies through better record keeping, transactions and better quality data.

The Australian federal government supports the ASX’s commitment to the implementation of this technology, which will strengthen the national financial system through greater efficiencies; supporting innovative initiatives to ensure that Australia is at the forefront of technology in the financial markets and is competitive globally.

Another official body, the Canadian Securities Exchange (CSE) has also developed a blockchain-based clearing and settlement platform, which reduces risk for investors, distributors and customers by ensuring that exchanges are settled immediately.

The development of this platform is the meeting point between blockchain and the financial markets, enabling a revolution in conventional transactions and record keeping mechanisms.

CSE, Blockchain.
Within the market sector, the distributed accounting system offers great possibilities for non-affiliated operators, but it is not the only area of impact. The benefits of Blockchain in the business lifecycle for the capital markets are countless, especially affecting post-trading.

But blockchain is already being used in other areas of the financial sector, such as Smart Contracts, such as Swaps. With the creation of intelligent contracts, you can apply it to extrapolate specific data or carry out specific instructions if certain parameters are met or activated.

The smart contract allows automatic payment processing only if certain requirements are met within the agreed contract. As a result of intelligent contracts, the costly errors of manual processing of settlement instructions can be significantly reduced.

Since all parties will have access to the same data, the benefit of transparency would eliminate the need for manual settlement confirmation, thus reducing the reconciliation problems that often arise when transactions are not carried out correctly.

Reduction of trading limit violations
Business activity within financial institutions includes transactions initiated to hedge market positions and to hedge existing positions for the bank as a whole in various instruments.

These transactions are conducted with other financial institutions and are complex. Trading limits within an institution are in effect for notional amounts and settlement dates.

There are also limits on the size of the position by intermediaries, as well as for specific instruments including financial derivatives, options, fixed income and currency hedging.

Breaches of trading limits can be very costly for financial firms. Any suspicious business activity that is outside of compliance could be detected and remedied before it negatively affects banks’ position, profits and losses and balance sheet.

JP Morgan and its anticipation strategy
At the end of last year, JP Morgan announced that it was developing a program based on blockchain technology, designed to analyze the data in buy/sell transactions, and group them together with a predictive and preventive utility (analysis of trader behavior).

The general operations proposed by its creators are intended to facilitate the decision making process.

WHAT TO CONSIDER WHEN DEVELOPING YOUR MUTUAL FUND PORTFOLIO

There are investors for all tastes: from those who are self-managed, decide what to invest their money in and even carry out the operation themselves, to those who rely on specialized managers of a bank or entity to invest their money, decide which assets it is better to invest in and move it around according to the circumstances. Either way, what is clear is that the individual investor wants to be more and more informed about their investments, and it is a very healthy and almost mandatory exercise to be aware of the funds in which your manager has decided to invest. Building a portfolio of funds is a strategic exercise in which many factors need to be taken into account. Whether you’re going to do this directly or rely on specialists, you want to know what the basic factors are to take into account to track your investments:

Risk profile

The starting point is to know what your risk profile is. Between being a conservative and a risky investor, there is a wide range of greyscale that will depend on the objective of your investment, your vital moment, how much you are willing to risk, your tax profile and other elements of context. It is important to tailor the assets in which the fund or funds you choose for your money invest to your risk profile. In this way, funds investing in riskier assets, such as bonds, will be more suitable for conservative investors and, as the risk to be assumed increases in order to obtain better returns, the share of investment in equities, for example, will grow.

Diversification

The effect of diversification is significant, which is why it is important to know the main categories and typology of funds that exist, since the supply today is very wide. With a focus on diversification, alternative management funds are an important part of the portfolio. Regardless of the risk of the same, we will always find funds in accordance with the investor profile that allow us not to have all the risk in the same asset or geographical area, but to have a balanced portfolio that allows us to compensate for unexpected behaviour in any asset or area. The distribution of assets, such as the weight given to equities versus bonds, is a key factor on which the return obtained will depend and must always be aligned with the investment horizon and the investor’s risk tolerance.

Investment Horizon

It’s basically about deciding what term you want to invest in. Generally speaking, when talking about funds, we usually think of a medium and long term investment so that the investment makes sense, but it is important to consider how many months or years you want to invest.

Quality of the background

Measuring the quality of a fund in which you are going to invest your money is a good practice and for this you will have to dive into the pages that make this information available to the investor. We must also take care of the type of funds we choose, especially in cases where there is a type of distribution and distribution, whether or not we want to receive periodic income.

There are various platforms that compare mutual funds by performance and by category; one of the best known is Morningstar, which bases its hierarchy on’stars’ and thus gives 5 stars to the top 10%, 4 stars to the next 22.5%, 3 to the next 35%, 2 to the next 22.5% and one to the worst performing 10%. Others analyse the performance achieved or compare fund managers, giving each one a rating. Other key figures that can be taken into account are the volatility, sharpe ratio, alpha or beta of the fund.

Fund managers

Knowing the professionals who manage the fund or funds you are going to invest in is important, as they will make the investment decisions about your money. If you take the trouble to find out more about the manager of your fund, you will know what his management style is and how his investment preferences are evolving. If they are also the so-called’author’s funds’ with even greater reason, as they are usually headed by’star managers’ who, if at any given time, leave the fund, they can lead to a change in the management of the fund and even the departure of a large number of participants.

Taxation and commissions

It is important to know the taxation of the different products in which you can invest your money and how the returns, positive or negative, you get from your investment can influence your accountability to the Treasury. Some products may be more convenient than others, so it is necessary to take this into account, as well as the commissions that entities may charge on each of the products.

Portfolio simulation

We currently live in an environment of low volatility across all assets. If we simulate the portfolio to see how it can work, we need to look at other risk ratios such as the historical maximum fall in the portfolio.