December 8, 2014

As 2014 comes to an end the financial markets are on track for another positive year following a strong performance in 2013. Although this year has seen more sideways action with periods of volatility the overall long-term trend of the market remains in an uptrend looking at its 40-week moving average. After the mid October lows that took the major averages down about 10 percent in a month, equities have rallied sharply and have set new highs and are poised to finish the year with solid gains.

For an investor this year has been confusing and not a lot of money is being made on the long side as stocks have fluctuated and have mostly traded sideways as compared to 2013. Despite the sideways action, there are a few sectors that have done well like technology, utilities, consumer staples and other defensive growth sectors such as REITs. The economy has improved at the labor market is now showing favorable trends that are likely to continue into 2015. For an investor investing in the equity market one has to realize that investing requires one to have some set rules that he or she follows and understand that sometimes the occasional trade may yield losses even if the analysis is correct. What is most important however, is keeping losses small say no more than 15% from the original purchase price and not to “fall in love” with a stock just because you may like there product or service. For an investor who does not want or have the time to dedicate to monitoring their investments on a regular bases and would like to do it them self perhaps investing in an index fund or (exchange traded funds) may be a good strategy in getting broad exposure to the market or specific sectors without worrying about the volatility of a single stock. These ETFs try to replicate the returns of the index they are benchmarking against and offer moderate capital appreciation, dividends and low fees which can provide a decent return over the long run. There are other strategies that can be used to invest in the equity market beyond buying a stock or ETF and those strategies are only suited for experience investors. One thing I have learned is to invest in any asset a combination of fundamental and technical analysis usually works best because sometimes one set of analysis may look correct but yet the security is going down and this can also apply to the overall trend of the broad market. There are other indicators that I keep track of to gage the overall trend of the market and stocks but I will discuss them in a future post.

All for now.

Sanjeev Mistry