DOCSLIB.ORG

Market Strategy: a Systematic Approach to Recession Investing April 2, 2020

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Market Strategy: a Systematic Approach to Recession Investing April 2, 2020 Market Strategy: A Systematic Approach to Recession Investing April 2, 2020 Amid extremely elevated market volatility and the prospect of a extremely severe recession, investors are seeking guidance on how to best take advantage of cheap assets and the prospect of an eventual recovery. We reiterate our view (discussed most recently in our publication from April 1, Kathryn Rooney Vera here) that we will continue to see extremely ugly economic data Head of Research & Strategy [email protected] (underscored by today’s record-high initial jobless claims), and that given the +1 786.871.3758 inherent uncertainty surrounding a virus that scientists still do not fully understand, pinpointing a precise bottom is virtually impossible. As a result, Gregan Anderson, CFA Macroeconomic Strategist we recommend dollar-cost averaging, putting money to work on an iterative [email protected] basis. +1 786.871.3743 Relative Performance - Market Vs Roll-In Strategy Market Benchmark (SPX Index) Roll-in Portfolio - FOLLOW SCHEDULE Roll-in Portfolio - BUY DIPS 110 105 100 95 90 85 80 Taking the next step, drilling down below index-level investments, requires evaluating likely earnings impacts of the virus on a sector, industry and company level. We highlight three strategies that can help in this regard, with each becoming progressively more important as the pandemic and associated recession evolves. 1. Find the babies thrown out with the bath water 2. Find Sectors that that will benefit from the crisis itself/can help to meet the radical change in immediate needs 3. Imagine the world post-crisis – what will have changed, how will tastes, priorities, and ultimately consumer behavior evolve? 1. Find the babies thrown out with the bath water There have been bouts of indiscriminate selling, where everything was sold simultaneously, without regard to the likely impact of the pandemic on earnings. This is either due to an irrationality borne of panic, a natural result of now-prevalent passive investing (when investors dump the SPY, for example, they by definition dump all securities within that ETF), or the need to sell even high-quality investments to provide cash or liquidity. In any case, investors can take a closer look at industries and companies whose earnings will not suffer to the same degree as others, either from the recession or from the radical change in the way we have suddenly begun to live our lives. To the extent that these companies have sold off along with the rest of the market, they may provide value. These include consumer staples, utilities, and other defensive stocks generally. From a valuations perspective, Consumer Staples largely avoided much of the sell-off, but Utilities are still trending largely in line with the benchmark, which we believe is too low. We also believe that there has been a visceral reaction against banks, which are much better-capitalized and better-positioned to weather the storm than they were in the 2008-2009 financial crisis. Banks are the third-worst performing industry after autos and energy (whose drawbacks in the present environment are much more obvious), and are being punished to an unjustifiable extent. Industry Price Returns Between Market Top and Today Staples Retail -10.4% Pharma & Biotech -12.1% Personal Products -12.9% Telecoms -18.5% Food & Beverages -20.0% Retail -20.1% Software & Services -22.7% Health Care Equipment -22.7% S&P 500 INDEX -23.0% Semiconductors -24.1% Technology Hardware -24.1% Utilities -24.9% Media -25.4% Materials -27.2% Diversified Financials -29.8% Real Estate -30.1% Transportation -30.3% Professional Services -30.4% Capital Goods -33.3% Consumer Durables -35.0% Insurance -35.3% Consumer Services -39.1% Banks -42.8% Autos & Components -44.3% Energy -47.6% Source: Bloomberg, Bulltick 2. Find Sectors that that will benefit from the crisis itself/can help to meet the radical change in immediate needs This crisis is costing the world literally trillions of dollars. As a result, there is an enormous financial incentive to deal with its consequences (mitigating this cost), as well as make the ordeal as short as possible. One of the most significant changes to American lifestyles is a sharp, drastic reduction in travel, as we are ordered to stay at home and limit interpersonal contact. Companies that are able have begun to adapt by having employees work from home, while consumers are adjusting their spending habits towards more in-home services. All of this benefits streaming services, internet providers, providers of teleconferencing, telecommunications more broadly, delivery services (including food and medicine delivery), and online retail. Some companies involved in this space include, but are not limited to Citrix, DocuSign, Microsoft, Advanced Micro Devices, Amazon, Five9, Zoom, Slack, Netflix, Hulu, and others. While consumer staples largely avoided the worst of the sell-off (see chart below, where the y-axis shows the decline from Feb 19 highs through the March 23 bottom), this online space still shows value, with Software & Services, Tech Hardware and Semiconductors still lagging the S&P 500 since the March 23 bottom. In terms of shortening the length of the ordeal itself, that has always leaned heavily on the science of public health, and this will continue to be the case moving forward. As the chart above demonstrates, health care has been among the best-performing sectors, both in terms of avoiding the worst of the sell- off, as well as seeing some of the strongest post-March 23 bounce. Finding value in the space will require more parsimonious consideration, looking particularly at the fight against the virus, and later, the strongest players in establishing a more robust telemedicine infrastructure for the future. Dozens of companies have sprung into action to fight COVID 19 on a number of fronts, and healthcare services will be front and center in the fight against the virus. While we do not advocate directly investing in these or any other single-name stocks, below we provide a few examples to illustrate the trend which in our view is only just beginning: Testing: Abbott Laboratories has developed a 5-15 minute point-of-service testing kit which has received the enthusiastic endorsement of the administration, and even demonstrated at one of the now-daily White House press briefings on the coronavirus response. The company is now ramping up production and shipping tests across the country. Cepheid has another test which takes 45 minutes, and will begin shipping tests this week. Quick turnaround in testing is crucial, so that authorities are better able to target treatments, and, eventually, target stay-at-home orders or other major life disruptions to those that are known to be infected. Tests for the antibodies of coronavirus, called serological tests, are being developed by the CDC, the Mayo Clinic, SureScreen Diagnostics, and Ideal Rehab Care Inc, which will also allow individuals with natural immunity to be identified. Once these tests are available, the plasma of such individuals may be used to develop treatments, and such individuals may be subject to fewer restrictions of movement and interpersonal contact. Vaccines: There are many companies developing various forms of vaccines, which should help those who have not yet been exposed from contracting the disease in the future. Vaccines typically take several years to authorize, and even with the accelerated timetable, it is likely that we will not have a vaccine for at least another year. Nonetheless, prospects for an effective preventative treatment are good, if only for the sheer amount of resources devoted to the effort. Following is a partial list of companies working on a vaccine: • Gilead Sciences (beginning phase 2, testing on infected human subjects, with control groups) • Moderna (set to begin phase 1, testing on healthy human subjects to ensure safety) • Novavax (set to begin phase 1 in June) • Johnson & Johnson (pre-clinical, but announced highly promising candidate, set to begin phase 1 in September) • Sanofi and Translate Bio (pre-clinical) • Regeneron Pharmaceuticals (pre-clinical) • Takeda Pharmaceutical Company (pre-clinical) • Vaxart (pre-clinical) • Inovio Pharmaceuticals (pre-clinical) Treatments (for individuals already infected with coronavirus): The US FDA has approved the use of chloroquine, an anti-malarial drug also used to treat some forms of arthritis, for emergency use in the treatment of COVID-19. In China, an antiviral drug called Favilavir has also been approved to help treat the disease. Other treatments are in development by private companies, including the following • Gilead Sciences (phase 3, final phase of human testing) • Roche (phase 3) • Regeneron Pharmaceuticals and Sanofi (phase 2/3 of human testing) 3. Imagine the world post-crisis – what will have changed, how will tastes, priorities, and ultimately consumer behavior evolve? Post-crisis, we are unlikely to go back to the level of interpersonal interaction pre-crisis, both due to the fact that coronavirus will not be completely eradicated (meaning that social distancing procedures remain prudent), as well as the demonstrated ability of many companies to employ remote work on a much greater scale. The basket of assets held by global investors should therefore reflect this change in behavior. Mass gatherings at stadiums, amusement parks, and even cinemas may be avoided by consumers long after the crisis has passed. Air travel and cruise travel is also likely to see a prolonged dip in demand as consumers seek to limit their health risks. In contrast, individual modes of travel should see demand come back potentially stronger than before, as months of social distancing changes the mentality of households towards greater isolation, at least at the level of the family. Auto manufacturers’ stocks have been hit hard, as production has completely shut down, but we expect a long-term renaissance of the family car, slowing longstanding trends towards ride sharing and public transit.
Load more

Recommended publications
  • What Is Dollar Cost Averaging?
    Massachusetts Deferred Compensation SMART Plan Office of State Treasurer and Receiver General EDUCATE What Is Dollar Cost Averaging? SAVE MONEY AND RETIRE TOMORROW Dollar cost averaging is a technique that allows you to regularly contribute money over time to help avoid timing risk (i.e., trying to pick just the right day when prices are low so you can buy more shares).1 • Dollar cost averaging is a simple, systematic investment approach in which you invest a fixed-dollar amount at regular intervals. With your payroll contribution, you are already taking advantage of dollar cost averaging. • With a fixed-dollar amount, you purchase more shares when prices are low, while you purchase fewer shares when prices are high. • Typically, your average cost per share will be lower than your average price per share. How It Works Example: Jennifer wants to invest a total of $2,400 in the market over four months. Month Amount Invested Price per Share Number of Shares Average Price per Share: Sum of Prices $114 January $600 $20 30 Number of Purchases / 4 February $600 $24 25 Average Price per Share $28.50 March $600 $30 20 Average Cost per Share: April $600 $40 15 Total Amount Invested $2,400 Total $2,400 $114 90 Number of Shares / 90 FOR ILLUSTRATIVE PURPOSES ONLY. This hypothetical illustration does not represent the performance of any investment options. Average Cost per Share $26.67 How to Use It If you are currently regular paycheck contributions, then you are already taking advantage of this principle. Otherwise, log on to the website at www.mass-smart.com or call (877) 457-1900 to specify your dollar cost average setup date.
    [Show full text]
  • Dollar Cost Averaging - the Role of Cognitive Error…………….Page 44
    City Research Online City, University of London Institutional Repository Citation: Hayley, S. (2015). Cognitive error in the measurement of investment returns. (Unpublished Doctoral thesis, City University London) This is the accepted version of the paper. This version of the publication may differ from the final published version. Permanent repository link: https://openaccess.city.ac.uk/id/eprint/13172/ Link to published version: Copyright: City Research Online aims to make research outputs of City, University of London available to a wider audience. Copyright and Moral Rights remain with the author(s) and/or copyright holders. URLs from City Research Online may be freely distributed and linked to. Reuse: Copies of full items can be used for personal research or study, educational, or not-for-profit purposes without prior permission or charge. Provided that the authors, title and full bibliographic details are credited, a hyperlink and/or URL is given for the original metadata page and the content is not changed in any way. City Research Online: http://openaccess.city.ac.uk/ [email protected] COGNITIVE ERROR IN THE MEASUREMENT OF INVESTMENT RETURNS Simon Hayley Thesis submitted for the award of PhD in Finance, Cass Business School, City University London, comprising research conducted in the Faculty of Finance, Cass Business School. April 2015 1 Table of Contents List of Tables and Figures………………………………………………………...page 3 Abstract…………………………………………………………………………….page 6 Summary and Motivation…………………………………………………………page 7 Chapter 1: Literature Review…………………………………………………...page 13 Chapter 2: Dollar Cost Averaging - The Role of Cognitive Error…………….page 44 Chapter 3: Dynamic Strategy Bias of IRR and Modified IRR – The Case of Value Averaging……………………….
    [Show full text]
  • Dollar Cost Averaging a Disciplined Approach to Long-Term Investing
    Dollar Cost Averaging A disciplined approach to long-term investing Dollar cost averaging is a systematic approach to investing. It is a strategy that Is this strategy right for you? overlooks day-to-day market fluctuations and acknowledges the difficulty in pinpointing the best time to invest. Instead, a fixed dollar amount is invested Dollar cost averaging is designed for investors who: regularly over a period of time. While it does not guarantee a profit or protect from a loss, it simply focuses on asset accumulation and avoids guesswork. • Seek a plan to help deal with market fluctuations. Market fluctuations can make it difficult to determine the best time to invest. A • Do not wish to invest all their widely accepted investment strategy called dollar cost averaging can help money at one time. smooth out market fluctuations. The key to this long-term strategy is persistence. Whether the market rises or falls, dollar cost averaging can work in • Can continue the program your favor. That’s because when you dedicate a fixed dollar amount to invest on a through both rising and falling regular basis, your average cost per share over time will be lower than your markets without selling all or average price per share. part of the assets. Accumulating shares When you invest using dollar cost averaging, you: • buy more shares when the price is low • buy fewer shares when the price is high Over time, dollar cost averaging may help you increase the numbers of shares you purchase and, at the same time, decrease your average share price.
    [Show full text]
  • The Basics for Investing in Stocks S K
    The Basics for Investing in Stocks s k By the Editors of Kiplinger’s c Personal Finance magazine o t In partnership with for S 2 | The Basics for Investing in Stocks Table of Contents 1 Different Kinds of Stocks 2 A Smart Way to Buy Stocks 3 What You Need to Know 6 Where to Get the Facts You Need 7 More Clues to Value in a Stock 8 Dollar-Cost Averaging 9 Reinvesting Your Dividends 12 When to Sell a Stock 13 How Much Money Did You Make? 13 Mistakes Even Smart Investors Make & How to Avoid Them 14 Protect Your Money: How to Check Out a Broker or Adviser Glossary of Investment Terms You Should Know About the Investor Protection Trust The Investor Protection Trust (IPT) is a nonprofit organization devot- ed to investor education. Over half of all Americans are now invested in the securities markets, making investor education and protection vitally important. Since 1993 the Investor Protection Trust has worked with the States and at the national level to provide the inde- pendent, objective investor education needed by all Americans to make informed investment decisions. The Investor Protection Trust strives to keep all Americans on the right money track. For additional information on the IPT, visit www.investorprotection.org. © 2005 by The Kiplinger Washington Editors, Inc. All rights reserved. Different Kinds of Stocks | 1 o other investment available holds as much potential as stocks over the long run. Not real estate. Not bonds. Not savings accounts. Stocks aren’t the only things that belong in your investment portfolio, but they may be the most important, whether they’re pur- Nchased individually or through stock mutual funds.
    [Show full text]
  • Maliyyə Bazarları Terminlərinin Izahlı Lüğəti
    MALÈYYß БАЗАРЛАРЫ TERMÈNLßRÈNÈN ÈZAHLI LÖÜßTÈ БАКЫ–2010 Bu nəşr Qiymətli Kağızlar üzrə Dövlət Komitəsinin təşəbbüsü ilə Avropa Birliyi tərəfindən maliyyələşdirilmiş və Yerli İqtisadi İnkişaf Mərkəzi (YİİM) tərəfindən hazırlanmışdır. Nəşrin məzmunu Azərbaycan Respublikasının Qiymətli Kağızlar üzrə Dövlət Komitəsi və Avropa Birliyinin mövqeyini əks etdirmir və məsuliyyəti yalnız YİİM daşıyır. This publication has been prepared by the Center for Local Economic Development (CLED) and funded by the European Union under initiative of the State Committee for Securities. The contents of this publication are the sole responsibility of of the CLED and can in no way be taken to reflect the views of the State Committee for Securities of the Republic of Azerbaijan and European Union MALİYYƏ BAZARLARI TERMİNLƏRİNİN İZAHLI LÜĞƏTİ Bakı, «NURLAR» Nəşriyyat-Poliqrafiya Мərkəzi, 2010, 272s. Bu lüğətdə maliyyə bazarları, o cümlədən qiymətli kağızlar bazarları, fond birjaları, valyuta birjaları, ilkin səhm bazarları, bu bazarlarda həyata keçirilən əməliyyatlar, onların iştirakçıları, istifadə olunan maliyyə alətləri, investisiya fondları, depozit sistemləri, maliyyə hesabatlılığı və bu kimi digər əlaqəli məsələlər üzrə terminlər (Azərbaycan və İngilis dillərində) və onların Azərbaycan dilində izahı əks olunmuşdur. Lüğət geniş oxucu auditoriyası, xüsusən də maliyyə, o cümlədən beynəlxalq maliyyə və maliyyə bazarları ilə əlaqədar məsələlərlə məşğul olan mütəxəssislər, müstəqil ekspertlər, dövlət və özəl təşkilatların işçiləri, maliyyə menecerləri, brokerlər,
    [Show full text]
  • Another Look at Dollar Cost Averaging Gary Smith Heidi Margaret Artigue
    Another Look at Dollar Cost Averaging Gary Smith Heidi Margaret Artigue Department of Economics Department of Economics Pomona College Pomona College 425 N. College Avenue 425 N. College Avenue Claremont CA 91711 Claremont CA 91711 [email protected] [email protected] Another Look at Dollar Cost Averaging Abstract Dollar cost averaging—spreading an investor’s stock purchases evenly over time—is widely touted in the popular press because of the mathematical fact that the average cost per share is less than the average price. The academic press has generally been skeptical, and attributes dollar cost averaging’s popularity to investor naiveté and cognitive errors. Yet, dollar cost averaging continues to be recommended by knowledgeable investors as a sensible way to avoid ill-timed purchases. We argue that dollar cost averaging is, in fact, an imperfect, but helpful strategy for diversifying investment decisions across time. keywords: dollar cost averaging Another Look at Dollar Cost Averaging An investor following a dollar cost averaging (DCA) strategy periodically invests a constant dollar amount in stocks, adjusting the number of shares purchased as stock prices fluctuate. When stock prices are high, fewer shares are bought; when prices are low, more shares are purchased. Because the average cost weights the purchase prices by the number of shares acquired at each price, the average cost is always less than the average price. This mathematical fact has led many to recommend dollar cost averaging. In several Barron’s columns and multiple editions of Successful Investing Formulas, first published in 1947, Lucile Tomlinson persuasively extolled the virtues of cost-averaging plans.
    [Show full text]
  • Basics of Dollar Cost Averaging Dollar-Cost Averaging Is a Popular Method of Investing for the Long Term
    Basics of Dollar Cost Averaging Dollar-cost averaging is a popular method of investing for the long term. If you’ve been burned before by buying high and selling low, you may want to consider putting your investments on cruise control with dollar-cost averaging. Dollar-cost averaging – the basic premise behind employer-sponsored savings plans like 401(k)s – is the practice of investing a set amount each month in a particular investment vehicle. As the share price of your investment fluctuates, so will the number of shares your set amount buys. Sometimes you’ll pay more and sometimes the stock or mutual fund will decrease in value, allowing you to purchase additional shares. By year-end 2015, Americans had $24.0 trillion invested in IRAs, employer-sponsored savings plans and annuities, according to the Investment Company Institute’s 2016 Investment Company Fact Book. With the vast and varied information available on investing, many Americans have chosen to stop chasing yesterday’s high returns. Using dollar-cost averaging can help them ride out the ups and downs of the market. Dollar cost averaging involves continuous investment in securities, regardless of fluctuating price levels. Investors should consider their ability to continue purchases through periods of low price levels or changing economic conditions. Dollar cost averaging does not ensure a profit and does not protect against a loss in a declining market. Dollar-cost averaging isn’t for everyone. Short-term investors and those concerned about market volatility won’t benefit from the slow and steady pace of dollar-cost averaging.
    [Show full text]
  • Review on Efficiency and Anomalies in Stock Markets
    economies Review Review on Efficiency and Anomalies in Stock Markets Kai-Yin Woo 1 , Chulin Mai 2, Michael McAleer 3,4,5,6,7 and Wing-Keung Wong 8,9,10,* 1 Department of Economics and Finance, Hong Kong Shue Yan University, Hong Kong 999077, China; [email protected] 2 Department of International Finance, Guangzhou College of Commerce, Guangzhou 511363, China; [email protected] 3 Department of Finance, Asia University, Taichung 41354, Taiwan; [email protected] 4 Discipline of Business Analytics, University of Sydney Business School, Sydney, NSW 2006, Australia 5 Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam, 3062 Rotterdam, The Netherlands 6 Department of Economic Analysis and ICAE, Complutense University of Madrid, 28040 Madrid, Spain 7 Institute of Advanced Sciences, Yokohama National University, Yokohama 240-8501, Japan 8 Department of Finance, Fintech Center, and Big Data Research Center, Asia University, Taichung 41354, Taiwan 9 Department of Medical Research, China Medical University Hospital, Taichung 40447, Taiwan 10 Department of Economics and Finance, Hang Seng University of Hong Kong, Hong Kong 999077, China * Correspondence: [email protected] Received: 22 December 2019; Accepted: 4 March 2020; Published: 12 March 2020 Abstract: The efficient-market hypothesis (EMH) is one of the most important economic and financial hypotheses that have been tested over the past century. Due to many abnormal phenomena and conflicting evidence, otherwise known as anomalies against EMH, some academics have questioned whether EMH is valid, and pointed out that the financial literature has substantial evidence of anomalies, so that many theories have been developed to explain some anomalies.
    [Show full text]
  • Sales Representatives Manual 2020 ● Volume 1 3 Chapter 1
    Sales Representatives Manual Volume 1 2020 Foreword Financial instruments business operators and registered financial institutions play very important roles as market intermediaries in order to ensure that the financial markets can properly exert their function to distribute funds efficiently through market mechanisms, and they are entrusted with an important social mission. Accordingly, Sales Representatives engaged in the financial instruments business are required to have a great deal of expertise in financial instruments, as well as a high awareness and consciousness of compliance and strong professional ethics. To meet the goals above, the Japan Securities Dealers Association (JSDA) administers the Sales Representative Qualification Examinations in accordance with its self-regulatory rules from the perspective of achieving a suitable level of quality on the part of Sales Representatives, in order to ensure that Sales Representatives who belong to Association Members (financial instruments business operators and registered financial institutions) will respond to the trust placed in them by society and carry out their activities appropriately. The present Manuals provide explanations concerning laws and regulations that people engaged in the Type I financial instruments business need to understand, as well as the various products and operations with which they deal in their business. These Manuals are expected to serve as reference materials for such people to acquire the knowledge necessary for acting as Sales Representatives. The 2020 edition has been edited based on the laws, regulations, rules and systems, etc. in effect or publicly available as of September 1, 2019 in principle, which may be subject to revision in the future. It should be noted that with the enactment of the Financial Instruments and Exchange Act in 2007, the legal names of entities such as securities companies and exchanges governed by this legislation have respectively been changed to financial instruments business operators, etc.
    [Show full text]
  • Avoiding Emotional Investing Decisions Mohd Sedek Jantan Standard Financial Adviser Sdn Bhd When Instability Occurs in the Marke
    Avoiding Emotional Investing Decisions Mohd Sedek Jantan Standard Financial Adviser Sdn Bhd When instability occurs in the market, emotions are involved in investments. During turbulent economic times, one may be tempted to perform drastic actions on the investment portfolio, such as withdrawing investment to their fixed deposit. An exemplary situation is when an adviser invested RM100,000 of an individual’s money and the value is reduced to RM80,000. There may be various reactions towards this RM20,000 loss, be it selling all or some of the investments, buying more of the investments, or not performing any actions at all. These possible reactions from different individuals will provide important insights into risk profiling. Considering the volatile market condition, understanding investment risk and implementing a systematic investment plan would assist one in meeting long-term financial goals. a. Volatility, Market Information, and Noise Traders Proper research prior to investment is crucial. It is important to understand the types of risk associated with the investment. However, investors tend to be confused between the concepts of ‘risk’ and ‘volatility’. In financial terminology, ‘risk’ refers to the probability of losing an investment capital based on the expected return on any particular investment. Meanwhile, volatility measures price fluctuations in a security, portfolio, or market segment. An investor will have little or no control over any of these segments. The information regarding the changes in the company’s management team or announcement for share dividend payouts would usually result in stock price volatility. Based on the efficient market hypothesis, information is placed into security prices within a high speed that investors would not gain an opportunity to profit from the publicly available information.
    [Show full text]
  • Introduction to Financial Markets
    UNIT THE BASICS 2 UNIT 2 I Introduction to Financial Markets TEACHING STANDARDS/KEY TERMS ■ 12(b)-1 fees ■ “Blue chip” companies ■ Bond market ■ Caveat emptor ■ Commodity Futures Trading Commission (CFTC) ■ Common vs. preferred stock ■ Consumer ■ Consumer Financial Protection Board (CFPB) ■ Coupon rate ■ Dividend ■ Dollar cost averaging ■ Dow Jones Industrial Average (DJIA) ■ Economic growth ■ Economic indicators ■ Economy ■ Exchange ■ Financial Industry Regulatory Authority (FINRA) ■ Financial markets ■ Free enterprise system ■ Futures ■ Gross domestic product ■ Load vs. no-load ■ Market economy ■ Markets ■ Mutual funds ■ NASDAQ Stock Market ■ Net Asset Value (NAV) ■ New York Stock Exchange (NYSE) ■ North American Securities Administrators Association (NASAA) 2020 INVESTOR EDUCATION 2 I 1 UNIT 2 THE BASICS ■ Private vs. public companies ■ Prospectus ■ Risk tolerance ■ Securities and Exchange Commission (SEC) ■ State securities regulators ■ Stock ■ Stock market ■ Supply vs. demand Unit Objectives: INDIVIDUALS WILL: ■ Understand the relationship between risk and return. ■ Learn about U.S. financial markets and investment products. ■ Explore conditions that affect market prices. ■ Grasp the extent and limits of government regulation of the financial markets. Unit Teaching Aids: LESSON 1: Myths Vs. Realities: Risk and Returns (Handout/Overhead) How Financial Markets Work LESSON 2: Market Questionnaire (Worksheet) Public and Private Companies Company Questionnaire (Worksheet) LESSON 3: Reading Stock Tables (Handout) What Makes Stock Prices Rise and Fall? Evaluating Stock Prices (Worksheet) LESSON 4: The Role of Government in Securities Regulation Securities Regulation Research Project (Worksheet) UNIT TEST: (Test and Answer Key) INVESTOR EDUCATION 2020 2 I 2 UNIT THE BASICS 2 For Instructors Why Teach This Unit? The youth and young adults of today are the investors of tomorrow … or should be.
    [Show full text]
  • Spotlight On: Dollar-Cost Averaging
    Spotlight on: Dollar-Cost Averaging Spotlight On Methodology: Dollar-Cost Averaging The member-only community forum on TalDavidson.com is an invaluable source for learning and ​ receiving feedback and support. Members bring forth questions and topics not commonly addressed by traditional blogs and services, or those for which the web is filled with too much contradicting information. We are a small and exclusive community, and thus each posting member gets the maximum personal attention to resolve any investing question or dilemma*. Surfacing questions and doubts on the forum, not only helps members get quick support and resolution, but also helps me evolve the service in those aspects that are of interest for our members. Recently, a member asked the following question (here’s a link, make sure you are logged in to view it): ​ ​ “Do you have any recommendations on how the QV strategy could be implemented with accounts receiving monthly deposits such as the IRAs I manage? How could the “new money” be integrated, either at the yearly rebalance or any other time? I have considered adding new positions or adding to existing positions, or ???? In this case taxes are not an issue. Thanks!” The question is an excellent opportunity to bring to discussion the topic of Dollar-Cost Averaging. ​ ​ I am happy to delve into this concept and provide an elaborate answer on this topic, which may be of interest to many of our members. Dollar-cost averaging (DCA) is the practice of investing a fixed dollar amount in a stock or a portfolio of stocks every single month.
    [Show full text]