From the very beginning, equities have been the “hard core” of all financial markets and the fulcrum around which all strategies have revolved, whether implemented by listed companies, by ordinary investors and savers or by strong financial lobbies, funds, investment banks and simple speculators.
Currently, the reality on which the market mechanism is based has changed a little; firstly with the advent of technology that governs all transactions through software, but above all due to the constant introduction of new alternative, complementary or hedging financial instruments (read protection), and also due to the speed with which modern finance processes a single transaction, split seconds versus hours or even days until markets digitize and become precisely telematics.
The definition par excellence of an action is that it constitutes the property of a piece of societynot in all cases, however, does it imply the right to vote for holders at shareholders’ meetings to actively participate in the company’s policies and strategies proposed by senior management, as well as to decide the senior management itself.
For share holders savings, for example, no voting rights, but a higher dividend rate, if ever distributed; in the same way the actions privileged grant limited voting rights to shareholders’ meetings extraordinary and assign the right of precedence in the distribution of profits.
We also have stakes in multiple vote it’s from increase in votes generally in unlisted companies that respectively confer higher voting rights than the shares held (i.e., Weight of the vote is higher than the value, in percentage, of the shares held) and possibility, for the shares increase in voteshave the right to vote until twice in relation to the number of shares held.
Of course for ordinary investors, traders and for most traders it is stocks. ordinary arouse the greatest interest while the savings and the privileged contemplate other types of strategies not commonly adopted.
Therefore, we focus our attention mainly on ordinary.
Normally, investing in stocks (not purely speculative) involves a medium or long term that depends first of all on the companies you have decided to trust, so it is advisable to know the fundamental this is the essential data from which the solidity of a company and its propensity to growth can be deduced and also, through technical analysisunderstand what best time enter because, as specified in the previous articles, the timing in finance it is almost always the antechamber of profit.
Investing in stocks involves constant and almost maniacal information about each company object of interest and one of the disadvantages in relation to investing in instruments linked to indices and commodities is that in the second case, although generally more risky of actions, the information is so to speak limited to data relating to global and non-specific market dynamics, as indices, in 90% of cases, move in unison and the price of raw materials is unique throughout the world.
Ordinary smaller amount of information, therefore, generally of an economic-financial and geopolitical nature, it is possible to have a very clear picture of the situation; something that is not possible if you invest in stocks for the simple fact that only in the main world markets we have such a large amount of companies listed that we must spend at least 8 hours a day informing us to find the best opportunity, unless you ask attention to calls big that form the backbone of all price lists, and in this case it’s just a matter of moments, understanding that information is always a obligation if you don’t want to have any unpleasant surprises.
Another key point is the diversification of sectors good configured in weight can yield interesting returns in the medium and long term, as each sector also acts as a cover or protection because, excluding global financial catastrophes, there are always sectors that function while others decline; obviously a management active and constant, such as decreasing or increasing the Weight of a sector within the portfolio ensures less risk exposure.
In addition, the utmost attention should be paid to transactions such as takeover bids, IPOs and dividend distribution dates, because these circumstances almost always involve speculation and high volatility.
Therefore, investing in stocks involves a certain commitment that you never need. to delegate as unfortunately happens with customers loyal to traditional banks who think they can consider their trusted person as a personal consultant; this is not possible, especially under legislation that prohibits any consultant or employee from to recommend customers to buy or sell shares.
Another question if you decide to buy stocks in a way to livethat is, inside investment funds whose management is entrusted to the managers and in this case the consultant is entitled to advise the client on the basis of his risk propensity.
Ultimately, an investment fund (in our case equity) has an annual management fee that precisely remunerate the work of managers who not only need to be H24 in the playthus avoiding all the work mentioned, but they also have the obligation to manage our capital in the best possible way so that it can grow and it is a job of great responsibility.
The costs, however, are not lacking even in the direct management as for each accomplished in both buying and selling, there are commissions and active personal management is not limited to operating only once a year, but frequently, especially if you have a diversified portfolio; in addition, when operating on its own account, 100% of the risk is assumed directly.
An equity fund that costs 2% a year, say 2,000 euros out of a nominal 100,000, is likely to earn more than we can independently and will likely have almost the same expenses; the real difference is in risk because no matter how knowledgeable and competent we may be, we will never have the means available to large investment banks or asset management companies.
After all, who has time and skillsin addition to funding to support the costs of advanced platforms and subscriptions to specific publications for real-time information, it has the minimum requirements to be able to operate with a given calmfor savers and ordinary investors it is preferable to have a stock investment fund or, ultimately, to operate as a drawer drawer long-term, which means investing and holding bonds in the market drawer for years exploring the growth trend of the markets.
Antonine Pope, April 20, 2022