Everything you wanted to know, and more.
Everyone, if given the opportunity, would love to dabble in stocks and shares.
It is, after all, a great way to diversify one’s source of income, and wealth.
It is also a sound way to grow the nest egg, promising the ‘proud parent’
a bundle of joy that is most rewarding.
However, not everyone has the gumption or courage to try it.
Not everyone has sound knowledge or deep understanding of how it all works.
What you may have, however, is readily available funds. A fair amount to put aside and consider this exciting endeavour.
Question is, where do you start?
Before we can talk about how you can achieve your investment goals, let us first talk about the fundamentals.
In the world of investing, there are usually two categories of stocks.
Growth Stocks and Value Stocks.
Growth Stocks are companies that are considered to have the potential to grow significantly faster than the overall market (in terms of revenue, number of users, and transactions). Although they may not report any profit for currently, or may even be suffering huge losses, they are, however, sought after because of their future potential. These companies are usually made up of startups and tech companies, like Netflix, Google and Grab.
Value Stocks on the other hand, are usually more well-established companies that are currently trading below what they are really worth. Because their share prices are currently undervalued, they have the potential to provide good returns in the long run. Value Stocks examples would be the likes of Great Eastern Life, Petro China, Honda Motor and CIMB Group.
What is your preference? Growth Stocks?
Growth companies are considered to have a good chance for considerable expansion over the next few years.
They may have a product, or a line of products that are expected to sell well.
And because they appear to be better run than many of their competitors, they are predicted to gain an edge on them in their market.
Some growth companies are also disruptors, as they seek to revolutionize the way business is conducted in certain fields.
For example, Netflix sought to redefine video rentals, while AirBnB did the same, for the hotel industry.
While growth companies may not be making any meaningful profits now, they have the potential to win big in the future.
However, as compelling as Growth Stocks are, they are some things to consider carefully.
For starters, their stock price normally looks more expensive compared to Value Stocks, when measured using conventional metrics.
What’s more, Growth Stocks often fluctuate, and sometimes violently. So, the probability of loss for investors is there, particularly if the company is unable to keep up with growth expectations.
In the event, you do suffer a loss (because of their volatile nature and if you only invest in a handful of Growth Stocks), it can result in quite the body blow.
What about Value Stocks?
Value Stocks, as stated earlier, are more well-established companies that are trading below the price the stock is worth – depending on the financial ratio or benchmark that they are being compared to.
For example, the book value of a company’s stock may be $25 a share (based on the number of shares outstanding, divided by the company’s assets).
Therefore, if it is trading for $20 a share at the moment, this is considered to be of good value.
But what actually causes stocks to become undervalued? Well, there are a variety of reasons.
In some cases, the public’s negative perception of the company can push the price down.
In another instance, the annual sales for that year may have been rather poor.
Or it could even be, the industry – in which the company is in – was not doing well (that was the case for the oil and gas industry a couple of years ago).
But if the company’s financials are still relatively solid, then value-seekers may see this as an ideal entry point.
A diversified portfolio: the way to build fund resilience.
Over the years, AAM has executed investment strategies that enable it to do well.
For starters, it diversifies its stock holdings extensively – this not only helps it to achieve growth, but lowers the risk of great volatility as well.
AAM’s long established Aggregate Value Fund (AVF) spreads investments across 1500 stocks, covering 16 countries.
While its younger sibling, the Aggregate Global Equities Fund (AVGF), holds an upward of 500 stocks, covering over 10 countries.
To heighten its investing ability, AAM also employs machine learning to churn through a large number of variables, in order to discover the winning combination of Value and Growth Stocks.
This level of stock diversification, combined with the use of AI, helps AAM attain good returns, while avoiding concentration risks.
This sets the firm apart from many other fund companies, which may only invest in a handful of stocks, in certain sectors, or in a few markets.
Just stay calm
However, like all investments, no journey can be smooth sailing for all times.
There will be bumps in the road.
At times like these, some investors tend to panic, they will want to dump their stocks, as soon as possible.
At times like these, the AAM team will tell their clients to do exactly the opposite!
“Don’t panic, be patient, trust the process and keep investing”.
You can almost hear the nervous thoughts of investors, when they hear this,“Really? Keep investing?”
In fact, instead of selling, AAM always likes to quote the wise words of Warren Buffet to their clients, “Be fearful when others are greedy, be greedy when others are fearful.”
So, instead of being pessimistic and desperate, AAM advises their clients to consider investing more!
Because, investing in stocks is not a short term exercise, but a long term one, that pays off handsomely in the end.
This advice is not based on speculation, but on data!
Over the years, AAM has consistently executed a strategy to build fund resilience, diversifying its investments widely, across many countries with the aid of machine learning.
And the results speak for themselves.
If all that has been shared here, fascinates and resonates with you, why not contact us and request for an appointment?
We certainly look forward to hearing from you, and leading you to greater investing success!
* Photo by cottonbro