Where to invest $10 000 in the current market conditions

DMTrading Bulgaria
Sep 6, 2018 · 4 min read

Nowadays more and more people want to be part of the financial world and to invest. However, the big investors that we are all trying to copy are operating with a lot of money. That makes their job easier and at the same time harder. This is due to the fact that with a lot of money you can afford to build a bigger and more diversified portfolio encompassing different sectors and products in every price range. In this way, you are hedged, and at the same time if your portfolio is built correctly it has a higher probability to reach your expected return. But here is the catch if you have a lot of money you have a lot to lose as well.

When you are losing it doesn’t matter if you big or small investor — the loss is always a loss. That’s why for the small investors like us it is important to invest smartly not just to put our money somewhere and hope to collect the yield after.

In this article, I am going to share with you some ideas and opinions which I had collected from different places regarding how and where the reasonable amount of money like $10 000 could be invested.

It is not a secret for anyone that we are expecting a turbulent market over the next few months. That’s why based on the new all-time highs some experts are suggesting going for paring holdings in the popular FAANG stocks will realize for you nice return with minimum risk. However, the sentiment on the financial and technology stocks is relatively negative. Bloomberg analysts are suggesting that sectors such as consumer staples, consumer services, and oilfield services may fare better over the next quarter. Furthermore, experts from the same source are suggesting that many moves can be played throughout mutual funds and mainly ETFs.

In the current market conditions, we are facing a market phenomenon called “3 Percent Problem”. Before the year is over the stock market may be forced to deal with that problem. It is represented by wage inflation which is 2.7 percent, consumer price inflation which is 2.9 percent and 10-year Treasury bond yield which is at 2.98 percent. All of these numbers will attempt to break the 3% barrier for the first time after the correction in January. This will strengthen the fear of market overheating which will force the Federal Reserve to keep tightening and pressure the valuation of the stock market.
Nevertheless, investors should stay with stocks, but they also should diversify more broadly. Which basically means to sell some optimistically high stocks on the US market and increase the weight in the portfolio of both emerging and developed international markets. They are cheaper, under-owned, have more hospitable policy officials and will benefit from renewed weakness in the U.S. dollar.

Now it makes sense more than ever in this market conditions to seek value in the emerging markets. Following a stellar 2017, emerging-market equities are once again on the back foot. Despite bouncing in recent weeks, so far this year the MSCI Emerging Market Index is trailing the MSCI World Index of developed countries by about eight percentage points. The selling has left many of these markets cheap at a time when economic prospects are improving, and the dollar is stabilizing. Which means that this sector can offer you a lot in this market conditions with reasonable risk and at a lower price.
And now we came to the commodity sector and in particular oilfield services companies. One of the most undervalued areas of the U.S. unconventional oil and gas industry is oilfield services. Investors, apparently unwilling to wait, have cast aside oil services stocks, especially those with sizable exposure to the Permian Basin. But pipeline squeezes don’t last long in the shale era; they incentivize midstream companies to accelerate new pipelines or expand existing capacity to fill the gap. Meanwhile, oil prices seem well supported. New crude oil discoveries since 2013 probably can’t offset the drag from aging oilfield production declines, falling reserves and insufficient replacement of produced volumes. Supply constraints in countries such as Venezuela, Iran, Libya, Nigeria, and Mexico may get worse.

As a recent affirmation of U.S. shale’s promising future, energy majors are making sizable acquisitions of U.S. onshore oil and gas assets. Producers will need oil services companies — even the beleaguered pumpers — to develop these newly acquired fields.

There are also still chances to extract profit from the “Peak Growth” in the U.S. Despite the risk of slower U.S. growth, Federal Reserve Chair Jerome Powell has indicated his willingness to push rates higher in coming months. The U.S. dollar has gained due to the divergence in relative growth, higher U.S. rates and a faster pace of tightening. Not only has this meant pressure on developed markets, it’s also signaled that global liquidity conditions are tightening rather than easing. The expectations are the dollar strength to be sustained through the second half.

Nevertheless, we remain buyers of equity volatility, which we expect to rise on a trend basis in the next year, given the rise in real and nominal rates.
I hope some of the shared information was useful and could give you a basic idea where to target your investments. I tried to provide you with the information as short and simplified as possible, however, if you have any questions do not hesitate to contacts us through our social media or our company emails. Hopefully, your future investments will be well targeted and hedged thanks to this article. Remember not to invest more than you can lose. This is just an analysis and recommendation, any capital you use is at your own risk.

Written By Valentin Fetvadzhiev

06.09.2018

DMTrading Bulgaria

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