Tag Archives: Life Funds

Market Outlook This Week

26 Apr

The Good News – the market snapped the losing streak at only two weeks, with a modest gain last week.  

The Bad News – that’s pretty much the only good news.


Economic Events

The retail sales for March and last week’s economic numbers were net-neutral. Stocks did well to finish the week with a gain and I expect the pessimists may have more to shout about shortly.

On the positive, retail sales numbers showed that consumers spent more in March. Unfortunately, that’s the only decisively ‘good’ news there was last week.

Otherwise, the news reports were uneventfully neutral.

From the negative side, the UK as well as the most of Europe are back in Recession (its official), existing home sales fell, continuing unemployment claims rose and prosperity generally looks under pressure. These will raise both concerns and possibly fears for the future.

Last week’s economic numbers weren’t compelling and explains why the market remained pretty neutral.  If the coming week’s numbers aren’t better, it’s seems less likely that stocks will build on last week’s growth and further drops are become more expected.


Bigger concerns lie with expected Q1’s GDP growth estimates and the more positive recent forecasts are looking over-optimistic and could fall back, seeing revisions in excess of 10%. Order books are likely to have the typical knock-on effect, and durable orders are likely to fall, as well — not good for stock market valuations. I expect that this could see further revisions in consumer confidence.

Here’s hoping that we see improvements in the jobs figures but if this doesn’t happen the compounded effect of negativity will be dire.

I struggle to see where optimists can suggest opportunities lie.

Although, volatile markets create opportunities and I am well placed for a market drop giving me the opportunity for the market confusion to create buying opportunities – buy when others panic and out of favour sectors where some real returns may exist.


Stock Markets

It’s pretty clear that the market’s direction has changed.  Both the 20-day moving average line and the 50-day moving average line are now pointed lower.  While it’s certainly possible – and likely – we’ll see bullish days even while the trend is technically bearish, one or two bullish days doesn’t snap a bigger losing streak.  Only a close above the 20-day line would suggest the overall trend had turned bullish again – I don’t expect this until the negative news has been priced into the markets.

Looking to the CBOE Volatility Index (VIX) (VXX) (VXZ) – we are waiting for a spike in the commonly called fear index from the lows we are currently experiencing. So clearly there is little downside potential but huge upside risk. So what does that mean in English – there are many reasons for the stock markets to drop and an increase in fear could see this drop but how much of a drop?

based on historical data – possibly a 9% drop but reality and common sense dictates that the drop may be more or les severe and will be influenced by sentiment and the economic data.

In fact, the VIX’s 20-day average is about to cross above its 50-day average line for the first time since late last year. 

Things are definitely changing, and not for the better.

Remember every market cycle creates silver linings  – and opportunities to profit. I think the next few weeks will be key.

My email address is :- welshmoneywiz@virginmedia.com, tel (office) 029 2020 1241

twitter welshmoneywiz, linkedin Darren Nathan

Markets Weekly Round Up – And What A Week

14 Apr

The markets have ended the week down, marking the largest weekly decline so far this year. What a crazy week in the markets! The markets have felt more like a roller coaster than the financial valuations of shares in companies, with prices swinging wildly on an almost daily basis and that’s in a week where there was virtually no significant economic and other driving news.

Investor sentiment has really shown how quickly investors views have and can change from optimist to pessimist. This change was expected as we have seen a lack of market volatility and investment realism based on actual underlying fundamentals so the likelihood of the “king’s new clothes” scenario I had expected. The question is – is this just a bit of profit-taking before the rally continues or the end of an overzealous spike – the calm before the storm and panic?

I am expecting a short-term pull back based on fundamentals, Eurozone fears, US & China economic story and reality that the markets have priced in an overly optimistic view of the near future. In spite of this I believe the general trend and data show a positive story over a long time horizon but the short-term will be volatile and is currently over-priced with a further drop expected.

The Markets

The recent market drop and increased volatility reflects, in my opinion, investor sentiment regarding the health of the UK and global economies, which saw some of the most impressive gains of the year going into earnings season and were then wiped out over the last two weeks.

I can confirm that prior to the recent declines, I had already restructured client’s portfolios to be significantly more defensive and the outcome is during this negative period we have made a profit and are well placed to take advantage of the opportunities created by the situation. Client’s investment risk exposure is carefully controlled to reflect their personal risk profile as a maximum if potential profits warrant the exposure.

When we have weeks like the ones that have just been, help to explain why investing for the long-term is the only way to play the markets today but with the bias to maximise potential risk adjusted profits and minimise any potential to losses. The plan is to structure and manage clients’ portfolios to reflect potential risk/return opportunities with a limitation on the exposure as defined by your individual risk profile. To be sure, I believe you should stay well-informed about the recent happenings and this is part of the reason for the existence of this blog.

However, wild swings like this week’s often hurt investors’ psyche more than they help unless you receive suitable support, guidance and investment advice. The risk being that investors can be largely distracted from the most central aim of saving and when you receive quality advice market volatility, panic and confusion can lead to enhanced profits.

Questions, please contact me at welshmoneywiz@virginmedia.com, twitter welshmoneywiz, linkedin Darren Nathan

Seeking Advice

18 Mar

I have been asked by many, the best way to contact me if you are seeking advice?

The easiest is by the blog email :- welshmoneywiz@virginmedia.com, or my business email :- dnathan.jpl@ntlworld.com or darren@jpltd.co.uk

Or call my office :- 029 2020 1241

Or my mobile :- 07931 388651

Or to follow me  –

On twitter :- Welshmoneywiz

On Linkedin :- Darren Nathan

All the best


So What’s Asset Allocation & What’s The Point?

11 Mar

I have mentioned throughout many articles, as financial adviser, professional investor and wealth manager, the importance of asset allocation.

I think it is worth explaining more, as to what this means to me.

Many financial experts believe asset allocation is an important factor in determining returns for an investment portfolio. Asset allocation is based on the principle that different assets perform differently in different market and economic conditions. So, diversification reduces the overall risk in terms of the variability of returns. Academic research has painstakingly explained the importance of asset allocation and the problems of active management.

Asset allocation is an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset class in an investment portfolio according to the investor’s risk tolerance, market expectations, client’s goals and investment time frame.

Each asset class will move to some extent either correlated or negatively correlated with equities. So what this means is some assets will rise and fall with equities; and some assets will generally fall when the stock market rises and vice versa. By combining these assets in a portfolio, we can diversify what we hold and the volatility of the portfolio. The dream is to achieve a straight line of growth no matter market conditions. Admittedly, I believe that this is impossible but it’s what we strive to achieve.

The more equity exposure we take, where the risk profile is increased the wider the range of the possible outcomes both positive and negative. My underlying strategy is to take a diversified broad-based approach but when markets correct aggressively, then the risk-return ratio can achieve significant returns, at least in the short-term i.e. buy cheap and sell at a higher price. Over time the market typically returns to an average return, so care needs to be taken when considering if we are above or below the average. The question being; Are pressures in the market up or down? What time scale are we considering? Following the banking/debt/global economic crisis, what is our time horizon? And, what should it be?

I believe a key constituent to developing a strategy is market expectations. Personally, I am not willing to place a client in an asset allocation, where I expect we will make a loss. I see a person’s risk tolerance as their maximum or normal exposure in a rather abnormal world.

Any decision around this area is discussed first with my client. (My crystal ball works no better than anyone else.) If we are expecting a market pull-back (decline) then a more defensive strategy than normal may be more suitable. By asset allocating, then if we expect equities to drop in value, other markets are growing and so combining or excluding some assets can obtain positive returns in declining equity markets.

Asset classes and strategies

There are many types of assets that may or may not be included in an asset allocation strategy:

  • cash and cash equivalents (e.g., certificate of deposits, money market funds)
  • fixed interest securities such as Bonds: investment-grade or junk (high-yield); government or corporate; short-term, intermediate, long-term; domestic, foreign, emerging markets; or Convertible Securities
  • stocks: value, dividend, growth, sector specific or preferred (or a “blend” of any two or more of the preceding); large-cap versus mid-cap, small-cap or micro-cap; public equities vs. private equities, domestic, foreign (developed), emerging or frontier markets
  • commercial property or residential real estate; and REITs
  • natural resources: agriculture, forestry and livestock; energy or oil and gas distribution; carbon or water
  • precious metals
  • industrial metals and infrastructure
  • collectibles such as art, coins, or stamps
  • private equity and Venture Capital
  • and others

There are several types of asset allocation strategies based on investment goals, risk tolerance, time frames and diversification: strategic, tactical, and core-satellite.

Strategic Asset Allocation — the primary goal is to create an asset mix that will provide the optimal balance between expected risk and return for a long-term investment horizon.

Tactical Asset Allocation — a more active approach that tries to position a portfolio into those assets, sectors, or individual stocks that show the most potential for gains.

Core-Satellite Asset Allocation — a hybrid of both the strategic and tactical allocations mentioned above.

Systematic Asset Allocation – depends on three assumptions:-

  • Markets provide explicit information about the available returns.
  • Relative expected returns reflect consensus.
  • Expected returns provide clues to actual returns.


Return versus risk trade-off

In asset allocation planning, the decision on the amount of stocks versus bonds in one’s portfolio is a very important decision. Simply buying stocks without regard of a possible bear market can result in panic selling later. One’s true risk tolerance can be hard to gauge until having experienced a real bear market with money invested in the market. Finding the proper balance is key.

Asset allocation is important. It determines an investor’s future return, as well as the bear market burden that he or she will have to carry successfully to realize the returns. We are looking to an investor’s sensitivity to loss in the hope of long-term profits.

It is interesting to see that those with a more cautious prudent approach over the medium to longer term have performed better than more speculative strategies. The depth and severity of the recent recessions (or bear markets) have been the primary contributing factor.

My experience is that my clients risk profile is affected by the level of fear of losses. Generally speaking, I believe we should take a more prudent approach unless the market creates an opportunity to make enhanced profits.


Problems with asset allocation

There are various reasons why asset allocation fails to work.

  • Investors’ risk tolerance is not knowable ahead of time.
  • Security selection within asset classes will not necessarily produce a risk profile equal to the asset class.
  • The long-run behaviour of asset classes does not guarantee their shorter-term behaviour.
  • Most all asset allocation decisions fail to consider the effects of personal circumstances and any life changing events


Any questions email me – welshmoneywiz@virginmedia.com

European Fund Picks for a Difficult 2012

9 Mar

Europe was clearly the worst performing developed region in 2011. This was caused primarily by fear over the sovereign debt crisis and a potential break-up of the Eurozone. There is a belief that these problems may well now been contained and worries over contagions into other weaker European countries could have past.

This could be good news for investors, as history shows that the worst performing regions often bounce back strongly. Although, there are many outstanding isues still to be resolved but if this is the case, there could be a strong argement to invest in Europe.

Some of the most consistent funds, in my opinion, in the sector :-

  • GAM Star Continental European Equity
  • Blackrock European Dynamic
  • Threadneedle European Select
  • Neptune European Income
  • Jupiter European
  • FF & P European All Cap Equity
  • Jupiter European Opportunities (Investment Trust)

My email is :- welshmoneywiz@virginmedia.com

Time to Invest in The Eurozone?

2 Mar

It is fair to say, that compared to the state of the Eurozone  since the Recession there are many redeeming features, which have led some to call – now is the time to invest.

Some key points :-

  • The threat of the Eurozone imploding has faded. 
  • The fear of the immediate demise of the Eurozone has subsided.
  • The European Central Banks’ Long-Term Refinancing Operation (LTRO) may be a turning point because it removed the tail-end risk.
  • Since December, the ECB has lent to European banks more than 1 trillion euros at low interest rates, and those funds don’t have to be paid back for three years.

This refinancing operation is likely to help calm worries about the Eurozone Debt Crisis, at least short-term and may lead to European stockmarkets rallying and the bond yields on at least some Eurozone countries falling this year. Trading volumes are relatively low and the long-term effects of the LTRO and its impact on the real economy are unknown.

Is Europe able to stimulate more, and are they willing? The answer I think is YES to both, although further liquidity operations in Europe and the US will be needed.

I think banking in the future will look completely different and the golden age of finance is now over. I just doubt that the banks accept this fact as yet.

Investing is all about being careful but not too careful.

The question you must answer is – if you don’t take risk now with everything that has happened, when is it right to take risk?

Any questions my email is welshmoneywiz@virginmedia.com

Market Inconsistencies Can be Explained, Create Opportunities — And Acted On

1 Mar

Advising on investments, wealth management and portfolio construction is complicated. The markets are more volatile than ever and this causes people to worry. My approach is all about diversification through asset allocation with the plan of out performance whilst reducing investment volatility.

What this means, my target is to make the best possible returns while reducing risk and volatility and protecting the portfolio to unknowns. When I meet people they ask many of the following questions and more :-

  • Is the Stock Market recent blip the start of a Double Dip Recession or are the Bulls right and we are on the cusp of the greatest rally in the 21st Century?
  • Should I be selling my gold and oil holdings?
  • Buying into Emerging Markets?
  • Selling all shares and only holding Gilts?
  • Or should I now be buying into China?
  • Or is that selling anything to do with China in anticipation of a “Hard” or is that a “Soft Landing” in their economy.
  • My stockbroker tells me to select the risk profile and they will design a portfolio to match but they seem to stay fully invested no matter what. So who’s giving the advice?

The market yields are pretty consistent with a 10 year Treasury/Gilt Yields, say between 2% – 3%, and gold is almost $1,800? Is $124 Brent oil consistent with cyclically low implied volatility in many market segments, as well as widening spreads for Middle Eastern oil producers?

All of this seems to be rooted in four key factors that investors need to understand in order to navigate a very fluid outlook for markets :-
  • Emerging countries are slowing and Europe is slipping into either a technical recession or a neutral growth phase, the US economy continues to grow but with the help of money being pumped into the system by the Federal Reserve. 
  • The result is a complex and perplexing picture for the world economy as a whole.
  • Some believe the improvement is sustainable and, accordingly, assuming the United States can regain its role as a locomotive for the globe.
  • Others feel that it is just a matter of time before external headwinds once again interfere with global growth momentum, i.e. similar to what happened in the last two years.

Outcome:We have taken an approach to combine assets that act in an inversely proportional manner to one another. The plan is that some assets will make positive returns in a declining market while other the opposite is true. The outcome is a portfolio, which achieves positive returns in many market conditions with the outlook of taking advantage of market inconsistencies when they arrive rather than trying to predict the future market trends.

We will report on the investment returns of the risk adjusted portfolios in the near future.

Any questions email welshmoneywiz@virginmedia.com


Europe’s Second Cash Injection of Cheap Money

29 Feb

In December 2011, the first mass injection of cheap money into the European banking system from the European Central Bank was seen as a major success. This helped fuel the market rally at the end of 2011 into 2012; and the markets have opened higher on the expectation that the results from the second installment will be successful again.

Estonia Using Euro








The first time around, the market did not initially appreciate how popular this three-year term refinancing operation (LTRO) would be .

With the second round, there are a several central questions to be answered:-

  • How Big Will It Be? The estimates suggest 400 Billion Euros and this would be seen positively by the markets
  • How Much of the Total Sum Is Actual “New Money”? Analysts are predicting up to 300 billion will be new liquidity.
  • How Will It Affect Markets? Immediately after the LTRO, a large takeup by European banks should help boost the recent risk rally in stock markets, which is hoped could help bolster the recovery around the world, in the longer term.
  • How much of this money makes it into the Real Economy? If banks choose to lend it, or to buy sovereign bonds, they could help struggling Eurozone economies and bolster the productivity of SMEs (Small and Medium Sized Enterprises). Otherwise, I fear it will merely postpone the Eurozone’s troubles but for how long? 

Wealth Accumulation, Retirement Planning and Family Commitments

27 Feb

I was recently asked how much should I save and how much is enough?

The simple anwer is, whatever you can afford – save and in my book that means invest. The exception is a pot of cash for unexpected eventualities and known commitments.

The whole idea of saving and investing is for money to grow in value at a greater rate than inflation, otherwise in real terms you are losing money. What you think of as your target growth rate and risk profile is a personal matter.

You must be realistic and be aware that the higher the possible returns, the more risk and volatility you will be requested to accept. Also, more risk does not automatically mean higher returns. What it means is more risk the higher range of returns, so you could lose or gain more but there are no guarantees. My role as your financial adviser is to guide, inform and advise you on this as it will have a serious effect on the potential outcome. So, planning, reviews and planning agian is paramount.

So where to start?

OK, this may well be different depending your stage of life.

Pre-retirement is all about accumulating wealth for self (you and possibly spouse) and family.  You need to accumulate for when one day you stop working, so in most cases this is Pension Planning, ISAs, EISs, VCTs, Collectives amd possibly Investment Bonds; and of course the clearing all debts. This is so, when children go to University, need a deposit for their first flat, get married, first car, start a buiness or whatever else then, as with all us parents, we help. And one day, when it’s time to retire, we have sufficient wealth to support and fund the rest of our lives to the standard we had planned.

There are two key important factors, firstly you only get what you put in; and secondly, you need to make sure whoever looks after your investments help them to grow. We are talking effective wealth management. If you only hear from people annually or worse, never then it is fair to say they aren’t managing but they maybe being paid for the “service” they are not providing.

Post-retirement is all about wealth preservation with the target of sustaineable and growing income over time but most importantly protecting the underlying value of the investments.

The key factor being, you need to make sure whoever looks after your investments takes a suitable approach/strategy to help sustain and hopefully grow the investments. You will recognise this comment from above – we are talking effective wealth management. If you only hear from people annually or worse, never then it is fair to say they aren’t managing but they maybe being paid for the “service” they are not providing.

Here are some simple concepts :-

If you invest £500 per month and just make 5% per annum, compounded annually :-

  • 20 years – you would have invested £120,000 and be valued at £203,728.89
  • 25 years – you would have invested £150,000 and be valued at £294,060.44
  • 30 years – you would have invested £180,000 and be valued at £409,348.92

If you invest £3,000 per month and just make 6% per annum, compounded annually :-

  • 10 years – you would have invested £360,000 and be valued at £489,792.87
  • 20 years – you would have invested £720,000 and be valued at £1,366,937.30
  • 30 years – you would have invested £1,080,000 and be valued at £2,937,769.39

If you invest £100,000 and just make 5% per annum, compounded annually :-

  • 5 years – valued at £127,628.20
  • 10 years – valued at £162,889.50
  • 20 years – valued at £265,329.80

If you invest £500,000 and just make 6% per annum, compounded annually :-

  • 3 years – valued at £595,508.00
  • 5 years – valued at £669,112.80
  • 10 years – valued at £895,423.80

All you need now is your investment adviser to make in excess of 5% or 6%, to make these figures come true. Also, if we look at the last decade, the figures could be far superior to these.

Should you have any questions or want my help, my email address is :- welshmoneywiz@virginmedia.com



Woolnough: What Moody’s downgrade threat Means for Gilts (Artlicle by Kyle Caldwell in Investment Week on 16.02.2012)

16 Feb


M&G Investments’ bond manager Richard Woolnough has backed gilts to shrug-off Moody’s downgrade warning released earlier this week.

Woolnough, manager of the £5.3bn Optimal Income fund as well as a number of other portfolios, said with only moody’s putting the UK on notice, yields should remain fairly steady.

 He expects gilt yields to remain unchanged by the news, adding the overall increase in probability of a gilt default stands at just 0.17%.

He said: “The risk of default on gilts would remain to all intents and purposes unchanged.”

Woolnough was responding to fears UK government bonds could sell-off if investors got spooked by the warning from Moody’s.

The credit rating agency has placed the UK’s coveted triple-A credit rating on downgrade watch, but there was little movement in the gilt market initially, with yields rising only marginally.

“Given only one of the three main rating agencies has taken this negative view on the UK, if we weight their views appropriately then using the increase in default probability from Moody’s and reducing it by two thirds to take account of an average rating from the three agencies, the increase in probability of default would be just 0.17%,” Woolnough said.

However, other managers were more concerned by the actions of the ratings agency.

Barings’ head of fixed income Alan Wilde said he is worried about a potential nightmare scenario of rising gilt yields and a double-dip recession.

“Hampered by slow demand from the eurozone, the UK government now faces the uncomfortable choice of deciding whether to continue down the same path and risk a credit downgrade, or change tack and risk the wrath of bond vigilantes,” said Wilde.

Woolnough disagreed saying the threat of further downgrades for a batch of eurozone countries is more concerning, from a macro standpoint.

“The downgrades for example of Spain from A1 to A3 do result in a more noticeable increase in the probability of default using rating agency methodology,” he said.