Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
You can access both of our platforms from a single Saxo account.
SaxoInvestor
- Accessibility: Investing in stocks has become very accessible today, with many brokers offering easy-to-use trading platforms. Additionally, you don’t need a lot of money, you can purchase a single share for just a few euros or dollars, and trading commissions have significantly decreased over the years.
- Liquidity: Stocks are traded on exchanges, making it relatively easy to buy or sell them on a daily basis. Compared to other asset classes, such as real estate, stocks tend to be more liquid. However, it’s important to note that not all stocks exhibit the same level of liquidity. Large-cap companies generally offer higher liquidity than small-cap companies, and U.S. stocks tend to be more liquid than those in emerging markets.
- Dividend income: Many companies allocate a portion of their profits to shareholders in the form of dividends. Dividends are cash payments that can supplement people’s income. The amount and payment of the dividend is usually decided on a quarterly or annual basis, according to how well a company has performed during the preceding period.
- Inflation hedge: Inflation is the general increase in prices over time, and it has averaged around 3.1% annually in the US since 1913. Inflation erodes purchasing power, making cash worth less over time. Historically, stock markets have provided returns that outpace inflation, helping to safeguard wealth against its effects.
- Time horizon: Before you start investing in stocks, you should consider your time horizon. By “time horizon” we mean that you should ask yourself: if you invest your money today, when would you need it again? Your time horizon will determine the type of investments you should go into and the kind of stocks you should consider. There are 3 main types of investing time horizon: short term (typically up to 3 years), medium term (ranging from 3-10 years) and long term (more than 10 years). The longer the time horizon, the more time you have to recover any losses thus the riskier the type of assets you can invest in.
- Investment goals: Next, consider your personal investment goals. Are you investing for an upcoming vacation, a wedding party in 5 years or are you saving for retirement? Your investment goals will determine your time horizon, which will in turn influence the level of risk you can take with your investments.
- Risk tolerance: As previously mentioned, before you start investing, think carefully about your time horizon and your investment goals. Those two will determine your risk tolerance. If you have a high tolerance for risk and a long term horizon, you couldconsider technology stocks or cyclical stocks, which tend to have higher volatility and higher expected returns. Conversely if you have short term goals and anticipate needing the money soon, you may want to invest in more conservative, low-risk stocks, such as defensive stocks, which are less volatile and have lower expected returns.
- Diversification: Buying one stock is akin to putting all your eggs in one basket, which is generally not advisable. Instead you should aim to diversify your portfolio by investing in a variety of stocks across sectors and even geographies. Diversification will help reduce your overall risk. If one position declines, others may not be affected as much or could even increase in value, thereby balancing out the overall volatility and return of the entire portfolio.
- Do not try to time the market: Timing the market involves attempting to buy or sell an instrument at the right time, essentially buying low and selling high. While it is possible to get lucky occasionally, consistently timing the market successfully is nearly impossible due to the highly unpredictable nature of market movements. If you wait for the perfect day to invest, you may never start, and as a result, you might miss out on valuable opportunities. The perfect day doesn’t exist. The best time to get started is now.
Related Articles
SaxoInvestor
SaxoInvestor
SaxoInvestor
SaxoInvestor
SaxoInvestor
SaxoInvestor
SaxoInvestor
SaxoInvestor
Latest Market Insights
Quarterly Outlook
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer