Who would have thought that after the coronavirus pandemic, the world would fall into the next crisis mode. The end of 2023 is now overshadowed by the war in Israel and the ongoing conflict in the Ukraine. Both conflicts have shaken the global community to its core and have brought the most violent atrocities of war back onto the map of Europe. Global leaders are now challenged to find a solution to these conflicts before the regional fighting escalates into a war that will affect all bordering nations, if not the entire world.
While diplomats are busy on the international front, politicians are trying to ease the problems in their respective countries. Their focus might be to further ease the inflation that has been on the front foot since mid-2021. The good news here is that inflation is dropping worldwide but not expected to reach the target of 2 per cent until 2026. It looks like prices will remain higher which means that interest rates on loans and mortgages will stay elevated. These developments make it even more important for the small investor to be frugal with their disposable income and get proper investment advice.
In the dynamic landscape of the global economy, investment strategies play a pivotal role in determining financial success. Investment strategies that are formed through systemic research can help the retail investor make better-informed decisions by considering the broader economic and social context in which companies operate. Systemic research involves analysing the interconnected relationships between different factors such as economic trends, industry performance, market conditions and government policies. By looking at the larger picture, the educated investor can gain a deeper understanding of the risks and opportunities the different markets and industries face and develop his or her investment strategy.
One major factor that is currently affecting businesses is technology. The way that companies communicate, operate, and compete in the different markets is changing. One example is the rise of digital payment systems and E-commerce platforms. With their introduction, companies can now reach new clients and areas worldwide. At the same time, advances in Artificial Intelligence (AI) and machine learning are allowing companies to gain new insights into customer preferences and behaviours. This leads to targeted and more personalised marketing strategies.
In the search for investment success in the financial markets, every investor - whether private or institutional - is confronted with an unmanageable amount of information. With a realistic self-assessment, you quickly realise that you cannot process this wealth of information and condense it into an investment success on your own. To understand what is driving the performance of a portfolio, it makes sense to look at the factors and their application.
A wide variety of factors are used as filters to screen available company and price data to evaluate possible investment markets. Systematic investing is an investment approach that emphasises data-driven insights, scientific testing, and disciplined portfolio construction techniques, to seek varied portfolio outcomes.
The mid-cycle environment still offers a positive environment for riskier investments, and
clients remain invested with a moderate risk appetite. The exact rate of inflation and growth
is uncertain and probably will remain controversial in the coming months, which means that volatility can be expected to persist.
Diversification remains the key to the construction of more robust portfolios. For this purpose, investors might also consider the partial allocation of their investment portfolio into Hedge Funds.
Aside from this macroeconomic stimulus, there are also a variety of factors driving general asset allocation. The fiscal priorities of the individual states are likely to be on infrastructure investments, while the fields of biotechnology, Artificial Intelligence, and equipment, should be carefully observed. However, in 2024 and beyond, the topic of environmental sustainability will probably dominate some of the investment strategies. The earth needs help. The most recent natural disasters around the world show that climate change is top of mind, and the urgency to address it on a scale of 1 to 10, sits at 9.9. It is real and everyone must do their part to avert what scientists have dubbed "the sixth mass extinction event."
Investment ideas that could drive markets in 2024 include taking advantage of the rise in Artificial Intelligence opportunities, the carbon capture technologies breakthrough, and the FinTech revolution around cryptocurrencies and blockchain technology. Diversify your portfolio by investing in a range of companies across different industries. This will reduce your exposure to the risks associated with a disruption in any one sector. The savvy investor should also keep a close eye on regulatory developments. By staying informed about regulatory changes, investors can anticipate potential risks and adjust their investment strategies accordingly.
To take advantage of the volatile markets, traders can rely on state-of-the-art trading platforms. There are numerous trading platforms on the internet, via which speculative investors can trade in various financial products. These include, for example, stocks, bonds, ETFs, currencies, cryptos and derivatives. Unfortunately, not all operators of such trading platforms are reputable across the board and traders need to be diligent when making their selection.
The best trading platforms should give the investor a wide selection of indicators and trading tools to further assist with analysing a specific instrument. For example, technical chart indicators help to assess the market and provide an overview of price developments in graphical form over time. They identify trends, support and resistance levels, which then enables investors to find the right times to make buying and selling decisions. Indicators that show trends are called trend indicators or trend followers. However, some of the most used technical indicators are: Moving Averages, Bollinger Bands, Relative Strength Index (RSI), MACD (Moving Average Convergence Divergence), and Stochastic Oscillator. Traders often use a combination of technical indicators in their analysis.
But even more important than the user-friendliness of the platform is the seriousness of a trading platform or the corresponding broker.
A trader can recognise a legitimate broker if the company ticks the following boxes: licenced and regulated by a reputable financial institution (Securities Commission of the Bahamas); offers client fund protection; knowledgeable and reachable customer service; and segregated client accounts.
And where the broker is regulated should be of utmost importance to every trader. The Securities Commission of the Bahamas acted swiftly after the FTX collapse and is about to introduce the amended DARE Act in late 2023/early 2024, which will enhance the legislative framework for the digital asset businesses and provide further investor protection and robust risk management.
If you orientate yourself on the points mentioned, you reduce the risk that you will end up with a dubious broker, and thus lose part of your capital or bear excessive costs related to your investment decisions and/or strategies.
Overall, systemic research is essential for all investors looking to capitalise on the opportunities in the various market segments. By analysing the broader economic and social context in which companies and clients operate, the investor can develop more effective strategies that are better aligned with the changing realities of the global business world.
Chris Illing was born in Germany and moved to the Bahamas in the early nineties. He finished his education in Cologne and has a BA in Business. After a successful career in the hospitality industry, which included ownership of 3 hotels and several restaurants, he decided to change the industry and joined ActivTrades Corp. in 2019. His is focused in Client support, business development and contributes to a weekly financial column in the local newspaper. Chris is also the serving honorary consul for Germany in the Bahamas. His free time Chris spends with his family and enjoys the Bahamian aquatic life.