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Concerns about inflation, rising interest rates and excessive government spending for more than a year and a half have added to the uncertainty in the investment market. For this reason, it is imperative that both experienced and novice investors protect their portfolios.
I call this the “bulletproof” of your portfolio. There are several steps that need to be taken to aid in this process.
The first is to check the flexibility of the stock.
During the pandemic, the traditional rule of investing in well-established, profitable and profitable companies was abandoned. According to Credit Suisse, one of the best-performing styles in 2021 was a basket of stocks that were likely to default on the company.
As of August 31, shares of these potentially defaulting companies were up more than 28% annually, while the S&P 500 was up nearly 20%.
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But in September, the market provided investors with a real-life check. The S&P 500 fell 4.8% in its worst month since March 2020.
what was the problem? Perhaps it was stubborn inflation, the prospect of rising interest rates, or ongoing supply chain issues preventing companies from meeting their earnings expectations for the rest of 2021 and beyond.
When companies start reporting their third quarter earnings, investors can know exactly what happened.
Markets will not be favorable and stock prices will fall as the company’s expectations of future profits are reduced. The most highly rated stocks are the most respected. This is the time to test your investments’ ability to withstand the current adverse conditions and determine if they are really resilient.
A resilient company is one that can survive fluctuations in operations during a full business cycle, including recessions. Will the company survive if sales or profit margins decline? In the long run, businesses like your home need to have consistently positive cash flow.
Access to cash usually comes from two places. The first is the sale of the company’s products (company management). The second is financing through debt (loans) or the issuance of new shares in the company.
Long-established companies need to secure enough sales and profits so that they do not need to issue new debt or shares. On the other hand, companies with new technologies or non-traditional products may need to raise fresh funding for several years before sales and profits are strong.
Both types of companies can be considered resilient, so stock prices are unlikely to drop significantly.
Now delve deeper into your investment financials.
Examining the cash flow flexibility of an investment is a good start, but there are some additional statistics and statistics that can be indicators of potential problems. The following data further examines your financial position.
Revenue and Revenue Growth: Check whether the revenue and revenue of the company in the previous year is more than the revenue and revenue of the previous year. At a minimum, you’ll want to make sure that revenue and revenue growth are on a positive trend. Of course, companies that are considered technology and medical innovators may need some leeway...
Balance Sheet Debt and Equity Levels: Compare the current dollar amounts of both the liabilities and the stock on your company’s balance sheet with those of the past few years. Have any of these increased significantly from one year to the next?
Next, examine the company’s revenue and net income. Both are listed in the company’s financial statements. Are they decreasing?
If the answer to both of these questions is yes, then the company’s operating cash flow is declining and you can go to the bank or shareholder to make up for the difference.
The good news is that you don’t have to be a financial analyst to find the answer to the above question. This information is readily available through quarterly income declarations. Search company website Or see previous financial press releases.
Now that you understand the numbers, you need to know when, how to play safely and when to take risks.
Companies are beginning to warn that inflation and supply chain disruptions will result in a failure to meet Wall Street’s expectations. Margin estimates for 140 companies in the S&P 500 have declined in the past three months. When a company’s sales or profit estimates fall, its share price also goes down.
Frustrated companies are entering an era of harsher punishment than ever before. The reason for this is because of the overvalued and right pricing stocks. As a preparation, understand the degree of financial strength of your company during the full business cycle.
Evaluate your company’s pricing power, the flexibility of demand for its goods and services, and its ability to meet current demand. It also forecasts how the indicators highlighted above will be affected during long inflationary periods and low growth.
Invest cash flow flexibility and a new understanding of financial indicators to determine how much income you can make or lose when you report income in just a few weeks. I’m ready Failure to do so will result in severe punishment.
There are also steps you can take to maintain these benefits.
how to keep profits
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View a company’s portfolio in the same way as an institutional manager. Estimate how much stock prices are likely to rise and fall over the next 12 months.
Evaluate how short sales and low profit margins affect stock prices. Go back and see how the company has progressed during the last recession and declining profitability.
This is not a complicated calculation. You don’t need a spreadsheet.
If the projected rate of increase is equal to or less than the estimated rate of decrease, you will either make a profit or sell your position. For example, if you expect a stock price to rise only 10% over the next 12 months and a potential drop of 15%, be sure to sell some.
If you’re concerned about calculating percentages, check your company’s earnings bid to see how stock prices perform in the market. If the market is retreating and your position is down, set a sell point for all or part of it. If the market continues to rise, check your stock price. If the price approaches the consensus target and you agree with the analysis, you will make some profit.
The last 18 months have been profitable and relatively easy for investors. However, economic and political uncertainties have raised the prospect of a market correction and are monitoring the disappearance of profits.
Now is the time for investment discipline. The strategies outlined above provide this discipline.
Once you take a look at the flexibility of your investment, understand its financial condition, and determine whether the sale is legitimate, you’ll be able to maintain the money you’ve earned and reach your long-term investment goals. are more likely.
Investment managers are more rigorous, but follow basically the same steps. Now you have a strategy to survive on your hard earned money.