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Everyone needs a plan

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By Michael O’Connor  

Instead of obsessing over your hypothetical investment misses, put a plan in place to capture future opportunities.

I spoke last week about the abundance of opportunities in the current market. Yet, many investors remain transfixed on the opportunities they have already missed instead of putting the necessary steps in place to ensure they will be in a position to take advantage of the next opportunity.

People look at the run the stock market has been on since the drawdown in March 2020, rue the fact that they didn’t put everything they own into the high-flying tech stocks when they had the chance and then return to their everyday lives as if another opportunity will never arrive. In reality, the next opportunity is always just around the corner.

In the investing world, fortune favours the prepared. Those who know what they want to do and how they plan to do it will be able to strike while the iron is hot.

Here are a few tips to get you started with your investment plan

Know your numbers:

Understand your own investing goals, time horizon and target account size. This information will dictate how your investment plan needs to be structured to reach your goals.

Understand the basics:

Learning basic valuation metrics such as the PEG ratio, Price-to-sales, debt-to-equity, and Free Cash Flow will allow you to compare companies and sectors. You don’t necessarily need to calculate these numbers, as much of the information is readily available. You simply need to understand what they represent and when these figures are above or below expectation. This screening will prevent you from getting caught up in any overhyped growth stories or falling into any value traps.

Narrow your focus:

The investing universe is far too vast to truly be an expert in all areas. Trying to jump on every opportunity without the relevant knowledge is simply gambling. Focus on what you know and seek out opportunities in these areas.

Set up a watchlist:

Familiarise yourself with a chosen list of companies that are of particular interest to you. By closely tracking these preferred names, you will be able to notice and take immediate action when a buying opportunity presents itself.

Implement a rules-driven process:

When investing, your worst enemy tends to be yourself. Your emotions will introduce inherent uncertainty that is notoriously difficult to overcome. The ups and downs of the stock market can stir up costly emotions. Fear and greed.

Disciplined investors actively use a set of proven rules that protect them from themselves.

By implementing a rules-based approach, you can impose discipline on your decision-making by taking it out of your hands entirely. Tools like the humble checklist, Dollar-cost averaging, stock screening and stop-loss orders can help structure and simplify a world that is often overwhelming. The less factors you need to account for before making a decision, the more likely you are to invest when the opportunity presents itself.

By following these simple steps, you’ll be the one who is ready to invest when an opportunity arises while the competition is busy making up more anecdotes about another missed opportunity.

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Pandemic policy changes have left us with skewed data figures

By Michael O’Connor They say history doesn’t repeat itself, but it often rhymes – at this point however, even the rhyming has stopped. The pandemic policy changes have left us […]

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By Michael O’Connor

They say history doesn’t repeat itself, but it often rhymes – at this point however, even the rhyming has stopped.

The pandemic policy changes have left us with skewed data figures, manipulated comp stats and a remarkably unfamiliar backdrop resulting in immeasurable uncertainty amongst investors across the globe.

During times like this, it is best to break complex problems down to their simplest forms and concentrate solely on the most crucial variables.

And the most crucial variables in this case are inflation and Fed policy.

An infinite number of potential outcomes are possible over the coming months, but all will be derived based on the aggressiveness of future Fed adjustments and the persistence of inflation.

There will always be risk

There is no perfect scenario here. The inflation we are experiencing is the by-product of an overheating economy.

The cumulative net worth of US Households is now almost $150 Trillion, $80 Trillion more than it was 10 years ago. The US labour market currently boasts two jobs for every one person looking for work, and corporate earnings jumped 35% in 2021, the largest increase since 1950.

Simply put, there is more money in the system than ever before.

The supply side issues have been well documented, but if inflation is to be quelled, then the demand side of the equation needs to be solved.

This is where the Fed’s tightening cycle comes in.

The Fed cannot improve supply issues, but they can negatively impact demand by dampening the labour market and decreasing the amount of capital in the systems through higher interest rates.

This tighter monetary policy is expected to bring inflation under control, but as the Fed increases the speed of rate hikes, the odds of economic contraction also increase.

In short, the goldilocks scenario of a gradual decline in inflation while maintaining labour market strength, household wealth and corporate profits, remains a pipe dream.

To strip inflation out of the system, a period of economic contraction is a necessary evil.

Crucially, this contraction does not need to lead to a crippling recession or anything of the sort. The level of contraction we experience will depend solely on the Fed’s ability to strike a balance between cooling inflation and maintaining demand.

Only time will tell if they can successfully thread the needle.

Jumping back in

Before declaring an all-clear for stocks, investors need to believe we are at the peak of policy tightening and inflationary pressure.

Certainly, we are seeing signs of improvement from an inflationary standpoint. For example, wheat prices are now lower than at the beginning of the war in Ukraine – another showcase of the unpredictability of markets.

With that said, one crucial paradox remains. Investors want interest rates to fall so stocks can rise, but any fall in interest rates is unlikely if stocks rally, somewhat capping the recent upside.

Make a plan

As always, I encourage a long-term focus. Investors will be better served focusing on the bull market opportunity on the other side rather than overemphasising what may be left in the bear market.

Those looking to take advantage of any potential upside need to get their house in order. You need to take the time to develop a clear picture of what your allocation will look like, create a watchlist of preferred names and know your entry points.

Scrambling together a plan after the fact is a sure-fire way to ensure you miss the very opportunity you were trying to capture.

Learn more at

https://www.theislandinvestor.com/

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Tenant’s termination notices have risen by 58%

By Ted Healy of DNG TED HEALY It has been highlighted this week that the number of termination notices issued by landlords to tenants has risen by 58% in the […]

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By Ted Healy of DNG TED HEALY

It has been highlighted this week that the number of termination notices issued by landlords to tenants has risen by 58% in the first six months of the year compared to the previous six months.

There were 2,913 termination notices issued in the first six months of this year compared to 1,845 in the last six months of 2021.

It is reported that 55% of those notices were for the purpose of sale of the property.

A ban on evictions during lockdown periods during the COVID-19 pandemic lowered the number of termination notices. However, the eviction moratorium was lifted in April 2021 and numbers have been rising significantly since then.

The figures, released by the Residential Tenancies Board, have been described as “very alarming and require urgent action”.

They highlight the ongoing crisis in the rental sector and make for stark reading. At the time of writing only four properties were advertised as being available for rent in Killarney on Daft.ie.

The exodus of private landlords from the market is a real concern and needs to be addressed. Landlords exiting the market in greatest numbers at present are those that in the past had charged rents that were less than market rates and are now only able to minimally increase rent on their properties because they are subject to Rent Pressure Zone rules.

The Government has extended Rent Pressure Zones until the end of 2024 and has prohibited any rent increase in a Rent Pressure Zone from exceeding general inflation or two percent, whichever is lower.

However, more needs to be done to entice private landlords to stay in the market and supply of available properties needs to be increased.

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