Dear Wizard Learner

In this update we introduce a full text based online course for investment and risk and in our Wizard's View this month we talk about the current investment climate. 

CF2 Investment and risk online course

Following the success of our CF1 online text course at the start of July we continue our expansion of online courses with investment and risk. The aim of this course is to enable you to understand some key investment subject areas and apply your knowledge in order to make well-reasoned client recommendations. The learning outcomes are appropriate both for someone wishing to supplement their studies for the CF2 exam or for professionals looking to brush up on their knowledge.

Click here for full course datails and how to purchase. For details and prices of the 35 items in our training directory click here.

Wizard's View
In this month’s "CPD - Monthly notes and assessments", we include some interesting articles on the investment front. Reading some of the comments, it feels like the world is turning upside down, but looking a little deeper, some fundamental principles of portfolio investment are coming out loud and clear.

Who would have thought even a year or so ago, we would experience such a heavy weighting of commodity firms in the FTSE100? We are also experiencing a slow down in growth of some of our favourite emerging markets such as China and India. Instead the Middle East is being touted as one for a future growth spurt.

Unsurprisingly, banks are currently regarded as a poor buy for equity purchasers but good for those investing in bonds.

Some investment portfolio managers with brilliant foresight are investing vast portions of clients’ discretionary portfolios in cash.

So what do these snippets tell us? Well for one thing investment into any sort of asset- backed market cannot be looked at short-term. If I wanted to invest in financials medium to long term for growth, I would be hoping that some of my money in a pooled fund is going into equities in the UK banking sector. OK the credit crunch etc, etc, but in how many years will UK banks be looking back at this crisis with just a cursory glance? Not many probably. We have one of the most stable financial systems in the developed world, robust regulation and a wealth of expertise within banking organisations, not to mention a fat client base from which to profit.

When it comes to geographic areas, you would expect every nation to have a cycle of development. Nothing lasts forever especially the good times. In any event we would hope that a half decent fund manager investing in these markets would be picking which of them are on the wane and which are on the up.

For short-term stability in a volatile market, cash would be an approach, but there will come a point where there are buying opportunities in the equity market. Would you still want your discretionary portfolio manager squirreling funds away in cash just on the basis of volatility? Volatility is a key component of equity markets and to an extent bonds as well. Its management, ie reducing specific and market risk whilst looking for opportunities to buy, sell or hold assets is the basis of good portfolio planning.

Some of the stories in this month’s CPD demonstrate a few points about longer-term investment:

- Risk does not just mean price movement (or volatility). It covers the markets you are investing in, the specific risks of an investment or a company you wish to invest in, global economic and political risks in terms of the countries and geographic markets to be invested in, inflationary risks, default risks to name but a few. Appropriate diversification of the portfolio will help to reduce risk and for larger portfolios, management using hedging techniques can also be adopted. Cash would not be a long-term choice.

- Understand where countries, industries and companies are in their relevant economic cycle. Look for opportunities to buy as well as sell and hold. You would hope if investing in a pooled fund or managed portfolio, that your investment manager would be doing this for you.

- Watch for developments or unexpected changes in your portfolio. The story about the new weightings in the FTSE 100 is pertinent to everyone. Active managers can change weightings more readily. Unfortunately, if you are in a FTSE 100 tracker fund, there is a limit to what can be done without upsetting the fund’s overall strategy to track the index.

I am sure that there are many more tips we could come up with from these articles to give to clients. I hope you find the articles help you to help them. Happy saving!

Kind regards

Wizard Learning

Wizard Learning is run by Mike Goldsmith a Chartered Financial Planner in association with a team of highly qualified, industry experienced individuals in order to assist finance professionals pass industry exams and help meet their CPD requirements. We provide a wide variety of online learning solutions for recognised industry qualifications as well as online training on key skills.

Contact us if you have any comments or questions.

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