Penny stocks has a higher average yield, and higher risk. They're also more independent of the total market conditions. Penny stocks is an excellent investment during downturn. When most large companies aren't doing to well, rich investors might take a break from all of these to concentrate on micro cap stocks. This implies more money in the micro cap industry - and money equals money. Micro cap companies are small businesses, with massive growth potential. They're more sensitive to fiscal information, such as new advancements and endorsement of funds, than bigger businesses. Lets do an example: A little furniture business has only a landed a contract with the states largest junk food chain, to start utilizing their furniture in restaurants all around the nation.
This contract would not mean that for a large million dollar furniture business that has contracts all around the world, but to a small business gold. A large cap stock is considered strong if it is an annual increase of ten percent. Micro cap stocks may profit 20-30 percent in one day! Some stocks may even jump countless percentage on a positive statement. If you know how to choose the winners, and make the most of these massive price jumps, you could possibly make a ton of money. Consider it, it is a lot more easy for a stock to double in 2 to 4 cents, compared to doubling up in 20 to 40 bucks. Still, if you invested a thousand bucks in the 20 dollar inventory, you'd get the same percentage yield as the cent stock. Big percentage gains like from the previous example, happens a great deal more in micro cap stocks, compared to the big blue chip companies. Let alone that they happen over a shorter amount of time. This is why there are so many Opportunities in the micro cap sector. Consult with C.L. King & Associates for more details. C.L. King is a full-service investment bank and self-clearing broker-dealer founded in 1972. We provide investment banking, equity research, sales and trading, and investor services to corporations and institutions. In addition, we transact directly in the capital markets on behalf of corporations through our Corporate Services business focused on share repurchase and continuous share offerings (“ATMs”). CL King is also a leading woman-owned securities firm and is WBENC-certified. To read more, please visit here: http://clking.bcz.com/
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Asset management is a careful process of mixing the right balance of stocks, bonds and cash reserves for the purposes of retirement or long term investing. With limitless variables in the markets, you'll find that a single investment could drop in the double-digit range. The ultimate goal of asset management is to have a portfolio that can withstand a downturn in any sector. Think about the internet boom of the 90s and the stock market crash of 1929. Both events created a fear among investors that made it scary to invest in the market.
But it doesn't mean that the bond market is immune from radical changes. Bond markets, too, go through cyclical changes that can mimic stock market shake-ups. Recently, in the 2000s, the bond market went through a tremendous drop because of rising interest rates. So how do we protect ourselves from dropping bond prices in our asset management plan? Here are some ways to weather major downturns in the bond market. Understanding Interest Rate Risk Before we address methods to protect ourselves, we need to understand interest rate risks with bonds. Interest rates for bonds fluctuate like stocks. The bond par value, which is like the stock price, can go up or down based on demand in the bond market. Demand is determined by how valuable a bond is for someone at a certain interest rate. If the bond provides a great rate in an environment where interest rates are going down, then the investment should go higher. Conversely, if the bond has low interest rates, while interest rates are rising, the par value would go down. Bond rates are tied to the discount and federal funds rate, which could go up or down, depending on factors such as the Federal Reserves and supply and demand. TIPS For responsible asset management, Treasury Inflation Protected Securities (TIPS) are a great way to hedge interest rate hikes in asset management. Usually for bonds, as inflation rises, the prices go down. Now you have a bond that can do the opposite. TIPS are investment vehicles by the US Treasury that allow you respond to inflation increases. The investment vehicle holds bonds with part of the assets that responds to inflation. TIPS may not be perfect for everyone. They might not necessarily correspond to interest rates because they are pegged to inflation. More so, they may not provide returns like a treasury bill does because of the inflation-based protection. Short Term Bonds Short term bonds have a shorter maturity. And as such, they provide less volatility versus long term bonds. If interest rates were to go up, long term bonds would face a steeper drop than a short term bond. Why? Long term bonds, like 30-year treasuries, hold more risk. We do not know what the interest rates for borrowing would be like for the next 30 years. However, for the next 1-2 years, it's easy to estimate interest rates. Short term bond values would slightly be affected by rates. Money Market If you want to dramatically reduce interest rate risk, consider money markets. Money markets provide a safe haven. These investments buy ultra short term bank paper or debt instruments for corporate and municipal borrowing. They generally have a maturity of 30 - 60 days. Because of the low risk of default, the price of a money market usually stays at $1.00. Interest from a money market account doesn't fluctuate as a long term bond would. These are a few of the investment alternatives if you feel that bonds are becoming too risky, especially with rising interest rates. Consult with C.L. King & Associates for more help on your asset management. C.L. King & Associates is a full-service investment bank and self-clearing broker-dealer founded in 1972. We co-manage bond offerings, IPOs, follow-ons, secondaries, convertibles, and preferreds. In addition, we transact directly in the capital markets on behalf of corporations through our Corporate Services business focused on share repurchase and continuous share offerings ("ATMs"). CL King is also a leading woman-owned securities firm and is WBENC-certified. To learn more about how C.L. King & Associates’s capabilities align with your long-term goals, please contact us at 518.447.8050 To read more, please click here |
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