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Another important tip is to maintain updated on the up's and down's that
happen around the world. This may have not been easy fifteen years ago,
but now, thanks to the presence of the Internet, you can know what is
happening at New Delhi, Buenos Aires, or Kyoto. All with the clicks of a few
buttons. This is the first time in the history of mankind that we can do this
kind of things.
In 1997, the Asian crisis, which started with currency devaluation in Thailand the
previous summer, was gathering momentum and markets elsewhere started to feel
the hurt.
The following year, the problem was no longer confined to a single region and
Russia had defaulted on its debt repayments. Once again, markets went into
freefall.
Although October 1999 passed without incident, this year has seen a return to the
old pattern. An oil crisis exacerbated by trouble in the Middle East has eerie echoes
of the cruel recession endured by many in the 1970s and, as a result, the markets
are nervous.
But there is another factor which has contributed to recent selling pressure, which
has little to do with oil prices or inflation.
The world still cannot seem to make up its mind about the technology sector. Early
in the year, people just could not buy technology shares fast enough and venture
capitalists were eager to throw millions at every clever -sounding internet start up.
When companies such as lastminute.com in the UK floated, shares were massively
oversubscribed and its founders became overnight millionaires.
The other TMTs, namely media and telecommunications, were also caught up in the
boom on the grounds that they were poised to benefi t from the much heralded
internet revolution.
In late summer, there was much talk about the US economy heading for its much
heralded soft landing. The US Federal Reserve seemed to have done a good job of
choosing monetary policy and people were confident we would not see a repeat of
the recession of the early 1990s.
Investors again became more inclined tow ards higher risk within their portfolios
and many were persuaded to have a second flutter with TMT stocks. The Nasdaq
started a shaky climb in August, but early September again saw the start of a
wholesale sell off by investors disillusioned with the secto r. In mid-October, Japan¶s
technology sensitive Nikkei index fell below the psychologically important 15,000
level for the first time in 19 months.
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This second technology rout was partly due to profit warnings from the likes of IBM
and Intel, the microprocessor manufacturer. Both corporations blamed poor
performances on a persistently weak euro, which is damaging sales on this side of
the Atlantic.
Market pundits have begun to speculate whether this really is the lo ng-awaited
technology shakeout. The optimists hope that markets will bottom out soon and
investors will be free to start playing a high -quality technology sector finally cleared
of trash.
Passive strategies are often used to minimize transaction costs, and active strategies such
as market timing are an attempt to maximize returns.
One of the better known investment strategies is buy and hold. Buy and hold is a long
term investment strategy, based on the concept that in the long run equity markets give a good
rate of return despite periods of volatility or decline. A purely passive variant of this strategy is
indexing where an investor buys a small proportion of all the shares in a market index such as
the S&P 500, or more likely, in a mutual fund called an index fund or an exchange-traded
fund (ETF).
This viewpoint also holds that market timing, that one can enter the market on the lows and sell
on the highs, does not work or does not work for small investors, so it is better to simply buy and
hold. The smaller, retail investor more typically uses the buy and hold investment strategy in
real estate investment where the holding period is typically the lifespan of their mortgage.
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An investor's plan of attack to guide their investment decisions based
on individual goals, risk tolerance and future needs for capital. The
components of most investment strategies include asset allocation, buy
and sell guidelines, and risk guidelines.
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Investment strategies can differ greatly from a rapid growth strategy where
an investor focuses on capital appreciation to a safety strategy where the
focus is on wealth protection. The most important part of an investment
strategy is that it aligns with the individual's goals and is closely followed by
the investor.