World stock markets have fallen at least 10% over the last month or so at the time of writing and prospects look pretty dim for at least the next few weeks if not months and years! So what should a fund manager do when confronted by such dismal prospects for the fund he manages?
Well, here at Minerva Money Management we are considering several strategies to not only minimise losses but to create gains for The CCM Intelligent Wealth Fund. So what techniques and strategies are we considering currently?
First and foremost it is important to ensure that the fund is invested in the right stocks in the first place! So a clear out of over-valued and out of favour shares is a good starting point.
Targeting top performing companies which are well managed, are consistently profitable, are growing, have low levels of debt and are ideal leaders in a niche market are prime stocks to invest in.
The next step is to increase the size of your cash deposits until prices have fallen sufficiently in order to create buying opportunities for the fund. The maximum cash balance the fund can hold is 20% of the net assets of the fund due to FCA regulations. There is little doubt that a future market correction will present a number of fantastic opportunities to buy certain shares at bargain basement prices.
Making money from the fall in share prices of old-fashioned companies that are affected by the new technologies of the fund is yet another technique to follow. There are a number of ways of achieving this by what’s known as shorting the market and/or individual shares. Useful ways to achieve this potentially include traded options, contracts for difference (CFDs), spread betting and inverse ETFs. Within the scope of this blog, I do not intend to explain these techniques in detail. Suffice to say these are hedging techniques which means that they are instruments that take advantage of price rises or falls for a fraction of the share price. A kind of calculated risk technique.
Because the CCM Intelligent Wealth Fund is a global equities fund, currency risk is potentially both a threat and an ally. So some form of foreign exchange trading may prove useful especially with Brexit looming.
We remain convinced that we can overcome any stock market conditions and produce healthy positive returns for investors especially, over periods of 5 years or more. We look forward to the future with confidence.
So if you would like to invest in the CCM Intelligent Wealth Fund what are you waiting for? You know it makes sense.
