FINANCIAL MARKET

Understanding The Market's Risk-Reward Profile

There are basically two intermediate-to-longer-term investment climates for all asset markets. In a favorable climate, where the odds favor higher asset prices, an investor’s bias should be to hold the majority of their positions during periods of stress, fear, and anxiety. In an unfavorable climate, where the odds favor lower asset prices, an investor’s bias should be to protect hard-earned capital. MBA Capital Limited’s advantage is understanding how to differentiate between these two climates.

Asset managers must have extensive knowledge of both inflationary and deflationary forces and, more importantly, their impact on asset prices. Attractive investments in an inflationary environment are almost polar opposites of those in a deflationary environment. The global financial landscape has an almost infinite number of inputs which drive asset prices, including monetary policy, fiscal policy, economic fundamentals, and asset market technicals. In an era of paper currencies and high levels of global debt, it is imperative money managers understand all asset classes, including commodities, precious metals (gold/silver), real estate, timber, stocks, and bonds.

MBA Capital Limited assists investors with meeting their primary objectives of growing and preserving their purchasing power, taking into account their life expectancy and inflation (or deflation). In today’s liquidity-driven global economy, asset price correlations often hover near historic highs, which diminishes the value of traditional asset class diversification. However, at various stages of the economic and business cycle, asset class and sector diversification still play a meaningful role in maintaining a proper risk-reward balance.

 

 

 

 

 

 

 

 

 

 

 

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