You are a new investor or with low experience in investments. You have available a good database to check possible asset to invest in, but which would be the right one? How can you select the most interesting assets for your goals? We recommend you to look into a database with high-quality reports about the assets. There you will find lots of information. Check the following figures to take a decision:
- Performance: look at the historical performance. How good were the returns in the last months? And in the last years? It is true that past performances do not guarantee future results, but it show a trend about the long-term stability. It is not the same to get a share with positive and negative returns in different years than a one with regular positive returns.
- Volatility: this is quite important. Volatility measures a deviation from a middle point. For instance, if the price goes up 4% one day and goes down 3% the following, the security is quite volatile. On the other hand, if the price goes up 0.2% three days and goes down 0.1% one day, it is less volatile. Take it into account depending your risk profile: if you are risk averse, you will not feel comfortable with a share that has high variations every day.
- Trend: it is the development of a security in a timeframe. You have to consider the recent trend to decide to invest or not. A trend has a slope. If the slope is strong, it means that the trend has accelerated. For instance, if the slope is strong upwards, it can mean a bubble or that there is speculation behind the movement. On the other hand, if is very negative, it can mean a crisis in the company.
- A historical chart: an image is worth more than a thousand words. It is easy to detect the items mentioned above in a chart. The best one is an active chart where you can choose different timeframes.
- Value at Risk (VaR): this is an advanced item, but very useful. What does it measures? The probability of losses in a timeframe. You will read “VaR one week” or “VaR one year”. It indicates that you can lose at maximum the written figure with a 95% probability. In other words: if you invest in that asset, you can earn, you can lose less than the indicated figure in the VaR, you can lose at maximum that figure with 95% probability and you can lose more than that maximum with 5% probability. These are the scenarios that you have to analyze. The highest VaR it is, the highest risk you accept.
This is the beginning. There are some more that we will comment in future posts. The T-Report in T-Advisor offers all these data. Check it in our platform.