Shares, funds and ETFs, as assets, have their own ratios and figures that help us decide whether we buy or sell them for our portfolios. As we already have written, there are several measures, as performance, volatility, risk, technical analysis and many others.
But assets are not in a parallel world and they are affected by external factors. That is why an investor must always be alert to news. You can have a very good portfolio with a nice score, but sudden and unexpected facts can take place. This is a short list of some circumstances that can change everything in our positive portfolio evolution:
- Macroeconomics: If we invest in assets from a specific country, we have to consider the evolution of the own country. GDP, inflation rate, debt and fiscal deficit are some figures to assess. When a company, for instance, depends on internal consumption, you have to follow the variation of global consumption in that country. Also, a high debt is a risk, if we have bought local bonds.
- Sector evolution: When you invest in a company, you have to consider the global evolution of its economic sector. For instance, oil has been in the first pages in the first half of the year and that has effects in the value of oil companies. It also affects funds and ETFs linked to a specific sector.
- Individual company evolution: balances, financial statements and, very important, investments and expectations about future business are some facts to follow.
- Interest rates: We live now a weird situation, because official interest rates are around zero or even negative. Interest rates have a strong link with the interests that bonds offer. They also are a condition to assess the possible profitability of different kind of assets. If interests are high, investors possibly look to fixed-income funds, bonds or even deposits. If they are low, they will surely turn to equities.
- Politics: Money runs away from instability and tries to rest in quiet places. Social unrest, political changes by elections or confrontations between countries (not necessary a war) are situations to take into account in order to decide the safest investments.
- The unexpected: There is also a black hole with unexpected situations, as a terrorist attack, a company bankruptcy or a sudden crash in the stock market (who could predict the Black Monday in 1987?).
Yes, we can think that we have everything under control, that the portfolio ratios are impossible to improve, but investments do not only depend on internal figures. We live in a world where many things happen and several of them have huge consequences for our wealth. Would you mention other factors to our list?