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Investment Management

Investment management is the professional management of various securities and assets in order to meet the investorís goals. Securities such as bonds, stocks and shares are managed along with assets such as real estate. The services provided by an investment manager include financial analysis, asset selection, asset management, stock selection, plan implementation, and ongoing monitoring of these investments.

Asset management is often used when referring to investment management of collective investments.  Fund management refers to all forms of institutional investments in addition to investment management for private investors. The skill of a successful investment manager exists in forming the asset allocation and the individual holdings separately so as to outperform certain benchmarks. Basically, when referring to investment managers who practice discretionary or advisory management for private investors, we refer to their services as portfolio management or wealth management. Private banking is also a term used with the term portfolio manager.

When determining a clientís needs, an investment advisor or manager should asses each clients risk profile as part of this. This will enable them to do the following.

Asset Allocation
The investment manager will look at asset classes such as stocks, bonds, commodities, and real estate. Asset classes display different market dynamics and have different effects. As a result, your advisor must allocate your money along asset classes that will also spread your risk.

Long Term Returns
Your investment advisor must look at evidence of long-term returns of different assets and to the holding period returns. (Long Term Investing) Holding period returns are the returns that accrue on average over different lengths of investments.

Diversification
Portfolio diversification is a theory that was developed by Markowitz. Diversification requires management of the correlation between asset returns and the liability returns, internal issues such as volatility, and cross-correlations between the returns. Investment management requires the fund manager to consider the degree of diversification that makes sense per client when constructing their investment portfolio. This will again depend on the clients needs and risk level.

There are several aspects to this type of financial management including research, marketing, internal auditing, and report preparation for clients. There are many large firms that employ fund managers, marketers (people who bring in the money), compliance staff, internal auditors, financial controllers, computer experts, and back office employees. As you can see investment firms of this nature employ many.


Market Direction: The week between Christmas and New Year's is usually an investors time for reflection. What did I do right and what did I do wrong this past year. Most investors will rationalize that it was difficult to make any money in 2008. The market decline made for difficult trading. That is rationalization! There were very good profits made during 2008. This was in spite of the fact that approximately half the year showed sideways moving markets. Candlestick analysis provides a very clear advantage when analyzing market trends. Sideways motions in the markets reveal valuable information. The elements built into candlestick analysis clearly defines what that information is conveying. Although the markets decline dramatically in 2008, big profits were made both on the short side as well as the long side.

How can big profits be made on the long side with such a huge decline in the markets? The gains were derived by recognizing oversold conditions and candlestick reversal signals. This allowed for short-term trades to produce excessive profits. The Doji, that formed in the Dow in mid-October, revealed the end of the severe downtrend that was foretold by the Dumpling Top pattern that had formed all during the summer. Although there were no profits made during the summer, because the Dumpling Top pattern kept us in a cash position, the profits made by being short in the first two weeks of October, well offset the time no profits were made during the summertime. Additionally, the Doji at the bottom of that downtrend revealed when it was time to take profits on the short positions and go long.

Gains of 20%, 40%, 60% and greater were made in a three-day period after the downtrend reversed. It can easily be rationalized that not making money in 2008 was not unusual for most investors. Many investors will take that posture. But the candlestick investor made a very good percentage return this year. As had been advised for the major portion of the year, participating in the short funds was a constant recommendation from the Candlestick Forum. With very little effort, most investors in the Candlestick Forum chat room discovered how easy it was to buy short funds so they could make money as the market was moving down. Profiting from the markets this year was merely exploiting the information conveyed in candlestick signals. Making profits does not involve speculating correctly which direction the market will go. Making profits involves being in the right direction at the right time. This is easily done when using candlestick signals to analyze the investor sentiment of the overall markets.

What will the markets do in 2009? That can be answered with the same answer for the question of what the market will do in 2008. We have no earthly idea. Nobody has any idea. Ask 15 analysts which way the market will end up in 2009, and you will get 15 different answers. Candlestick analysis eliminates the guesswork. It is much easier to produce big profits when analyzing what the market is telling you the market is doing right now. This is not a difficult process to learn. Take advantage of the knowledge incorporated into candlestick analysis. January 24 and 25 will be a two day training online training seminar. The two-day training allows you to understand the powerful insights that are produced by candlestick signals. As you may have seen in the Monday night and Thursday night training sessions, candlestick analysis is nothing more than interpreting the information provided by graphics. The two-day training puts this information into a logical chronological order. When you learn how to use the candlestick signals and patterns in the correct fashion, you gain a huge advantage over many other investors in the markets. Take advantage of the information Steve Bigalow has accumulated over the past 25 years while utilizing candlestick signals. What was the predominant information that candlestick signals conveyed this past year? Although the market in general was heading down, candlestick signals clearly identified specific sectors that were gaining investor strength. The clear graphic illustrations created by candlestick signals allowed for good profits to be made even in lethargic market conditions. As has been identified and discussed in the daily chat room, there are sectors that are performing extremely well. The signals reveal when strength are coming into specific sectors and stocks. Being aware of the candlestick patterns allows investors to take advantage of price moves that most investors will not recognize.

When a number of stocks from a specific sector shows strong buy patterns, that indicates some valuable information. That is where the large money is moving to. As illustrated in the DRYS chart, a stock that has been recommended over the past few trading days in the chat room, it has produced extremely good profits. The shipping stocks produced excellent profits for the portfolio in the latter part of 2008. The candlestick signals revealed when it was time to take profits. The candlestick signals also show that it has been time to be back in the stocks over the past couple weeks.

DRYS

The fry pan bottom/cradle pattern indicated investor sentiment was possibly changing back to positive. Taking advantage of that information has created close to a 30% profit over the past few trading days. Is DRYS a fluke? When the same analysis can be seen in numerous shipping stocks over the past couple of weeks, it becomes more evident that the big money likes the sector in general. This produces bigger probabilities of being in the right sector/trades at the right time.

DOW

The Dow had been moving up nicely during the quiet trading days of the holidays. Although volume was much lower than normal, the candlestick signals still represent what is occurring in investor sentiment for those that are still participating in the markets. Today's selling occurred at a crucial time. The Dow was in the process of attempting a breakout through the recent resistance levels. This makes for easier trade or investment analysis over the next day or so. A breach of the upper resistance level would indicate much more upside. The stochastics clearly reveal that this market is not yet in the overbought conditions. A breakthrough of the upper resistance level would be obvious that the uptrend was still in progress. Weakness in tomorrow's trading would confirmed today is bearish Harami, providing more evidence the upper resistance level was still in effect. Knowing the simple rules of each signal allows for immediate entry or exit of trades, well before the rest of the market participants.

Chat session tonight at 8 PM ET for members.

Good investing,

The Candlestick Forum Team

 

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