Here’s how this works…
Each week, we will introduce you to one new investing term that you’ll need to know if you want to start investing.
Then we’ll provide a summary of the past week’s financial news and explain why it’s relevant to you as a beginner investor and, more importantly, how you can use this knowledge to your advantage.
So, let’s get cracking!
TERM TO LEARN
ASSET ALLOCATION IS HOW INVESTORS DIVIDE THEIR INVESTMENT PORTFOLIO AMONG DIFFERENT TYPES OF ASSETS. TYPICALLY STOCKS, BONDS, AND CASH. THE GOAL IS TO BALANCE RISK AND REWARD ACCORDING TO THE INVESTOR’S SPECIFIC GOALS, RISK TOLERANCE, AND INVESTMENT TIME HORIZON.
There is no one-size-fits-all approach. Allocation depends on an individual investor’s preferences.
Asset allocation is considered one of the most important investment decisions, as it largely determines overall investment results.
Asset allocation can change over time as an investor’s circumstances and goals evolve.
INVESTMENT NEWS FOR BEGINNERS
The battle of the bond markets and public finances.
Decisions made in bond markets (where governments borrow money) are influencing the UK government’s approach to spending and debt. Bond investors (people or organizations who buy government bonds) want to feel confident they’ll get back their money with interest, so they’re cautious about government borrowing and spending. As a result, the government is under pressure to keep spending low and possibly raise taxes to reassure bond investors. Too much focus on making bond investors happy (like cutting spending or raising taxes just to reduce the government deficit) can actually hurt the country in the long run, because it means less investment in things like schools, roads, and healthcare. If bond investors see the government borrowing to build things that help the economy grow in the future, they might be less worried than if the government is only borrowing to pay for everyday costs.
Why this matters to you…
Bond yields influence the whole economy. When government borrowing costs go up, it can lead to higher mortgage and loan interest rates for everyone, affecting personal finances and spending.
Stock markets are also affected. If the government cuts spending or raises taxes to please bond investors, it can slow economic growth, which can weigh on businesses and share prices.
What you need to do…
Understand that bonds and stocks sometimes move in opposite directions: when bonds are “happy” (low risk), the government faces less pressure, but stocks may not have the same boost, and vice versa.
Inflation, interest rates, and government policies all connect to the bond market – learning how they interact will help you make smarter investment choices.
Recognize that big economic decisions are often a balance between short-term caution (cut spending, raise taxes) and long-term investment in growth.
Director dealings: National Grid and Lords Group insiders buy shares.
“Director dealings” means when company leaders (like CEOs or directors) buy or sell company shares using their own money and some of the top managers or directors at Lords Group and National Grid have recently bought shares in their own companies. When these leaders buy shares, it is usually seen as a positive sign. It means they are confident in the future of their company and believe its shares are a good investment.
Why this matters to you…
Knowing about insider buying can help beginner investors make more informed decisions. It shows you how professional insiders act on their beliefs about their own companies, which can guide your own research and choices.
Actions like these can also connect to broader investment goals, such as looking for safer investments or understanding what motivates price changes in popular companies.
What you need to do…
Pay attention when you see news about insiders buying shares as it’s a sign that the people with the most knowledge about a company are showing confidence in its future.
Learn to check reports and news about “director dealings” regularly to spot these patterns for companies you’re interested in.
However, don’t follow insiders blindly. Use insider buying news as one point in your research, not the only reason to buy.
Liquidity pressures mount, Fed intervention likely in the coming months.
There are increasing problems with "liquidity" in US financial markets, meaning it’s becoming harder for banks and large investors to get cash quickly when they need it. This is partly because the Fed has been reducing its support for the markets, shrinking its balance sheet, and taking money out of the financial system. If things get too tight, the Fed may soon need to start helping again by buying government bonds to pump more money (liquidity) back into the markets.
Why this matters to you…
If there’s less cash (liquidity) in the financial system, borrowing becomes more difficult and expensive for people, companies, and governments.
When the Fed changes its actions, it can move interest rates up or down, affecting the cost of mortgages, loans, and credit cards.
Stock markets can react strongly to news about the Fed. Less liquidity sometimes brings more volatility and falling stock prices, while Fed support can boost stocks.
What you need to do…
Staying informed about the Fed’s possible actions helps you understand why markets move and how global news might impact your money decisions.
Even as a beginner, keeping updated on news about the Fed and market liquidity can help you make better, more informed investment choices.
Thanks for reading this 11th edition.
“Director dealing” - not to be confused with “insider dealing”.
Remember, “director dealing” = good.
“Insider dealing” = bad.
If you want to know why, you could Google it.
Or you could watch “Wall Street”, the Oscar-winning film from 1988, for a more entertaining explanation.
See you next week!