With 9 more months to go before the
end of 2017, I believe there is still an abundance of opportunity to
invest for the average investor. In this post, I will be highlighting
the general market outlook for 2017, key opportunity areas to invest and
build a general investment portfolio for 2017. Now let's get started!
Criteria to Check Before Investing in 2017
1) Predicted Health of the World Biggest Equity/Stock Market
The
very first criteria an investor should look into before investing is to
check the predicted health of the world largest equity/stock market. By
that, I am are referring to the growth forecast of the US stock market
for 2017. Most investors including myself will refer to market
predictions of the S&P 500 Index which is made up of 500 largest US
companies in terms of market capitalization.
Now in this post by the Business Insider,
the top nine (9) Wall Street Firms are predicting that the S&P 500
will achieve a single digit percentage gains for 2017. JP Morgan is the
most bullish among the 9 firms by making a prediction of +7.20% gains.
 |
| Wall Street Firms prediction for 2017 (as of 10 Dec 2016) |
With all 9 firms predicting a positive outlook for the US market, we can safely put a tick on this first criteria.
2) Current Economic, Market and Investor Sentiment towards the World's Largest Economy
Once again the United States is used as our reference point for investors to regularly check the following key items:
- Changes of the country's economic health
- Current health of the S&P 500
- Current investor sentiments towards the stock market
 |
| The Guided Investor - updated as of 20th of February 2017. The next update is scheduled on the 20th of March 2017 |
There are 3 key items and 9 sub-items listed in The Guided Investor:
- Stock Market Indicator
- Shiller Cape
- S&P 500 12 Month Trailing PE
- S&P 500 EPS
- Investor Sentiment Indicator
- Volatility Index Indicator
- NYSE Breadth Indicator
- American Association of Individual Investors (AAII) Sentiment Survey
- Economic Indicator
- Manufacturing PMI
- Services PMI
- Unemployment Rate
Each
sub-item plays an important role in telling an investor the latest
health of economy and stock market. In The Guided Investors, each
sub-item have green or red indicators. Green indicating optimism and red
indicating caution. As more sub-items turn red (except for the AAII
Sentiment Survey), an investor should start to be more cautious towards
his or her investment exposure in the equity sector.
Now
as of February 2017, all 3 sub items under the Stock Market Indicator
are indicating a warning/caution sign. Never the less, sub-items under
Investor Sentiment Indicator and Economic Indicator are still looking
optimistic. Finally with 6 out of 9 sub items still looking optimistic
as of 20th February 2017, I will give this criteria a passing tick!
Market Outlook for 2017
1) What the Experts Say?
In
order to get a better overview of the what the experts have to say,
I've compiled information of the market outlook from reports produced by
Blackrock, Goldman Sachs, Russel Investment and Morgan Stanley. Each of
these reports capture the market outlook for Japan, Emerging Market,
Asia ex Japan, United States and Europe, of which I have summarized the
findings in the table below:
 |
| Market Outlook for 2017 |
The
assumption made for the table above is that as long as there are two
(2) reports indicating positive outlook for a particular area, an
investor may consider that area fit for investing. In this case, Japan,
Europe and Emerging Market are the potential areas identified.
2) What our Country Indicators Say?
This time I am bringing in another section of "The Guided Investor"
called Attractiveness by Country. Under this section, the
attractiveness to invest into a particular country is updated on a
monthly basis based on our evaluation of 4 key criteria:
- Manufacturing PMI
- Services PMI
- Shiller Cape
- GDP Growth Projection
The
evaluation is then translated into percentage (%) basis. The higher the
percentage given, the more attractive the country is for investment. Do
take note that percentage changes on a monthly basis and we recommend
investors to avoid investing into a country that is rated below 60%. Now
here's how the attractiveness to invest by country section looks like
under The Guided Investor:
 |
| The Guided Investor - Attractiveness to Invest by Country as of 20th February 2017 |
As
of 20th February 2017, China, Australia and UK are the most attractive
to invest into with scores of 80% and above. Germany, Japan, South Korea
and Thailand potential as well with 75% and above rating.
Do
take note that the percentage rating for countries will change on a
monthly basis. Therefore it is extremely vital for an investor whom
follow the recommendations of The Guided Investor to check for updates
on a month basis.
Investment Portfolio for 2017?
The Three (3) Questions!
While we all would like to build an awesome investment portfolio, one must oneself these key questions first:
- What is my risk tolerance? Knowing your risk tolerance will help you determine how many % of you money should be allocated for risky investments such as equity.
- What is my investment horizon? Is it 1 year? 3 Years? 10 Years? Knowing how long you intend to invest before needing to use that money is as important as knowing your risk tolerance. Simply put, the longer your investment horizon the more investment risk which you can take.
- What strategy will you use? Now this is another question which have several sub questions to it. What is your entry and your exit strategy? How much profit is enough for you in a year? What would you do if your investment are suffering significant losses?
To help you answer these three questions (which I strongly encourage that you do), I would suggest that you look up Unit Trust Made Easy.
Now
assuming that you have clear answers for all three questions, let's
move on towards building an investment portfolio for 2017.
The Assumptions
- Investor's Risk Tolerance - Moderate
- Investor's Behavior Required - Passionate to invest on your own
- Frequency of portfolio review - Monthly
- Investment Vehicle Used - Online Unit Trust Investment (I recommend using eUnittrust)
The Recommended 2017 Portfolio
Referring
to the above assumptions as well as earlier highlighted market outlook
here is how our "active" investment portfolio for 2017 would look like
along with remarks and justifications:
Some tips on how to maintain this portfolio:
- Monitor the health of the World Biggest Stock Market using The Guided Investor platform
- Monitor the changes of attractiveness rating by country via The Guided Investor.
- Keep up to date with key events/news impacting the political and economy of the countries which you have invested into
- Use an online platform to purchase unit trust funds, especially during promotion period. These low sales charge for unit trust funds will help you see quicker gains.
- Have standby cash (liquidity) parked under Money Market which would allow you to invest into new opportunities created during a market correction (A 10-15% drop in the stock market index of a country is considered as correction)
- Exit an investment when is it no more attractive or when it has hit your targeted returns.
Summary
There
you have it, Invest Made Easy's market prediction and investment
portfolio for 2017. Do be reminded that this is only a general portfolio
constructed based on all the information and indicators shared
earlier.
As
an investor, one should be flexible in making changes and tweaks to
your own investment portfolio. Research and knowledge will help you
improve upon your portfolio. As a self investor, always remember that
investing is a continuous learning journey where one can only get better
with self practice and failures.
Just
to add on, my next post will be on the recommended funds to invest
based on our constructed 2017 portfolio. So stay tune for future updates
and don't forget to share this post with your family and friends!
Cheers and Happy Investing!
http://invest-made-easy.blogspot.com/2017/03/invest-made-easy-market-prediction-and.html
