Research is the Key to Financial Investment

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Since the financial market suffered its much publicized collapse in 2008, a large number of key private investors have been apprehensive about returning to the markets after losing large amounts of money during the crash. In fact, many are now willing to accept a lower return. Below are a few spread betting tips in terms of research that any investor, old or new, could benefit from.

In any market condition, research is imperative to successful investments but you need a trading platform with which to begin. Once you have identified the best platform to assist you in your financial investment pursuits, you will then need to decide how to conduct market research. Markets such as the FTSE 100 have a large number of potential investments. When you research, you will be able to spot trends that occur within the market and discover profitable opportunities.

Begin by evaluating the investment with regards to its consistency. A bull market can see any investment experience a high performance period. This could be as a result of a strong trend, a spike in a single sector or a particular market issue. Three to five years is the amount of time that will give you an idea of how the investment really performs. Steady performance during a market downturn is also a good indication.

Also look at how the manager has performed with regards to the funds they have managed. Some asset managers will show you the account that has performed the best but you should ask to see all of their investments and again, over a long period. If they have enjoyed success with numerous investments during a three to five year period and in various market conditions, you can be confident in their ability.

Managers who receive income from a part of the trading fees could be involved in a conflict of interest between what is best for you and generating revenue for the fund. Typically, they will act to achieve more commissions for themselves which is obviously not the best situation for you.

Fees are another area worthy of evaluation. Ensure that when you review yields that you assess fees and their potential impact on returns. They can add up quickly and cause a serious reduction on your returns.

You should also look at drawdowns. Drawdowns are the peak-to-trough decline that occurs over a specific fund or investment period. Typically, it is quoted as the percentage that lies between the peak and the trough. A drawdown occurs from the beginning of a retrenchment to the moment that a new high is attained- the depth of the trough is an unknown quantity until the new high is attained. You should also evaluate your investment with regards to drawdown in addition to profit. Assess the performance in terms of the length and severity of any drawdown.

If an asset manager produces 60 per cent gains, for example, with a drawdown of 50 per cent and another does 40 per cent with a drawdown of 15 per cent, the latter is likely the better in terms fo risk over reward.

Any budding trader should now start to understand just what an important role research has to play should they wish to enjoy any kind of trading success. Fortunately, there are some reputable trading firms in the marketplace, such as Cantor Index. They are long established and dedicated to helping the customer. They are regulated by the Financial Services Authority and have a range of quality tools to help with your research. Becoming successful in financial spreads necessitates that you have the confidence and experience to make the correct calls- and research is the bedrock of that success.