Next Investors logo grey

Investors should watch where the money is flowing, not where it has been

Published 13-NOV-2020 11:33 A.M.

|

2 minute read

Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.

In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.

The below articles were written under our previous business model. We have kept these articles online here for your reference.

Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.


Click Here to View Latest Articles

The secret to investing successfully is to know where the money is flowing.

Although, for retail investors this can be a little challenging depending on what you want to invest in.

But if you decide to invest in the stock market it is very easy to track the money flow, as the data is always transparent and easy to find on the ASX website among others.

The best way to identify where the money is flowing is to look at each sector and how they are performing.

For example, since 1 January 2020, the Technology sector has been the top performer up around 40 per cent, while Energy has been the worst performer down nearly 40 per cent.

By following each sector, you can narrow down the potential opportunities in the market, so you only invest in those sectors that are performing.

Alternatively, you can take the contrarian view and find opportunities in sectors that are underperforming and likely to turn around, such as Energy.

It is also important to understand that sectors, such as Financials and Materials, account for over 45 per cent of the total All Ordinaries index and movements in these sectors will have a significant impact on the performance of the market.

Energy and Information Technology, on the other hand, only make up around 7 per cent of the market, and, therefore, have a much lesser impact on the market.

For example, in reviewing the performance of the All Ordinaries Index this year, the Financial sector is down over 14 per cent, while the Material sector is up 2 percent and, as a result, the All Ordinaries Index is down around 4 per cent.

However, this represents opportunity, because if the Financial and Material sectors are falling or going sideways, other sectors in the market are potentially moving up, as we have seen with Technology stocks this year.

That said, as I previously mentioned, it is more important to focus your attention on where the money is flowing rather than where it has been.

Right now, I believe Technology has had its run and will slow in 2021, and, as such, opportunities in this sector will be limited.

Whereas the sectors likely to see the money flow in 2021 are Energy, Materials and Financials, which is why I recommend investors look at these sectors, as they may present some very good opportunities in the coming year.

Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online at www.wealthwithin.com.au



General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

Publication Notice and Disclaimer

The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.