Predicting Market Moves Of "Shares Investor In Aggregate"

A shares investor in aggregate uses multiple or linked accounts to determine the way in which the market will move. This process, which uses different types of mutual funds within a family of funds, is used to help an investor select a investments that are designed to meet a stated investment goal or yield a desired rate of return.

Asset allocation and diversification seeks to maximize profits for an investor while minimizing the risks associated with investing. Although it is possible to reduce losses in an investment, it is not possible to eliminate the associated risks. Balancing shares between funds and aggregating the accounts allows a way for investors to predict market movements.

The steps needed to aggregate fund shares and predict market movements involves placing funds in the same fund family, linking them and monitoring the performance of the funds over time relative to the market.

Step 1: Making a Fund Investment


The initial step in aggregating fund shares is to make investment selections within a family of funds. Mutual funds or investment company shares offer a wide range of fund choices that cover the entire spectrum of investing, including money market, bond and stock funds. Allocating your investments between these different funds in an appropriate proportion helps you minimize your overall investment risk.

This process of aggregation is known as asset allocation. Since the behavior of bonds is opposite that of stocks and cash, it is easy to determine how the portfolio in the aggregate will behave relative to the market.

Beta is a measure of a portfolio’s volatility relative to the market. A beta of 1 means that the portfolio is as volatile as the market. A beta of 2 means the portfolio is twice as volatile and a beta close to 0 means the portfolio is less as volatile. These measures help you predict the overall movement of the market.

Step 2: Linking Fund Accounts


After the fund selection has been made, link the accounts within the fund family. This will allow you to determine its relative volatility. The fund family can provide you with the beta ranking for your aggregated account (calculating this on your own is a complex process that would be beyond the scope of this article).

Step 3: Monitoring Fund Performance


Monitor the fund’s performance or beta relative to the market and make adjustments in order to maximize your profitability. A portfolio with an aggregate beta that is twice as volatile as the market means that you will need to adjust the proportion of stock funds in relationship to bonds. A beta 2 means that interest rates are rising and stock prices are falling.

Conclusion

Predicting the market is not an exact science as there are other factors to consider. Aggregating the shares in your fund accounts to determine its relative volatility to market is one method that can give you some insight on your investments.

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