Thursday, May 30, 2013

Japan Stocks Rebound After Sell-off, Leading Asia

HONG KONG (MarketWatch) -- Japan stocks gained in early trading Friday to recover some of the steep losses suffered in the previous session, with exporters aided as the U.S. dollar climbed above Yen101 after a slew of monthly economic data.

The Nikkei Stock Average gained 2.2% to 13,888.10 a day after it plunged by 5.2%, while the broader Topix rose 1.4%. The gains were steady after the sharp volatility seen recently amid concerns over an increase in Japanese government bond yields.

The rebound kept the Nikkei Average on course for modest gains in May -- the 10th straight month of advances -- despite steep losses suffered over the past few days.

Elsewhere in Asia, Australia's S&P/ASX 200 gained 0.5%, and South Korea's Kospi rose 0.4%.

The broad advances came as stocks on Wall Street rose overnight on signs of further improvement in the U.S. housing market, while weaker-than-expected data on first-quarter economic growth and jobless claims raised hopes the Federal Reserve may keep its current level of bond purchases.

"Every U.S. data point about the pace of economic growth is being closely examined by market followers after Federal Reserve Chairman Ben Bernanke indicated that the central bank could pare back its stimulus efforts should the U.S. economy continue to improve," said Perpetual head of investment-market research Matthew Sherwood.

"The Fed needs to improve its communication with the market about what its intentions truly are, but the stimulus is only likely to be reduced, not reversed," he said.

In Japan, the rebound followed data showing April core consumer prices rose 0.3% from March, although they were 0.4% lower from the year-ago month. Industrial production during the same month rose 1.7% from a year earlier, but a survey indicated lingering pessimism, with manufacturers tipping flat output for May and a 1.4% drop in June.

Among the notable gainers in Tokyo, Sony Corp. ( SNE ) jumped 3.4% after several reports said the company has tapped Morgan Stanley and Citigroup to help sound out options for its entertainment business. The reports came after billionaire hedge-fund manager Daniel Loeb called on the electronics major to spin off its entertainment business.

Several other exporters also advanced as the U.S. dollar (USDJPY) traded at Yen101.17 after sliding toward the Yen100 level Thursday.
Shares of Fanuc Corp. (FANUY) jumped 4.2%, and Kyocera Corp. ( KYO ) added 2.7%.

Fast Retailing Co. (FRCOY) gained 3.3% after plunging 11% in the previous session.

Financial stocks also rebounded after recent losses, with Sumitomo Mitsui Financial Group Inc. (SMFJY) rising 1.5%, and Mitsubishi UFJ Financial Group Inc. ( MTU ) adding 0.7%.
In Sydney trade, an overnight improvement in gold prices sent producers of the metal rallying, with Evolution Mining Ltd. (CAHPF) leaping 5.1% and Newcrest Mining Ltd. (NCMGY) ahead by 1%.
Other mining majors also advanced, with BHP Billiton Ltd. (BHP) rising 1.5%, Rio Tinto Ltd. (RIO) up 2.9%, and uranium extractor Paladin Energy Ltd. (PDN.T) adding 3.6%.

The modest overnight U.S. gains also appeared to help the large banks, as Commonwealth Bank of Australia (CBAUY) rose 0.7%, and Macquarie Group Ltd. (MCQEF) added 1.8%.
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Wednesday, April 10, 2013

Investment Risk

Investment risk is defined as a deviation from an expected outcome. We can express this in absolute terms or relative to something else like a market benchmark. That deviation can be positive or negative, "no pain, no gain." In order to achieve higher returns in the long run you have to accept more short-term volatility. How much volatility depends on your risk tolerance - an expression of the capacity to assume volatility based on specific financial circumstances and the propensity to do so, taking into account your psychological comfort with uncertainty and the possibility of incurring large short-term losses.

Those who are just starting off saving for retirement also need to think about investment risk. While academics and investment professionals struggle to define and measure risk, most ordinary people have a pretty clear understanding of it – what is the chance that I'm going to lose a substantial portion of my money.

It is recommended that new savers and investors be realistic about risk. While any amount of savings is a good start, small amounts of money are not going to produce livable amounts of income in the future. That means that it makes very little sense to invest in fixed income or other conservative investments right at the beginning. Likewise, you don't want to destroy that initial savings right off the bat, so avoid the riskiest areas of the market - no biotech, no gold, no leveraged funds, and so on. A basic index fund (a fund that matches a popular index like the Dow Jones Industrials or S&P 500) is a good place to start; there's certainly a risk that the price will fall, but odds of a total wipeout are nearly zero and the odds favor a reasonable amount of growth.

Risk is inseparable from return. Every investment involves some degree of risk, which can be very close to zero in the case of a U.S. Treasury security or very high for something such as concentrated exposure to Sri Lankan equities or real estate in Argentina. Risk is quantifiable both in absolute and in relative terms. A solid understanding of risk in its different forms can help investors to better understand the opportunities, trade-offs and costs involved with different investment approaches.