Shift from Riskier to Defensive Assets – Investment Decision & Debt

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Guest Writer: Jason Holmes

Investment is a tricky thing. The main idea behind investment is, higher should be the rate of return against the investments made. If you are able to understand this, taking the right investment decision may become easier for you. Just as if you have debts, you may go to a debt counselor for debt advice, before starting off with investments, it is better for you to go to a financial advisor and an investment specialist. He may be able to help you with your investment decision. Other than this, it also becomes important for you to follow the financial markets. As of now, the shift is more from the riskier assets like stocks and commodities to defensive stocks.


Shift from riskier to defensive assets


Practical and rational people will always try their best to increase and preserve the future consumption.  On a general basis, you can say that we have increasingly decreasing marginal returns against our wealth. The future consumption which gets purchased by the billionth dollar cannot have the same value to you just as the thousandth dollar. Wealth is a volatile thing, and depends on the coming state of the economic status of our country and your present asset allocation situation. This is the situation as of now.

As per recent reports, the renewed fear over the Euro zone debt crisis has again worked as a dampener on the economic condition. As a result, the markets saw a move from the riskier assets to the defensive ones. Following the renewed fear of the Eurozone crisis, The Dow Jones Industrial Average is said to have fallen by quite a few points. On the other hand, the Microsoft too is said to have led the blue-chip index lower. But, in comparison to this, the American Express is said to have gained points. The S&P 500 too is seen to have fallen by quite a few points and the tech-heavy Nasdaq too is said to have fallen by considerable points. This fall is supposed to be the lowest since the close in the month of April for both of these indexes. If compared to the previous two indexes, the CBOE Volatility Index (VIX), which is widely considered to be the best gauge of the fear in the stock market, have risen by few points. The reason that has led to the drop in the tech stocks though is not totally clear, it can be said that most of the investors are now following a “risk off” mode; and the tech stocks more specially are considered to be amongst the riskier stocks in the financial market. Even, the bank stocks are said to have dropped sharply in the early trading transactions after the New York Federal Reserve took the action to suspend the MF Global Holdings from going on with the new business just as Treasury bond dealer.

Thus, investors are now trying out the defensive stock investments in the sectors like the utilities, consumer staples, and health care and so on. The trading volume of the stocks, with regards to the defensive stocks and the assets has surged to such high levels that this surge is considered to be the highest of this year. The different fund managers are using the dividend-paying stocks in order to combat some the market swings. Moreover, just as the investors are dumping stocks, the gold futures are seen to be rising above the level of $1,700 per ounce. In addition, the U.S. Treasury too has been able to maintain its tag as the safe harbor for the investors even after the downgrade.


Jason Holmes is a regular writer with Debt Consolidation Care and is also a contributory writer with other financial sites. His expertise is woven around various aspects of the debt industry and with his e-books he tries to impart to people the different situations and simple solutions to get out of difficult situations. Some of his works include e-books like ‘Credit Score The Quintessential Therapy for a Happy Pocket’, Take Creditors and Collection Agencies to Small Claims Court’ and, My Story- From Depression To a Smile’.

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