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Guide to Essential Money Tools
Investing Tools
The five tools of investment
Ashburton
We are active managers at Ashburton, which means that we do not spread assets across a broad range of different investments for the sake of it, nor do we create a portfolio that relies entirely on beating benchmarks, since that means when benchmarks on major indices go down, investors will lose money.
Instead, we actively manage investors’ money and to do this successfully we rely on our own tools of investment which we describe as the building blocks of our investment process. There are five tools of investment and they are:
Fundamental Analysis – the process by which we determine the outlook for economic activity and inflation; the two principal drivers of financial markets’ performance.
Valuation Analysis – the process by which we try to determine how expensive an asset is by historical standards. An expensive asset is an asset that has factored in all the good news and its price is likely to fall almost irrespective of what happens in the future.
Sentiment Analysis – the observation that at extremes in opinion (excessive optimism or pessimism) the majority view tends to be wrong. By monitoring the way in which investors are generally positioned, we can gauge how close we may be to a major turning point.
Technical Analysis – the study of price trends and chart patterns in order to determine whether the current trend will continue or is about to change direction.
Intermarket Analysis – the interplay between currencies, commodities, bonds and equities, on the basis that a more comprehensive view of one market can be gained by analysing the behaviour of another.
The techniques we use to actively manage portfolios are at the forefront of the modern investment industry, but it is a disciplined investment approach that we have relied upon at Ashburton for virtually all of our 24 years of operation. They are techniques, which combined with the flair, passion, intellect and passion of our investment team, have ensured consistently impressive results in managing clients’ wealth.