ABSTRACT
It is necessary for investors to consider their overall portfolio and analyze which investment option is lagging in which area. Thus, we took all the investment what we were involved in over a given period of time. The three markets taken were stock exchange options, Forex currency trading and bullion trading. Under stock exchange trading options, we considered the investments made in three separate quarters, for Forex trading, we took the two currencies: Euro and Yen and for the bullion trading we invested in gold and silver as precious metals. Later, we found the profit status from all the investments, along with recommendation to improve the same.
INTRODUCTION:
There are certain concepts that need to be well understood before carrying the exercise and analysis in the paper. The three most important topics covered in the analysis are stock options, investment in currencies and investment in bullion market.
The definition of option can be a contract which provides the right of buying or selling an asset of underlying nature to a buyer, which is not his obligation and which he needs to complete for a specific price and on a specific date (or prior to that). An option is as good as bond or stock and is taken as a security. The contract of option is binding in nature and has clearly defined properties and terms. The idea of option can be realized even on day to day basis. Suppose there is a house that a buyer wants to buy but he does not have enough money to buy the house right now. So, the idea of option is same as holding the house to talk to the owner and keep it in hold for buying it after three months at the original price. But for the option to exist additional cash needs to be paid.
Another concept on the list is forex or currency trading. This is the trading where profit generation is speculated based on the comparison of currency values. These currencies are a part of trading as there is fluctuation in their values and as the exchange rate changes; there is scope for profit or loss generation in the trading. The conduction of currency trading is generally done via margin trading, which means that some collateral deposit is traded, which is worth some percentage of the total value of trade.
The bullion market, our third concept, is a forum where pure silver and gold are traded by sellers and buyers. This market is open for almost 24 hours and has the primary feature of being over-the counter in nature. London is the base for most of the trading. The turnover rate for this trading business is quite high and most conduction of transactions is telephonic or electronic. The derivation of gold and silver values is from the uses that they have on industrial or commercial scale and these can assist by being the anti-inflation hedge.
This market is one of the many options for investors to invest in silver and gold. The other underlying options are futures, mutual funds and options, and exchange-traded funds. As compared to the bullion market, there have higher flexibility. However, for gold and silver investment bullion is preferred much because of high flexibility. However, there are storing and insuring costs involved which are high for bullion market.
Stock market options (30%)
In the first period which was from 1st of March to 1st of April
The company that we buy from the in this period are Islamic holding, QNB, Ahli bank and Medicare. (25%) in each from QR 300,000
The profit from this period reach QR 33,974.19
In the second period it was from 3rd of April to 9th of May. The companies were AlMeera, Dalala and Widam. (33.33%) in each from QR 300,000
The profit from this period reaches QR 27,855.094.
In the third period and it was from 9th to 18th of May. The companies were Islamic holding, Medicare, Qatar fuel and gulf international. (25%) in each from QR 300,000
The profit from this period reaches QR 28,434.84
The total profit from buying and selling the Qatar stock exchange in these three period were QR 90,264.13.
Investing in the currencies market:
We chose to invest 400,000 QR three currencies (yen, euro, and won), with a leverage level of (zero). The weighted averages for the three currencies respectively (25%, 50%, and 25%).
The results are as follow:
Therefore, we gained a total of 2,729.89 QR on our 40,000 QR investment because we did not borrow money since the amount of 4.5% interest rate is going to be more when we borrow more.
Bullion Market
GOLD
On March 1, 2016 we purchased 20.08 ounces of gold for a total of QR 90,000 each ounce for QR4481.33, the prices after that went up and down, we waited till the end of the month to sell our 20.08 ounces hoping that the prices would go up. We kept a close eye on the market searching for the best opportunity to sell the gold. On march 15, the prices went up and an ounce of gold was worth QR4496.08. On March, 29 we decided to sell the gold with a gain as prices were higher than the prices at the beginning of the month. We sold each ounce of gold for QR4517.74 making a gain of QR36.41 per ounce, total gain of QR731.11 on our original investment.
Investment in gold, period: one month, March 1 till March 29.
After our first investment in gold we reinvested the whole amount of QR90,731.11 on April, 1. The one ounce of gold was priced at QR4444.93 so we bought 20.4 ounces of gold. The prices of gold kept going up during April and we hoped that it will continue to move up and not to go down. On May 17 we decided to sell the 20.4 ounces of gold at price of QR4655.3 making a profit of QR4237.01 and a total of QR94968.12.
SILVER
On March 1, we invested 70% of our QR300,000 principle in silver for a total of QR210,000. We were able to purchase 3896.11 ounces of silver for a price of QR53.9. During March the prices of silver went up and down but it didn’t go below the purchase price. We decided to keep the amount and wait for the right price because we noticed that silver’s prices increase more rapidly than gold. On May, 17 we sold the silver to make a total profit of QR34325.05, each ounce was worth QR62.71 and the total selling amount was QR244325.05.
After we invested in precious metals, we found that invested in silver is more lucrative than invested in gold in that period of time. In addition, when we decided to take more risk by invested our money for longer period we get more return and this according to the basic rule in investment which is {take more risk to get more return}.
Profit Summary:
The profits that we have gained from the three different investment decisions are varied in nature. Collectively, they make up the investment portfolio of the investor whereby they can decide which investment option is giving them the highest return. The overall profit analysis can be presented in a table which shows what our investments were and for a given period what the profits were in buying and selling of these securities.
The stock option investment seems to be stable and the return for each period is almost the same. Much consideration is needed is the other two investments of bullion and currency.
The profit for the whole period and the total investments can be increased or at least maintained if the following considerations are put in place:
For the Bullion Trading:
Gold are taken as the controversial assets. While it is important to note that they have high religious and other values attached to them, there are people who take it as speculative nightmare. This should be especially borne while dealing in gold trading. Over or under speculation will not bring desired results.
The investment in precious metals is tricky as they respond only positively in specific conditions of markets. It is easy to speculate that the rise of precious metals will be when there is fall in the stock market, however that is not the way in which speculation is to be done. The relation of the bullion market is more to the movements in value of dollars than anything else. There is gaining when the dollar in the market goes weak and falling when the dollar gets strong. Given that we will be unaware of the time when these transitions will be made, gaining from bullion is a luck game and thus holding a certain amount of precious metal at all times is suggested.
For Forex Trading,
It is statistically proven that the forex traders’ initial success is quite low. Given time, there is improvement in the trend but many traders do not stick around to the market to see the benefits of long term. With a few losses, most of the new traders leave the market, but not necessarily there needs to be a loss on Forex.
A demo forex account helps the investors see how the market will react to economic disturbances such as events and news, without actual risks to investment capital. However, this account needs to be taken seriously if learning is expected. The cause for a loss in forex should be taken seriously so that next time the same mistakes are not repeated. There are many training tools for forex as these using which we could commit money wisely in real trading accounts for forex.
Another important key to managing as a pro forex trader is to stick to the game for the initial few months whether there is profit or loss. But, it is also necessary to understand the reason for the same. For instance, in our case, we have profit. Now we should be able to trace the reasons and factors that led to the initial profit. It means that there should be understanding as to which positions the investor should close and take profits. In cases, where there is loss, it is necessary to understand the level at which the investor is prepared to set limits to the losses which is also known as limit order.
The Forex market is too volatile to be prepared at all times for all circumstances. Thus, if the investor is unsure of the level of handling on forex, it is better not to trade for the time being. The alternative plan of bot doing anything should be well considered in this trading (Rose, 2015).
One of the useful concepts could be take-profit orders which allow the establishment of rate at which closing of open positions can be done to lock profits. Here, it is on the investor’s part to realize the profit taking rates and the trading system will do the rest. Trade leverage should also be carefully considered.
Too many open trades should not be handled at a single time because if the market goes down all for once, all the investments are gone and it may eventually even lead to situation of bankruptcy.
There should be an innate ability to understand the losing trends and how they can be minimized. Holding and hoping might not be a good idea after all and the investor needs to walk away with small losses rather than letting it magnify.
Conclusion:
Thus, it is necessary for investors to consider their overall portfolio and analyze which investment option is lagging in which area. Investment is a risky field and yet tacky in the sense that if analysis is done correctly, it can create good return to the investor. In our case, the returns are satisfactory but additional efforts should be put in to optimize investment variety.
