Educational articles

When is dollar cost averaging a bad idea?

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Dollar-cost averaging is an investment strategy where you invest a fixed amount of money at regular intervals, like monthly or quarterly, to reduce risk and avoid trying to time the market. It is often marketed as a universally safe, smart investing strategy—but it isn’t always the best move. In fact, there are clear scenarios where dollar cost averaging can reduce returns, introduce unnecessary costs, or create a false sense of security. 1.When the market is rising steadily (which it historically …

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Why are higher interest rates bad news for small caps?

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Why are higher interest rates bad news for small caps? Higher interest rates are typically bad news for small-cap stocks. They weaken the growth prospects and investor demand that small companies rely on. This is how it works: Borrowing Costs Rise — And Small Caps Depend More on Debt Small companies often rely heavily on short-term loans or revolving credit to fund: working capital expansion inventory payroll equipment purchases When interest rates rise, the cost of servicing this debt increases …

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5 reasons why share trading is different to gambling

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Both share trading and gambling involve risk, uncertainty, and the possibility of financial loss or gain. However, they are fundamentally different in purpose, process, and probability. Below are five reasons why. 1.Purpose and Underlying Value Share trading: When you buy shares, you are purchasing a small ownership stake in a real company that produces goods or services. Your investment’s value is linked to the company’s performance, earnings, and long-term prospects. → There’s underlying economic value behind the trade. Gambling: Gambling …

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6 sectors which pay a good dividend

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When investors look for dividend-paying stocks, they typically want sectors that combine steady cash flows, predictable earnings, and mature, well-established businesses. These companies often generate more profit than they can reinvest efficiently, so they return the surplus to shareholders as dividends. Below are the major stock sectors that traditionally offer good dividend yields, the reasons why they do so and the risks they face. 1.Utilities Sector Overview The utilities sector includes companies that provide essential public services such as electricity, …

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How does a lower USD dollar affect Australian stocks?

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Some stocks on the ASX have exposure to the US dollar which means that if the US dollar falls, these stocks can be affected in either a positive or negative way. Here is an explanation of how a lower U.S. dollar (USD) affects Australian stocks (ASX), covering the economic, financial, and sectoral perspectives. 1.The USD and AUD Relationship The U.S. dollar is the world’s dominant reserve and trade currency, while the Australian dollar (AUD) is considered a “commodity currency,” meaning …

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