Having some capital invested in something solid is a great place to be in. The truth is, even if it is only a little, it is better than nothing. All investment, ultimately, is worthwhile – so long as you know what you are doing. One of the main aspects to proper investment is knowing when to buy and sell. For that, you need to keep a keen eye on the markets and the financial world as a whole. This much is clear to anyone who has anything invested. What is less clear to some, however, is what that awareness actually looks like. If you have a significant proportion of your capital invested, then it is in your interest to pay attention. But what are the things you should really be watching closely? To answer that question, we have put together a few of the top considerations you should be making. Here is what to watch when you have a lot invested.
The Put-Call Ratio
To begin with, let’s look at the importance of the put-call ratio, and why you should pay attention to it. First of all, let’s look at what it actually is – in case you are not already aware. In short, the put-call ratio is a tool used to help investors get an idea of the mood of a market. What does this entail, exactly? Well, it is calculated by dividing the number of traded put options by the number of traded call options. As a result, what you see is an overall picture of the sentiment of the market. This is useful to investors in a number of ways. Most significantly, it allows you to anticipate whether the market is expected to lower or rise. The benefit of the put-call ratio is that it gives you a heads-up, often with enough time to make the necessary alterations. Any serious investor needs to pay careful attention to this one.
Stock Averages
On a more simple level, anybody who is invested in anything benefits hugely from knowing what the market is doing. Even if you are not taking steps to predict, as with the put-call ratio, you can still watch the stock markets. The main factor here is the averages. Figures like the dow jones industrial average and the S&P 500 can be extremely useful for this. The dow jones, in particular, can be of great benefit to investors. This figure is taken from the average value of 30 large household-name companies. As such, it is a relatively reliable figure for investors to depend upon.
Yield Curve
This final one is a little more complex, but determined investors will find it useful. As a tool, it can tell you a great deal that you need to know as an investor. The dynamic yield curve ratio shows the relationship between interest rates and stocks over an extended period of time. It should be clear already how this might be of interest to an investor. By watching the yield curve, you can readily anticipate changes in stock levels based on interest rate alterations. A little forward thinking is then all it takes to turn this in your favour.