Business stock exchange: the technique, the human
It is the ability to bear the potential losses that could emerge following the investment made that highlights the risk appetite of the potential investor. Of those who look at Piazza Affari, not for the sculpture that characterizes it, but as a symbolic place of the Italian Stock Exchange. Where, over the air, now, but with the direct human presence in the "shouts", in the past, the prices of shares and government and corporate bond issues find the point of contact between sellers and buyers. In any case, a good knowledge of the "mechanisms" that regulate stock market trading is fundamental, naturally over the air, as almost all trades are carried out using the most advanced systems of modern techniques.
Even before this purely technical aspect, it is fundamental to know the reasons that lead a significant number of companies to be valued by investors in a public form, through the prices of their shares. But not only that, also the market value of the classic BOTs, BTPs, CCTs, in practice Italian government bonds. Alongside which it is possible to note the prices of the bonds of "competing" government issuers, especially in the euro area. In part also bond issues issued both by countries that have not joined the single European currency, and by those across the Atlantic, but also by South America or Oceania. The fundamental reason that supports this organizational machine is the possibility of knowing the value of one's investments without interruption, thanks to the legislation that governs exchanges on the stock exchange, the objective of which is to make market values public, in an almost universal.
Investing: the technique is simple, but it's tomorrow that counts
In the past, buy or sell orders were transmitted over the telephone and in the various Eurozone stock exchanges there was a "cry" to buy or sell a type of share or bond. But we are talking about the "Middle Ages", of times now forgotten. Now from home, for example, or during the interval of a film or an opera, you just need to connect to your bank to enter the purchase or sale order.
Purchase of a stock, for example, about which news has been read that is not only reassuring, but even a harbinger of possible increases in market value, thanks to an economic perspective which, in the not too distant future, could be combined with an increase in the aforementioned value of exchange. Then, the wait for confirmation of the purchase. And, from that moment, also in the mind the anxiety that arises from the fear of having been too optimistic. Or maybe not, who knows? Is it better to rely on a specialist, a bank? Is it better to choose personalized management? Is it better to risk directly, on the basis of news received, read and analysed?
Or investing in a government bond issue, or even a corporate one, if you have medium-high level assets. Why is it necessary to have high-value assets? But also of other qualities, if you opt to invest in corporate bonds with maturities defined as perpetual, because repayment is at the discretion of the issuer. Or even for issues defined as "subordinated", which expose them to the risk of becoming shares, in the event of difficulties of the issuer to which they refer.
And, in light of the possible qualities that allow you to invest in these instruments, are you really sure you want to take on a risk deemed significant enough? To return to the minimum value that can be subscribed to at issue, it is now equal to 250 thousand euros, but for slightly older bonds 100 thousand are enough. In fact, recent corporate bonds (already over ten/fifteen years old) are placed with a minimum purchase threshold, which initially was 50 thousand, then 100 thousand and now 250 thousand euros. In Italy, in particular, debtors who place bonds with minimum denominations are very rare: three/four issues per year. An ever-increasing number of subordinated bonds, however, which, in addition to the aforementioned minimum subscription capital requirement, also refer to the minimum assets held by the subscriber, generally of 500 thousand euros, to knowledge of the markets and to carrying out an annual medium-high number of operations in the financial markets.
Here too, what is in charge is the risk propensity, which should be on medium-high values, because the amount at stake is significant.
In both cases, once the investments made have been included in the portfolio, the countdown begins. Or, better yet, does one focus on the strategy to rely on: instruments to keep in the portfolio for a medium-long period of time, or implement a "hit and run" trading strategy? The latter is a fairly widespread activity which consists of the purchase and sale, even in very short periods of time, of shares, bonds, but also options or, for those with a high propensity for risk and excellent knowledge of the markets , futures, "derivative" instruments aimed above all at specialists. A few minutes, hours or days can pass between the time of purchase and sale of the aforementioned instruments. But it's not for everyone. Indeed for a relatively limited audience of investors.
Risk appetite “decides” which sector to favor
As often happens, to conclude we go back to the beginning. The investor's ability to withstand the possible negative variations that the future exchange values of the instruments placed in the portfolio could highlight. The central point, in this phase, is represented, on the one hand, by the findings of the cost of the route, and the consequent variations from month to month. On the other hand, by the strategy that the Central Banks are implementing, in order to bring the increase in the cost of living back to 2%. Cornerstone, for years, of their monetary policy. Those who love investing in equity and/or bond instruments, government bonds first and foremost, will carefully and apprehensively follow the evolution of the inflation rate. Dormant in years gone by. Inflated, beyond the turn of phrase, in the last two years. The "trader", who operates in a very short time, as mentioned above, probably fundamentally trusts his own instincts, even if, naturally, he cannot fail to have an important approach also with communications that refer, on the one hand, to companies listed on the stock exchange and, on the other, by the dynamics of the inflation rate itself.
From a medium-term investment perspective, two types of attitude and, consequently, operations could correspond. Medium and long investment duration, in this phase, especially for the bond sector. The current market yields of both Italian government bonds and those of other issuers show fairly high values, even though in the past we lived with decidedly higher numbers. Which was followed by years with values of the aforementioned yields gradually decreasing. Finally, the not so distant negative returns from issuers of bond securities.
While remembering that there is no certainty, investments in bond issues maturing in five years or more, purchased at this stage, should return a decent capital gain in the coming months, despite the strong rise already recorded, thanks to the fact that the market returns will settle at gradually decreasing values. An example for everyone: if the yield of the ten-year BTP decreases by one percentage point, its exchange value increases by approximately seven and a half points.
Diversification, ideal portfolio, percentages
Even financial markets, like most human activities, do not escape fashion, even though they may immediately expose themselves to the risk that their average life is very, very short. The most recent refers to the division of investments between the stock and bond sectors. Certainly a remote hypothesis, even if never made official, especially in the field of asset management, where the customer's propensity to risk gives rise to the division between the two aforementioned sectors. Can you imagine the investor with little appetite for risk opting for a portfolio with a predominantly equity composition, i.e. 60% of the assets, against the remaining 40% destined for the bond segment?
Here are the two fashion references, 60 and 40 to give life to the hypothetical ideal wallet. Assuming that the latter takes on a static form and that changes in the value of the instruments present within the segments take place, but without changing the percentage weights mentioned.
Certainly for asset management that refers to a medium-high number of clients, and which for this reason "impose" strategic choices that unite them, it is understandable that the strategy ends up dividing the presence of equity and bond instruments that are worth "erga omnes ”. Subdivision which naturally refers to managed savings relationships. In this case, the aforementioned values make sense, even if, in any case, the risk propensity is different from investor to investor and that combining them is certainly convenient for those who manage, but it is not said, nor demonstrated, that it is equally convenient for the savers.
Even today, despite a prospective situation that the financial markets assume is free from increases in the reference rates of the Central Banks, but without a precise date on which the first reductions will take place, the largest share of investments (60%, for portfolios with medium risk appetite) would be invested in the bond sector, less exposed, in this phase, to the continuous changes in mood of the markets themselves.
The same percentage would instead be allocated to the equity sector for asset management aimed at those with a greater propensity for risk. Even if not now, given that the numbers at stake should be 50% each, because the dynamics of interest rates should gradually confirm their reduction. Rewarding the prices of fixed coupon issues, BTPs first and foremost, and of companies in the stock sector, with attention focused on the technology sector. Artificial intelligence is inexorably knocking on humanity's door!
Hypothesizing a large migration of investors from the bond sector to the equity sector is not far-fetched in the future. But impossible. Simply, the majority of investors in our country were "born" with the first BOT issues. To then choose BTPs, but with not very long duration, when it is from the price variations of the ten-year duration that you gain (or lose). Not always, in any case.
Among those who opt for equities, the outlook appears favorable, because the "tile" of official rates should gradually disappear. Imagining migrations between the two types of risk is almost impossible in our country. Even if it would be appropriate. Let's forget 40 and 60. Let's remain, for now, not really anchored but almost, to the choices that don't make us ask: “Did I do the right thing? Was I wrong to buy those shares?”. For a substantial part of investors, beyond the numbers, beyond the possible and continuous variations in the composition of the managed portfolios, there is only one certainty: uncertainty!
“Let's drink from the happy glasses that beauty flowers…”
I certainly couldn't help but refer to Moody's decision regarding our country's public debt. Which the European Union often looks at with concern, due to its excessive level. Two data points to clear up doubts about confidence in Italian public debt. January 2022: the Italian Treasury offers BTPs for sale in March 2037, without indicating the nominal value that will be assigned: total demand equal to 55,897 billion euros, of which only 7 billion assigned. April 2023: the offer is for BTPs October 2031, total demand of 52,885 billion euros, against a final placement of 10 billion euros.
About the worried gaze of the EU. Many external observers often forget that Italy still has considerable resources, including social ones. Come here to visit us and see the real conditions of the country.
In any case, to return to the title of this paragraph: I'm not a Verdian. Bellinian, yes.
Holding of financial assets by Italian families (2022 data)
Source: REF calculations Research on Consob data, 2022 survey on the investment choices of Italian families
Distribution of investors by number of types of assets held
The Consob survey of families who hold financial assets shows that Italian savers have a high degree of risk aversion, but do not diversify their portfolio much.
The survey reveals that the most widespread instruments are certificates of deposit and postal savings bonds, held by approximately 50 percent of investors. This is followed by mutual funds and government bonds.
Families do not diversify much: 43% hold only one type of business, while another 38% of families hold a maximum of two; only 8% of investors hold more than three types of financial assets.
