The issue of quality vs. quantity is central in the world of investment, as the challenges facing traders vary from one market to another.
For example, forex traders have the opportunity to optimise profits by executing a high-volume of orders in a relatively short space of time, whereas those who deal primarily in stocks should always create a selective portfolio that features so-called quality stocks.
But what exactly are quality stocks, and can investing in international equities from across the globe help you to bank a greater profit over time?
What are quality stocks?
The notion of quality is arguably one of the vaguest and most subjective factors in the investing world, and there’s certainly no agreed-upon definition for it.
As a general rule, however, asset managers tend to consider a wide range of measures pertaining to profitability when defining quality stocks, including gross margins, stability, return on equity and return on invested capital.
Another key and widely used metric is earnings (or dividend) growth, the latter of which is often used to define so-called ‘blue-chip’ stocks that deliver sustained returns over a concerted period of time.
You’ll also often see a crossover between some of these metrics, with a gross profit to assets ration arguably one of the purest methods of gauging quality stocks. Gross profits refer to the revenues earned by a company minus the direct cost of the goods sold, and dividing this by the total assets employed offers a unique insight into tangible wealth and growth.
Interestingly, this metric is also hard for companies or their senior leadership to manage effectively, so it can be widely trusted by wealth managers and investors alike.
When categorising quality stocks, asset managers also tend to observe the wider performance of the companies behind the equity, prioritising entities that are consistently profitable in real terms and capable of showcasing long-term growth.
They’ll also have solid balance sheet, supported by high-value and tangible assets and relatively free from debt.
How to use to international stocks to boost your profits
Of course, the world is choc-full and blue-chip brands and high-growth stocks, which is why investors should always favour a portfolio that’s global in nature.
However, accessing in such equities can be extremely challenging, at least without accessing managed funds that have been carefully conceived and are capable of achieving capital and income growth in the longer-term.
The VT Global Investment fund managed by Downing’s Anthony Eaton offers a relevant case in point, as this adopts a transparent and straightforward approach that’s largely trend based and features up to 150 positions in countries across the globe.
This provides you with access to a broad range of quality stock options, while the fund’s top-down conviction generally leads to larger levels of capitalisation while avoid any unnecessary market exposure.
This fund is also relatively accessible for most aspiring investors, with minimum lump sum investments of between £100 and £1,000 depending on your precise portfolio and selected assets.
Perhaps the biggest advantage of this type of fund is that it does the heavy lifting by identifying quality international stocks on your behalf, leveraging the expertise of knowledgeable wealth managers to optimise your profitability over time.