| |
| |
|
Stocks & Mutual Funds Information |
|
|
|
Stock Market Diversification
In one of my previous articles (Investing in the stock market -9 powerful tips), tip number one was: 1. Do not spread your money too thin. My friend has a little over $200,000 invested in the stock market through 27 different Mutual funds. In my opinion, 27 Mutual funds is 27 too many collecting load fees, management fees, commission fees, operating and advertising fees. Diversity is important, but just as important is over-diversification. Also, in my opinion, $200,000 should not be put into more than 12 stocks, let alone 27 different Mutual funds. If I may, I would like to explain where I'm coming from by stating that tip. On October 16, 1990 the Royal Swedish Academy of Sciences awarded 3 men each a third of the Nobel Peace Prize for their work in the theory of financial economics - Harry Markowitz, Merton Miller and William Sharpe. Harry Markowitz's work involved the theory of portfolio choice. (This in layman's terms was the introduction of a diversified portfolio to help offset the uncertainty and risk of investing in the stock market. Harry Markowitz has been labeled the 'Father of Diversification'. William Sharpe used Markowitz's model from an individual investment theory to a market analysis theory based on price formation for financial assets. This formulation is called Capital Asset Pricing Model (CAPM). From what I understand about this model is that it places a "beta value" on a share, the higher the beta value, the higher the risk. By knowing the 'beta value' of each stock in a portfolio, the portfolio can be adjusted to either involve more or less risk. Merton Miller's work involved dividends supplied by companies to a shareholder and its effect on stock market value and the effects of taxes. Miller's theorems are used for theoretical and empirical analysis in corporate finance. Markowitz received his award for an essay published in 1952, "Portfolio Selection" and for his book in 1959, Portfolio Selection: Efficient Diversification. Harry Markowitz, in his Nobel lecture given in 1990 says: "an investor who knew the future returns of a security with certainty would invest in only one security, namely the one with the highest future return'. Nowhere could I find that an investor should own 27 different mutual funds. For more excerpts from the book 'The Stockopoly Plan' please visit http://www.thestockopolyplan.com Charles M. O'Melia is an individual investor with almost 40 years of experience and passion for the stock market. The author of the book 'The Stockopoly Plan - Investing for Retirement'; published by American-Book Publishing. To order a copy of the book: http://www.pdbookstore.com/comfiles/pages/CharlesMOMelia.shtml
MORE RESOURCES:
Stocks-Mutual-Funds - Google News |
|
|
|
RELATED ARTICLES
Market Success Who are the successful investors?There are those who follow the advice of their brokers and financial planners or those who choose to use their own good judgment? If you care to compare the results of the past 4 years from 2000 to now I believe you will see who as done the best job.In the old days at the Chicago stock yards they used to have an old sheep who led the lambs to the slaughter when they arrived on the train. Investing in Trash Company Stocks Refuse is a serious issue in any society, about as serious as cleaning the water and air, even more so to some degree, especially if you study your history with regards to the plague. This is why it is considered one of the better long-term hold stocks to have in one's portfolio. How to Make Big Money Safely in Stock Market (1) Stock Market is Tough Place to Make Any Money ConsistentlyNASDAQ or SP&500 averaged about -6% per year for 5 years between 1999 and 2003. Many individual investors who made killing in the internet bubble period got wiped out during those 5 years. Roller Coaster I love roller coasters. The steeper the better. Choosing An Investment Stock Broker If you want one.And I don't recommend any broker with whom to trade who will be giving you advice on what to buy and sell. Political Investing We have two candidates for president that have really different ideas on how to make the economy grow.Bush believes in the entrepreneurial approach. Defining a Long-Term Investment in the Stock Market For some "long term" would mean holding a stock position over the weekend. For others, it may mean holding a security for at least 1 year for the purpose of declaring a long-term capital gain, thus saving on taxes. How to Pay Less and Get More: Discount Broker vs Professional How do you invest? What do you really pay? At the end of the day, what are your real results? These are questions smart investors should be asking themselves (but usually don't). In this era of more fees, misc. Oil Stocks CHK WLL - What Is Their Worth? (1) CHK stock price $16.74, NAV $32. The POWER of a Proven Stock Investment Plan When you invest in the stock market for ever-increasing cash dividend income, verses trying to make a buck in the stock market, your mindset will change. There will no longer be a fear of losing money in the stock market. Planning Your Dive and Diving Your Plan - Trading! A colleague of mine just returned from a scuba diving trip in Cozumel, which just happens to be one of my favorite places to dive. Anyway, she was telling me about an unexpected difficulty she encountered while swimming around the corral reef down about 85 feet. Trading Tips No 5: Stock Trading Curve Drawdown and Commitment All stock trading and investing methods must deal with the inevitable drawdown from the most recent peak in one's stock trading curve to a bottom before reversing and making a new high. Seasoned systems traders are well familiar with the drawdown phenomenon and the importance of drawdown as a percentage of annual average returns in evaluating a trading system. Buy Low - Sell High Now where have I heard that before? I know. It was my broker. Trading Tips No 6: The High Cost of Low Cost Stock Market Information It has been said that low cost or even free stock market information or trading advice can be the most expensive advice you can get. The meaning is clear. Emotional Involvement I'll bet with almost anyone that has stocks or mutual funds in his portfolio that he has losers, but he won't sell them because he "likes them" or some similar excuse. This is the philosophy of a loser. Stock Trading Secrets? How often have you come across an advertisement or e-mail proclaiming to "teach" you the stock trading secrets that Wall Street Insiders don't want you to know? Usually included in the descriptions of these trading products are claims such as "Make 10K monthly in minutes per day", or "Learn the secrets of Professional Stock Brokers", etc. etc. Finding A Good Stock One of the things people are always asking me is how can I find a good stock. The answer I give does not please them. Stock Market System ... ONLINE STOCK TRADING ... Beyond Day Trading Basics & Tips Day trading is all about making buy and sell decisions. When you make a trade either your going to lose money or your going to make money, and some other times you will break even. Getting Even I know there are a lot of you out there who would like to "get even" with the stock market. Many are on the diet of "I hope, I hope". Box Of Chocolates Ever have one of those sample boxes of candy? Each little piece is beautifully wrapped in colorful foil or decorated with an interesting design. Taste just one.
|
| Good Credit Loans | home | site map | School Bus Clothing | Florida Pool Heating |
| © 2006 |