Posts Tagged ‘Stock Market Investing’

Whatever Happened to Diversification?

Posted March 4, 2009 by Bernz

Every investor has heard the advice to diversify their portfolio holdings in order to reduce risk and increase income. It is the gospel of every television financial guru and appears in every brokerage newsletter.

diversification

But how many people actually know what it means and practice it on a regular basis? Diversification is nothing more than a variation of the old “don’t put your eggs in one basket” mantra that has served people well from the Great Depression until today. Spreading out your investments amongst different industries, securities types and company size protects you from an economic downturn in any one segment of the market.

While diversification makes logical sense, many small investors choose to ignore the safe route and try to make fast money in the markets. It’s easy to see why people choose this path. Every late night “you too can make a million next year with tax notes” charlatan encourages you to forget about boring bonds and blue chip stocks and get on the train to riches. After all, Joe from New Jersey made $120,000 last month by spending five minutes a day picking stocks. (more…)


Posted in Financial Education, Investing Strategies, Stock Market Investing | No Comments »

Index Funds: What They Are And How They Perform

Posted February 15, 2009 by Bernz

Index funds are a type of mutual fund that combines a number of different stocks into a single stock market investment vehicle.  Instead of buying the individual stocks, you can buy shares of the fund.  That way you own a portion of many stocks instead of owning many shares of just one stock.

This type of ownership appeals to many investors who prefer to spread their risk over a number of stocks, but may not have the investment money that it  takes to buy a lot of stocks across a wide section of the market.

Of course, some people are critical of mutual funds since they typically yield less than individual stock portfolios.  This is largely due to the fees charged by most mutual funds.

Mutual Fund profits are decreased by the management fees.  Since the stocks in the funds are personally selected by the managers, the managers are well paid for their research and expertise.  But you can minimize those management fees by investing in index funds.

(more…)

Posted in Financial Education, Investing Strategies, Mutual Funds, Stock Market Investing | No Comments »


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