There are some ways to build on an automatic steered portfolio when you are not a financial expert:
-you can trust your banker/broker's advices about hot-products
-you can invest, automatically, monthly in some financial tool without caring about the 'stock market weather forecasts'.
When you trust your banker: you are gonna paying him fees for that 'service'. This is bad, because we hate to pay in order to earn...
What is even worse: your advisor is often payed on commission basis and if his boss has told him to sell some products during a morning meeting, and you're going there that morning, you can be almost certain that products will become: 'This is the key investment, YOU must have in your portfolio'.
So, please, invest some hours of your time to study basics of investments and you will achieve a better Return On Investment than you would achieve listening to your 'best-friend-advisor'.
Basic rules of thumbs to achieve superior ROI:
- Postpone the taxes as much as you can. When you exit from an investment, you will pay the capital-gain taxes... that is bad because for your next investment you will have less money to invest. So, the key is: identify your investment tool, define a strategy, and forgot about partial disinvestments. Let them grow! (money, of course).
- Hedge the risk: if you put all your money in one Stock 
which has been suggested you by some incredible financial guru you are taking big risk. You can be one of the lucky guys who put all their bucks into a triple A perfect money-making company called Lehman Brothers.....
which has been suggested you by some incredible financial guru you are taking big risk. You can be one of the lucky guys who put all their bucks into a triple A perfect money-making company called Lehman Brothers.....Please, avoid that. OK????
The person who is using stocks for his own investments should AVOID to put all his money in few stocks.
Because even Titanic has found one iceberg once. No way: you simply cannot take this risk.
You are a Civil Engineer, a Cop, an English teacher...you do not know what is behind the Financial reports of Enron, Parmalat, Northen Rock and all the other magnificents companies suggested to you by some great 'advisor'.
Spread the risk. Spread the risk. Spread the risk.
How you can spread the risks?
1- you can listen to your advisor and buy some Mutual funds
2- you can build your portfolio with 10-20 companies
1- you can listen to your advisor and buy some Mutual funds
2- you can build your portfolio with 10-20 companies
3- you invest in ETFs
Mutual funds are good for paying fees to the portfolios managers. They are highly regulated and linked to auditors who will check everything... but normally they will not beat the market. I try to avoid them. Just sometimes some bond funds, because as private investor is not easy to go on that market.
Build your portfolio, we have discussed about that earlier in this blog. This can be a good solution, but you have to invest a lot of your time reading hundreds of financial reports of companies in order to succeed following this path. If you are good, you can turn out in the next Warren Buffett... For what concerns Automatic-generated portfolios using stock screening techniques: Could they work? Maybe not, Maybe yes. I am not sure about that, but I am currently testing some of these techniques - but only with simulations accounts!!
ETFs are the common investor's best friends because:
- they hedge the risks as a mutual funds
- they always performs as the benchmark (you do not have to care about the skills of the portfolio manager)
- they have extremely low fees (that's good!!)
- you do not need to buy and sell in order to balance your portfolio (you delay tax payments!)
- you can choose which economy you trust in, you want to invest in: China, US, Europe..or even the Whole world.
- you can profite of leveredge ETFs which will double the performance of the index. You have a good Hedge Funds with half of a Mutual funds'fee... is that paradise?
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To be continued for more details and ETF techniques.
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3 comments:
Excellent stuff with wonderful information! I'm new here and loving the post! Thanks for sharing this great info!
bank
ETFs or the Exchange-traded funds are open-ended investment companies that are also termed as the Unit Investment Trusts . ETFs generally include different asset classes like the stocks and bonds.The biggest advantage that the intuitional investors get from the ETFs and buying Creation Units is the arbitrage rate. They can exchange the stocks with the ETFs and in that way they can approximate the net asset value of the underlying assets.
Legal advance funding
Exchange traded funds are most likely the greatest investment thats come out since stock trading went on computers.
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