Arriving at the appropriate asset allocation is not very easy to do by guesswork, so we’re here to help. There is no such thing as a mix of assets that is right for everyone. It depends on your age, employment situation, the size of your investment portfolio, your objectives, time horizon, risk tolerance, income requirement from your investment portfolio, tax bracket, and many other factors. Programs and algorithms can help you significantly when you plug some of these variables in, but it is still wise to apply some scrutiny and a human touch. Continue reading...
You can get substantial diversification through mutual funds and ETFs, but it is good to have increasing amounts of diversification the larger a portfolio is. Here are some general guidelines: If your portfolio is less than $50,000, probably 4-5 Mutual Funds will suffice. If your portfolio is from $50,000-$100,000, you might consider adding a few more exotic Mutual Funds or buying a couple of ETFs. Continue reading...
Market risk is the chance that an investment will not maintain its value when it is dependent on the many factors that influence the health of the economy and the stock market. Investors must be aware that investing money in a stock or mutual fund is to tie the fate of that money to the fate of the company or companies that they have invested in. The other side of the coin, of course, is the potential for gains. The potential gains of an investment are the premium that is paid to an investor in exchange for allowing a company or mutual fund to take risks with the investor’s money. Continue reading...
When compared to other methods of investing, there are benefits to using an IRA. An IRA provides tax deferred growth of your assets, and the result of such growth, over the years, can be quite remarkable in comparison with a regular savings account. Using an advanced calculator online – or asking an advisor or a CPA to run some calculations for you – can be an eye-opening experience. For most investors, mutual funds will be their best option for cost-efficient diversification. Holding mutual funds outside of an IRA or 401(k) means that the investor will have some taxes, whether long term gains or short term gains, passed on to him or her from the mutual fund company every year that the fund experiences gains. Continue reading...
The easiest way to start investing is with Tickeron's Portfolio Wizards. There are several ways of using this tool. Firstly, if you know how much money you have, our Wizard can build a diversified portfolio just in a few clicks. Secondly, if you already have a portfolio, our Wizard can verify if your portfolio is well diversified. Finally, if you have a portfolio in a 401(k) plan, we can provide you with the full diversification analysis of your company's plan menu. All you need to do is to follow the prompts, and within seconds, you will get all the answers. Continue reading...
Diversification is intended to reduce the volatility of price movements in individual securities, but many people are not sure what proper diversification looks like. It depends. You should definitely have exposure to at least two asset classes: equities and bonds. Within each asset class, diversification is also important. In your equity portfolio, you should have exposure to stocks with various capitalizations (such as Large Cap, Mid Cap, and Small Cap), various geographical areas (such as the Europe), Developing Markets, and Emerging Markets. Continue reading...
Realistically, you should not plan on getting more than about 10% average per year over the long term for a portfolio of diversified equity exposure and you should really plan on getting less than that to be on the safe side. Everybody wants to have a portfolio that outperforms the market when the markets are rising and does not lose money when the markets are falling. We have a secret for you – it’s not possible. Continue reading...
Diversification is the age-old strategy of owning securities with different risk attributes to mitigate total risk in a portfolio. The opposite of diversification is creating a highly concentrated investment portfolio, where the investor may only own a handful of stocks or just one or two stocks. The potential reward/risk of loss is much higher than a portfolio with securities diversified across a sector, style, and region. Continue reading...
The more time you have to invest, the more room you have to make mistakes, wait-out downturns, and to experience the power of compounding interest. As you get older and need to draw income from investments, things change. The answer is relatively simple: you can afford to be very aggressive when you’re young, and gradually become more and more conservative with your investments as you grow older. Generally speaking, stocks are considered risky investments, while bonds are considered less risky, so a person’s portfolio mix from age 40 to age 80 might go from 80 stocks/ 20 bonds to 50/50 or even 20 stock/ 80 bonds depending on his or her preferences and the market conditions. Continue reading...
Market exposure is the degree to which an investor is participating in the risks and returns of the market as a whole or a particular sector. Exposure can have a positive or negative connotation, but, as they say, “nothing ventured, nothing gained.” Market exposure allows an investor to participate in the potential upside of the market, but can also subject the investor to the inherent risks. Some people save money religiously but are not likely to retire the way they want to because they aren’t willing to let their money be risked in the market. Continue reading...
Active management is when an investor or money manager attempts to outperform an index or benchmark, using tactical strategies. Many economists and financial professionals believe that the markets are efficient. This means that all available financial information has already been built into the prices of securities, and that you cannot outperform the market by making specific selections of stocks, timing the market, reallocating your assets regularly, following the advice of market pundits, or finding the best portfolio managers. Continue reading...
There aren’t many easy-to-find tools on the web or elsewhere to help an investor check how well diversified a portfolio is. Tickeron is setting out to change that. With our proprietary Diversification Score® tool, an investor can input each of their portfolio holdings, and our Artificial Intelligence (A.I.) will provide a score indicating how well diversified the portfolio is. An investor generally wants to make sure that they do not have too many assets allocated to one region, style, or sector, and that they have sufficient exposure across asset classes if that is their goal. Continue reading...
Covariance is a measure of what degree the returns on two assets move in tandem. A positive covariance implies that returns on two assets move together in the same direction, while the opposite is true with negative covariance. In a diversified portfolio, an investor ideally owns securities with negative covariance, so that returns may be smoothed out over time. Continue reading...
Systematic risk is the broad risk of fluctuations and downturns in the market as a whole, which it is said cannot be eliminated through diversification. Systematic risk is also known as market risk, which is the exposure of all investors to the broad movements and downturns of the market as a whole. Theoretically it cannot be controlled for through simple diversification, since that would only bring a portfolio closer to the broad market performance, with a Beta closer to 1. Continue reading...
Asset allocation is theoretically the best way to control the return you experience, through diversification and rebalancing. Asset allocation theories provide you with mechanisms to diversify your money among various asset classes, such as stocks, bonds, real estate, commodities, precious metals, etc. The benefit of asset allocation is twofold: first, nobody knows which asset class will perform better at any given time, and second, various asset classes are not entirely correlated or have a negative correlation, which provides a hedge. If one asset class appreciates significantly, the other might not, but, if the allocation is done correctly, this may be exactly what the investor was looking for. Continue reading...
All of the investments held by an individual or mutual fund or other entity are referred to as that person or entity's portfolio. These investments can range from securities to cash to real assets held for the purpose of preservation, growth, or income; essentially anything that is part of a long-term financial strategy that is held separate from daily operations and cash flow can be considered part of a portfolio. The gains and losses of all the singular investments held are totaled up to find the overall return of the portfolio. Continue reading...
Not diversifying a portfolio sufficiently can mean putting your assets at greater risk of loss. At the same time, less diversification means more risk but also the possibility of a better return. An investor that put all of their assets into Apple Inc. (APPL) five years ago would certainly be much better off than an investor that owned a broadly diversified portfolio over the same time frame. But over time, a less diversified approach can hurt an investor’s chance of achieving the long-term desired result they want for retirement. Continue reading...
Unsystematic risk is idiosyncratic or unique risk that does not reflect a direct correlation with the risk present in the market, or systematic risk. Most securities and portfolios experience risk and variations which are not attributable to the market as a whole, and this is known as unsystematic risk. Systematic risk, on the other hand, is the risk borne by all investors in the market, where broad changes in the market cannot be avoided through diversification of a portfolio. Continue reading...
There are many ways to diversify a portfolio, but all of them center around a strategy of owning different types of asset classes. For equity investors, perhaps the best strategy for diversifying a portfolio is to own companies from different sectors in different style categories, maybe even across the globe. The S&P 500 has ten different sectors, and a very broadly diversified portfolio should have exposure to each one in some capacity. Continue reading...
First things first, accumulate six months’ of cash as emergency savings. Then you can start investing. From there, it makes sense to try and set up a monthly investment plan, where you set aside a certain amount of money each month and stick to that schedule. If there is any extra money in any given month, put that away too. Once you build up a few thousand dollars, you can start buying broad-based ETFs or mutual funds to gain diversification while also getting equity exposure for growth. Continue reading...