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Portfolio Design
The more you know,
the better investor you'll be.
| Investing for the long term can reduce risk and increase returns
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| See why it is important to invest early
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| See how even a mini-investment plan can provide substantial long-term returns |
| Tailor your investments to fit your investment style |
| Risk mitigation available through the selection of diverse stock categories |
| Dollar cost averaging - when is the best time to invest?
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| Real Return - Beat inflation by packing enough growth potential into your investments
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| See the effect investment timing and procrastination has on your earnings potential
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Investing is a bit like hiking
Like hiking, the trail you take with investing depends on how much time you have, where you want to get to, and how risk averse you are. If you only have a short period of time, and your target is to reach a good elevation for a view, you'd better take the trail to the top of the hill.
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There are few dips on the way to the summit. Alternatively, if you have plenty of time and you can handle the risk, your greatest elevation is most likely to be experienced by taking the trail up the mountain range. You know there will be dips and crevices on the way, but the climb will be steeper.
The analogy equates money market and bond securities to hills. They have low short-term risk, yet climb at a low average rate over long periods. Stock market based securities equate to the mountain ranges. They have more risk, yet climb at a greater rate over long periods. This mountain range analogy is easily seen when looking at the stock performance graph profiles below.
Here is a misconception: The more you hope to make the greater the risk you take.
This is a misconception because it is ignoring time. Risk is a time relativistic term. And like Einstein's theories on relativity, the magnitude of change or risk is dependent on your "frame of reference." The key point here is that risk is relative to the duration for which the investment is held. The risks of two different investment products can actually reverse themselves if you compare the two products over a short period versus a long-term investment period.
The conventional definition for Investment Risk is:
Investment risk is the probability that the actual return on an investment will be different from what you expect. This is the type of risk one usually thinks of when considering investments. For example, CD's and EE savings bonds are considered safe investments because the probability that the actual return on your investment will be what you expect is 100 percent. They are guaranteed. On the other hand, stocks are considered more risky because you have no guarantee about the actual return.
Of equal importance is a second type of risk associated with investments which is also important to consider. Purchasing power risk is the risk that the value of the money you invest will not keep up with inflation. In general, this risk is greatest with those investment alternatives with a set, guaranteed rate of return. So while CD's have a low investment risk, they have a high purchasing power risk.
The Securities and Exchange Commission's advise on investment risk in its Invest Wisely publication states:
How much risk should you assume? In a new account agreement, you must specify your overall investment objective in terms of risk. Categories of risk may have labels such as "income," "growth," or "aggressive growth." Be careful you understand the distinctions between these terms, and be certain that the risk level you choose accurately reflects your investment goals. Be sure that the investment products recommended to you reflect the category of risk you have selected.
Nobody invests to lose money. However, investments always entail some degree of risk. Be aware that:
1.The higher the expected rate of return, the greater the risk; depending on market developments, you could lose some or all of your initial investment, or a greater amount.
2.Some investments cannot easily be sold or converted to cash. Check to see if there is any penalty or charge if you must sell an investment quickly or before its maturity date.
3.Investments in securities issued by a company with little or no operating history or published information may involve greater risk.
4.Securities investments, including mutual funds, are NOT federally insured against a loss in market value.
5.Securities you own may be subject to tender offers, mergers, reorganizations, or third party actions that can affect the value of your ownership interest. Pay careful attention to public announcements and information sent to you about such transactions. They involve complex investment decisions. Be sure you fully understand the terms of any offer to exchange or sell your shares before you act. In some cases, such as partial or two-tier tender offers, failure to act can have detrimental effects on your investment.
6.The past success of a particular investment is no guarantee of future performance.
The stock portfolio profile we built below shows you how we have been successful in constructing a consistently reliable portfolio that outperforms the stock indexes and towers over well in excess of 90% of the stock based mutual funds.
If you had invested $10,000 in the Dow Jones Industrial Average index 5 years ago, your investment would have appreciated to $22,060 by the end of this past September, 1998, an achievement most mutual funds don't accomplish. If you had invested $10,000 in The Investor DRIPs Portfolio stocks 5 years ago, your investment would have appreciated to $36,817 by the end of this past September, 1998, a $26,817 return compared to the Dow Jones return of $12,060 or just over twice the return on your $10,000 investment. Not only has The Investor DRIPs Portfolio outperformed the Dow Jones Industrial Average, but it has the advantage of allowing you to invest directly into the portfolio stocks without a middleman. Furthermore, you can make your investments at your pace in increments as low as $50 and less.
There are some things that seem too good to be true, yet, are true!
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