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Casual Articles - How to Control Excess Volatility in Your Portfolio
With direct mail, you can break even and still claim success. The reason for this can be understood only when determining the lifetime value of each customer brought in and the likelihood of those customers responding to subsequent offers. Here is a concrete example to illustrate my point.Joe’s Civil War ShopJoe owns a Civil War souvenir shop. Yes, believe it or not there is a rather large market of Civil War nuts who collect anything from old bullets, to swords, to manuscripts written by confederate generals. Joe’s sales have been slowing since he is located in Virginia, the capital of Civil War memorabilia because this market has saturated itself from having close local stores to buy collections from.So, Joe decides he wants to sell nationwide through direct mail. He goes out and gets the best Civil War nut list he can find (no offence Civil War lovers...), hires the best copywriter he can afford and sets out on a little campaign of his own…a direct mail campaign.His sales letter sizzles. Orders come in at a respectable rate, but after he tallies the results he discovers the cost of the mailing just about breaks even with the orders that came in.My question to you is this:S
• However, young people just entering the work force may have good reasons to avoid taking much risk in the early years. Just like someone approaching retirement, young workers likely h
It is said that content is king, but today 'fresh, relevant content' is the master - or is it?Every owner of a commercial web site knows that frequent fresh content is needed on their pages in order to achieve and maintain a high listing on search engines which actively seek fresh content. Google sends out its 'freshbot' spider to gather and index new material from all the sites which offer it. MSN Search seeks it too. I've noticed that MSN Search's spider pays a daily visit to a site of mine which has proper fresh content every day.By incorporating fresh content, commercial web sites will remain competitive, for without it they will certainly fall down the search engine listings and lose business. Besides, having something new keeps visitors coming back and attracts potential customers.But creating and then manually uploading fresh content onto our web sites each day is hard, time consuming work, isn't it? What we want is a way of putting daily fresh content onto our web sites easily and efficiently. Let's look at the current techniques available to us to achieve this goal and see which one offers a global solution to the fresh content problem:1) Server Side Includes (
This kind of portfolio diversification is called “asset allocation” because it involves allocating different percentages of your portfolio into different types of asset classes.
• Bonds, cash and real estate are all different types of asset classes that may be expected to offer some protection during a serious bear market.
This is the traditional approach to designing a portfolio mix that will help to control excess volatility; and it involves setting unchanging, fixed allocations in the different asset types (such as 60% in stocks, 30% in bonds and 10% in cash).
• Then there is a newer, more active style of portfolio management that involves adjusting the allocations for the different asset types as market conditions change. The active style is generally referred to as “dynamic asset allocation” or “tactical asset allocation”.
Traditional Asset Allocation -- Balancing Risk and Reward
How do you design a portfolio mix in the traditional way that will maximize returns yet not expose you to more risk than you can handle? That’s the $64,000 question.
Stocks are the “growth engine.” So you want as much stock market exposure as you can handle in the form of mutual funds, index funds and diversified groupings of individual stocks. But you have to balance stocks’ higher growth potential against the risk of a “destructive storm” because the stock market has historically taken dives of as much as 40%, 50% and even 90% during bear markets.
• Since traditional asset allocation techniques are based upon a “buy and hold” approach, the trick is to decide what percentage of your portfolio should be in stocks so you get some of that growth engine working for you, but not so much that you can’t weather a destructive storm if it were to hit.
The right portfolio mix for you will be a reflection of very individual circumstances. The right mix should be consistent with your “risk tolerance”. If you could not weather a short-term portfolio loss of more than 25%, then you may not want stocks to represent any more than about 50% of your portfolio (if you assume that the next destructive storm wouldn’t be worse than a 40% to 50% drop in the market). In that event, a 50% loss in your stock market holdings would translate into a 25% hit to your overall portfolio (assuming the other half is invested in cash or money market funds).
You Can Take More Risk When You are Young
The conventional wisdom is that the younger you are, the more stock market risk you can take. The simple thinking behind this is that a younger person has many more years in which to recover from a “destructive storm” and reap the ultimate benefit of holding stocks in the long term. Clearly, a worker close to retirement could not easily recover from such a destruction of value because there isn’t enough time. By the same token, retired people may have the lowest tolerance for stock market risk since they may be living on a fixed income and can’t afford any loss of value.
• However, young people just entering the work force may have good reasons to avoid taking much risk in the early years. Just like someone approaching retirement, young workers likely ha
We've all seen the TV ads and heard the radio spots telling us Company XYZ can solve all our credit card debt problems. There are so many companies screaming at you about their debt solutions with phrases like "consolidate", "negotiate", "settle", "counseling", "management" and on and on it goes. They all want you to call them for their "free consultation." It's more than a bit overwhelming to most people who know they have a problem but have no idea where to begin to go to get a reliable, legal, and trustworthy solution.Debt is a financial problem for sure but it's different than most financial problems. Let me tell you why this is true.There are no well known household brands that people trust to turn to when they have a debt problem.Think about it:When you have a tax problem, you know you can go to H&R Block. When you need to refinance your home, you know you can go to Countrywide Financial When you need to set up a retirement plan, you know you can talk to your local bank When you need insurance, Allstate is there Now you need debt relief - Where do you go?Even more troubling is, what can you do about it? Most people don't know what the
• Then there is a newer, more active style of portfolio management that involves adjusting the allocations for the different asset types as market conditions change. The active style is generally referred to as “dynamic asset allocation” or “tactical asset allocation”.
Traditional Asset Allocation -- Balancing Risk and Reward
How do you design a portfolio mix in the traditional way that will maximize returns yet not expose you to more risk than you can handle? That’s the $64,000 question.
Stocks are the “growth engine.” So you want as much stock market exposure as you can handle in the form of mutual funds, index funds and diversified groupings of individual stocks. But you have to balance stocks’ higher growth potential against the risk of a “destructive storm” because the stock market has historically taken dives of as much as 40%, 50% and even 90% during bear markets.
• Since traditional asset allocation techniques are based upon a “buy and hold” approach, the trick is to decide what percentage of your portfolio should be in stocks so you get some of that growth engine working for you, but not so much that you can’t weather a destructive storm if it were to hit.
The right portfolio mix for you will be a reflection of very individual circumstances. The right mix should be consistent with your “risk tolerance”. If you could not weather a short-term portfolio loss of more than 25%, then you may not want stocks to represent any more than about 50% of your portfolio (if you assume that the next destructive storm wouldn’t be worse than a 40% to 50% drop in the market). In that event, a 50% loss in your stock market holdings would translate into a 25% hit to your overall portfolio (assuming the other half is invested in cash or money market funds).
You Can Take More Risk When You are Young
The conventional wisdom is that the younger you are, the more stock market risk you can take. The simple thinking behind this is that a younger person has many more years in which to recover from a “destructive storm” and reap the ultimate benefit of holding stocks in the long term. Clearly, a worker close to retirement could not easily recover from such a destruction of value because there isn’t enough time. By the same token, retired people may have the lowest tolerance for stock market risk since they may be living on a fixed income and can’t afford any loss of value.
• However, young people just entering the work force may have good reasons to avoid taking much risk in the early years. Just like someone approaching retirement, young workers likely h
Before I start on this one, it may be well to remember the saying, "where is the best place to meet the high and mighty high?" hey, at most New Years Eve Parties.If you want to read a article written by a Internet Guru or English Professor you can stop reading now. If you’re looking for honest Internet Information in plain everyday writing this is for you. Read on, this could save you a bundle and give you enough information to start part time Marketing on the internet.I found out the hard way that Internet business opportunities are almost never all they're cracked up to be. The only persons who benefit from the opportunities are the people who start the programs and a few friends at the top.Seen all those ads with images of luxury cars, boats, and house? This is the image of high life you can have if you join a MLM opportunity. If you believe the above I have a beautiful famous bridge in San Francisco I want to sell, cheap, doesn’t wait, today only.As a newbie to the Internet (joining after years of retirement), with 40 years of successful publishing, printing, business off line, it makes me sick to think people would believe this. Yeh, just join this MLM and
Stocks are the “growth engine.” So you want as much stock market exposure as you can handle in the form of mutual funds, index funds and diversified groupings of individual stocks. But you have to balance stocks’ higher growth potential against the risk of a “destructive storm” because the stock market has historically taken dives of as much as 40%, 50% and even 90% during bear markets.
• Since traditional asset allocation techniques are based upon a “buy and hold” approach, the trick is to decide what percentage of your portfolio should be in stocks so you get some of that growth engine working for you, but not so much that you can’t weather a destructive storm if it were to hit.
The right portfolio mix for you will be a reflection of very individual circumstances. The right mix should be consistent with your “risk tolerance”. If you could not weather a short-term portfolio loss of more than 25%, then you may not want stocks to represent any more than about 50% of your portfolio (if you assume that the next destructive storm wouldn’t be worse than a 40% to 50% drop in the market). In that event, a 50% loss in your stock market holdings would translate into a 25% hit to your overall portfolio (assuming the other half is invested in cash or money market funds).
You Can Take More Risk When You are Young
The conventional wisdom is that the younger you are, the more stock market risk you can take. The simple thinking behind this is that a younger person has many more years in which to recover from a “destructive storm” and reap the ultimate benefit of holding stocks in the long term. Clearly, a worker close to retirement could not easily recover from such a destruction of value because there isn’t enough time. By the same token, retired people may have the lowest tolerance for stock market risk since they may be living on a fixed income and can’t afford any loss of value.
• However, young people just entering the work force may have good reasons to avoid taking much risk in the early years. Just like someone approaching retirement, young workers likely h
It is an American dream to own a business. But sadly, according to the U.S. Department of Commerce, only 1 in 5 businesses is still in business 5 years after it opens.A business needs a great business plan, but it doesn’t give management enough information to have a successful, profitable business. You dramatically increase your chance of success with a game plan. According to a PriceWaterhouseCoopers survey, over half of the fastest growing firms not only have business plans, but also have separate game plans to keep them focused on what must be done day to day.A business plan gets you in the game. A game plan keeps you in the game. To use the sports analogy, it’s easy to see how you are going to win the game in from the locker room. Most businesses don’t have a working plan that takes into account what actually happens on the field once play starts.A business plan is a sales brochure and a game plan is an instruction manual. You send a business plan to potential investors and others to excite them about the business. A business plan is about strategy. You create a business plan at a management meeting. A game plan is about tactics and is created by and for the people on the front lines.
The right portfolio mix for you will be a reflection of very individual circumstances. The right mix should be consistent with your “risk tolerance”. If you could not weather a short-term portfolio loss of more than 25%, then you may not want stocks to represent any more than about 50% of your portfolio (if you assume that the next destructive storm wouldn’t be worse than a 40% to 50% drop in the market). In that event, a 50% loss in your stock market holdings would translate into a 25% hit to your overall portfolio (assuming the other half is invested in cash or money market funds).
You Can Take More Risk When You are Young
The conventional wisdom is that the younger you are, the more stock market risk you can take. The simple thinking behind this is that a younger person has many more years in which to recover from a “destructive storm” and reap the ultimate benefit of holding stocks in the long term. Clearly, a worker close to retirement could not easily recover from such a destruction of value because there isn’t enough time. By the same token, retired people may have the lowest tolerance for stock market risk since they may be living on a fixed income and can’t afford any loss of value.
• However, young people just entering the work force may have good reasons to avoid taking much risk in the early years. Just like someone approaching retirement, young workers likely h
For the first time internet entrepreneur [newbie] the best ways to promote your website at first instance are :1. Express inclusion of your website for the usual 12 months offered by most of the major search engines. You can choose express inclusion for askjeeves, inktomi, altavista,msn etc but keep in mind to have your site submitted to the local index of your region.For example if you reside in Toronto, Canada and you are submitting for express inclusion in the DMOZ or Canada.com search engine/directory you must ensure that your site is indexed in the Toronto's business and economy directory. Get your site in the local index first things first.If your submission listing includes the regional version of the DMOZ directory then thats good enough to go. One point to note is that many of the major search engines and directories actually inter-relate that is they search across each other's database therefore submitting to only one major engine or directory will satisfice for the Internet Marketing beginner.2. Next, the most overlooked approach for the first-time website owner is the maximisation of the benefit of offline marketing methods. Promote your website in exactly the same way you
• However, young people just entering the work force may have good reasons to avoid taking much risk in the early years. Just like someone approaching retirement, young workers likely have several important, near-term objectives for using their savings: (1) buying a home, (2) paying back school loans and (3) starting a family. Too much portfolio risk could be counter-productive.
At the other end of the age scale, retired people may need to introduce more stock market exposure into their portfolios to have some growth potential that can offset rising expenses during their increasingly longer lifetimes. The rising costs of medical care, combined with the general rate of inflation can do serious damage to a fixed income over 15, 20 or 30 years … and that’s how long many retirees can expect to live.
What to Watch Out For
Deciding upon the right portfolio mix for your particular situation is a delicate question and should involve careful consideration of a broad range of factors. There are a number of important caveats you should understand before entering into a traditional asset allocation exercise with a broker or financial planner.
Bonds Go Down Too: Don’t be mislead that bonds never go down. There is only one instance in which the value of a bond doesn’t change … that is when you hold it to maturity and, like a Certificate of Deposit, it will return the original, face value of the bond. At any other time prior to maturity, the market value of a bond goes up or down in response to the changing level of interest rates. If you own a bond mutual fund, the market value of the fund changes daily with the movement of interest rates. A mutual fund holding long term bonds has the potential to lose as much as 10% to 20% in value during a period of steeply rising interest rates.
Online Asset Allocation Tools are … well … “Canned”: Many brokers and mutual fund companies include an online tool on their websites that you can use to generate recommended asset allocation percentages for your portfolio. These tools can be helpful as you consider the different factors in your situation and what impact each should have on your allocation decision. But many of these online tools are too simplified and may not be able to take into account certain critical factors in your own unique situation. Suffice it to say that these canned tools don’t really substitute for an in-person interview with a good financial planner or advisor.
Maximum Downside Risk Should be Considered: When you seek guidance on the right asset allocation mix for you, be aware that you can get wildly different answers from different advisors, and from different canned online tools. There are various reasons for this; but one main reason you can get very different answers from the experts is the kind of measure they use to define risk. Many advisors use statistical measures of “historical market volatility” that do not effectively take into account the maximum loss potential of a major “destructive storm”. These advisors
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