I lose money instocks? Can I lose everything? Yes, you can lose money; and if you set your mind toit, you could lose it all. Companies begin and end all the time, so it’s critical to find theright companies to invest in. Even then it’s critical to determine how long it will bebefore you need your investment capital back. Stocks sometimes experience periodswhere they go up for an extended time, and then consolidate, even drop in price.When they go up, it’s called a bull market; when they drop it’s considered to be a bearmarket. A rising market is referred to as a bull market because bulls buck up with theirhorns. Declines are called bear markets because bears swat down with their paws.Bull market: A rising stock market over a prolonged period of time, usuallycaused by a strong economy and subsequent increased corporate profits.Bear market: A declining stock market over a prolonged period of time, usuallycaused by a weak economy and subsequent decreased corporate profits.
If you absolutely need your money by a given date, and it’s a bear market, yourun the risk of selling when prices are less than when you bought initially. The
78
THE WORLD OF STOCKS
Type of Order
Description
At-even orders
Should be placed without a debit or a credit to the account.That means that you may have to wait until the market gets tothe right prices for your trade to be placed.At-the-openingShould be executed at the opening of the market orordersshould be canceled.Day ordersRemain good only for the duration of the trading day whenentered, and are canceled at the end of the trading day if notexecuted.Good till canceled Remain in effect until executed or explicitly canceled, or theorderscontract expires.Immediate orMust be executed immediately in whole or part as soon ascancel ordersentered. Any part not executed is automatically canceled.Fill-or-kill ordersLimit ordersLimit buy ordersLimit sell ordersMarket-on-openordersMarket-on-closeordersMarket orders
Market-if-touchedordersMarket-if-touchedbuy ordersMarket-if-touchedsell ordersStop ordersBuy stop ordersSell stop ordersStop limit orders
Figure 3.10
Must be executed immediately or by a specific date as a wholeorder. If not, the order is canceled.Specify a maximum buying price or a minimum selling price.Must be executed below the current market price.Must be executed above the current market price.Must be executed during the opening of trading.Must be executed during the closing of trading.The most common type of order—buying or selling securitiesat the price given at the time the order reaches the market. Thiscan be different from the price on your broker’s screen. Amarket order must be executed at the best price the market hasto offer. It is the only order that guarantees execution.Combined market and limit orders, whereby the order becomesa market order when the options or stocks reach a specifiedprice.Become buy market orders when the options or stocks fallbelow the current market price.Become sell market orders when the options or stocks riseabove the current market price.Used to limit risk, they become market orders when theoptions or stocks reach a certain price.Become market buy orders upon a trade at or above thespecified price.Become market sell orders upon a trade at or below thespecified price.An extension of stop orders, where the activated orderbecomes a limit order instead of a market order.
Types of Orders
GETTING STARTED
79
avoidance of this situation is obviously very important. The person with a 20-yeartime horizon can afford to let an investment go through these inevitable cycles,whereas the person set to retire in five years and needs the funds to supplement hisor her pension must be more cautious.So, can you lose money? If you own stock in a good company and sell whenconditions are rotten, you bet. So the trick is to invest according to your personaltime frame, so you’re not creating a market risk. (The major risk is not dependenton the company staying afloat, but rather that you may be forced to sell at an inopportune time—a down cycle in the market.)As mentioned earlier, there is a wide array of stocks that range from aggressive toconservative investments. Time plays a factor here, but so does personal tolerance forrisk. Most of us have had to work very hard to save the money that goes into the stockmarket. While the market does fluctuate in value, it has outperformed any other kindof investment vehicle over the long run. Even with that knowledge, some people cannot tolerate the thought that the dollar they invested may be worth less than that a fewmonths later. They fret and stew and read the paper daily to see if they’re back to evenyet, as nightmares of living under a bridge (or worse) haunt them. The stocks theychoose to invest in will most likely be much more conservative than the ones boughtby a dot-com bachelor who has a much higher risk tolerance, is comfortable with themarket’s ups and downs, and never loses any sleep over losses.Stress is not an enhancement to the trading process; it’s a liability.Buy stocks and choose strategies that allow you to sleep at night!
That’s the key: Buy stocks you can live with, avoiding stocks that make youcrazy with worry. Figure 3.11 shows the different categories of stocks. Create aportfolio of these stocks that best suit your particular needs, time horizon, and risktolerance, otherwise known as your investment profile.Experienced investors know to spread their risk out over a variety of stocks,from conservative to aggressive. This is also known as asset allocation. Asset allocation is the percentage of your portfolio that’s invested in stocks, bonds, and cash.More aggressive portfolios will be more weighted in stocks, less in cash. The opposite is true for conservative investors; they’ll have a greater percentage of funds incash and less in stocks. How your portfolio is structured is where a good financialplanner or top-notch broker can help tremendously. Your portfolio should be ablend of different types of stocks, from conservative to aggressive; the percentageor weighting of each category should meet your own investment profile. In otherwords, if you’re more interested in preservation of capital, you shouldn’t have a lotIncomeUtility stocks
Growth and Income
Growth
Blue-chip stockswith a dividend
Mid-sized tolarge-cap stocks
Figure 3.11 Quick Reference Guide
Aggressive Growth SpeculativeSmall tomid-cap stocks
Start-ups,turnaroundsituations
80
THE WORLD OF STOCKS
of aggressive growth stocks (if any) in your portfolio. The opposite is also true. Ifyou’re a 28-year-old with no family and making a good living, conservative growthstocks should have the least weighting in your portfolio. It’s all about your risk profile. Take your time in the creation of your own profile. Don’t worry—you can andprobably should change it as time goes on.Weighting: The percentage breakdown of stocks, bonds, and cash in an investment portfolio, as well as the types of stocks that comprise the stock portion ofthe portfolio (i.e., aggressive, growth, green, cyclical, and income stocks).Investment profile: Refers to the risk tolerance of an investor, the suitability ofthe type of investments based on the person’s age, financial condition, and psychological ability to tolerate risk.
If you’ve ever opened up the financial pages of a newspaper, you’ve probablybeen astounded by all the tiny little numbers that detail the previous day’s marketperformance. To a novice’s eyes, these pages might as well be written in Greek. Butthere’s no reason to panic. It doesn’t take a degree in rocket science to understandthe markets—just the patience and determination to monitor the few stocks youchoose to specialize in. As you get to know a few stocks, you should be able to learncertain lessons through them that are applicable to other stocks.Luckily, there are certain steps you can take before investing in the stock market.First, consider that a stock is really a unit of ownership. As such, you want to be theowner of a high-quality company. I feel that the greatest potential lies in identifyinggrowth companies with mid to large capitalization. Second, make an assessment asto what areas of the market are likely to attract money. Personally, I think the flowof capital is likely to favor the U.S. market because of this country’s dominance ofcorporate (especially technology-oriented) enterprises and the sustained growth inour overall economy.I am a big believer in the future prospects of high-tech stocks. The unparalleledvolatility of this sector has provided me with countless opportunities to increase mynet worth. These stocks run the gamut from rising Internet standouts to computeroriented stars. If you want to learn to trade, you absolutely have to get to know thestocks in these sectors.A good place to start is the “tech section” of CNNfn(cnnfn.cnn.com/news/technology/techstocks). Another great site isWhatis.com (www.whatis.com). Bring your lunch, asthere’s a ton of useful information about all things technical.
In order to help you learn how to monitor stock performance (and inspire you tospecialize), I recommend tracking the following five stocks. These stocks representfive promising investments that should teach you a lot. Since each stock has tremendous influence, tracking them can help you understand various analysis techniquesand how news and economics impact stock prices. Start by using Figure 3.12 as a
GETTING STARTED
81
Company:
Entry Date:
Industry Sector:
Capitalization:
Present Price:
52-Week High:
Target Exit Price:
52-Week Low:Quarterly Figures
Quarter
Earnings per Share
Sales
Latest QuarterPrevious Year Quarter% Change(Latest Quarter—Previous Year Quarter)
Five-Year Price-Earnings FiguresYear
Price52-Week High52-Week Low
Earningsper Share
High
P/E RatioEPSLow
EPS
TotalAverageIs the current 52-Week High or Lowhigher or lower than the average?
Is the current P/E ratio higher orlower than the average P/E ratio?
Growth RateCurrentEPS
Next Year’sProjected EPS
Growth Rate =Projected EPSCurrent EPS
CurrentEPS
Projected EPSTwo Years fromNow
Growth Rate =Projected EPSCurrent EPS
Five-Year Sales/Expenses PerformanceYear
Annual Sales
Annual Expenses
Net Profit
% Change(Last Year—Two Years Ago)
Price to Sales Ratio
(Every $1 of sales = “X” amount of investing value)
Year
Market Capitalization
(# Outstanding Shares × Price per Share)
% Change(Last Year—Two Years Ago)
Figure 3.12
Stock Analysis Template
AnnualSales
Price to Sales Ratio(Capitalization—Sales)
82
THE WORLD OF STOCKS
base form for your study and research. From there, please take advantage of themany web sites that offer portfolio-tracking services. These sites will send youdaily quotes and news on the stocks of your choice directly to your computer via email. There is no substitute for hands-on learning.1. America Online (AOL): Regardless of whether you love it or hate it, youhave to admit that AOL is the name to be reckoned with in the Internet accessand e-commerce arenas. Since AOL is also one of the few Internet companiesto make money, it is a strong long-term investment prospect.2. JDS-Uniphase (JDSU): JDS-Uniphase is a high-technology company thatdesigns, develops, manufactures, and distributes products for the growingfiber-optic communications market. It has been on an acquisition binge, andthis is expected to continue. Some refer to JDSU as the Intel of fiber-optics.3. EMC Corporation (EMC): EMC is a worldwide leader in the area of storagedevices. As the need for storage continues its incredible growth of the pastfew years, EMC should also show dramatic growth in years to come.4. Qualcomm (QCOM): Qualcomm was the biggest gainer in the S&P 500 in1999. It is the world leader in what is expected to be the top technology forwireless technology, CDMA technology. QCOM has worldwide royalties thatcan propel the stock much higher.5. Yahoo! (YHOO): Yahoo! is one of the most popular Internet companies onthe Web. Recently added to the S&P 500, Yahoo! has many advantages overits competitors, including worldwide name recognition. Yahoo! has lots ofroom to grow over the next year and beyond.Portfolio tracking service: A portfolio tracker is an online service provided by afinancial web site or an online brokerage that enables an investor to keep trackof the daily price movement, breaking news, and investor sentiment of a chosenlist of stocks, indexes, and options.
ROADMAP TO SUCCESSObjective
Course of Action
Company Stock
Definition• A company is defined by Webster as “a number of personsunited for the same purpose; either in private partnership or abusiness concern.”Privately Held• Difficult/impossible for outsider to purchase.• Valuations unclear—generally do not have audited financialstatements.• Illiquid—no ready market.
ROADMAP TO SUCCESS
83
Publicly Held• Relatively simple to buy/sell.• All financials easily obtained.• Valuations determined by market forces.• Generally easily liquidated.DevelopmentStages
Birth• Privately held.• Possible angel/venture capital involvement.• High-risk and illiquid.Adolescence• Initial public offering (IPO).• Possible high-risk situation.• Liquidity event for early-stage investors.• Price volatility is usually high.• Technical analysis virtually impossible due to lack of trackrecord.Childhood• Early-stage growth company.• No dividends.• Still considered aggressive growth (risk still very much a factor).• Major investment returns still possible.Adulthood• Sustainable growth achieved.• Consistently profitable.• Possibility of dividend payouts.• Widely followed by brokerage community.Mature Company• Pays dividends.• Usually large market cap.• Long history.Skateboard Effect• Reinvention of a mature company after it has gone intodecline.• Diversification of product line.• Innovative new marketing that generates major sales revenues.
Stocks
Preferred• Usually pays a fixed dividend.• Possible conversion feature.• Possible cumulative dividend (if company misses dividend,must pay missed dividends before any dividends can be paidto common stockholders).• If company is liquidated, preferred shareholders paid beforecommon.• Often stockholders do not have voting rights.Common• Straight common has no conversion features.• More volatile than preferred.• Risk/reward ratio higher than preferred.
84
THE WORLD OF STOCKS• No set dividend unless declared by company.• Public stockholders have voting rights.
Proof of Ownership Stock Certificates• Physical delivery of certificate.• “Denomination” (number of shares) displayed.• Not easily transferred from one person to another—certificatemust be physically sent back to the company (or delivered tothe brokerage firm) for issuance of a new certificate.Street Name• Held by brokerage.• No threat of loss, damage.• Monthly valuation updates.• Dividends, splits, and so on are automatically accounted forand added to the account.Varieties
Large-Cap• Blue-chip stocks.• Long history of profitability.• Low risk.Mid-Cap• Mid to high market cap.• More growth oriented.• Slightly higher risk.Small-Cap• Much more aggressive growth potential.• $150 million to $500 million market cap.• Under-owned by institutional investors.• Higher risk, greater volatility.Micro-Cap• Small market cap, start-up stage.• High risk.• Possible illiquid market (tough to sell).• Wild price swings caused by rumors, and so forth.• Enormous returns possible, as well as similar losses.
Quotes
Display of Previous and/or Current Trading Day’s Information• NewspapersOpenHigh/lowClosing priceVolume (shares traded that day)P/E ratio52-week high/low• Computers/OnlineReal-time or delayedBid/askHigh/low for dayVolume% change from previous day’s close
ROADMAP TO SUCCESS
85
Types of Orders
Market Order• Order is matched with another; price is flexible, which couldmean unfavorable price execution.• Usually fastest execution, if you want in or out, period.• Lower commission charged at many brokerage firms.• At-the-open orders—Executed at the market upon themarket’s opening. Poor execution prices highly likely.• Market-if-touched—Combine market and limit orders,whereby order becomes market order when options or stockreach a specified price.• Market-if-touched buy orders.• Market-if-touched sell orders.Limit Order—A limit order specifies a price that must be met (orbetter). No assurance order will be filled.• At-even—No debit or credit to account. Delay possible whilewaiting for correct market to execute.• Day orders—Good for that trading day only, cancels at theclose if not executed.• Good till canceled or GTC—Order stays open until canceledor executed.• Immediate or cancel crder—Must be executed, in whole orpartially, immediately, or order is canceled.• Fill-or-kill—Fill the entire order immediately at specifiedprice or cancel.Stop Order—Used to limit risk, a stop order becomes a marketorder when option or stock reaches a specified level.• Buy stop orders—Must be executed when the specified priceis above the current market price.• Sell stop orders—Must be executed when the specified pricefalls below the current market price.• Stop limit orders—An extension of stop orders where theactivated order becomes a limit order instead of a market order.
Determining aStock Transaction
Bull Market• Going long a stock in anticipation of an uptrend.• Fundamental, technical, sentiment analysis show bullish signs.• Limited risk (can only go to zero).Bear Market• Going short a stock in anticipation of a downtrend.• Margin requirements are high.• Is stock available to short?• Unlimited risk. (How high can it go? You’re on margin!)• Fundamental, technical, sentiment analysis show bearish signs.Payment Options: Cash and margin.
The Use of Margin
When to Use It• Bull market.• Certain options strategies.• Short sales.
86
THE WORLD OF STOCKSMargin Requirements• Brokerage will lend you (usually) 50% of a straight stockpurchase (if stock is marginable).• Requirements vary for shorts, option trades.• Interest is charged.How to Use It• Specify when placing order.• Broker will tell you margin requirements beforehand.Margin Calls• Regulation T issued when account equity drops belowcertain level.• Cash deposit required immediately.• Cannot sell to meet Reg. T in some cases.• Forced liquidation, usually at the worst times.
Useful Web Sites
Biofind (www.biofind.com): Guide to biotech stocks and newfindings.Direct Stock Market (www.dsm.com): Provides info on publicand private offerings.Good Money (www.goodmoney.com): Socially andenvironmentally friendly investment guide.Moody’s Investment Services (www.moodys.com): Leadingprovider of credit ratings, research, and financial information ofthe markets.Quote.com (www.quote.com): Comprehensive site for all yourstock research needs.Signal Online (www.dbc.com): This site is actually hosted byDBC Online and is the dynamic state-of-the-art, real-timequoting service.Standard & Poor’s Equity Investor Service(www.stockinfo.standardpoor.com): Not just a renowned indexanymore, this site offers great insight into S&P stocks and more.Stockpage (www.thestockpage.com): Specializing in small andmicro-cap stocks.Silicon Investor (siliconinvestor.com): Comprehensive guide tohigh-tech stocks.Yahoo! Finance (finance.yahoo.com orwww.yahoo.com/business.com): One of the best sites on theWeb to become familiar with the world of stocks and options.
4Critical Trading Approaches
For the past decade, the stock market has become more than America’s favoritepastime. It has become the lifeblood and driving force behind the U.S. economy.People from all backgrounds have become mesmerized by the incredible wealthgenerated by the market in such a short period of time. The potential for significantwealth creation is a prime catalyst that will undoubtedly continue to lure more people into the market. Whether you’re 25 or 55, if you’re serious about the market insofar as it helps you achieve a nest egg of suitable size to provide a measure ofsupport in your golden years, the best place to start is sometimes the least palatable:an unblinking and rigorous self-assessment.Before you know what you need to become a successfultrader, it’s necessary to figure out what you already have.
This exercise is in no way meant to replace any planning already done with aCertified Financial Planner or some other financial professional. Hopefully it willhelp support their advice. But for the rest of the crowd that is wondering what assetallocation is all about, this is the first step.
BRASS TACKSIn Chapter 1, I outlined a system for determining your financial bearings. In order toget where you want to go in the investment arena, you have to take into consideration:• How much you have to get started with.• How long you have until you need the money.• How much time and effort you want to put into the investment process.87
88
CRITICAL TRADING APPROACHES
If you haven’t taken the time to fill out the handy forms in Appendix A, now’sthe time! Look at it this way: If you’re afraid to face the music now, what’ll it belike in 5 or 10 years? It doesn’t get any easier. Here are a couple of tips for those ofyou who just don’t know how to get started.• Savings: How long could you live off your savings if tomorrow your incomesuddenly stopped? If it isn’t at least three months, start saving. Don’t get fancytrying to play catch-up. Put it into the bank and leave it. When you get to threemonths of rent money, groceries, and utilities, begin stashing away money foryour trading account.Pay yourself first! If you haven’t done this before, and your savings aren’twhat you’d like them to be, do something different! They say that doing thesame thing over and over again and expecting different results is a form ofinsanity. So take 5 to 10% off the top of your next paycheck and put it away.
• Contributions: Contribute as much as you possibly can into your company401(k), IRA, anything. This will lower your annual tax bite and allow yourmoney to grow tax-deferred. This is a big deal, and if you’re not doing this, start.If you do have money in a qualified account, get a handle on recent performance.Contact information is on the monthly statements. Call the fund. Pay attention!Qualified account: An account that allows you to deduct your contributionsfrom your gross income, and the money is not taxed until you withdraw it.
If you have both savings and consistent contributions to funds already in theworks, and have some capital that’s not earmarked for a near-term event (like rent),let’s move on to finding the best approach that suits your investment profile.For performance evaluations and in-depth detail about virtually every fundon the market today, you can’t beat Morningstar’s free site. Plus it has avery useful feature called the IRA calculator. This is a great way to see thetremendous earnings power that a qualified account can deliver. The longerit’s in there, the better it will do. Go to: www.morningstar.com. For acomplete list of mutual funds, go to: www.investorlinks.com/mfcomp.html.
ASSET ALLOCATIONAsset allocation is a term that describes the diversification of your investment dollars in order to mitigate risk as well as take advantage of market cycles and trends.If it’s a bear market, your mix will be substantially different than if the market’s redhot (going up a lot!). To give you a sense of how to divide your portfolio up on arisk basis, I’ve created the grid found in Figure 4.1. Since markets are foreverchanging and time marches on, you’ll need to reevaluate your initial strategy atleast once a quarter (four times a year).
THE SIMPLE METHOD
89
Years untilRetirement
% Aggressive/Small-Cap
% Growth/Large-Cap
%International
% Bonds
% Cash
30+20+15+10+5+Retired!
25%25%20%20%15%5%
25%30%35%30%30%30%
20%15%10%15%10%5%
15%15%20%20%30%50%
15%15%15%15%15%10%
Figure 4.1
Asset Allocation Table
After you’ve identified your time horizon and the risk tolerances you can livewith, it’s time to determine what sector or group of stocks is attracting the most investment dollars. Different sectors move in cycles of their own. An increase in useof semiconductors spells a rally for that group while interest rate–sensitive stockssuffer when interest rates increase. Keep in mind the fund managers of the biggestinstitutions in the world are overachieving MBAs who work tirelessly to seek outthese groups before they begin to move. They anticipate changes in the economyand get there (hopefully) before the crowd. Therefore, looking for volume increasesin stocks can help you to determine which sectors are on the move.John Bollinger’s EquityTrader.com is a fun and informative web site thatprovides an abundance of information to help you research various sectors(www.equitytrader.com). Zacks Investment Research is another great site toscreen for finding promising stocks (my.zacks.com/index.php3). Zacks providessnapshot profiles of companies, ranks within the industry group, and a very usefularea called “The Whole Enchilada.” I use it to look for stocks of all sizes with thestrongest broker upgrades (and downgrades) as well as a host of other goodies.
You may want to start by simply looking in the back of Investor’s Business Dailywhere 197 sectors are ranked in order of strength. Once you’ve found the sectorsthat are the strongest, look for stocks within those groups that meet your personalcriteria. Figure 4.2 shows a few examples of stocks that fit into these categories.
THE SIMPLE METHOD (FOR THOSE TOO BUSY TO BE BOTHERED)If you feel like you just don’t have a taste for this sort of thing (i.e., studying charts,sectors, the economy, etc.), you’re not alone. Asset allocation in investing is amighty task. If you’re already saving but want things laid out for you and monitored, there are funds available that take the hassle out of it. They’re called lifecycle funds and they take into account your age and risk tolerance. Life-cycle fundsinvest your money, either as a lump sum or monthly savings, into strategic portfolios that take into account interest rates, bull markets, bear markets, big- and smallcap stocks, bonds and cash, everything.
90
CRITICAL TRADING APPROACHES
Aggressive GrowthLarge-Cap
Mid-Cap
GrowthLarge-Cap
Mid-CapForestLabs(FRX)
Growth and IncomeLarge-Cap
Mid-Cap Mid-Cap/Income
DukeEnergy(DUK)
NationalFuel Gas(NFG)
DukeWeeks (DRE)
AmericaOnline(AOL)
SmithHewlettInternational Packard(SII)(HP)
EBay(EBAY)
SiliconStorageTech. (SSTI)
International SeagateBusinessTechnologyMachines(SEG)(IBM)
EnronCorp.(ENE)
EquitableResources(EQT)
BostonProperties(BXP)
Immunex(IMNX)
Cree Inc.(CREE)
Cisco(CSCO)
TriQuintSemiconductor(TQNT)
Boeing(BA)
MCNEnergy(MCN)
SpiekerProperties(SPK)
JuniperNetworks(JNPR)
FinisarDigital(FNSR)
EricssonTelephone(ERICY)
BrocadeComm.(BRCD)
SouthernCo. (SO)
AmericanWaterWorks(AWK)
EquityOfficeProperties(EOP)
ONISystems(ONIS)
Avanex(AVNX)
GeneralElectric(GE)
InvernessMed.(IMA)
ReliantEnergy(REI)
RaymondJamesFinancial(RJF)
RiteAid(RAD)
Figure 4.2
Stock Evaluation Chart
The biggest problem with this approach is the fact that many life-cycle funds aretoo diversified to be effective. Not putting all your eggs in one basket makessense—to a point. Too much diversification virtually assures you you’ll be in agood sector and a bad one at the same time, the two performances canceling one another out. Here’s what I recommend doing if you just want someone to take this“problem” off your hands (you still have to do something!).
Age = Under 30Investment Position = Lump Sum to InvestGet aggressive and invest in America’s future. Put a minimum of 60% in an aggressivegrowth fund, 30% in a moderate or big-cap growth fund, and keep the rest in cash.Investment Position = No Funds AvailableSave on a monthly deposit plan with an aggressive growth fund. Since you’re investing once a month, you’ll automatically utilize dollar-cost averaging. When the market is high, you’ll buy fewer shares; when it’s low, you’ll buy more of them (sincethe dollar amount you invest is constant). The trick to making big money is not somuch the rate of return you achieve, it’s the number of shares you own! Think aboutit. If you own 100 shares of a $10 stock and it goes to $20, you make $1,000. However, if you own a thousand shares you’d make ten grand! So the trick with thesefunds is to accumulate shares. Every uptick means more cash. Downturns in the market should be viewed as buying opportunities. Just don’t stop saving.
IDENTIFYING OVERALL TRENDS IN THE MARKET
91
Age = 35 to 45Investment Position = Lump Sum to InvestKeep 10% in cash, and split the remaining 90% into two growth funds, preferablyin two different fund families. Different managers have different strategies thatwork better in some markets than others. Two funds/two families spreads the riskjust enough to cover yourself and keep the performance moving full speed ahead.Investment Position = No Funds AvailableIf you’re starting from scratch, get aggressive, but not stupid. Invest until you’vereached $10,000 in one fund (aggressive growth), and then put that same amount intoa less aggressive growth fund. When you’ve done that, keep splitting your depositsbetween the two for as long as you can, or until you’re within five years of retiring.
Over 45Investment Position = Lump Sum to InvestInvest 60% in growth, put 35% into a reputable bond fund (reinvest those dividends!), and keep the rest in cash. Keep saving!Investment Position = No Funds AvailableRoll up your sleeves, because you’re going to need a killer offense and an even better defense. Put each month’s deposit in an aggressive growth fund, and save a minimum of 20% of your gross income. Time is critical, but there’s still time enough tolet it work in