UnThreaded | Threaded | Whole Thread (7) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: TMFSelena Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 766  
Subject: Re: Are 20 Stocks Too Many Date: 12/9/2005 10:07 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
ab --

<<Exactly, and you couldn't predict better or worse. But, I want to average 50%/year so I therefore should buy each recommendation to match the newsletter return. >>

I'd disagree here. Because even if the newsletter has achieved a 50% average annual return, there's no guarantee of that in the future. The future may bring better or worse returns. What the 50% tells me is that the picks have been far from dismal, overall, and are likely to continue being that way.

If you choose to buy a little of each of the recommendations, you probably won't earn 50%/year (instead, it'll likely be more or less), but you *will* set yourself up to mimic/track the newsletter's performance, whatever that turns out to be.

<< For example, look at this quote from the Stock Advisor (http://www.fool.com/Newsletters/18/Help/Welcome/GettingSpecific.htm)

"How many stocks should I own?
We want you to build a diversified portfolio that helps you maximize profits and minimize risks. You want to own enough stocks so that a few bad surprises won't ruin your returns, but not so many that your great selections are cast adrift in a sea of also-rans. As a rule, we recommend holding anywhere from eight to 15 stocks..."

If I take the above recommendation, I can't expect to match the advertised return of the newsletter unless I'm lucky. So do I concentrate or buy 'em all? That's just my observation.
>>

Well, again, I concede that there's a contradiction here. But life is full of contradictions. I think an investor can do well concentrating a portfolio to 8-15 stocks (and for many people, this may be the best route). But I'll also agree that one can do quite well owning more. These are just different approaches, and sometimes more than one road will lead to Rome. :)

I wish that there was just one, clear way to invest most effectively, but I don't see that. Sometimes it's better to buy more of a falling stock, and sometimes it's better to sell. Some investors would do best with just an index fund, and others would do better with other funds or individual stocks, if they have the time and interest to devote to selection and monitoring.

Selena
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (7) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

2013 Feste Award Voting Begins!
Who will win the 2013 Feste Award? Vote now for the Fool that most exemplifies the Fool Community mission of Learning Together!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Tax Strategies

TMFPMarti-Feeling Good
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement