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Ed’s Stock Market Investing Beliefs

Partners' Network Blog

A "How To Invest" Summary

Purpose

I believe the purpose of investing in stocks should be to share in the growth of the economy as reflected in the stock market over a long period of time.

Strategy

I do not believe it is possible to “best” the market over a sustained period by owning more than a few securities or by trading stocks to either time the market, or try to “outsmart” all the other people doing this.

Time Horizon

I believe the minimum holding period for investing in the market is seven years. So, if the time horizon is less than that, or there is a likelihood of needing the funds prior to seven years, the stock market should not be invested in.

Risk

I believe that buying individual stocks increases risk because the portfolio possibly would not be as diversified as it needs to be spread the specific risk inherent in individual issues or sectors. Further, specific stocks with a disproportionately high weight in the portfolio should be avoided. Risk is the element that makes achieving gains easier or harder. The lower the risk the lower the potential returns or losses; the higher the risk the greater the potential returns or losses.

Risk Assumption

I believe that the level of risk that is assumed should match the probability of attaining stated goals. The lowest level of risk to attain goals should be assumed. Taking on a greater risk than necessary can jeopardize the entire portfolio and investment goals and plan.

The Way to Invest

I believe that a purposefully developed portfolio is not actively managed. It is occasionally rebalanced based on a loosely drawn schedule can accomplish broad goals of approximating the market.

Investment Activity

I believe that the efforts, expertise and time monitoring actively managed portfolios along with the cost of trading with possible tax costs, and where emotions and reactions to daily news would likely influence choices would make accomplishing state goals extremely difficult and highly improbable to achieve.

Investing Costs

I believe that it is desirable to keep costs as low as possible and this includes management and advisory fees, trading costs and taxes. Costs reduce investment returns. Some costs cannot be avoided and managers that perform exceptionally well on a consistent basis or that bundle the portfolio management with added services should be compensated accordingly and should not be compared to mediocre managers or those that do not perform beyond a minimum level.

Index Funds

I believe there are many good mutual funds whose purpose is to duplicate index returns. Typical low cost S&P 500 index funds are Vanguard 500 and Spartan 500, and the ticker symbols for some large exchanged traded funds are SPY, DIA, QQQ and IWM. There are many others and these are just included for illustration purposes.

One Size Does Not Fit Everyone

I believe that everyone has different purposes, motives, risk tolerances, backgrounds, education, investment sophistication and knowledge, income and cash flow, responsibilities, goals and plans.  Accordingly investment policies and plans should be carefully crafted and determined on individual basis without referring to the average investor, or what everyone else is doing, or what the current investing trends are.

The Game

I believe investing is not a game and should not be done because of supposed “excitement”. It is an endeavor which purpose is to secure yours and your family’s future financial security. This should not be approached in anything other than the most serious manner.

I Believe

I believe many things and this blog is limited to some beliefs regarding investment and wealth management. This blog represented some of my opinions and is presented for educational purposes only and should not be construed as investment advice or recommendations of specific things to do or invest in.

If you have any questions, I am available for your questions at emendlowitz@withum.com or by filling out the form below.

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