Asset Allocation Vs Diversification

Astute investors realize the appeal of finding investment options that do not move in step with one another. Over time, we expect the stock market to increase in value, albeit with short-term fluctuations. Ideally, it would be great to identify an investment that increased in value when stocks faltered which would smooth out the volatility in a portfolio.



Traditionally, there are several asset categories that have this type of relationship: stocks and bonds, US stocks and international stocks, large cap stocks and small cap stocks, etc. Over time, the strength of the correlations between these asset classes has varied. To avoid having all your investment eggs in one basket, it is important to have appropriate asset allocation and diversification strategies, and to understand the difference between the two.

Asset allocation is the most basic and important component of investing. An asset allocation is simply the percentage of your portfolio invested in stocks, bonds, and cash. Your asset allocation is the primary determinate of how risky your investment portfolio is. Stocks are the most aggressive investment, bonds are a middle-of-the-road option, and cash is the safest way to invest your money. Of course, the higher the risk of your portfolio, the higher the return you should expect.

Asset allocation, not market timing or asset selection, will account for approximately 92% of your investment return. An appropriate allocation that matches your risk tolerance will help you obtain the rate of return necessary to achieve your investment goals while limiting volatility so you can sleep at night.

A well-devised asset allocation does not ensure you are appropriately diversified, however. For example, if you have determined that you should have 60% of your investments in stocks, you shouldn't invest that full 60% in one stock. In fact, you shouldn't have the bulk of your investments in the same asset category (large cap, mid cap, small cap, international, growth, or value).

To be adequately diversified you should have representation in each of the major asset categories. Further, you should own at least 50 stocks in each category. (Owning a large amount of your employer's stock in your 401k is a common way of breaking this rule.) This steps will prevent your portfolio from plummeting due to the performance of one under-performing stock.

Diversification applies not only to stocks, but also to the bond side of your portfolio. Many people invest solely in U.S. corporate bonds, but they should be rounding out their portfolio and reducing risk by also investing in U.S. Government bonds and international bonds.

If done properly, determining an asset allocation that is right for you will help ensure your portfolio is correctly positioned on the risk-return continuum. Diversification is an additional step that spreads your investment bets across various asset classes to prevent your entire portfolio from suffering losses all at once. Incorporating both strategies will lessen the volatility in your portfolio and increase your chances of reaching your investment goals.

by Lon Jefferies

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How to Eliminate Credit Card Debt Today!

Are you struggling just to make those minimum monthly credit card payments? You are not alone! The average American has $10,000 in credit card debt today. If you are able to make the minimum monthly payments it will take 40 years to pay off $10,000 worth of credit card debt! That's right, 40 years! Now you know why your balance never seems to decrease!

Let's break that down even further. Suppose you went to the grocery store and decided to use your credit card to buy $100 worth of groceries. That's probably about a week's worth of food. Do you realize that it will actually take you 4 years to pay that $100 off by making only the minimum payment? That's right, 4 years to pay for 1 week's groceries! Shocking and outrageous isn't it?

Credit companies made more than $17 Billion Dollars last year on the interest they charge their card holders. They keep getting rich while we continue to struggle. The government has stepped in and put a limit on the amount of interest they can charge, but that won't help your current balance! But they have passed new laws that will help you now!

You no longer have to file bankruptcy to get relief from credit card debt! Bankruptcy will destroy your credit for years to come; it is not a viable option for anyone! Don't be fooled into thinking it is your only avenue for relief!

There are companies out there that are using the newly enacted laws to help you eliminate up to 50% of your credit card debt immediately! It's legal, ethical and for thousands a real chance to get control of their finances! You do have to do your homework and make sure the company you choose is legitimate! Unfortunately there are far too many unscrupulous people out there all too willing to run a scam and steal your money! Be aware and check with the better business bureau before deciding on any credit counselor!

By Sheri Baker Platinum Quality Author
ezinearticles.com

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How to Generate Cash Online - With Little Or No Investment

Everywhere you go nowadays on the Internet there's someone trying to entice you, someone trying to persuade you into believing that what they have is what you want. That it is necessary for you to pay $29.99 or $49.99 for their product or service in order to be successful online.

This is just not the truth, while there are many opportunities one can invest in, their are other opportunities that also require little or no investment at all. If you're new to the Internet and have not been surfing for a decent amount of time you have a huge learning curve to get past, there is a revelation that you need to receive which provides the understanding that 90 to 95% of all the income opportunities presented before you on the Internet arena or nothing but hyped up scams that promise success by only leaves sadness in the hearts of those that are seeking success like you and I online.

After you get past that you have to reprogram you're thinking because you understand that it's not about reinventing the wheel but it's about following step-by-step systems, and modeling yourself after successful people. I say all this because if you don't get this understanding years of your time money and efforts on the Internet will be wasted on scams and half truths that will not get you anywhere.

Finding real opportunities

Like I said before the way you find real programs and discover real opportunities is to model yourself after successful people or model yourself after successful systems. There is what the Internet calls affiliate programs that provide a proven track record to deliver real opportunities for people that have little or no income to invest. With

affiliate programs there is no website that is required there is no product that you need and there's no merchant account that you have to possess, all you need is the ability and the perseverance to advertise and promote a vendor's product. In exchange you will receive a portion or percentage of the transaction into your account.

The truth about making real income online, income that you can really be proud of is not seeking to advertise someone else's product but rather developing your own. Where you have your own website product or service, where you can receive credit card transactions and other merchant benefits, having your own advertising in place and branding yourself in your own specific niche.

Making money with AdSense

When you've arrived in this position you can now start making money by having ads placed on your own website, google will literally pay you to stick other people's advertising on your promoted website, this does not cost you any money and is 100% profit, there are other unique ways to make money when you have established yourself as a seasoned Internet marketer.

Until then focus on what works, focus on a proven method and strategies that you can duplicate while getting past the Internet learning curve and building your empire online.

> by Troy D. Johnson
> ezinearticles dot com

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Support and Resistance - How to Profit With Technical Analysis

With proper knowledge and training, the financial markets can be a consistent source of cash flow. Yet before any trading happens, a basic working understanding of technical analysis and trend identification is crucial. Support and resistance are where we begin in any discussion of technical analysis and provide the framework for learning how to spot a trend.


Here we will give basic operational definitions of these important terms and then describe how they can be used to increase profit margins.

Trend

The trend is the basic direction the market is moving. Trending patterns enable us to determine what actual market participants are doing, and respond accordingly with the proper trading strategy. In many ways, trend analysis gives us a window into the psychology of the markets, and how market participants are responding.

The stock market moves in a series of short term highs and lows, sometimes referred to as "peaks" and "troughs". It is the overall direction of these "peaks" and "troughs" that constitutes a trend. The technical definitions of these highs and lows are quite simply, support and resistance.

Support

The support area on a chart is the area beneath the overall market where buyers outweigh the sellers. Buying interest is strong enough to keep the price from moving farther down and so it reverses up again.

Resistance

Resistance on the other hand, is simply the opposite of support. It is the price level above the market where selling pressure overcomes buying making it difficult for the buyer to drive up the price.

Volume

Another critical component that relates to both support and resistance is the volume of shares being traded. Volume helps to measure the significance of a support or resistance level. If a level is formed with heavy volume, either buying or selling, that level is even more significant to our analysis.

Without understanding these technical terms, it becomes easy to trade recklessly based off educated guesses or rumors. Yet once a working knowledge of these terms is mastered, traders are able to precisely set entry and exit points and aid in choosing the correct trading strategy.

Trend, Support, Resistance, and Volume are the basic building blocks of learning and understanding technical analysis. It forms the basis of learning price patterns, and is the beginning of truly understanding the pulse of the market.

Jeffrey Ziegler
ezinearticles dot com

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