Strategies

Six Approaches to Asset Allocation

Developing an asset allocation strategy is about diversifying your investments across multiple investment classes (e.g. stocks, bonds, and cash) in order to align this mix of assets with your investment objectives and risk tolerance. With proper diversification, the fluctuations in the performance of the portfolio are minimized as declines in any particular asset class [...]

How and When to Rebalance Your Portfolio

Rebalancing is the process of bringing the various asset classes of your portfolio back to their appropriate weight in order to meet investment and risk objectives. Investors rebalance their portfolios to maintain the mix of stocks, bonds and other assets that was outlined in their original investment plan. If any part of your [...]

Investment Risk and Modern Portfolio Theory

Modern Portfolio Theory (MPT) is a financial hypothesis that proposes the use of diversification by rational investors as a means to minimize risk without sacrificing returns. Originally developed by Nobel Prize winner Harry Markowitz and published in 1952, MPT argues that looking at the expected risk and return of a single stock is not [...]

The Benefits and Drawbacks of Preferred Stock Investing

Some companies issue two types of stock: common and preferred stock. While each offers a portion of ownership in the company, there are significant differences between the two. Preferred stock is often seen as a hybrid instrument; a mix between a stock and a bond. Although preferred stock is an equity security, [...]

Understanding Stock Analyst Recommendations

A securities or stock analyst is a financial professional who studies companies and industries to analyze investment opportunities. Through their research, the analyst may provide one of a number of recommendations or ratings, including “strong buy”, “buy”, “neutral”, “sell”, and “strong sell”. The analyst will often be employed by a bank or another [...]

Four Good Reasons to Sell a Stock

Knowing the right time to sell a stock can be as difficult as determining when to buy. Even professional traders and money managers can struggle with this decision. It’s easy to make yourself believe that a stock that is down will come back and it can be just as tough to make a sell [...]

The Benefits and Risks of Investing in
Unit Investment Trusts

A Unit Investment Trust (UIT) is one of three types of investment companies (the other two being mututal funds and closed-end funds). A UIT offers a fixed (unmanaged) portfolio of securities to provide investors with the opportunity for income through dividends and/or capital gains through price appreciation. While the portfolio of a UIT [...]

Utilizing a Bottom-Up Approach to Stock Picking

With a bottom-up strategy for picking stocks, the investor chooses companies based on such things as strong fundamentals and the quality of the management team. The investor performs this analysis without regard for the current economic climate or trends. While top-down investors analyze the “big picture”, bottom-up investors look for those companies [...]

Utilizing a Top-Down Approach to Stock Picking

Under the Top-Down approach to stock picking, the investor starts with the big picture, studying global economic trends to identify industries and then the companies within those industries that look to offer good investment opportunities. Most fund management companies utilize this approach in their investing activities and many financial experts recommend this approach to [...]

The Strategy of Momentum Investing

Momentum investing is a style in which the investor looks for stocks that have been aggressively trending in an attempt to exploit opportunities from this current sentiment. The idea behind momentum investing is that when a trend is established, it is more likely to continue in that direction than to reverse. Under this strategy, [...]