Tuesday, 24 September 2013

It pays to be eclectic

Markets change and conditions change.
One style of manager or one kind of fund will not succeed in all seasons.
You just never know where the next great performances will be, so it pays to be eclectic.

Some problems to look out for:
1.  Stuck in a situation where the managers have lost their touch.
2.  The stocks in the fund have gone out of favour:

  • A value fund can be a wonderful performer for 3 years and awful for the next 6 years.
  • Growth funds lost their advantage in certain years and then led the markets in certain years.

1. (Fine Arts & Visual Arts / Art Terms) (in art, philosophy, etc.) selecting what seems best from various styles, doctrines, ideas, methods, etc.
2. composed of elements drawn from a variety of sources, styles, etc.

Some basic approach to finding stocks:
1.  Capital appreciation stocks:  Buy any and all kinds of stocks that can give capital appreciation.
2.  Value stocks:  Invest in companies whose assets, not their current earnings, are the main attraction.  
3.  Quality growth stocks:  Invest in medium-sized and large companies that are well established, expanding at a respectable and steady rate, and increasing their earnings 15% a year or better.  [This cuts out the cyclicals, the slower-growing blue chips, and the utilities.]
4.   Emerging growth stocks:  Invest mostly in small companies.  
5.  Special situation stocks:  Invest in stocks of companies that have nothing in particular in common except that something unique has occurred to change their prospects.

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