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Investing - Coggle Diagram
Investing
Active Investors
Can determine opportunities
Markets can be irrational.
Stock bubbles and changes in prices are proof.
Believes stock price can deviate from worth.
Do not believe markets are efficient
Fees are usually higher.
MER (Management Expense Ratio)
Analysis and valuation to achieve alpha
Goal to outperform benchmark.
Positions selected based on research or analysis
Monitors prices to find buying and selling opportunities.
Passive Investors
Diversifies
Does not seek to beat the market. Seeks to mimic the market.
Looking to gain exposure to whole market.
Considered rigid
Forces investors to buy deteriorating companies taking on too much risk.
Little to no research
Index investing.
Buy as soon as they have money
Efficient Market Hypothesis (EMH)
Stocks reflect all available information and will trade at true price. You cannot identify if price is too expensive or underpriced.
News headlines impact price
Sells at intrinsic value.
Don't focus on short term fluctuations of stock prices
Mutual Funds
Aggressive Growth
Tech companies and newer companies.
More growth potential with higher volatility.
Small Cap fun.
Emerging Market
International
Overseas companies, Non American.
Worst performing, do not perform as well as American stocks.
Growth
This is a Mid Cap Fund which is medium capitalization.
Mirrors S&P 500.
Growth & Income
Large Cap fund or Blue Chip Fund.
Consists of biggest companies.
Less volatile than other funds yet much less growth than other funds.
Tips
Dave Ramsey
Don't chase money
Don't invest in things you don't understand
Slow and Steady
Don't worry as much about fees.
Always use an advisor who has heart of a teacher.
The Plain Bagel
Diversify
Focus on long-term
Watch biases
Look to lower fees