[caption id="attachment_437" align="alignleft" width="150"] John G. Finley, CFA[/caption]
Over the years, my wife and I have enjoyed taking long walks with our dogs, either in the neighborhood or in a nearby forest preserve. You notice things on walks that you would never see driving a car over the same route. We are seldom disappointed by what we might see, such as a group of deer, a Northern Harrier or just the beauty of being in Creation. While we may occasional y get caught in a sudden thunderstorm on one of our long walks, they are usually very rewarding to us.
On one of our recent walks through our neighborhood, we turned the corner and I immediately spotted a dime on the ground. I turned to my wife and said "I wonder what we would have found if we had gone a different direction?" Just then it struck me that this was analogous to investing money. Whenever we commit funds to a particular investment in hopes of being rewarded with a positive return, we are deliberately excluding al other investment options we could deploy with those particular dollars. Only in hindsight will we know whether our choice was a good one or not compared with al the other investment alternatives we could have chosen.
When it comes to investing, there is a bewildering array of investment choices available to us. For example, there are well over 7,500 mutual funds (offering more than 21,000 share classes) in the U.S. alone. There are also over 1,400 exchange traded funds (ETFs), and more being created every day it seems. These funds and ETFs offer a very wide range of strategies, including equities, bonds or blends of each. There are even mutual funds that offer various hedge fund strategies. Of course, you could also invest directly in common stocks or individual bonds. There are many thousands of these to choose from as well.
See Part 2.
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Posted on Tue, May 1, 2012
by John Finley