4-07 Resources

It’s time to decide on how you’d like to construct your portfolio. Whether you decide to invest virtual money or real funds, you should now have a basis to create your own thoughtful plan and strategy. Using your virtual portfolio and trading ability, you can test your strategy and “tweak” it, if necessary, to achieve profitable results in both the virtual and real world.

Glossary

Portfolio – A collection of investments that you own. A portfolio can just be “everything mixed up in a bucket”, or (ideally) constructed with a specific goal or target in mind.

Diversification – The act of balancing a portfolio by purchasing a variety of investments in different sectors or security types.

Sharpe Ratio – a measure of risk versus reward, calculated by dividing the returns of a stock or portfolio by its variance over time.

KISS – “Keep It Simple, Stupid”, a common investing mantra that forms the “buy what you know” investing strategy.

Warren Buffett – One of the world’s most successful investors and richest men. Buffett champions the “buy and hold” investing strategy.

Peter Lynch – Another one of the world’s most successful investors, and former manager of one of the most successful mutual funds. He is a champion of the “Buy what you know” investing strategy.

Ten-baggers – A stock that returns ten times its purchase price.

Stock Screener – A tool used by investors to filter down stocks by different criteria to find an investment that suits their needs.

Index Fund – An ETF or Mutual Fund designed to match, not beat, the returns of a stock index like the Dow Jones or S&P 500

Exercise

Make a list of stocks that you are interested in. Identify their industry, market cap, and dividend yields. Now build a balanced, diversified portfolio of at least 10 stocks on your virtual account. Make sure you have with a selection of stocks from different industries, market caps, dividends, and countries.