Barbara Friedberg, MBA, MS
How to Get Rich; Wealth Building Guide for the
Financially Illiterate (available at Amazon)
teaches in his child
Today’s topics: Efficient Market Hypothesis (EMH) &
Modern Portfolio theory- only research supported
Who the H-ll am I and why should you listen to me?
How I started investing-Homework
Research Rules- look at the data
What are the most well researched investing
How to separate the noise from the proven
How to integrate investing information into
How to boost your own investing knowledge.
Where to look for inspiration and information.
The research is clear!
Over the long term, only approximately 30 %
of professional investors beat the market!
Of those 30%, few repeat year over year
You can try to beat the markets, but it’s a
Index mutual fund or ETF in diversified asset
allocation-in line with your risk tolerance.
What is the efficient market hypothesis?
How do I implement?
Background◦ Asset classes-Stocks, Bonds, Cash, Real Estate?
The Dow Jones Industrial Average
Index Investing: The Standard & Poor's 500
Index Investing: The Nasdaq Composite Index
Index Investing: The Wilshire 5000 Total
Index Investing: The Russell 2000 Index
•Risk averse: Zvi Bodie & Mike
•Sleep at Night Guide to Risk
•Search “risk tolerance quiz”
Invest $1.00 in the S & P Index in 1926
In 2003, your dollar is worth
That’s about 10 % per year return!
Now try some market timing:
Invest $1.00 in the S & P Index in 1926
Trade out of the market during the 37 months
with the best returns – during 1926-2003.
In 2003, your dollar is worth $17.42
Miss the best 37 months during that 77 year
period and your return drops to 3.78 percent per
Source: Investment: Analysis & Management by Charles P. Jones
Albert Einstein called compound interest "the
greatest mathematical discovery of all time"
Low Cost Index Mutual Funds
Great sample portfolios:
Sample Lazy Portfolio
10 Year return of 7.9% beats S & P 500 return
Of 7.65% with less risk (volatility)
S & P 500
Investing for Newbies
Difference between a stock, bond, and mutual
What is asset allocation?
How does risk tolerance relate to investing?
What to do when the market tanks?
Should I invest in individual stocks and bonds
or mutual fund?
Read to write
◦ Get ideas and
2 Ideas for Inspiration
Read investment related
publications such as; Money
Magazine, WSJ, CNN Money,
Use these 2 writing
1. List takeaway from article:
2. What are the implications
Use this model
“Fed officials voted to
interest rates near
zero, where they have
been pinned since late
make the first rate
increase in 2015 or
“Central Bank Stays Course
on Easy-Money Policies”,
Wall Street Journal,
September 19, 2013
Interest rates will
likely be low for
the next year or
Takeaway from Article
Investing in low interest rate environment.
Tips for savers:
◦ Step up notes
◦ Mid term bonds & bond ladder
Tips for borrowers:
◦ Borrow now for appreciating assets (home)
You’re not going to
make money trading in
and out of the markets
Avoid “hot tips”
Avoid “hot funds”
Long term economic
“Investing should be more like watching paint dry or
watching grass grow. If you want excitement, take $800
and go to Las Vegas.”Paul Samuelson
"The individual investor should act consistently as an
investor and not as a speculator." - Ben Graham
"If you have trouble imagining a 20% loss in the stock
market, you shouldn't be in stocks."-- John, founder of
Vanguard and the index fund
"Investors should always keep in mind that the most
important metric is not the returns achieved but the
returns weighed against the risks incurred. Ultimately,
nothing should be more important to investors than the
ability to sleep soundly at night."-- Seth Klarman
The best way to own common stocks is through index
- Warren Buffett, Berkshire Hathaway Inc. 1996
"Most of my investments are in equity index
funds." BusinessWeek & The Parable of Money Managers William F. Sharpe, Nobel Laureate in Economics, 1990
"Most individual investors would be better off in an index
So investors shouldn't delude themselves about beating
the market? "They're just not going to do it. It's just not
going to happen."
Daniel Kahneman, Nobel Laureate in Economics, 2002;
time educating yourself.
Designate only a portion of
your investment portfolio
(some recommend 10%) to
Email me with your questions. Use Contact form on the site
Wall Street Journal
Money Magazine, Kiplinger’s, Smart Money
The Elements of Investing, by Charles D. Ellis & Burton
A Random Walk Down Wall Street, by Burton G. Malkiel
AAII-American Association of Individual Investors
Free: 20 Minute Guide to Investing, by Barbara
Free: Investopedia (http://www.investopedia.com/)
Yahoo! Finance (http://finance.yahoo.com/), MSN