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4 Plrs
chap 2 & 3
Question | Answer |
---|---|
DDM | discount dividend model |
4 factors that decrease present value | 1. # of years to wait 2. rate of inflation 3. impatience of society 4.risk itself |
(DR) discount rate & (PV) present value | these two are inversely related. |
gordon equation | uesed to estimate stock returns, only good for long term |
bonds interest | this does not grow, it is a set rate |
short term investing | purely speculative |
long term investing | more predictable |
chap 3 | Investors |
3 kinds of investors | 1. those that don't know where market is going 2. those that don't know they don't know, 3. analysts (don't know mkt, and job depends on apearing to know) |
STOCK RESEARCH | not worth the cost or the effort put into it |
Old orig. theory, "find a great man and have him pick your stocks" | there are no great men, only lucky chimpanzees |
William Fause | started @ Melon Bank, evaluated money mgrs, created fund that bought all same stocks as S&P 500, went to wells fargo and in 1971 created first index fund which was a disaster, instead of stick to his idea they bought all stocks on NYSE |
Index fund | all stocks in a given index |
cap Weighted | |
Vangard group | 1st to offer public index fund |
Magellan | Lynches old fund, Index runs neck and neck with this fund. |
S & P | only the largest stocks |
what is the advantage of index funds over managed funds | 1-2% per year |
small stock | indexing does not work as well |
critisim of index find | you will never get exceptionally rich, you could get stuck in the mundane |