In order to accomplish good investing you need to manage the risks involved. For each investment you make there are three types of risks you need to guard against: business risk, valuation risk, and force of sale risk. The following are way to protect yourself from these risks: 1. Business Risk. This is the most familiar and easily understood of all the investment risks. It is the risk of loss of value through competition, mismanagement and/or financial insolvency. Larger industries are at higher risk, such as airline and railroads. The best way to protect against business risk is franchise value. … Continue reading →

Indexes are designed to reflect the performance of a specific segment of the stock market. For instance, the Dow Jones Industrial Average looks at the performance of the top companies in the US; whether Dow Jones goes up or down is indicative of how the stock market as a whole is doing. Index funds are investment funds that seek to match an investment index, like the Standard & Poor 500, by buying proportionate amounts of stocks from each company listed in the index. When the S&P 500 goes up, index funds targeted to it also go up. Commensurately, when it … Continue reading →