GETTING RICH THE ECON WAY - Mutual fund (diversification)...

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Getting rich the econ way Save (starting young) Invest in Indices Investing 101 Business muney library, – Investing Basics Personal Investors Planning and Education Invest (emphasis on stocks) Stock value – present view of future earnings Diversify (suggestion: index funds) The economic theory of financial markets Using experts vs. Using darts Efficient market hypothesis (EMH and cousin RWH) Don’t do nothing Don’t choose too good to be true Don’t buy last year’s hot investment Believing you can outsmart the market- NO Efficient Market Hypothesis Econ + B-school lingo =EMH\ Does not mean there is no rational investment theory Upward drift over a period of time
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Unformatted text preview: Mutual fund (diversification) and index funds Mutual funds actively managed in order to maximize growth on certain industries Managers believe they are above EMH Index fund financial instrument that buys common stocks across an entire market index Indices do not actively manage stocks, proportionate investing across the market. Investment mistakes no Econ 201 student should make No investment strategy based on publicly available information can beat the market because all information is rapidly reflected in share prices after becoming public. Burton Malkiel A Random Walk Down Wall Street Inefficient Markets by Andrei Schleifer...
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This note was uploaded on 04/19/2008 for the course ECON 201 taught by Professor Williams during the Fall '08 term at UVA.

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GETTING RICH THE ECON WAY - Mutual fund (diversification)...

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