Houston, TX (PRWEB) October 2, 2009
ArborInvestmentPlanner.com campaigns to educate individual investors about the benefits of managing their own portfolio. The investment environment has changed drastically and passive investing is no longer an acceptable alternative. Many Investors can use guidance in investment planning decisions. One of those decisions is which investment vehicles best suit the individual investor's needs. Individual stocks, exchange traded funds (ETFs), and mutual funds are the most popular vehicles for investing.
Investing in individual stocks gives the investor the most flexibility to target specific companies that fit the individual's particular investment style. It also makes it possible to own the very best companies or opportunities. Low commission rates make transaction costs and expenses another advantage. The main disadvantage is the need to properly diversify a portfolio to the point of reducing company specific risk, yet not over diversify to the point of the portfolio being similar to a market index fund. Both under diversification and over diversification are cause for poor portfolio performance.
Exchange traded funds (ETFs) provide diversification by owning a basket of securities, yet they trade on a stock exchange like a stock (see "What are ETFs? Should They Be In Your Portfolio?" on the Blog). ETFs can segment to very specific or targeted sectors, allowing investors to have a diversified position in a small slice of a sector, and generally have lower expenses than mutual funds. The main drawback to ETFs is most are not actively managed, but programmed to follow a specific index, the index and therefore the ETF, may not own the very best stocks.
Mutual funds are losing market share to ETFs and individual stocks due to the lower costs of individual transactions and the advantages of ETFs. Mutual funds, in general, have been poor performers in the current decade due to over diversification and high expense ratios. Mutual funds are still a viable choice for Investors with a small amount of investment capital and in the rare cases where you have an exceptional fund manager worth the extra expense.
Investors who choose to manage their own portfolio may want to hire a service such as ArborInvestmentPlanner.com. The Planner provides the Arbor Asset Allocation Model Portfolio (AAAMP) which uses individual stocks and ETFs in its portfolio to properly diversify. ETFs are used to obtain diversification in industries where the portfolio wants broad exposure in a specific sector (i.e. biotechnology, water resources, environmental services, etc.) Individual stocks are used to purchase companies with one or more strategic advantages. Examples of strategic advantages might include proprietary products, excellent management, strong balance sheets, high and or growing cash flow, a geographic monopoly, demand driven by a strong global trend, etc.
Chief Investment Officer of the AAAMP, Ken Faulkenberry states "The Arbor Investment Planner provides investors with the ability to put all the pieces of the puzzle together to form a properly diversified asset allocated portfolio. An active asset allocation strategy allows the portfolio to seek high rates of return by investing in areas of opportunity where prices may not reflect their real value or potential. At the same time, proper diversification lowers the overall risk of the portfolio.
For more information visit: http://www.ArborInvestmentPlanner.com.
Free investment articles, Money Management Tips, and Investment Proverbs available on the Planner's Blog: http://www.blog.ArborInvestmentPlanner.com