Investing is for the Little Guy - Risk-Return Concepts
Not what you're looking for?
You work for an large investment firm and recently wrote a position article on your firm's approach to investing for the small investor, titled "Investing is for the little guy". The article now appears on your company's website. It has, interestingly enough, generated e-mailed responses from potential clients and your firm is asking you to address some of their questions for a Frequently Asked Questions (FAQ) segment that will be posted to the site soon.
Specifically, some of the respondents have compared investing in the stock market as a no win situation and only the institutional investors can win. These respondents would like a response that further clarifies your firm's position regarding risk in light of these type of statements.
In your response, your company has asked that you address these questions building upon the risk-return concepts you identified in the position piece you wrote for the firm.
Purchase this Solution
Solution Summary
This posting provides a detailed solution to the student's question.
Solution Preview
Investing in the stock market is far from a "no-win" situation.
It is true that institutional investors have access to information most individual investors cannot see, such as research reports, historical company and market data, and in many cases direct conversations with corporate executives. But those institutional investors also face constraints that individual investors do not. Mutual-fund managers must often sell stocks they would prefer to hold simply because they need to raise cash to cover redemptions by fund-holders. Other institutional investors are limited as to the kind of investments they are allowed to choose, or face any one of a number of additional constraints.
As an individual investor one can harness the power of time. If you buy a diversified investment, say, an index fund that serves as a proxy for the ...
Purchase this Solution
Free BrainMass Quizzes
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Social Media: Pinterest
This quiz introduces basic concepts of Pinterest social media
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.
Introduction to Finance
This quiz test introductory finance topics.