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4 Plrs

chap 2 & 3

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
Created by: delorya



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