discuss strategies for investing in the equity market.?

Question

in your discussion include characteristics of various products in the equity market and identify which strategy you would choose for investment at present market conditions and why.

Answer 1

Bogle, the famous mutual fund innovator, had an idea that increasingly seems wise. He described how an individual cannot constantly beat the market any more than a gambler can consistently beat the casino over time.

It is a pretty-well demonstrated and established fact that the value of the stock market (in the American context) grows greater than merely money in the bank earning interest. The problem with buying some of everything is the obvious broadness of the market and the comparative minimal resources of any one individual. Bogle's mutual funds, therefore were a means to pool resources and buy a broad basket of stocks for safety's sake.

The problem with a broad mix of stocks is that while you hope that while some are down, there are enough others that are up, and up high enough to compensate. Organizations like Standard & Poors have sets of benchmark companies, including but not limited to the famous "500." Their rationale was to select, as with the Fortune 500 (which are not the same, although many companies are on both lists) which primarily lists simply the biggest publicly traded corporations, the S&P does a list of those most likely to profit and grow from the perspective of common success criteria.

If I weren't buying such a predefined set, and had the resources for a do-it-yourself basket of stocks, (say I won the lottery and needed a place to put the cash to work) then an easy approach might be to select the top 20, 50, 100, or 200 most profitable companies on the list and buy them, or the ones with the most earnings growth, or...any of a wide variety of criteria that sounded reasonable. On the other hand, I could just buy NY, the Ishares ETF (exchange traded fund, it trades like stock) of the 100 biggest (market capitalization) companies on the New York Stock Exchange--they got big and often stay big by being superlatively good at all they do.

Another tack might be to look at the BusinessWeek scoreboards for the top 8 or 9 hundred companies, sorted by industry sector, some two-dozen of them. Then find a criteria (most profit, most growth, etc.) and select the best one, two, or three in each industry group. This will give some diversity and minimize risk.