Hi Tom,
thanks for your reply.
I agree that one shouldn't apply too many different insurance policies, but do feel that diversification is one of the best also in a AIM managed portfolio.
Options is probably not what you want to go for if you have choosen the 'ease' of AIM, at least I don't.
AIM itself is a good method to increase profit, but not really a method to reduce risk. The highest risk around is that your stock goes down and down and doesn't come back anymore. AIM followed to the heart means that one continues buying that stock, i.e. increasing the loss!
Sector funds (that's what I understand for "ETF", don't think we have exactly the same in Netherlands) can indeed be suitable for AIM as they tend to have a high volatility. At least higher than a fund that is diversified in itself. Probably by chance my sector funds have done very bad over already a year (got one in biopharma, one in "New Energy", and one in Financials) while my individual stocks have been performing fine and have brought me the profits. Perhaps I'm a better stockpicker than the fund managers
It's important to realise that the market is these days largely governed by sector thinking, i.e. individual funds do not behave too much different from the whole sector. Having said that, sector funds should be as good as individual funds but with less risk because the influence of 'ENRONs' is much smaller. So, my 'theory' dictates to go for these funds, but my practice has teached me to go for individual stocks of good companies in volatile sectors.
What are the experiences of others on this forum?
Dik
thanks for your reply.
I agree that one shouldn't apply too many different insurance policies, but do feel that diversification is one of the best also in a AIM managed portfolio.
Options is probably not what you want to go for if you have choosen the 'ease' of AIM, at least I don't.
AIM itself is a good method to increase profit, but not really a method to reduce risk. The highest risk around is that your stock goes down and down and doesn't come back anymore. AIM followed to the heart means that one continues buying that stock, i.e. increasing the loss!
Sector funds (that's what I understand for "ETF", don't think we have exactly the same in Netherlands) can indeed be suitable for AIM as they tend to have a high volatility. At least higher than a fund that is diversified in itself. Probably by chance my sector funds have done very bad over already a year (got one in biopharma, one in "New Energy", and one in Financials) while my individual stocks have been performing fine and have brought me the profits. Perhaps I'm a better stockpicker than the fund managers
It's important to realise that the market is these days largely governed by sector thinking, i.e. individual funds do not behave too much different from the whole sector. Having said that, sector funds should be as good as individual funds but with less risk because the influence of 'ENRONs' is much smaller. So, my 'theory' dictates to go for these funds, but my practice has teached me to go for individual stocks of good companies in volatile sectors.
What are the experiences of others on this forum?
Dik
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