You and your friend have opened an account on E-Trade and have each decided to select five similar companies in which to invest. You are diligent in monitoring your selections, tracking prices, current events, and actions the company has taken. Your friend chooses his companies randomly, pays no attention to the financial news, and spends his leisure time focused on everything besides his investments. Explain what might be the performance for each of your portfolios at the end of the year.

Question

Business

Kai Elliott

24 February, 23:58

You and your friend have opened an account on E-Trade and have each decided to select five similar companies in which to invest. You are diligent in monitoring your selections, tracking prices, current events, and actions the company has taken. Your friend chooses his companies randomly, pays no attention to the financial news, and spends his leisure time focused on everything besides his investments. Explain what might be the performance for each of your portfolios at the end of the year.

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Answers (1)

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Danielle Shields · Answer 1

You will most likely have better results for your portfolio than your friend.

Explanation:

Investing and trading are difficult activities that require paying attention and being informed almost everyday.

Market conditions can change from day to day. One day a bond may have a coupon rate that pays higher than the prevailing interest rates, and the following day, the interest rates could be higher because of Fed Policy and the recommended action now is selling the bond at a discount instead of getting the coupon payments. And this example could be repeated for every type of financial instruments: bonds, stocks, futures ...