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Technology Stocks : INTEL TRADER -- Ignore unavailable to you. Want to Upgrade?

To: smolejv@gmx.net who wrote (7319)	11/30/1999 12:13:00 PM
From: MonsieurGonzo	Read Replies (1) \| Respond to of 11051

DJ:" where's the wurst? " argument? what argument (^_^) ...the assumption behind the construct is that the investor holds either SPX and/or NDX to begin with, either by direct investment in an index vehicle/fund or, indirectly - by owning around 20~30 BigBoy names that are the index for all intents and purposes. If the investor owns say, SPY or VFINX, then also holding the index's bellwether - in this case, GE - about 80:20 = SPY:GE or so, has the effect of reducing volatility and, from what I can tell, will out-perform the index basis in either a growth or decay scenario. I suspect this may be true of any index-investment scheme (which is why I am exploring it) for example... RLX:WMT or DRG:MRK or BTK:AMGN or BKX:C and so on... ...and it also appears to be useful for global index investments like EWG:DT or EWJ:NTT. The idea is simply to "beat the index" by heavily weighting its most visible bellwether component. We could try to pick other components within the index in an attempt to re-weight the basis, but doing so not only requires exceptional F/A skills, it also tends to expand specific risk... otoh, weighting the index bellwether actually tends to reduce the volatility = decay of the index when things are going down... IOW: bellwethers do not have the same "specific risk" (in relation to their index) as other components do. I would feel comfortable advising any index investor to allocate 5~20% of her kapital - presumably periodic, dollar-cost averaging or, triggered purchasing upon any -10% perceived dip - to the index bellwether. So, my first observation has to do with the effects of adding some bellwether to any index investment scheme; I submit that *reward : risk* is improved by doing so. My second observation has to do with amplifying this 80:20 = INDEX:BELLWETHER basis without employing margin or derivative leverage. For example, it is well-known that "financials" tend to lead bullish advances of the OEX-100; further, within the NF.X - Financials Sector, XBD.X - Brokers tends to out-perform either BKX.X - Banks or IUX.X - Insurance. Thus, a broker bellwether like, MWD appears to offer the index investor (an ersatz "leverage") a means of amplifying index gains over the course of any bullish run. Hence, 60 : 40 = [ 3 x SPY ] : [ [GE] : [MWD] ] I'm not advising you - or anyone else, for that matter - to change what you're doing, DJ; I'm simply exploring what appear to be elegant ways to beat an index... ...for a simple index investor, who doesn't have the F/A skills of a Berney and, does not employ margin or derivative leverage risk to her index basis. -Steve