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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Stefan who wrote (54962)	4/7/1999 3:43:00 PM
From: Knighty Tin	Read Replies (3) \| Respond to of 132070

Stefan, There are four ways to play 90/10 with $10,000. One would be to buy index options with the $1000. True, you may only get a one lot, but you have automatic diversification. The Dow Jones probably fits the bill better than any others as the options can be had well under $1000. That, of course, is not my cup of tea, with $10,000 or $10,000,000. I see no reason why your long options in a 90/10 should be diversified. Not for risk reduction, as the 90% in money funds takes care of that. For protection against profit? Hope not. <g> So, an extreme version would be to invest the $1000 in one or two issues. My accountant does a "golly gee" run for me every now and then and he showed that my avg. option buy cost $2.75 in 1998, and that is up from previous years. But let us say that your avg. cost is $3.33. That gives you a chance to buy one stock's options 3 times in a year. Another alternative would be to use that same $333 to buy 3 different issues. The problem with this one is that you could tap out early in the year, but shooting at three turkeys may mean you have more chance of a Thanksgiving dinner. I would choose between alternative 2 or 3 and work real hard to get the portfolio above $10,000. BTW, when I started 90/10 investing in the 1970s, I started with $5000. The good news is that I got lucky early, but this is a get lucky game at low risk. MB