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What is "concentration"?

Concentration occurs when you invest your capital in a few investment classes or one class. The thinking behind this approach for certain investors is if one investment or investing idea is outperforming other investments, perhaps it is a good idea to focus or concentrate your investment in this idea, in hopes of making relatively higher returns. Of course, your acceptance of this concept certainly depends on how much risk to your portfolio you are willing to accept, as a more concentrated investment choice may carry more risk than one that is relatively more diverse. Some investors even believe it is better to decide to invest their money based upon fewer choices or less diversity, as the returns are thought to be higher.

How often should I check or analyze my portfolio to make sure it is properly allocated?

You should check your investment portfolio to make certain it is properly balanced at least quarterly—if not monthly—in order to ensure that your investments are not too synchronous or correlated. Of course, this allocation depends on such factors as how much you have to invest, what your financial goals are, how much time you have before you need access to the capital (your time horizon), your tolerance to risk, and whether you are undertaking some sort of big financial challenge (losing a job, changing a job, health issues, etc.).

What is a "cyclical investment"?

A cyclical investment could be any investment that is highly correlated to some chronic economic event, condition, or pattern. People buy fewer cars and travel less if they are not employed. So investments dependent upon demand created by the level of employment of these cohorts may perform less than desirably, as the unemployment rate increases.

What are the two major stock exchanges?

Although there are many different stock exchanges in the United States, the two

Financial challenges, such as whether you are look¬ing for work, are something you should consider when evaluating your stock portfolio for risky versus safer investments.

Financial challenges, such as whether you are looking for work, are something you should consider when evaluating your stock portfolio for risky versus safer investments.

most important ones are the NYSE and the NASDAQ. The NASDAQ is the second largest stock market in the world, behind only the NYSE in terms of market capitalizations.

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