X-Message-Number: 12740
Date: Sun, 7 Nov 1999 10:49:46 -0800 (PST)
From: Doug Skrecky <>
Subject: funding options

In Message #12731  wrote:
> Now, the question of an investment vehicle to pay for cryostasis:
 
 John de Rivaz has had many suggestions, and we are actively investigating 
several new possibilities. The bare concept is that, if someone invests a 
very modest sum periodically in a well managed tech fund, or even just in a 
tech or mostly-tech index fund, possibly the Nasdaq 100 (symbol QQQ), then, 
if future tech growth anywhere near approximates historical rates, you will 
have enough to pay your suspension fee in amazingly short order.
<
  Finance journals which deal with such stock market inefficiencies have
found that there is a large difference between prudent long term investing
and gambling on short term fads. Sector investing offers a reduced
reward/risk profile, due to lack of diversification. There exists only
minor anomalies which can be capitalized on with short term investing, and
these face the hurdle of steep transaction costs.
  There is a strong temptation for some non-professional investors to
over-estimate their own stock picking abilities, when they've had a string
of good fortune. It is naive to believe this is much more than luck. The
market is fairly efficient with regard to large capitalization stocks,
which are too intensely studied by Wall St, for there to remain any
outstanding opportunities for nimble investors.
  With regard to funds, there exist only three means that I am aware of
for out-performing the market in the long term. One is to invest in
closed-end funds trading at a discount. Another is to use the Morning
Star rating system for mutual funds. Many people use past performance as a
guide to future performance. However retrospective studies have found this
simple strategy has been proven to be largely ineffective.
  The third method is to invest in funds that invest in small
capitalization stocks. However a useful discussion of this opportunity is
beyond the scope of my limited typing skills. I'll just mention that
underperformance as well as overperformance is a possibility when
investing in small funds.
  FYI - IF improved performance is actively desired, I would recommend CI
buy a subscription to the Journal of Finance, and the Journal of Portfolio
Management.

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