HomeRecently, my family and I took a trip to Maine to visit relatives. During our stay, we toured the rocky shore lines and took in the beautiful architecture of the old towns. One sunny morning, three generations of Wardlaws boarded a lobster boat and set out on a guided lobster trapping excursion. We quickly learned lobstermen lead a life of hard work and regulations. Over the course of many years, Maine's lobstermen and state officials have established certain criteria to protect lobsters and allow for greater development. With the rules, lobstermen look for "keepers." A "keeper" is a lobster that measures between 3.25 and 5 inches from its eye socket to the end of its back shell. In addition to the precise measurements, the lobster cannot carry eggs nor can it have a notch in its tail (indicating it is a breeding female). The notch is carved from prior lobstermen who observed the lobster's breeding. If the lobster does not fit the criteria set forth, it is discarded and placed back in the waters. As an investor, you constantly look for "keepers." At your disposal is a wealth of information to determine the quality of a position. Depending on your predetermined goals (including risk tolerances and time horizons), you may use a number of measurement tools. If the position does not fit such benchmarks, you may consider moving on to a more appropriate position. For example, among the many rules of measurement, an investor may look toward a mutual fund's beta. Of course the fund's management, its fees, asset allocations and historical performance should play a role as well. For bonds, an investor may consider its maturity, the coupon, its yield to maturity (or call), price, and rating. An investor must also determine the type of bond. Do you prefer a municipal, treasury, or corporate bond? And with regards to stocks, if you have been an investor for any number of years, you know the drill. Between fundamental and technical analysis, you have several traps to pull from the waters. It is important to know the criteria that is appropriate for your portfolio. Remember, some positions may be keepers while others may be discarded.
About the author: Wardlaw's belief is that familiar life elements best illustrate practical investment strategies; not typical investment jargon. With that philosophy, the author assists financial planners/advisors, brokerage firms, periodicals, and other investment information syndicates create informative and entertaining articles. For comments and questions, please contact the author at tools2invest@yahoo.com