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Monday, February 7, 2011
Tight Aggressive Style in Poker
If you’ve read our basic poker article about categorizing your opponents, you should already be aware of the 4 typical playing styles in poker using the following labels: tight, loose, passive, and aggressive. In that article, the tight-aggressive strategy was described as the most effective strategy for beating low limit cash games, single table tournaments (SNGs), and low buy-in multi-table tournaments (MTTs). How do you play a tight-aggressive style? Let’s break it down.
Playing Tight
The first step towards playing a tight-aggressive style is playing tight. Playing tight means getting involved in less hands and folding more hands preflop. Probably the biggest mistake that new poker players make is playing too many hands. Being selective about the hands you play will plug this leak and increase your winnings immediately.
The most important thing that being selective does is it helps you conserve chips by folding bad hands right away and not trying to chase second best hands. For example, folding hands like Ks8s helps you avoid going broke when your opponent makes an A-high flush to your K-high flush and saves you chips when the flop comes king high and you are facing a stronger kicker.
A lot of the money you win or lose playing poker will occur during hands that don’t go to showdown. You will save yourself money by simply playing tight and folding marginal hands preflop, instead of folding them after you’ve paid to see the flop and missed it yet again. Playing a tighter range of hands is also helpful for maximizing your credibility when employing the second part of a tight-aggressive strategy, which is playing aggressive.
Being Aggressive
Being aggressive in poker means constantly being on the attack. Your main actions are betting, raising and reraising. You rarely check or call. You don’t wait for your opponents to act and then react to their actions. As an aggressive player, you want the other players at the table to be forced to react to your actions.
A basic tenant of poker is that it takes a stronger hand to call a bet than it does to raise. Therefore, if your hand is good enough to call, it’s definitely good enough to raise. This forces your opponent to have to make the majority of the difficult decisions. This is a very important concept to remember when playing a tight-aggressive style.
Why the Tight-Aggressive Style is so Effective
The table image your create when implementing a tight-aggressive style is hard to combat. Your tight hand selection gives your opponents the impression that you only play strong, quality hands. It also makes your bluffs more effective. For example, your opponents will more apt to believe you have an overpair on a flop containing all low cards than they would against a looser player.
The aggressive component of the equation makes your hand strength difficult to read. By playing your strong hands, medium-strength hands, bluffs and draws aggressively by betting and raising, your opponents will have a difficult time putting you on a hand. If you maintain a uniform bet-size regardless of the strength of your hand, such as 2/3 to 3/4 of the pot, you will be able to further disguise your holdings.
Final Thoughts
The tight-aggressive style is the most important strategy new players should learn when they start playing poker. It combines the two most effective playing styles of poker and helps new players develop the fundamentals required to excel at poker. By playing tight, you will generally enter pots with an advantage and win more hands at showdown. By playing aggressively, you can keep control of the action and force your opponents to make the difficult decisions. The tight-aggressive style is the most optimal strategy for consistently beating low limit cash games and low buy-in SNGs and MTTs, so it’s definitely a style you’ll want to master as soon as possible.
Playing Tight
The first step towards playing a tight-aggressive style is playing tight. Playing tight means getting involved in less hands and folding more hands preflop. Probably the biggest mistake that new poker players make is playing too many hands. Being selective about the hands you play will plug this leak and increase your winnings immediately.
The most important thing that being selective does is it helps you conserve chips by folding bad hands right away and not trying to chase second best hands. For example, folding hands like Ks8s helps you avoid going broke when your opponent makes an A-high flush to your K-high flush and saves you chips when the flop comes king high and you are facing a stronger kicker.
A lot of the money you win or lose playing poker will occur during hands that don’t go to showdown. You will save yourself money by simply playing tight and folding marginal hands preflop, instead of folding them after you’ve paid to see the flop and missed it yet again. Playing a tighter range of hands is also helpful for maximizing your credibility when employing the second part of a tight-aggressive strategy, which is playing aggressive.
Being Aggressive
Being aggressive in poker means constantly being on the attack. Your main actions are betting, raising and reraising. You rarely check or call. You don’t wait for your opponents to act and then react to their actions. As an aggressive player, you want the other players at the table to be forced to react to your actions.
A basic tenant of poker is that it takes a stronger hand to call a bet than it does to raise. Therefore, if your hand is good enough to call, it’s definitely good enough to raise. This forces your opponent to have to make the majority of the difficult decisions. This is a very important concept to remember when playing a tight-aggressive style.
Why the Tight-Aggressive Style is so Effective
The table image your create when implementing a tight-aggressive style is hard to combat. Your tight hand selection gives your opponents the impression that you only play strong, quality hands. It also makes your bluffs more effective. For example, your opponents will more apt to believe you have an overpair on a flop containing all low cards than they would against a looser player.
The aggressive component of the equation makes your hand strength difficult to read. By playing your strong hands, medium-strength hands, bluffs and draws aggressively by betting and raising, your opponents will have a difficult time putting you on a hand. If you maintain a uniform bet-size regardless of the strength of your hand, such as 2/3 to 3/4 of the pot, you will be able to further disguise your holdings.
Final Thoughts
The tight-aggressive style is the most important strategy new players should learn when they start playing poker. It combines the two most effective playing styles of poker and helps new players develop the fundamentals required to excel at poker. By playing tight, you will generally enter pots with an advantage and win more hands at showdown. By playing aggressively, you can keep control of the action and force your opponents to make the difficult decisions. The tight-aggressive style is the most optimal strategy for consistently beating low limit cash games and low buy-in SNGs and MTTs, so it’s definitely a style you’ll want to master as soon as possible.
Tight Aggressive Poker Style Basic TAG Poker Strategy
Approaching the game of poker can be intimidating for any inexperienced player. Online poker takes away a large part of the intimidation factor, but a beginning player is still left with the difficult, strategy-based decisions that will determine his/her expectation. In this article, we will cover Basic Tight-Aggressive (TAG) Strategy.
Tight-Aggressive is probably one of the easiest styles to learn in No Limit Texas Holdem, simply because you are playing fewer hands. The word “tight”, in this case, refers to your starting hand requirements. Tight poker players will will rarely open a pot with a very weak starting hand (although even the most TAG player will loosen his/her requirements when opening a pot in position).
The word “aggressive”, in this case, refers to the way you play your hand in relation to the pot size and your opponents’ actions and reactions. A basic Tight-Aggressive player will mainly be forcing the action pre-flop and post-flop by raising or betting, constantly making opponents pay for entering pots with mediocre holdings while putting them to the test after the flop is seen.
Two things a consistent TAG player should always be on the lookout for from opponents are kicker strength and the possibility of being dominated by a huge hand post-flop. Many beginning players in today’s game would be surprised to learn that basic tight aggressive strategy, on its own, is not enough to be profitable at any game level above micro stakes. If you’re going to employ any broad-based strategy, you’ll need to learn and adapt to how opponents are playing against your table image.
Tight-Aggressive players, for the most part, enter pots where their starting hand represents an above average showdown value while having a reasonable chance of dominating others’ starting hands. In other words, there truly IS a ton of value in raising with Ace-Queen on the button, and getting one of the blinds to flat-call with a weaker Ace. More often than not, your Continuation Bet will double as a Value Bet, since you’re likely to be holding the best hand after the flop comes.
Beginning TAG players bet their hand strength, and bet it aggressively (at least on the flop they do)… hence the beauty of repeatedly getting opponents to pay for the privilege of seeing flops with inferior starting hand ranges. Opponents are repeatedly forced to either donate expectation with their post-flop draws, or muck… and this is pretty much the elementary theory of Tight-Aggressive play.
However, TAG strategy is highly exploitable, and simply can not survive on its own, especially versus competent players. Non-expert TAG players are constantly caught off-guard by players who trap with their own premium hands. Perhaps the most common (and unprofitable) trait of playing this type of strategy is the ease of becoming stubborn. Once you enter a pot or bet a relatively strong hand after the flop, it requires an enormous amount of discipline to rethink your betting lines once an opponent plays back at you. It can be argued that one of the main reasons people are willing to flat-call preflop raises with mediocre hands is because stubborn TAG players blindly bet their starting hand strength in spite of unfavorable community cards.
In order to play ANY style successfully, a player must put in the necessary work and make correct decisions in situations where “style” gives way to “what’s best right now”. Successful TAG players know how to value their strong starting hands… but perhaps more importantly, they know (more often than not) when they are up against a superior holding. If you are consistently stacking off with hands like Top Pair, Top Kicker in a deep-stacked blind structure, it won’t be long until you’re pegged by players who pay attention.
Especially in cash games, there are plenty of players who simply lie in wait for predictable TAG players. On nearly every site, it is common to find players who play 4 or more tables at a time, and give away tons of information without realizing it. More than anything, you DO NOT want to become predictable in deep-stacked blind structures.
So what’s the answer to turning a profit as a Tight-Aggressive player? Well, you must realize both the pros and cons of such a style. Take note of why exploiting edges is so necessary, but also work to discover how another player will attempt to chip away at your edge… and react/adapt appropriately. TAG is a style… and an extremely generic one at that. It’s highly profitable against opponents who have an unhealthy disregard for patience. It’s highly exploitable against opponents who know exactly what you’re doing.
As always, the determining factor of expectation is YOU. Learn how to play TAG… practice it… embrace it… make use of it. And when your opponents figure out what you’re doing… discard it in favor of a more-profitable “style” that will earn you the expectation a situational decision-maker deserves.
Tight-Aggressive is probably one of the easiest styles to learn in No Limit Texas Holdem, simply because you are playing fewer hands. The word “tight”, in this case, refers to your starting hand requirements. Tight poker players will will rarely open a pot with a very weak starting hand (although even the most TAG player will loosen his/her requirements when opening a pot in position).
The word “aggressive”, in this case, refers to the way you play your hand in relation to the pot size and your opponents’ actions and reactions. A basic Tight-Aggressive player will mainly be forcing the action pre-flop and post-flop by raising or betting, constantly making opponents pay for entering pots with mediocre holdings while putting them to the test after the flop is seen.
Two things a consistent TAG player should always be on the lookout for from opponents are kicker strength and the possibility of being dominated by a huge hand post-flop. Many beginning players in today’s game would be surprised to learn that basic tight aggressive strategy, on its own, is not enough to be profitable at any game level above micro stakes. If you’re going to employ any broad-based strategy, you’ll need to learn and adapt to how opponents are playing against your table image.
Tight-Aggressive players, for the most part, enter pots where their starting hand represents an above average showdown value while having a reasonable chance of dominating others’ starting hands. In other words, there truly IS a ton of value in raising with Ace-Queen on the button, and getting one of the blinds to flat-call with a weaker Ace. More often than not, your Continuation Bet will double as a Value Bet, since you’re likely to be holding the best hand after the flop comes.
Beginning TAG players bet their hand strength, and bet it aggressively (at least on the flop they do)… hence the beauty of repeatedly getting opponents to pay for the privilege of seeing flops with inferior starting hand ranges. Opponents are repeatedly forced to either donate expectation with their post-flop draws, or muck… and this is pretty much the elementary theory of Tight-Aggressive play.
However, TAG strategy is highly exploitable, and simply can not survive on its own, especially versus competent players. Non-expert TAG players are constantly caught off-guard by players who trap with their own premium hands. Perhaps the most common (and unprofitable) trait of playing this type of strategy is the ease of becoming stubborn. Once you enter a pot or bet a relatively strong hand after the flop, it requires an enormous amount of discipline to rethink your betting lines once an opponent plays back at you. It can be argued that one of the main reasons people are willing to flat-call preflop raises with mediocre hands is because stubborn TAG players blindly bet their starting hand strength in spite of unfavorable community cards.
In order to play ANY style successfully, a player must put in the necessary work and make correct decisions in situations where “style” gives way to “what’s best right now”. Successful TAG players know how to value their strong starting hands… but perhaps more importantly, they know (more often than not) when they are up against a superior holding. If you are consistently stacking off with hands like Top Pair, Top Kicker in a deep-stacked blind structure, it won’t be long until you’re pegged by players who pay attention.
Especially in cash games, there are plenty of players who simply lie in wait for predictable TAG players. On nearly every site, it is common to find players who play 4 or more tables at a time, and give away tons of information without realizing it. More than anything, you DO NOT want to become predictable in deep-stacked blind structures.
So what’s the answer to turning a profit as a Tight-Aggressive player? Well, you must realize both the pros and cons of such a style. Take note of why exploiting edges is so necessary, but also work to discover how another player will attempt to chip away at your edge… and react/adapt appropriately. TAG is a style… and an extremely generic one at that. It’s highly profitable against opponents who have an unhealthy disregard for patience. It’s highly exploitable against opponents who know exactly what you’re doing.
As always, the determining factor of expectation is YOU. Learn how to play TAG… practice it… embrace it… make use of it. And when your opponents figure out what you’re doing… discard it in favor of a more-profitable “style” that will earn you the expectation a situational decision-maker deserves.
Trade unions switch to aggressive strategy
After years of agreeing to moderate pay hikes to safeguard jobs, Germany's powerful unions are gearing up for a dramatic change of strategy, bidding for wage gains that bosses say could derail the recovery.
* O2 cuts 1,100 jobs - Business & Money (8 Oct 10)
* BMW and Daimler sales surge - Business & Money (8 Oct 10)
* Brüderle backs big pay rises as economy booms - Business & Money (7 Oct 10)
Heavily dependent on exporting quality German-made products, the economy, Europe's biggest, was hit harder than most by the global crisis but now appears to be recovering faster as demand across the globe picks up.
Foreign orders are booming, the country's low unemployment has been hailed as a "jobs miracle," top firms are reporting strong profits and consumer and business confidence levels are soaring.
And having contributed, they say, to this performance by not pushing for pay rises during the tough times, trade unions want a slice of the pie now the recovery is setting in.
"In this first wage round after the crisis, we want to ensure employees get their fair share of the upswing," Berthold Huber, head of IG Metall, one of Europe's biggest unions, wrote in the Rheinischer Merkur daily. "That is good for the employees, good for the economy and secures jobs."
"We want our part of the recovery," said Oliver Burkhard, another senior official from IG Metall, which represents more than two million workers in the steel and metalworking industry. The unions have German public opinion and many economists on their side.
A recent poll for ARD television showed that seven in 10 Germans thought union demands for a three-percent pay rise was "appropriate."
Peter Bofinger, one of the "five wise men" that advise Chancellor Angela Merkel on economic policy, called for a "strong increase in wages of at least three percent" saying it would boost Germany's sluggish domestic demand.
Horst Seehofer, head of the Christian Social Union, Bavarian sister party of Merkel's Christian Democratic Union, said in a recent interview he "absolutely" understood union demands for higher wages.
Unions have been "unbelievably responsible" in the past two or three years, which has enabled Germany to overcome the global slump better than many of its European neighbours, Seehofer said.
Fearing mass lay-offs amid plunging growth, IG Metall agreed in February a two-year deal with a pay freeze and a one-off payment in 2010 followed by a 2.7 percent hike next year.
On the other side of the negotiating table, employers' federation head Dieter Hundt warned it was "premature" to talk of wage hikes as the German economy is not yet completely out of the woods.
Some also caution that the unions' change of strategy could lead to German inflation taking off and eventually to European Central Bank interest rates climbing off their record low levels.
"German inflation slumbers but the alarm has been set," Commerzbank economist Eckart Tuchtfeld wrote Friday in a research note about German wage policy.
But the Financial Times Deutschland said bosses should not fear increased union pay demands as labour leaders have shown they can be responsible when times are tough.
"For unions to demand massive wage increases in light of the DAX (stock market) ... would of course be ridiculous, as the upswing is still too fresh and risky," the newspaper wrote in a recent editorial.
"But companies should not fear moderate demands, as unions have actually in recent years demonstrated that they are more sensible than some have claimed."
Nevertheless, Hundt warned that workers should wait until the upswing has fully taken hold before expecting a share of the proceeds. "We must not put the current recovery at risk," he told German radio. "It's still not yet time to start partying."
* O2 cuts 1,100 jobs - Business & Money (8 Oct 10)
* BMW and Daimler sales surge - Business & Money (8 Oct 10)
* Brüderle backs big pay rises as economy booms - Business & Money (7 Oct 10)
Heavily dependent on exporting quality German-made products, the economy, Europe's biggest, was hit harder than most by the global crisis but now appears to be recovering faster as demand across the globe picks up.
Foreign orders are booming, the country's low unemployment has been hailed as a "jobs miracle," top firms are reporting strong profits and consumer and business confidence levels are soaring.
And having contributed, they say, to this performance by not pushing for pay rises during the tough times, trade unions want a slice of the pie now the recovery is setting in.
"In this first wage round after the crisis, we want to ensure employees get their fair share of the upswing," Berthold Huber, head of IG Metall, one of Europe's biggest unions, wrote in the Rheinischer Merkur daily. "That is good for the employees, good for the economy and secures jobs."
"We want our part of the recovery," said Oliver Burkhard, another senior official from IG Metall, which represents more than two million workers in the steel and metalworking industry. The unions have German public opinion and many economists on their side.
A recent poll for ARD television showed that seven in 10 Germans thought union demands for a three-percent pay rise was "appropriate."
Peter Bofinger, one of the "five wise men" that advise Chancellor Angela Merkel on economic policy, called for a "strong increase in wages of at least three percent" saying it would boost Germany's sluggish domestic demand.
Horst Seehofer, head of the Christian Social Union, Bavarian sister party of Merkel's Christian Democratic Union, said in a recent interview he "absolutely" understood union demands for higher wages.
Unions have been "unbelievably responsible" in the past two or three years, which has enabled Germany to overcome the global slump better than many of its European neighbours, Seehofer said.
Fearing mass lay-offs amid plunging growth, IG Metall agreed in February a two-year deal with a pay freeze and a one-off payment in 2010 followed by a 2.7 percent hike next year.
On the other side of the negotiating table, employers' federation head Dieter Hundt warned it was "premature" to talk of wage hikes as the German economy is not yet completely out of the woods.
Some also caution that the unions' change of strategy could lead to German inflation taking off and eventually to European Central Bank interest rates climbing off their record low levels.
"German inflation slumbers but the alarm has been set," Commerzbank economist Eckart Tuchtfeld wrote Friday in a research note about German wage policy.
But the Financial Times Deutschland said bosses should not fear increased union pay demands as labour leaders have shown they can be responsible when times are tough.
"For unions to demand massive wage increases in light of the DAX (stock market) ... would of course be ridiculous, as the upswing is still too fresh and risky," the newspaper wrote in a recent editorial.
"But companies should not fear moderate demands, as unions have actually in recent years demonstrated that they are more sensible than some have claimed."
Nevertheless, Hundt warned that workers should wait until the upswing has fully taken hold before expecting a share of the proceeds. "We must not put the current recovery at risk," he told German radio. "It's still not yet time to start partying."
Lilly's Rough Patch Has Analysts Questioning Strategy
Eli Lilly (LLY), which has taken one body blow after another of late, on Tuesday threw in the towel on its much-anticipated Alzheimer's treatment, semagacestat.
The drug failed in its phase-three trials, Lilly said.
Lilly separately has recently suffered two court losses to generic-drug makers.
Eli Lilly CEO John Lechleiter wants the drugmaker to reinvent its
Eli Lilly CEO John Lechleiter wants the drugmaker to reinvent its "innovation engine," but some analysts want to see a more aggressive strategy. AP View Enlarged Image
Observers say it's time for the company to change strategy and look to make some acquisitions.
That runs smack-dab opposite the strategy extolled by Lilly CEO John Lechleiter. His strategy is "reinventing our innovation engine here," as he put it in an earnings conference call with analysts last month.
But the engine is sputtering. Lilly is appealing a judge's ruling Thursday that invalidated its patent for the ADHD drug Strattera. On Monday, Lilly asked a U.S. District Court to block all generic versions of the drug until Lilly exhausts all appeals.
The patent was to run until 2016.
Generic-drug makers Teva Pharmaceutical (TEVA), Mylan (MYL) and others are ready to launch generic Strattera. Generic competition commonly knocks 80% off the cost of a branded drug.
And on July 28, Lilly failed in another court to protect the patent for its chemotherapy drug, Gemzar. That patent was to expire in 2013.
A failed drug in phase-three trials means a write-off of many millions in already-incurred costs. The loss of a product to generic competition can cost billions in future revenue.
Lilly's stock has fallen more than 9% since Aug. 10, after sliding 2.3% Tuesday to 34.75.
Gemzar sales were $750 million in 2009. Lilly's Strattera sales last year were $600 million worldwide, $450 million in the U.S.
If prices fall 80%, then that's more than $1 billion off the company's top line, which was $22 billion last year. Add it up over the years until patent expiration, and that's more than $5 billion in forgone revenue.
"It's hard to see a reason for the stock to go up without a major pipeline success or without the company making some aggressive strategic moves," said Seamus Fernandez, an analyst with Leerink Swann, which has done business with Lilly.
Lilly's last big deal was its $6.5 billion purchase of ImClone in 2008, though it has made some acquisitions since. Last month, it bought privately held Alnara Pharmaceuticals for an undisclosed sum. Alnara is working on biologic drugs for metabolic diseases.
The drug failed in its phase-three trials, Lilly said.
Lilly separately has recently suffered two court losses to generic-drug makers.
Eli Lilly CEO John Lechleiter wants the drugmaker to reinvent its
Eli Lilly CEO John Lechleiter wants the drugmaker to reinvent its "innovation engine," but some analysts want to see a more aggressive strategy. AP View Enlarged Image
Observers say it's time for the company to change strategy and look to make some acquisitions.
That runs smack-dab opposite the strategy extolled by Lilly CEO John Lechleiter. His strategy is "reinventing our innovation engine here," as he put it in an earnings conference call with analysts last month.
But the engine is sputtering. Lilly is appealing a judge's ruling Thursday that invalidated its patent for the ADHD drug Strattera. On Monday, Lilly asked a U.S. District Court to block all generic versions of the drug until Lilly exhausts all appeals.
The patent was to run until 2016.
Generic-drug makers Teva Pharmaceutical (TEVA), Mylan (MYL) and others are ready to launch generic Strattera. Generic competition commonly knocks 80% off the cost of a branded drug.
And on July 28, Lilly failed in another court to protect the patent for its chemotherapy drug, Gemzar. That patent was to expire in 2013.
A failed drug in phase-three trials means a write-off of many millions in already-incurred costs. The loss of a product to generic competition can cost billions in future revenue.
Lilly's stock has fallen more than 9% since Aug. 10, after sliding 2.3% Tuesday to 34.75.
Gemzar sales were $750 million in 2009. Lilly's Strattera sales last year were $600 million worldwide, $450 million in the U.S.
If prices fall 80%, then that's more than $1 billion off the company's top line, which was $22 billion last year. Add it up over the years until patent expiration, and that's more than $5 billion in forgone revenue.
"It's hard to see a reason for the stock to go up without a major pipeline success or without the company making some aggressive strategic moves," said Seamus Fernandez, an analyst with Leerink Swann, which has done business with Lilly.
Lilly's last big deal was its $6.5 billion purchase of ImClone in 2008, though it has made some acquisitions since. Last month, it bought privately held Alnara Pharmaceuticals for an undisclosed sum. Alnara is working on biologic drugs for metabolic diseases.
Asset allocation for fund investors
The importance of diversification
Sometimes it seems like the deck is stacked against small or "retail" investors. These investors compete on an uneven playing field against large institutional managers and the people on Wall Street who make the rules of the game. As members of the investing hoi polloi, most individuals would fare best if they followed a diversified asset allocation strategy using mutual funds.
Diversifying across asset classes allows fund investors to mitigate market risk because, the theory goes, different investments perform differently under various conditions. An easy way to get exposure to many different areas of the market is to buy funds that focus on different types of assets -- for example, domestic funds containing shares of small, middle-size and large companies, plus international and emerging markets funds. For additional diversification, add other noncorrelating asset classes to the mix, such as real estate investment trusts, or REITs, and bond funds.
To determine your ideal asset allocation strategy, start by assessing your goals, risk tolerance and investing time horizon.
Consider your spending needs
Your tolerance for risk goes hand in hand with what you can afford to lose. Though you may have no problem snoozing through tectonic shifts in the stock market, liabilities on your balance sheet can be hazardous to your financial well-being. Liabilities can appear in the form of debts or future cash needs.
"If you are someone who has a spending need -- tuition, spending in retirement -- that you can factor in and put a present value on, incorporate that as a liability as you're doing your balance sheet analysis," says Dorsey Farr, Ph.D., investment strategist and portfolio manager at French Wolf & Farr in Atlanta.
"That means that most people can take less risk than they might otherwise think because they have to take into account that planned spending or liability when they're doing asset-liability modeling," he says.
Some people just cannot stomach the thought of losing money even if they own their home and may never need to touch a penny of their investments. Account for your personality when considering risk tolerance to avoid bailing out of high-risk investments at the slightest sign of turbulence.
Time horizon an important factor
In a broad sense, the amount of time you have to invest will dictate your investment strategy.
The retirement portfolio of a 25-year-old is necessarily different from retirement portfolios of 65-year-olds heading into their nonworking years.
"When you're investing, the time frame is extraordinarily important. As we've seen in recent years, you could have the greatest investment in the world, but in a matter of weeks it can come down drastically because of panicked selling that has nothing to do with that company or security," says Paul Mladjenovic, Certified Financial Planner and author of "Stock Investing for Dummies" and the "Unofficial Guide to Picking Stocks."
A recovery can take several years, which may be too long if you have short-term goals such as buying a car or house or funding college.
As a general rule, the more time you have, the more risk you can take.
A conservative strategy for "Retired Ray"
One rule of thumb calls for investors to have the percentage of their portfolio in bonds that represents their age. So a 60-year-old would hold a 60 percent position in fixed income.
With life spans increasing and the very real possibility of being retired for 30 years or more, some investment advisers are recommending more aggressive allocations later in life.
"I have some retirees that still have 60 percent equity positions," says Kevin Brosious, certified public accountant, CFP and president of Wealth Management in Allentown, Pa. "As long as they have the liquidity to pull funds out when they want to, that's fine."
"It's really the lack of liquidity that will kill a plan or not allow a person to realize their goal," he says.
With enough liquidity, long-term investors can ride out market volatility and wait out the recovery.
For an investor who can't afford to take much risk due to time constraints or emotional disposition, a portfolio heavy on the fixed-income side and light on equities can offer some growth with some safety.
The conservative asset allocation model includes equities for growth, REITs and TIPS for inflation protection, and bonds as stabilizers.
A moderate strategy for "Ethel Equilibrium"
A moderate asset allocation strategy involves a higher allocation to stocks than does a conservative strategy. Stocks are generally more risky than bonds for a few reasons.
"An equity is a security which is a residual claim on the assets of a firm. If there is a bankruptcy, other folks get paid before the equity owners. In exchange for coming last in line, there is potentially more upside," says Farr.
Upsides of stocks include possible dividend payments and increases in share price, also called capital appreciation.
To find the best mutual funds for your allocation plan, Mladjenovic recommends first determining the appropriate category and then filtering down the choices from there.
"People often choose the (fund) that is just in the wrong category," he says. He cites an example in which an adviser put his client's college fund into an Internet stocks fund.
"I thought it was a ghastly decision," he says. "In that fund, they could have chosen the greatest Internet stocks in the world, but it was too great a risk," says Mladjenovic.
When evaluating actively managed funds (as opposed to index funds), compare their cost, management tenure and their performance relative to their peers and benchmark.
An aggressive strategy for "Bold Betty"
Stocks aren't the only asset class to consider for investors interested in a growth-oriented portfolio.
The goal of an asset allocation strategy is to have a number of different asset classes with a low correlation to one another. Even if someone is diversified through the entire universe of equities, all can react similarly to a bad business cycle.
"You have to think about the underlying factors that they might be exposed to," says Farr.
Farr recommends that investors consider gold and Treasury securities when looking for assets that are not correlated with the stock market.
Both "would be a safe haven when the economy starts to do poorly. Or gold sometimes responds to concerns about inflation. Treasury securities ... are counter-cyclical in that when the economy gets weak, interest rates tend to decline and investors pursue safer assets," Farr says.
Heed this warning, though: In 2008, when the financial crisis unfolded and the stock market tanked, every asset class was adversely affected.
Since that's bound to happen from time to time, your investment plan should be based on the worst-case scenario while you hope for the best.
Sometimes it seems like the deck is stacked against small or "retail" investors. These investors compete on an uneven playing field against large institutional managers and the people on Wall Street who make the rules of the game. As members of the investing hoi polloi, most individuals would fare best if they followed a diversified asset allocation strategy using mutual funds.
Diversifying across asset classes allows fund investors to mitigate market risk because, the theory goes, different investments perform differently under various conditions. An easy way to get exposure to many different areas of the market is to buy funds that focus on different types of assets -- for example, domestic funds containing shares of small, middle-size and large companies, plus international and emerging markets funds. For additional diversification, add other noncorrelating asset classes to the mix, such as real estate investment trusts, or REITs, and bond funds.
To determine your ideal asset allocation strategy, start by assessing your goals, risk tolerance and investing time horizon.
Consider your spending needs
Your tolerance for risk goes hand in hand with what you can afford to lose. Though you may have no problem snoozing through tectonic shifts in the stock market, liabilities on your balance sheet can be hazardous to your financial well-being. Liabilities can appear in the form of debts or future cash needs.
"If you are someone who has a spending need -- tuition, spending in retirement -- that you can factor in and put a present value on, incorporate that as a liability as you're doing your balance sheet analysis," says Dorsey Farr, Ph.D., investment strategist and portfolio manager at French Wolf & Farr in Atlanta.
"That means that most people can take less risk than they might otherwise think because they have to take into account that planned spending or liability when they're doing asset-liability modeling," he says.
Some people just cannot stomach the thought of losing money even if they own their home and may never need to touch a penny of their investments. Account for your personality when considering risk tolerance to avoid bailing out of high-risk investments at the slightest sign of turbulence.
Time horizon an important factor
In a broad sense, the amount of time you have to invest will dictate your investment strategy.
The retirement portfolio of a 25-year-old is necessarily different from retirement portfolios of 65-year-olds heading into their nonworking years.
"When you're investing, the time frame is extraordinarily important. As we've seen in recent years, you could have the greatest investment in the world, but in a matter of weeks it can come down drastically because of panicked selling that has nothing to do with that company or security," says Paul Mladjenovic, Certified Financial Planner and author of "Stock Investing for Dummies" and the "Unofficial Guide to Picking Stocks."
A recovery can take several years, which may be too long if you have short-term goals such as buying a car or house or funding college.
As a general rule, the more time you have, the more risk you can take.
A conservative strategy for "Retired Ray"
One rule of thumb calls for investors to have the percentage of their portfolio in bonds that represents their age. So a 60-year-old would hold a 60 percent position in fixed income.
With life spans increasing and the very real possibility of being retired for 30 years or more, some investment advisers are recommending more aggressive allocations later in life.
"I have some retirees that still have 60 percent equity positions," says Kevin Brosious, certified public accountant, CFP and president of Wealth Management in Allentown, Pa. "As long as they have the liquidity to pull funds out when they want to, that's fine."
"It's really the lack of liquidity that will kill a plan or not allow a person to realize their goal," he says.
With enough liquidity, long-term investors can ride out market volatility and wait out the recovery.
For an investor who can't afford to take much risk due to time constraints or emotional disposition, a portfolio heavy on the fixed-income side and light on equities can offer some growth with some safety.
The conservative asset allocation model includes equities for growth, REITs and TIPS for inflation protection, and bonds as stabilizers.
A moderate strategy for "Ethel Equilibrium"
A moderate asset allocation strategy involves a higher allocation to stocks than does a conservative strategy. Stocks are generally more risky than bonds for a few reasons.
"An equity is a security which is a residual claim on the assets of a firm. If there is a bankruptcy, other folks get paid before the equity owners. In exchange for coming last in line, there is potentially more upside," says Farr.
Upsides of stocks include possible dividend payments and increases in share price, also called capital appreciation.
To find the best mutual funds for your allocation plan, Mladjenovic recommends first determining the appropriate category and then filtering down the choices from there.
"People often choose the (fund) that is just in the wrong category," he says. He cites an example in which an adviser put his client's college fund into an Internet stocks fund.
"I thought it was a ghastly decision," he says. "In that fund, they could have chosen the greatest Internet stocks in the world, but it was too great a risk," says Mladjenovic.
When evaluating actively managed funds (as opposed to index funds), compare their cost, management tenure and their performance relative to their peers and benchmark.
An aggressive strategy for "Bold Betty"
Stocks aren't the only asset class to consider for investors interested in a growth-oriented portfolio.
The goal of an asset allocation strategy is to have a number of different asset classes with a low correlation to one another. Even if someone is diversified through the entire universe of equities, all can react similarly to a bad business cycle.
"You have to think about the underlying factors that they might be exposed to," says Farr.
Farr recommends that investors consider gold and Treasury securities when looking for assets that are not correlated with the stock market.
Both "would be a safe haven when the economy starts to do poorly. Or gold sometimes responds to concerns about inflation. Treasury securities ... are counter-cyclical in that when the economy gets weak, interest rates tend to decline and investors pursue safer assets," Farr says.
Heed this warning, though: In 2008, when the financial crisis unfolded and the stock market tanked, every asset class was adversely affected.
Since that's bound to happen from time to time, your investment plan should be based on the worst-case scenario while you hope for the best.
Honda’s Aggressive Strategy: Hybrid Green Technology
Honda’s new president Takanobu Ito has announced that he will draw upon the legacy of Honda’s founder to try to ride the current storm in the auto industry; he will do this while trying to offer an aggressive strategy with its hybrid green technology.
The founder, Soichiro Honda was known for his love of cars as well as his boyish personality; sadly, he passed away in 1991. Ito has stated that Honda is to speed up its hybrid vehicle plans, the next vehicle is to be its CR-Z sporty hybrid, this should be released in February 2010 in Japan.
Honda also has plans for a Hybrid Fit subcompact before the end of 2010. Honda are also in the planning stages of offering a CR-Z for the North American and European markets, but it is not known if there will be hybrid versions for these reasons.
The founder, Soichiro Honda was known for his love of cars as well as his boyish personality; sadly, he passed away in 1991. Ito has stated that Honda is to speed up its hybrid vehicle plans, the next vehicle is to be its CR-Z sporty hybrid, this should be released in February 2010 in Japan.
Honda also has plans for a Hybrid Fit subcompact before the end of 2010. Honda are also in the planning stages of offering a CR-Z for the North American and European markets, but it is not known if there will be hybrid versions for these reasons.
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