D E P C

There is an Q and A in the June, 2007 issue of Money Magazine with Bill Sharpe, whose work on investment risk and return won him a Noble Prize. Sharpe says that 4 verbs summarize the principles of good financial advice. I agree. They are:

1. Diversify

The closer you come to owning the entire market, the higher your expected return for the risk you take.

2. Economize

Minimize management fees and investment costs.

3. Personalize

Take into account your personal situation and the risks you face outside of your investments.

4. Contextualize

If you think that the market is inefficient and you chose to invest in a single stock or sector, then you should be able to justify why the market is not right.

In my opinion, very insightful. The entire article is worth reading.