AAII: The American Association of Individual Investors

by Chris Orndorff

Consumers like to get what they pay for. When they purchase a carton of milk at the market, they are usually unhappy if they subsequently discover apple juice in the carton. Clients who hire an investment manager are no different. Someone who invests in a small-cap growth fund does not wish to own alarge-cap value portfolio.

In this context, risk management is best understood as investment quality assurance. It helps assure that milk gets into the container rather than apple juice. It does not, however, ensure that the investment product has a positive return or exceeds a benchmark index return.

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January 2007 Issue

Portfolio Strategies
Choosing the Right Mix: Lessons From Life Cycle Funds
Life cycle funds represent a fund family’s professional thinking about prudent asset allocations through a typical individual’s life cycle. What you can learn from four life cycle fund families.

Stock Strategies
12 Key Lessons Learned About Technology Investing
The technology sector may not be all that it used to be, but it still offers some compelling investment opportunities. Burnt-fingered investors, scorched by tech stock losses, may want to take heed of some useful lessons about investing in the sector.

Features
A Roller-Coaster Ride to a Strong Finish in 2006
It had its ups and downs, but the market had a thrilling end, as did most strategies during 2006. Of the 58 strategies tracked on AAII.com, only four failed to generate positive returns for the year. The value-oriented Enterprising Investor methodology of Benjamin Graham was the leading strategy for the year, while James O’Shaughnessy’s Tiny Titans growth and value strategy was the long-term winner.

Stock Strategies
Investment Quality Control: The Importance of Risk Management
Modern quantitative risk measures can provide investors with a more accurate way of assessing the risk level of their portfolios and ensuring that their portfolio is performing as was originally intended.

AAII Model Portfolios
Shadow Stock Portfolio: A Strong Year-End Finish
The AAII Model Shadow Stock Portfolio had a remarkable year, up 25.0% year-to-date, compared to 14.0% for the market. We may be due for a weak year down the road, but that is best dealt with by building profits in the interim.

Hot Links
Web Sites for Corporate Events & Activities
Corporate announcements can have a dramatic impact on a stock’s price, with positive announcements providing significant price boosts and negative news causing the price to fall. Where to go on-line to keep track of these events.

Departments
Briefly Noted
Current news items of interest to individual investors.

Departments
Letters to the Editor
Member questions and comments on recent AAII Journal articles.

First Cut
The First Cut: Revised Earnings Estimates
A starting point for investors. This issue’s focus is on the top 30 stocks that have had an upward revision within the past month of their consensus mean estimates for the current and next fiscal year.

Investment Quality Control: The Importance of Risk Management

by Chris Orndorff

In This Issue

January 2007 Issue