Tuesday, April 26, 2011

Do You Know Your Core?

I came a cross an interesting article at Morningstar this morning about core holdings.

It's by Christine Benz, and she address a reader's concern over her stating that what the reader considers his core holding is not a core holding. The basic gist of the article is that it depends on what your definition of the word "core" is. The most common usage of the term is to describe a broad-based fund that covers a large swath of investment territory (asset classes) in which you should place the bulk of your holdings.

Of course, that's likely to be different from investor to investor because every investor's style and goal is going to be slightly different.

She also briefly describes other terms commonly used to determine whether a fund or stock would typically be considered a core holding, like it's R-Squared value.

Her take: Just because most people shouldn't use an aggressive bond fun as their core holding, doesn't mean no one should. Do what makes sense for you, and understand why you're doing it.

Know your definition of core, and follow it.


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