[aquaswim47]

I don't think your teacher is really emphasizing a long-term portfolio so pick the most aggressive stock you can find. My CNBC portfolio is only up a measly 12.4%. In the CNBC challenge, I've been mainly a passive investor. I owned BHS, CAT, CBH, CC, CMGI, CTRP, CWTR, GSK, HLT, JBLU, JNJ, NOC, SHLD, TEVA, T, and UTX. My laggards were: BHS, CC, CTRP, HLT, JBLU, JNJ, and UTX. In any event, I'm 4th among the celebrity leaderboard. I hope this indicates the benefits of passive investing over trying to beat or time the market; it is only one more example. Also, it shows that if you're willing to take on more risk, you get may more reward. CMGI was the only stock I followed as a result of a herd mentality; the other 15 were value investment picks. Unfortunately, it was my best performing stock. I feel uncomfortable following the herd; it's simply not my investment style.

I believe creating your own mutual fund of 15-20 stocks is probably a good way to make money as long as you keep your costs low; you may want to invest 85-90% of your money in a Vanguard mutual fund and the rest in your own individual stock portfolio composed of five to ten stocks in different sectors. For instance, every time you get $4,000, you put $3,500 towards Vanguard and $500 for an individual stock. That won't help in your investment game, but it will likely pay off in your long-term investments. I really think the 87.5/12.5 is a great strategy that will, in the long run, pay off. It allows you to have enough in the game whereby you are interested in coming up with your own investment choices yet being able to earn market returns and be sure you won't underperform the market. Index funds are the best way to achieve market returns.

This isn't necessarily exciting but only 18% of mutual fund managers are actually able to reach or exceed the market. You might be one of those 1/5 of the meet or beat the market, but why put 100% of your money at risk if you have an 82% of underperforming the market. In order to beat the market, it helps to minimize trading costs, to read the firm's financial statements and annual reports, and to listen to any conference calls that you can find on Yahoo Finance for the firm. It makes you more likely that you will outperform the market if you follow these rules, but still you have an 82% chance of underperforming the market.