An Expert’s Input

I came across several questions when doing my research. My classmates and I were assigned to give an interview to an expert in our specific genre – my genre being stock market knowledge or analysis. When we first received this assignment, I thought of interviewing a professor here at Syracuse, or my cousin who has knowledge in this field. I ended up emailing an economics professor named Donald Dutkowsky to ask if he was willing to take part in an interview. He agreed to the interview and was eager to give his advice on what he knows about the stock market.

I met with professor Dutkowsky in his office at Maxwell School. I started off by asking him what he knew about the stock market and he had a lot of information to share with me. He started off giving some of his advice on how to and how not to use the stock market. “Never be in the market for a short term period of time, do not constantly buy and sell stocks, and do not back out of the market when it is trending downward” (Dutkowsky, Donald. Personal interview. 2 March 2014). Also, “Be in the market for the long haul, so you can take advantage of the positive trends. If you bail out during a tough time, you’re locking in your losses. Choose a diversified stock portfolio, don’t rely on one company. Put your savings into an index fund (first introduced by John Bogle), which uses a diverse range of stocks and relies on the economy doing well. The economy usually bounces back from hard times, so index funds are a smart investment” (Dutkowsky, Personal Interview).

I continued by asking Professor Dutkowsky why index funds are such a smart investment. Just to be clear, the exact definition of an index fund is:

A type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor’s 500 Index (S&P 500). An index mutual fund is said to provide broad market exposure, low operating expenses and low portfolio turnover

(http://www.investopedia.com/terms/i/indexfund.asp).

So, basically, putting money into an index fund is smart and efficient because there is a small chance of losing money and a good chance that the money will grow with the economy. I had never known that before Dutkowsky informed me, so in the future I will consider creating an index fund. He shared other information during the interview as well.

Professor Dutkowsky described that rate of return is the best measure of stocks. This formula can be explained as the stock’s price now minus its price this time last year divided by its price this time last year (Dutkowsky, Personal Interview). He also explained that there are two major benefits of holding stocks: 1) dividends made from stocks can be used as income or be re-invested. 2) capital gain – when a stock’s price increases. He also explained that you should have a goal when investing, so you know when / if you should back out, and the annual rate of return in the market is 9-10%. There were a couple other pieces of information he gave me. One being that Albert Einstein once said that the most powerful force in the world is compound interest – a formula that shows how money grows on a yearly basis. The other thing he mentioned was the 100 rule. “Take your age away from 100, that should be the % of your money invested into stocks” (Dutkowsky, Personal Interview). I thought what he said was crazy at first, but explained that investing a high percentage of your saved money into an index fund will only be beneficial down the road. I believe as long as you do your due diligence, Dutkowsky’s advice make sense.

My interview went very well with Donald Dutkowsky overall. He helped me better understand my topic for this assignment, now I will be able to translate this information to other people too.

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