5 Component Theory of Stock & Fund Analysis

Financial analysts across the globe spend hours researching securities and have formulas for calculating risk and return. I have been investing in the US Stock market since 2015 and have been developed a 5 component theory for analyzing individual stocks and funds. This theory takes into consideration the most important factors of stock performance and risk. It is a quite simple theory and when put in to practice will yield the returns you deserve. The fund strategy is all based on risk mitigation and capital appreciation.

This data tells me whether or not a security passes the risk tolerance test. So far my investment portfolio is up over 12% for my Roth IRA and 6.50% for my individual investment account. I plan to increase my risk tolerance levels to maximize growth during my 30 year investment career. My investment strategy consists of holding passively managed and open-ended index funds along with carefully analyzed growth stocks, with a small percentage allocated toward fixed income in the form of long-term treasury bond index funds. I have a mix of small cap, mid cap, and large cap index funds along with the S&P 500 to create a “Total Market Index Fund” and capture the total US stock market growth.

The 5 component theory was created in 2019 and has been the driving force behind the “Main Fund” which is my individual investment account via the Fidelity Investments platform. A security must pass a certain level of criteria before executing a buy and booking a place in the main fund. Below are the five components:

  1. Historical Performance
  2. Dividend Yield
  3. Beta
  4. 52-Week Range
  5. Intuition


Michael Moran

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