We have all heard about trading stocks online, and how easy it is through a plethora of television commercials. However, they do not tell you what you need to know to get the most out of your stock portfolio, or how to begin anew without incredible risks to your life’s savings. The safest options are bank savings accounts, but with such low interest rates, you will not get much of a return on your money. Maybe you should consider investing in stocks, but how?

There are literally thousands of companies that you can choose from to buy into through stocks. Buying one company’s stocks can imperil your savings, so you may want to diversify by buying several different ones. The question remains, how to create a profitable stock portfolio? Well, you can spend your hard-earned money on a stockbroker that can advise you which they think are the best at that time, or you can use your own wit and gut feeling to make that decision. You are the only one that is responsible for your own decisions, so you will want to choose your stock portfolio wisely. Instead of spending your money for someone else’s opinion, why not log on to the internet and take a look at what is available to you for free? There are excellent websites that will let you assess your current portfolio, as well as provide you with portfolio optimization techniques in seconds. This way, you can also make the best use of modern portfolio theory.

Modern portfolio theory uses a very simple concept that correlates a stock’s cost with the entire market. This concept is called a beta coefficient. What this means is that the beta coefficient is multiplied by the current market’s rate of return, which is called the expected return of that asset. This return is actually deducted from the current stock price, so the return is actually an estimate, not actual. All of this varies along with the volatility of the market, which is the risk that you take when investing. By using a modern portfolio theory, you can make the most of your stock portfolio in regards to volatility. Simply put, you want to increase your return and reduce your risks as much as you can. Therefore, you can use a mathematical optimization algorithm that will provide you with the best solutions to maximize your stock portfolio. This algorithm is available to you to use without having to have extensive mathematical knowledge.

There are many different ways to optimize your stock portfolio using this algorithm, most of which are costly, difficult to learn to use, are extremely boring or require Mat lab. Instead of these time consuming, boring, and difficult options, you can use the internet to take advantage of having all of the legwork done for you. With an optimization website, you can view all the details of any stock that you are interested in, all in easy to understand terminology. Although no one can predict what the stock market is going to do, by using the best online stock optimization programs, you can optimize your portfolio without endless hours of boring and hard to understand programs.

**Decision theory**

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*Decision theory*

* We often assume that our decision-making is rational and well-informed. Often, it is not. This video describes the ways in which our decision-making often deviates from the ideal of a rational, well-informed decision-maker.

CLOSED CAPTIONS AVAILABLE ON THIS VIDEO – USE THEM IF YOU HAVE TROUBLE FOLLOWING!

This video was produced in January 2013 for my research methods seminar (SOC 334) at Queens College in the City University of New York. If you are enrolled in this class, you must also complete the assigned readings and exercises. Instructions will be posted on my web site and on Blackboard.

This video is part of an experiment in teaching with technology. In the coming semester, I plan on releasing other videos and an overview of this experiment. If you are interested, please visit my web site (www.josephncohen.org) and share your questions, corrections, thoughts or criticisms. I appreciate any feedback or advice on the video’s content (admittedly poor) production, or the format of moving my lectures to sets of short (5-10 minute) streaming videos.

Rational Decision-Making: Theory Versus Reality

__Decision theory__