food for thought

Key Risk Factors to Consider
In my opinion, the four most important factors that will influence the volatility of your portfolio’s return relative to the market’s return are: (1) the number of holdings; (2) the correlation between holdings; (3) the amount of financial leverage each holding has; and (4) the market cap size of each holding.

The American Association of Individual Investors (“AAII”) wrote an article citing that “holding a single stock rather than a perfectly diversified portfolio increases annual volatility by roughly 30%…Thus, the single-stock investor will experience annual returns that average a whopping 35% above or below the market – with some years closer to the market and some years further from the market.”

While it is highly subjective, I believe the relationships between portfolio value and the number of holdings in the table below provide a reasonable balance between the need for diversification, a desire to keep trading costs low, and a limited amount of research time to devote to maintaining a portfolio.

15 - $25k
25 - 50k
30 - 75k
35 - 100k
45 - 250 k
50 - 500 k
60 - 1m

How to Build a Dividend Portfolio
Source: Simply Safe Dividends

Millions of Lumosity members worldwide enjoy Memory Matrix. But this popular game is more than just a game: as you play, you’re challenging important aspects of your working memory, including your working memory capacityand ability to chunk information.

Working memory: your brain’s power source

Working memory, by definition, refers to your ability to hold and manipulate information in your mind. And the amount of information you can handle—also known as your working memory capacity—plays a large role in how quickly and effectively you process complex situations. To use a computer analogy, the bigger your memory storage, the better equipped you are to handle demanding tasks.

Just as a supercomputer can handle complicated projects such as mapping a genome, a person with a developed working memory capacity can do mental math quicker, hold their own in a fast-moving debate, or follow complicated directions through a new city without writing anything down.

Is working memory limited by the “magic number”?

In 1955, Princeton psychologist George Miller published a paper that declared that most people’s working memory capacity waslimited to about seven “chunks” of information. Still one of the most highly cited psychology papers to date, these findings became known as Miller’s Rule.

Miller’s Rule was based off experiments in which he found that seven (plus or minus two) was the number of digits, letters, or words that most people could successfully repeat back without error. In the 60 years since Miller’s paper was published, other researchers have questioned the universality of his rule: for example, some studies have found that people can remember 7 chunks when it comes to digits, but only 6 for letters and 5 for words. Nonetheless, there is widespreadagreement that working memory capacity is limited to a relatively small number of chunks.

The good news: there may be a way to improve.

Remembering more is possible

Miller’s Rule is not the last word on memory ability, as you probably realize.You may have a friend with a seemingly unlimited memory. Or maybe you’ve memorized a string of digits—such as a credit card or bank account number—far longer than seven plus or minus two.

People with impressive memory abilities are often skilled atchunking information in an intelligent way. Given the numbers “7 4 7 6,” you could choose to think of each number individually, using four memory chunks—or you could turn those numbers into the memorable date of America’s independence, July 4, 1776, and remember them as a single chunk. Though you may be limited in the number of “chunks” your working memory can hold, you have nearly unlimited ability to make each chunk rich with far more information.

This chunking strategy is used by experts in competitive memory competitions. And it’s also used by Lumosity members who excel at Memory Matrix. When faced with the top level of 15 tiles, a Memory Matrix beginner and a Memory Matrix expert don’t process the information in the same way. The beginner may attempt to remember each individual tile, fumbling quickly—but an expert can group 15 tiles into 3 or 4 discrete patterns and breeze through Memory Matrix by chunking intelligently.

Master Memory Matrix, train your working memory

Though the above strategy can give you a boost, Memory Matrix—and all other Lumosity Memory games—don’t rely solely on chunking. They’re designed to directly exercise your working memory, possibly improving your capacity to hold “chunks”!

Through practice, effort, and awareness, you can stretch the limits of the abilities you’re born with. Unlock full access today to train with all our working memory games, including the even trickierRotation Matrix. Then harness the power of all 40+ subscriber-only games to reach your full potential.