RE: Financial Tip of the Day #1 - What Investment Companies DON'T Want You to Know
Great post, you do a good job of simplifying the pointlessness of having a money manager, but then you don't explain the inputs in the FV formula.
Also to be fair while index is far and away the winner, it is not fee free.
With dividend yields so low, it seems the market just doesn't compound like it used to. And while every broker everywhere likes to cite the 8-10% number, in real terms the market went nowhere for a decade after 2000.
I was playing with the idea of making a post for the world's easiest trading strategy. Save your money, make 1% a year or whatever. Wait til a market crash, invest all of your money in a low fee vanguard spy etf. Sell everything after 7 yrs. Repeat.
Even after long term capital gains tax and a -2% a yr inflation while you save, and lost opportunity cost (in yr 8,9, etc) I think this would still be a great strategy for the average Joe.
Just a fun thought that would probably never work due to investor psychology.
Thoughts?
It's an interesting concept that you bring up, and is actually one of my favorite trading strategies. I wouldn't necessarily do 7 years, but I definitely do a similar strategy. Personally, mine deals with bonds and stocks. I try to enter the market when its low, ride it up to around the amount where it started going down + whatever the deviation was between that and it's lowest point. At that point, or gradually as it gets to that point, I would take out 50-75% of my position and either hold onto it, or put it into bonds. If stocks decline, bond prices go up, and rinse and repeat. If stocks continue going up, well then you just realized your profit.
Currently I'm not invested in the traditional stock markets at all as I'm expecting a correction or possible recession in the near future. I will however be getting into the market once that happens.
That's a pretty good idea. I'm sure you are much more disciplined than the average joe. I just wish sometimes I could give my friends something that didn't require too many moving parts.
Same, I'm mostly invested in commodities.