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People's investment philosophy will vary and tolerance for risk will play a major role in it all. My own view is this, and it is based on a lifetime of having
by grellas 11y ago
People's investment philosophy will vary and tolerance for risk will play a major role in it all.
My own view is this, and it is based on a lifetime of having made all the typical mistakes.
Steady is the best way to go for your investable funds. That means, go with stocks for a decent segment of your investments but temper this with investments that will help preserve capital when things get rocky. Keep a ratio between the two that is age-appropriate. There is a rule of thumb floating about among advisors that your stock percentage should be 110 minus your age. This may or may not be a good ratio for you but some method that helps discipline you in these decisions will help you and this is not a bad one for many people. The other major factor is to avoid impulse buying or selling and to keep transaction costs at a very low level - and this usually means going with broad-based no-load index funds for much of the ride.
Doing the above will not make anyone rich. It will, however, ensure that you have the best chances of getting decent, normal returns on average over time while helping to preserve your capital as you go. If you want extraordinary returns, get them through your startup or by doing extraordinary things in your work. For your investments, the rule is different. You do not "underperform" by hitting averages with your investments. You simply meet the goal that should be the defining goal for most people in that area.
- pbreit 11y agoBetter: make a core position in Vanguard LifeStrategy.
- PaulHoule 11y agobest: buy $XIV today
- Omnipresent 11y agoAny particular reason?
- herge 11y agoIt's cheap today, maybe not tomorrow when the panic will have worn off.
- cynicalkane 11y agoTo algo market makers, inverse and leveraged indices are free money. They are bought almost exclusively by clueless traders with poor execution, making it easy for market makers to shave their pennies, and due to their dynamic leveraging requirements, bleed value during market gyrations like a puddle evaporating water. Don't buy indices with a coefficient other than 1 unless you think Wall Street is a noble cause to give money to. If you want to short volatility, use options on major indices. Better yet, don't short volatility at all unless you know what you're doing.
- branchless 11y agoThe FTSE is where it was 17 years ago. Since this time everything has gotten way more expensive. Anyone in the UK following this advice from age 20 to 35 is staring down the barrel of working forever. The problem is they have a share in growth in the UK over the past 15 years and that growth is next to nothing. IMHO the old advice needs to be taken with caution. This is not your dad's market.
- tonyedgecombe 11y agoYes, there was a bubble so if you invested all in one hit, all in equities, your timing was unlucky and you ignored the return from dividends then it doesn't look good.
- batterseapower 11y agoThe FTSE 100 total return index is at 5,898.87 i.e. the levels of November 2012: https://www.google.com/finance?cid=15424700 https://www.google.com/finance?cid=15424700
- branchless 11y agogoogle finance for that goes back to 2012 and no further!
- n72 11y agoSelective end points. Dollar cost averaging is a simple way of solving this particular problem.
- patdennis 11y ago1) If you put all of your money in exactly 17 years ago, then, yes. You would be at the same place. 2) It still would've been paying you dividends that entire time 3) If you, rather than investing an imaginary lump sum at the top of the market 17 years ago, invested slowly as your savings accumulated over time, you would be ahead. The FTSE hasn't exactly been sitting still all those 17 years.
- 11y ago
- slg 11y agoBeyond the slow and steady recommendation, I also think this is a reminder that most people really shouldn't be paying attention to the day to day movement of the stock market. Even after all the panic, standard total market ETFs are currently down between 1-2%. It would look like a perfectly normal day on the market if you ignore the intraday prices. It is amazing how much of the market volatility disappears when you lower the number of data points you are recording. Just keep investing that X% of your paycheck and rebalance a few times a year if needed.
- blakecaldwell 11y agoYep. If you invest broadly enough, then shrug this off and consider that the market is on sale today. Your existing holdings will return to their yesterday prices at some point, and everything you buy in the meantime will have gone up.
- wiz21 11y agoPardon my ignorance, but why will the : "existing holdings will return to their yesterday prices at some point" ? The way you put it seems so inevitable (although "at some point" may be 100 years from now). So, as you're not the only one to say that, I'd like to know what makes you think that the holdings will get back to their previous level ? Because, if they increase from their current position, then you certainly imply that they will increase indefinitely, which in turns mean (because you didn't frame that), that putting money on stock exchanges is always a good move, because holdings value increase...
- chiph 11y agoThere is obviously nothing guaranteeing that will happen. However, it has done so every single time that a correction has happened in the past. This is where the word "faith" applies to the markets.
- lewisl9029 11y agoThis is pretty much it. Thinking rationally, we can see pretty obviously that this is a case of using the past to predict the future. It's never guaranteed to work, but since it tends to be the common sentiment shared among so many investors, it does become somewhat self-perpetuating. At the end of the day, the market does move based on sentiments, after all. However, it probably is a good idea to try to shield yourself from potential downsides when this sentiments changes in the future (and it certainly can).