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The market will rebound and a few years from now we will be wishing we had invested. We will see stocks that doubled or tripled. The big problem is that there's

The market will rebound and a few years from now we will be wishing we had invested. We will see stocks that doubled or tripled. The big problem is that there's really no way to know now what those winners will be. The best advice is to pick a broad index, S&P 500, and invest the money over a period of time, maybe 6 months. You won't hit a homerun but you'll do better than most.

fnbr 7y ago
This is exactly the right answer. Broad based index funds, invested over time. You could also consider a 70/20/10 portfolio of S&P 500, international equities, and bonds.
- sytelus 7y ago
  I mostly believe this (which is also largly the Buffet philosophy) but have learned few caveats: 1. Not all broad indexes are great buy because lot of companies will do great in this crises but others will suffer long term. Instead of investing only into S&P 500, you might want to also diversify in Europe, Asia Pacific, China markets as well as have ETFs in energy, utilities, finance etc. 2. S&P500 doesn't actually have all that great returns, contrary to usual belief for same risk taking. For example, QQQ has returned ~30% avg/yr while SPY has only ~12%/yr over past 10 years even at lowest points. This is more than double the difference for reasonably similar level of volatility and liquidity! 3. The buy and forget strategy misses out on entirely on "unreasonably low" prices event. For example, massive ETFs like XLE are at all time lowest price and very unreasonably low priced. Investing them in now can boost your returns massively.
  - raincom 7y ago
    well, this strategy requires investors to master some basics. Yes, it is worth the effort.
  - davidivadavid 7y ago
    How can QQQ which tracks mostly tech stocks have comparable volatility to SPY?
  - fnbr 7y ago
    I largely agree with what you're saying. The only point I disagree with is 3. That's the exact same logic I used to make a large investment on March 6th. If I had time-averaged the investing, I would have saved a ton of money. The point is that it's near impossible to predict market bottoms, so time-averaging helps with that. If your point is that you should increase investing now, I totally agree, but you should invest the money over a period of weeks/months, not in one lump sum (which I don't think is what you're advocating).
laksmanv 7y ago
why do you invest over 6 months instead of at once?
- raincom 7y ago
  because it is hard to time the bottom, which can be known ex post. So, if one averages in small amounts over time, one can get a better average than worst cases.
johnchristopher 7y ago
But even if stocks double or triple, isn't there a likely scenario that a dollar wouldn't buy you the same thing as today or that some supplies or furniture would have considerable different price tags than today ?
- skookum 7y ago
  If stocks double and everything costs twice us much, you're 2X better off having invested than held cash. If stocks double and everything costs the same, you're 2X better off having invested than held cash. If stocks double and everything costs half as much, you're 2X better off having invested than held cash. Note I'm not claiming stocks will double or triple, but if that's the starting assumption then there's no need to ask what inflation or deflation will do.
basch 7y ago
There are considerably safer bets than S&P500, with similar returns, including a classic 60/40. https://portfoliocharts.com/portfolio/portfolio-matrix/ https://portfoliocharts.com/portfolio/portfolio-matrix/ https://portfoliocharts.com/portfolio/risk-and-return/ https://portfoliocharts.com/portfolio/risk-and-return/
- 6gvONxR4sf7o 7y ago
  The risk is less important when OP says > Investment horizon: long term to forever Total market ranks 1 on average return, which arguably matters most assuming OP is gonna wait 30-40 years before using this money.

fnbr 7y ago

This is exactly the right answer. Broad based index funds, invested over time. You could also consider a 70/20/10 portfolio of S&P 500, international equities, and bonds.

sytelus 7y ago
I mostly believe this (which is also largly the Buffet philosophy) but have learned few caveats: 1. Not all broad indexes are great buy because lot of companies will do great in this crises but others will suffer long term. Instead of investing only into S&P 500, you might want to also diversify in Europe, Asia Pacific, China markets as well as have ETFs in energy, utilities, finance etc. 2. S&P500 doesn't actually have all that great returns, contrary to usual belief for same risk taking. For example, QQQ has returned ~30% avg/yr while SPY has only ~12%/yr over past 10 years even at lowest points. This is more than double the difference for reasonably similar level of volatility and liquidity! 3. The buy and forget strategy misses out on entirely on "unreasonably low" prices event. For example, massive ETFs like XLE are at all time lowest price and very unreasonably low priced. Investing them in now can boost your returns massively.
- raincom 7y ago
  well, this strategy requires investors to master some basics. Yes, it is worth the effort.
- davidivadavid 7y ago
  How can QQQ which tracks mostly tech stocks have comparable volatility to SPY?
- fnbr 7y ago
  I largely agree with what you're saying. The only point I disagree with is 3. That's the exact same logic I used to make a large investment on March 6th. If I had time-averaged the investing, I would have saved a ton of money. The point is that it's near impossible to predict market bottoms, so time-averaging helps with that. If your point is that you should increase investing now, I totally agree, but you should invest the money over a period of weeks/months, not in one lump sum (which I don't think is what you're advocating).

laksmanv 7y ago

why do you invest over 6 months instead of at once?

raincom 7y ago
because it is hard to time the bottom, which can be known ex post. So, if one averages in small amounts over time, one can get a better average than worst cases.

johnchristopher 7y ago

But even if stocks double or triple, isn't there a likely scenario that a dollar wouldn't buy you the same thing as today or that some supplies or furniture would have considerable different price tags than today ?

skookum 7y ago
If stocks double and everything costs twice us much, you're 2X better off having invested than held cash. If stocks double and everything costs the same, you're 2X better off having invested than held cash. If stocks double and everything costs half as much, you're 2X better off having invested than held cash. Note I'm not claiming stocks will double or triple, but if that's the starting assumption then there's no need to ask what inflation or deflation will do.

basch 7y ago

There are considerably safer bets than S&P500, with similar returns, including a classic 60/40. https://portfoliocharts.com/portfolio/portfolio-matrix/ https://portfoliocharts.com/portfolio/portfolio-matrix/ https://portfoliocharts.com/portfolio/risk-and-return/ https://portfoliocharts.com/portfolio/risk-and-return/

6gvONxR4sf7o 7y ago
The risk is less important when OP says > Investment horizon: long term to forever Total market ranks 1 on average return, which arguably matters most assuming OP is gonna wait 30-40 years before using this money.