Valuation-Informed Indexing Is the Future of Investing
By Rob Bennett
You have recently been sent to Earth from your home planet of Mars and know nothing of what people here have for years been saying about stock investing in the papers and magazines and web sites. You have some money to invest. You have only had time to do enough research to learn a single important fact about stock investing: The average long-term return in the U.S. market is 6.5 percent real.
What do you do? You follow a Buy-and-Hold strategy. You put most of your money in stocks and count on the long-term realities to pay off for you. You make an effort to tune out the short-term noise. You stick with stocks for the long run.
That’s where most of us stand today. We know one important and true thing about stock investing: Stocks are unpredictable in the short term but they always do well for those willing to wait long enough.
Continue reading The Future of Stock Market Investing? →
Beyond Buy-and-Hold
By Rob Bennett
Our economy is a mess.
The premise of this new column (you’ll see it in this space each Wednesday morning) is that Buy-and-Hold has failed. Each column entry will examine a different principle of Buy-and-Hold Investing, explain why we now know that things don’t work in the way that the Buy-and-Holders say they do, and describe what those of us who believe in the Valuation-Informed Indexing Model (the alternative to Buy-and-Hold) believe instead.
The focus of this first column entry is -- How Buy-and-Hold caused the economic crisis and how switching from Buy-and-Hold to Valuation-Informed Indexing will bring about a recovery.
Continue reading How We Ruined Our Economy – And How We Can Rebuild It →
The stock markets’ recent 1,000 point slide is a good time to stop and ask some critical questions
By Kevin M
Let’s get one thing out of the way right up front: I am NOT an investment expert!
Now that that’s been declared for the record, let’s mush on.
After bottoming at 6600 in March of 2009, then rocketing to the 11,000 level in just over one year, the Dow Jones Industrial Average has given up 1,000 points in a space of only a few weeks. What does that mean? Does it mean anything at all? It seems we may be at a crossroads.
There are two schools of thought on where the stock market is heading, and the implications of either are of no small consequence where our personal finances are concerned. If we firmly believe the market will rise, we need to position ourselves for maximum gain when it does. If we think it will slide—or even crash—it’s incumbent upon us to arrange our assets in such a way as to minimize or even eliminate losses.
Are we about to break out of the 10,000 level on the Dow, and if so, which way is it more likely to swing?
Continue reading Where Do YOU Think the Stock Market is Headed? →
By Kevin M
How is it, that when we put money into commodities or raw land, we’re “speculating”, but when we buy growth stocks or growth stock mutual funds, we’re “investing”? Where’s the dividing line? Is there a dividing line, or is it all marketing spin?
In recent decades, investing in the stock market has become common even and especially among the middle class. We’re routinely guided to “invest” money in stocks for future gain, and inundated with newspaper, magazine, TV and internet ads promising us double digit returns for placing money in this or that mutual fund—albeit with the caveat “past performance is no guarantee of future performance”. But exactly how do we process all of that? Do we process it at all?
In Investing Basics: What Is an Investment? Paul Williams at Provident Planning introduces the concept of familiarity blindness, a state in which “most of the basic questions don’t occur to (us) any more”. This is a valid observation of the human tendancy to avoid challenging assumptions once they’re fixed in our minds. Though we give lip service to the volatility of the stock market, do we also turn a blind eye to it’s clear speculative nature?
Continue reading Are We Investing or Speculating in Growth Stocks? →
The following is a guest post by Rob Bennett of A Rich Life. While it is not the intention of this site to present and offer investment advice to visitors, Rob offers a conservative approach that may be of value to anyone who is in a career change, debt reduction, or other type of financial transition, and represents a refreshing approach that offers a counter to the prevailing financial culture that recommends heavy and permanent positions in stocks—an investment class which is more risky than most people commonly understand.–Kevin Mercadante
Many people believe that stocks are always the best asset class for middle-class investors. It’s not so and I can show this with numbers.
The price that you pay for stocks obviously affects the long-term return you obtain from them. But have you ever gone to the trouble to check how much overpricing affects the return obtained? I have, and the results of my investigation were eye-opening for me.
Continue reading Cash Is a Strategic Asset Class →
