How to book, educates and motivates, manage own stock portfolio
What's your strategy?
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Match the Market Strategies

Strategy A — For Most of Us

  • Stock market is best investment over last 200 years (Jeremy Siegel Stocks for the Long Run)
  • Equities have outperformed bonds, commodities, real estate over long term (Siegel)
  • Approximately 20% of fund managers and individual investors beat the market (wsj, others)
  • ETFs (Exchange Traded Funds) are low cost way to diversify and accept market return (ETFs posted record inflows in 2004, Meg Richards- AP Newswire). SPY is the oldest, largest ETF. It is design to, and has a good track record of, mirroring the performance of the S&P 500.
  • FOLIOfn.com is the low cost way to manage your own portfolio ($199 for a portfolio of up to 50 equities) ($399 for 3 portfolios)
  • Strategy is put money in ETFs (SPY), in FOLIOfn, and relax knowing you are getting market return

This is a buy and hold strategy. Probably best to phase in. Move 20% of your nest egg into SPY every 3 or 4 weeks. Once you get to 100% invested, relax.

Strategy B — If Strategy A Seems Too Easy

Is above strategy just too hands off? There is a strategy that is a little more work, a little more global, and a good fit to FOLIOfn. Equity is spread between five large ETFs, SPY, DIA, QQQQ, EFA, and EWJ. DIA tracks the Dow Jones industrial Average. QQQQ tracks NADSAQ. EFA tracks global, less North America. EWJ tracks Japan. The strategy is called indexing and plotted against the S&P 500 (SPY alone) in the graph below.

5 ETF Indexing Strategy beats SPY (market)

First off, notice the little note from FOLIOfn in the lower right corner. "Remember, future returns may differ substantially from past returns." FOLIOfn makes it easy to rebalance. Each ETF position is brought to 20% of account equity every week. This is a little more fun than just holding SPY. It will give you more to talk about at cocktail parties. It has given a better return, since inception (6/11/02). Indexing has grown at an annualized rate of 10.5% compared to 8.7% for the S&P 500.

Part of the difference between Strategies A and B is how we define the market we are trying to beat. Strategy A defines the market as the USA Stock Market. The S&P 500 is a broader measure of the USA Stock Market than the Dow Industrial Average or the NASDAQ. Strategy B defines the market as the Global Market.

BEST STRATEGY FOR MOST, BUY MARKET AND HOLD
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