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Don’t miss the market

Friday, June 27th, 2008

I’m sure you’ve read the statistics regarding stock investing that say that it is imperative to stay in the market through the ups and downs because if you try to time the market then you are likely going to miss some of the best days in the market. I found an interesting article that discusses this from Will Hepburn. I’m not going to say that I agree with the article fully, but it is at least an interesting theory.

Historically the market has returned over 10% per year on average. But if your money was out of the market for just the 10 best days, your return would be closer to 7%. Miss the 20 best days and you’re looking at only 5%. Miss the 40 best (less than 8/10ths of a percent of the days in this study), and you can expect 1.6%.

One additional point that I would like to make is that this assumes that you actually sell your stocks and take your money out of the market. Obviously, most of us don’t cash in and out of the market fully on a daily basis. With fees and complexities, this just doesn’t make sense. This study is just meant to make a point. Just because one of your stocks falls 10% on a particular day, don’t bail on it necessarily. Take a look at why this happened, the short and long-term future of this company and then make an informed decsion. An informed investor will shuffle their portfolio, but not try to time the market daily. If you see a bleak future (or none) for a company, then sure take your losses and get out while the getting out is good. Look for another company that has a great potential or is in a current slump but has solid financials.

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Free books from the government

Monday, June 2nd, 2008

J.D. over at getrichslowly.org just posted an interesting article about the Federal Citizen Information Center. Remember those commercials on TV that tell you to order information by writing to Pueblo, Colorado? Well, I never paid much attention to those commercials, but J.D.’s post makes me think that maybe I should be paying a little more attention.

There are cheap/free books on pretty much every subject that you can think of. Some booklets cost $1.00, but most, if not all are available free in PDF form. There are booklets on buying a car, investing, planning for retirement, small business and many, many more. J.D. specifically recommends the 2008 Consumer Action Handbook which is “a 174-page guide to becoming a savvy consumer”.

I plan to take some time over the next couple of days to see what they have to offer. If I see anything particularly interesting, I’ll let you know. Post in the comments if you see find anything useful.

If you like, or can at least stand to read what I write, make sure you add my RSS Feed to your list so you don’t miss a single post. If you have no idea what I’m talking about, read this.