The 3 Simple Rules of Investing: Why Everything You've Heard about Investing Is Wrong and What to Do Instead

The 3 Simple Rules of Investing: Why Everything You've Heard about Investing Is Wrong and What to Do Instead

Michael Edesess, Carol Fabbri, George Peacock

Language: English

Pages: 264

ISBN: 1626561621

Format: PDF / Kindle (mobi) / ePub


What if the most effective investment portfolio was also the easiest to manage and the least expensive? As the authors of this clear, practical, and enlightening book―part financial guide, part exposé―prove, there are just three simple rules you need to follow and only a few, very inexpensive investment products that are necessary for an ideal portfolio. The authors deftly bust investing’s myths―what they call investing's Seven Deadly Temptations―and dispense with all that complicated, confusing, and self-serving advice of the Wall Street wolves. By embracing commonsense solutions and rejecting investments that seem enticing but are overpriced, needlessly complex and risky, you'll put not only yourself in a stronger position, but the entire economy as well.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States. In both cases, he performed studies exactly like the one we just mentioned. He looked to see how professionally managed investment accounts ranked in one five-year time period and divided them into the best and worst performers, then looked to see how they ranked in the next five-year time period. There was absolutely no consistency from one time period to the next. There was no way to tell how a fund would rank in the future by looking at how well it had done in the past. This

four years trading at home who emerged with a million dollars. UPS, DOWNS, AND DITCHING CONVENTIONAL WISDOM Earlier we pointed out that there is no trend. But now we’ll say there may be an exception. What would a trend mean, anyway? Suppose the chance that a particular stock will go up tomorrow is 50%. Now suppose on Tuesday the stock goes up. What are the chances it will go up on Wednesday? If Tuesday’s result and Wednesday’s result are independent of each other—that is, if there is no

Standard & Poor’s 500 index, a broad measure of the U.S. stock market, for that 20-year period. It zoomed up for almost the first half, then fluctuated but went down overall in the second half. That’s why investors’ “timing was poor”: because the timing of their pattern of saving, which they really couldn’t help, resulted in by far the most being invested during the period, the 2000s, when investment performance was worst. FIGURE 5 Time Period over Which Investors “Underperformed” SUMMARY OF

at age 64, it will be 36% stocks/64% bonds. How will your results in retirement with the target-date fund compare with the results you would get if you just used a constant mix? The answer: the results will be exactly the same. There is a constant mix (in this case 49% stocks/51% bonds) that gives you exactly the same chances of various levels of wealth accumulation at age 64 as the changing mix of the target-date fund. For example, using reasonable assumptions, Table 3 shows the probabilities

2.2%, is what the issuers of the bonds and the investors who buy them expect inflation to be over the next 30 years. Of course, this doesn’t mean that’s what inflation will be; it’s just their best guess right now. Both TIPS and U.S. Treasury bonds are guaranteed by the U.S. government. That makes them extremely low-risk. Indeed, financial academics refer to them as “risk-free.” With a little more risk, you could invest in a diversified basket of U.S. domestic corporate bonds. At the time of

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