- Save early and invest early. Compounding is more powerful than you think.
- And yes, that means maximizing your retirement contributions (401K, Roth IRA etc.) as soon as you can.
- For the vast majority of investors, passive index ETFs are the way to go.
- Passive beats active when it comes to investing.
- ETFs are more efficient than traditional mutual funds.
- Best-known names for ETFs: BlackRock iShares, SPDR ETFs, Vanguard, Fidelity, Charles Schwab, etc.
- Not all passive index ETFs are the same. Pay attention to the market segments they represent.
- Major market segments:
- US Equity.
- Historically, small-cap outperforms large-cap, and value outperforms growth, although they are very highly correlated.
- You can stick with Vanguard 500 if you don’t want to shop around.
- Global equity.
- iShares MSCI ACWI ex US ETF.
- US Bond market.
- Vanguard Total Bond Market ETF tracks the Barclays U.S. Aggregate Bond Index.
- US Equity.
- Asset allocation is the biggest driver for performance.
- So you need to carefully allocate your investments among market segments.
- When the volatility is too high, parking money in cash is smart.
- Nobody can time the market but you should be aware of large market trends and adjust asset allocation accordingly.
Markets and Investing
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Volatility and VIX, the Volatility Index
The VIX volatility index, the barometer of the US stock market, can help you understand the large trend. In investing, some volatility is inevitable but high volatility is usually not your friend.
Behavioral Bias – Are You Rational?
For stock pickers and day traders, their biggest enemies are their own behavioral biases such as loss aversion, overconfidence, and overreaction. Blog articles are coming up.
Diary of a Rational Investor
Check out the Diary of a Rational Investor to see how it plays out in real life.