Investing

Perfect market timer?

We all know that holding stocks for the long run is the recipe for wealth accumulation. According to MIT Professor Andrew Lo, $1 invested in the S&P 500 index on 1/1/1926 would have grown to about $4000 by the end of 2005. Not bad considering that $1 invested in the aggregate bond market over the same period would have only grown to $18.

However, for a “perfect market timer” who knows precisely when to sell and when to buy, this perfect timer would have grown the $1 to $23 billion. Now we know why market timing remains a popular sport among investors and speculators alike.

Source: April 2006 issue of Fund Alarm.

Investment guide

Taylor posted (49073) a link to yet another great online book. According to Paul K, author of the online book “Investment Guide“, the book was written to help an investor to

  • Implement the five essentials of investing,
  • Understand and manage risk,
  • Evaluate and select mutual funds,
  • Recognize and control the devastating effects of cost,
  • Develop and write an Investment Policy Statement,
  • Evaluate and choose an Investment Advisor, and
  • Locate a large collection of reference material.