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This will be a short post, though I want to toss this question out to readers: what investment strategies do you know of that are simple, and work on average over the long-term?
Here are four (together with posts of mine on the topic):
1) Indexing
Index Investing is not Inherently Socialistic
Why Indexes are Capitalization-Weighted
Why do Value Investors Like to Index?
On Bond Investing, ETFs, Indexes, and the Current Market Environment
2) Buy-and-Hold
Buy and Hold Will Return?? 2/15/2009 (what a time to write this)
Risk vs Return ? The Dirty Secret
3) The Permanent Portfolio
Can the ?Permanent Portfolio? Work Today?
4) Bond Ladders
I chose these because they are simple. ?Average people without a lot of training could do them. ?There are other things that work, but aren’t necessarily simple, like value investing, momentum investing, low volatility investing, and a few other things that I will think of after I hit the “Publish” button.
That said, most people don’t need to work on investing. ?They need to work on cash management, and I have written a small fleet of articles there. ?Managing cash is simple, but it takes self-control, and that is what most people lack in their financial lives.
But for those that have gotten their cash under control, with a full buffer fund, the above strategies will help, and they aren’t hard.
Final note: I realize valuations are high now, so buy-and-hold is not as attractive as at other times. ?I realize that interest rates are low, so bond ladders aren’t so great, seemingly. ?Indexing may be overused. ?Most?of the elements of the Permanent Portfolio look unappealing.
But what’s the alternative, and simple enough for average people to do? ?My answer is simple. ?If they can buy and hold, these strategies will pay off over time, and far better than those that panic when things get bad. ?There are few regularities in the markets more reliable than this.
Covered calls that are slightly OTM.
“I realize valuations are high now, so buy-and-hold is not as attractive as at other times. I realize that interest rates are low, so bond ladders aren?t so great, seemingly. Indexing may be overused. Most of the elements of the Permanent Portfolio look unappealing.” That takes a lot off the table!
Nick de Peyster
http://undervaluedstocks.info/
A couple of thoughts about the permanent portfolio:
1. When does gold provide any value at all? It would seem to be only during periods of high inflation. Does the inclusion of the late 70s through 1981 period – if we believe this will never be repeated in the U.S. – cause gold to be overvalued as a part of this portfolio?
2. Why would we want to limit equities to S&P 500? Is that necessary because broader measures were not available for your 50 year analysis?
Cash covered puts on dividend paying stocks in a cash account.
Strike price minus premium = price at which you WANT to own the stock.
The daring can do it in a margin account against T-Bills of the shortest possible maturity.
Rampant specs might use T-Bills maturing on/near to expiration dates of the puts.