Market Rally: The Only Question That Matters

Here are the questions you are asking about the market rally:

Is this the beginning of the end or the end of the beginning?

Should I return to the markets slowly or over time?
Is [name of stock] a good buy?

Are we headed for rampant inflation?

Should I buy gold?

Here are my answers:

I don't know and you shouldn't care.

There is only one question that intelligent investors should be asking. You won't find it discussed in the financial media. Your "market beating" broker or advisor is unlikely to focus on it.

It is this question that is the focus of this week's video:

The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein.

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Comments

[johngood]

I appreciate your perspecitve on long term investing.

What's your strategy during retirement for generating income, balancing return and consistency?

[Dan Solin - Huffpost Blogger]

My strategy does not change. The asset allocation during retirement would obviously be more conservative.

[billkarwin]

Thanks for these videos Mr. Solin. Yes, you are succeeding. Your message is clear and correct, and will help most people who view the videos.

But don't expect to reach everyone. There will always be those who want a get-rich-quick scheme so badly that they ignore facts and data.

[Dan Solin - Huffpost Blogger]

I am very grateful to you and to other readers for your support.

[michaeledward]

Mr. Solin,

Yes. You have succeeded.
Your lessons are simple and powerful. And, they have the appearance of fundamental truth.

When I read comments from those who are natural detractors, I can understand how they can't understand.

Certainly, I need not be a climate scientist to understand that the carbon we release into the atmosphere will affect the atmosphere. I don't need to run the tests myself to be convinced. So it is with your simple basic premise. I don't need to crunch the numbers to understand a globally diversified portfolio of low cost index funds, held for extended periods, is the most productive way to invest to beat inflation.

Thank you.

Mike

[mumbler]

But Dan, how do you get those 99% or 100% numbers ?
If you invested in an S&P index fund in 1998, about 10 years ago, you'd have lost money, right ?

I'm a buy and holder but it's hard to get past thinking abou tthe last 10 years.
I have 20 to go before I need my money, and I'm pretty much allocated 60/40, but with our governrment spending wildly, trillion dollar health care plans, inflation on the way -etc , I wonder - is it different this time ?

[Dan Solin - Huffpost Blogger]

No one should invest in "an S&P index fund" as the sole holding in their portfolio. Instead, you should determine your asset allocation and invest in a globally diversified portfolio of low cost index funds.

Cramer and others have perpetuated the myth that followers of this strategy have lost money over the last decade. They do so by limiting their analysis to the performance of the S&P500 index. This is extremely misleading.

Those who held an allocation of 60% stocks and 40% bonds over the past decade had annualized returns of 4.75%. Over the past twenty years, this portfolio had annualized returns of 7.59%.

It is important to understand the data.

[mumbler]

Ok, gotcha, and I agree. As stated I am 60 euqities, in low cost index funds (plus about 5% gold). I got the impression that your numbers were for the stock market overall, not a 60/40 mix.
That makes me feel better, thanks for the clarification.

[Thermodynamics]

buy-and-hold vs. timing the market -----

This is a question about the methodology of your analysis.
When you did the analysis did you only include the survivors that are still here today? What about companies that completely disappeared? They would bring down the average return.

For example, what return accrued to someone who put $1000 in GM 15 years ago?

Selecting only the companies that are still here today would skew the results toward a more positive conclusion.

[schatsie]

Bernie Seigel did that analysis and he shows that you still are ok having a few dogs...

[WIpatriot]

Dan, your answers actually made me laugh out loud...tha­nks!

[Netizen]

In answer to your sign-off question, you are certainly succeeding in educating me, Mr. Solin. Thanks very much for both your writings and videos.

[JBS]

It's not a hard and fast rule.

Just took a look at a 10 year period for each of the mutual funds in my 401K and IRA. Over the 10 year period from Aug 9, 1999 to Aug 10, 2009, every one of them is down by at least a third.

[zwack000]

But are these mutual funds you speak of truly globally diversified index funds and not actively managed ones or worse specialized funds concentrated in say commodities, real-estate and the like?

[schatsie]

I also agree with you entirely, something like 80% of the mutual funds are worth less now than they were 10 years ago....BUT you can bet the real insiders are doing quite well....I am firmly of the opinion now that 90% of the gains are going to the top 1% and screw the rest of us....