I’m all in…get ready for the big correction!
Well, I’ve been sitting on the investing sidelines for several years and have finally decided its time. Time to move some cash into equities. Now, despite the fact that the government has merely allowed the proverbial can to be kicked farther down the road, one cannot argue that stocks have continued to rise with no end in sight. Are they due for another correction? Sure, but my investment timeline is long enough that I should be able to absorb it. I’m hoping I can get enough gains in before that happens.
I have considered investing in real estate or a business, but could never get comfortable enough with the risks. In my mind, they are far greater than the risk you take in the stock market. Don’t get me started on how good real estate is. Housing is not a great investment. Period. Comparatively over time, you’d be much better off investing in equities.
So, I’ve taken the bold step to close some of my CDs and swallow the early withdrawal penalties. I suppose, the positive side of the puny interest rates on CDs is that the penalty is almost negligible. In fact, I’ve already earned back the penalty on the first CD I closed in one day! The second one hasn’t been reinvested yet so the jury is still out on that one. I’m still gonna keep a good chunk of cash to keep somewhat hedged. (I haven’t totally drunk the Kool-Aid!)
So what am I investing in? Precious metals? Small caps? Emerging markets? None of the above. It’s all going into an S&P Index fund. Warren Buffet is famous for his 2008 $1M bet with hedge fund Protégé Partners. Protégé Partners could pick a group of hedge funds to perform against a simple S&P 500 index fund over the course of 10 years. Buffett bet $1 million that they couldn’t outperform the simple index. Six years into the bet, Buffet has a huge lead. I’m pretty sure I read somewhere that when he passes away, he wants his money invested in an index fund. I figure if its good enough for Warren, it’s good enough for me. LOL!
So, the S&P 500 Index closed at 1,883.95 today. I will use this blog entry as a measuring stick to see how good (or bad) of a decision I just made. Wish me luck. Of course, you won’t be able to truly make a fair assessment for another 5+ years, so I have time to stumble I little.
WARNING: Historically, my luck is the absolutely worse. I always pick the longest and slowest lines. I buy houses at their peak prices and sell at their lowest. So that means all of you should get out of the market now! We are headed for a huge correction! ;-)