Key Concepts for Successful Investing
Knowing What Not to Do is Half the Battle
- Market timing does not work
Double equal probability (50% sell x 50% rebuy = 25% success rate)
- Great stock trader is a “Great Oz” myth (See: expert quotes)
Maintain Long-Term View
- Think in terms of bond market terminology
< 5 yrs. = short term
5– 10 yrs. = intermediate term
>10 yrs. = long term
- We are all long term investors and must maintain discipline through inevitable downturns (see: Stock Market Downturns)
Capturing the Equity Premium is Significant
20 yrs., $1.00, 3% compounding = $1.81
20 yrs., $1.00, 8% compounding = $4.66
Take Advantage of the Best and Current Scientific/Academic Research
Fama/French 3 factor model (now 4) adds value/diversification
Best Risk Reduction is through Diversified Conservative Bond Position
- 9/30/2008 – 3/31/2009
DFA Intermediate U.S. Govt. Fixed Income (DFIGX) +8.91%
DFA Five Year Global Fixed Income (DFGBX) +3.86%
S&P 500 Stock Index -31.59%