The Motley Fool Discussion Boards
Investing/Strategies / Retirement Investing
|Subject: Re: Strategy comparison S&P500 vs. IUL||Date: 4/3/2013 4:08 PM|
|Author: Dwdonhoff||Number: 71681 of 78271|
More response on Ray's post;
2) "buy & hold" -- I don't do buy & hold. Of *anything*. Every investment strategy I use is subject to some form of a market-timing overlay/gate for shifting my equity allocation to short-term or intermediate term bonds/T-bills. It's not perfect, and it's not ultra-technical, or genius-level, or requires a massive or superhuman effort as CC likes to taunt. It just moves to cash when the general market is in a downtrend, and back to equities when in an uptrend. It takes approximately 2 minutes once a month. Maybe 4 minutes if you have to boot up your computer first.
3) "S&P" -- I don't actually invest in the S&P500. I invest in various ETFs and individual stocks. But still, saying S&P is a valid synonym for "equities".
Is this the strategy you would recommend to our OP, instead of an IUL?
If you would *not* recommend a long-term naked S&P500 strategy, and you've already admitted it doesn't match the performance of an IUL when safety is considered, why are you trying to push it as superior?
You don't seem to recommend an apple, you prefer bananas, yet you want to try to compare apples to orangutans.
I'm trying to find reasons why I wouldn't want to do this, but it seems like it's not really all bad.
4) "backward-looking wisdom [of S&P]" -- All anyone has to do is pull up a long-term chart on the S&P. Here's one: http://finance.yahoo.com/q/bc?s=%5EGSPC&t=my&l=on&am......
Now look for a time when you can say, "If I put money in here and didn't touch it for several decades, that would suck." Can't find one, can you?
That's irrelevant for retirement strategies, which (by definition) is money that has to be there regardless of the timing (surprise) of retirement. There are plenty of places in the historical chart you can see you might enter, and be completely S.O.L. if you subsequently had no choice but to stop contributing and begin liquidating.
5) "& awareness of typical S&P drawdowns" -- Yup. Drawdowns happen. That's life. Sometimes you hit a golfball and it lands in the lake. Hell, I saw Tiger Woods nail one right into a pond at Cog Hill. Arrange your affairs so that a large drawdown doesn't wipe you out.
Personally, I diversify not only between asset classes but also between strategies.
'Diversification' is just another word for hedging/covering. It reduces your direct growth potential (and often also loss potential.)
If drawdowns *didn't* happen, then investing would be risk-free. And therefore return-free. Like a bank account or CD. No volatility and also very low return.
*THIS* is the religious faithful voice... the fallacy that you cannot take market gains unless you also allow the market the opportunity to hand