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Author: activeREinvestor Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35387  
Subject: Re: CDs? Bonds? Notes? - Where should my money g Date: 3/3/2005 7:52 AM
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On 2/25/05, the S&P 500 had a P/E of 19.2 which is a 5.21% yield. On 01/20/05 a 5yr CD yielded 5.25%. Would you be kind enough to tell us where one can get a higher real rate of return with similar or less risk then that 5yr CD? Than you.

You are making my point.

You are looking at a 5 year horizon so not something that is liquid in the short term (medium term maybe?).

You then cite one asset class (equity stock market) as the alternative. The one that is the most popular and at some level the well understood.
CD rates are as you note.

I completely agree that given the two choices the obvious answer is the CD route. I am trying to say that there are a few more asset classes and some have done a better.

Not all options are for everyone based on the preferences. When the preferences are driven from a lack of knowledge then a good 'investment' is education rather then trying to find the marginal improvement.

In a different discussion someone else indicated that a good place for such a discussion is a Portfolio forum. He went on to say that he remembers a report that says the bulk of the difference in returns comes from picking the right asset classes to invest in vs. try to maximize the returns within a class. I know that stock investors believe the same thing. This is presented by saying that if you wanted to be in a sector, picking the right sector is more important then picking the individual company within the sector (partially because a single company can have unique performance results while the sector will tend to reflect the larger economic picture for the sector).

As to specific investments.

I have tried that before and people get worked up about the specific suggestions and then miss the point that alternatives exist. Normally we get into a debate between those who do and those who don't for each specific suggestion. This time I am trying to be more neutral and encourage education and thinking as opposed to chasing crumbs when the other table might have a richer offering.

Side note. I will look at the other forum to see if there is the possibility of an educational discussion there on the broader alternatives. If there is then I will drop a note here.

John B. Corey Jr.
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