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TIMINGTRUTH.COM NEWSLETTER 2012-01-14
NEWS: Recent news has been mostly good news but that's to be expected in an election year. Historically, if the economy is perceived to be bad by the majority of Americans then the incumbent president is defeated. For this simple reason the current administration is doing everything it can to make the economy rebound. Political parties aside let's hope this continues to be a good year for the economy. Europe is still struggling so the Standard & Poor rating arm downgraded Europe in general and some countries specifically (France) from a nAAA to an AA+ status. The US was similarly downgraded last year.
CURRENT SIGNAL TRENDS: The S&P 500 Index is still a SELL, but maybe not for long. Last month, the long trend turned flat. The graph below shows the S&P 500 with the trend analysis lines. The middle blue line shows the long term trend, red line is the short term trend. The two blue lines above and below the long term trend indicates the volatility of the market.
OUR STRATEGY INSIGHTS: Last month we presented the advantages of a long term retirement strategy. This month we want to explain why we promote the use of Index Funds. The reasons are simple: - They perform better than actively managed funds over the long term.
- They are less expensive to buy and own (which is one reason they perform better).
- Only a few fund managers are capable of outperforming the market in the short term and it is very difficult to know who they are except in hindsight.
You can read the whole article here: Mark Hulbert for the NYT So, TimingTruth suggests that retirement investors use the least expensive Index Funds from long established companies. If you've read us much you know we prefer Vanguard and we get nothing from them for saying it. That's about as simple as it can get. Since all Index Funds by definition perform identically how do you chose one company over another? For us the primary consideration is total cost. The main cost to look at is the expense ratio which should be less than 0.10% per year. But beware that companies can hide fees in many places so it's difficult to dig this information out on most of their web sites. Avoid any funds that charge for purchasing shares (load funds). Here's a useful tool from FINRA but it may NOT reveal ALL the hidden costs.
For more details on our investment strategy visit our site links below:
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