Monday, March 7, 2011

K. I. S. S.

Keep it simple, stupid.

I'm talking to myself here, not you. This is why I invest long term according to the Krypto Fund methods. I don't want to spend my life looking for stocks, commodities or anything. I've done that and it's a lot of work - very, very difficult work. I can make good money in that line of WORK, but unless one needs to, why do it? Life is too short.

Now about YOU. Most of you have a job and a family and plenty of responsibilities. Do you want to spend all your free time investigating investments? I think not. Besides, it's very, very hard to find winners. Here's why: There are about 7,000 stocks; even more bonds. There are about 7,000 mutual funds. And for the rich, there are about 7,000 hedge funds. If YOU want to pick your own investments, you have to find the few winners in that huge pool. Tough job. Your competition is lots of very smart, driven, informed, experience investment managers. You haven't got a chance. They will eat you alive.

Can you find a good advisor to help you? Maybe. Or maybe not. Again, you face a crap shot. And you'll pay plenty.

BUT the modern investment world has given you marvelous tools, a way to virtually guarantee a good - nay, excellent - long term investment perfomance. Those tools are index funds and diversification. ALL studies of investment performance show that almost all investment managers and mutual funds underperform the AVERAGE over a 20 year time horizon. How can that be? Fees. Consider a 1% annual fee. After 20 years, you've paid 20% of your money to the manager. That's a huge amount. Analogy: 1% is about the house take on even good bets on the crap table in Vegas and is about the house take on good play at blackjack. But the house always wins.

You can win in long term investing. You can avoid almost all the fees and ride long term growth in the world economy; it's virtually a free ride.

You can reduce risks even more. The world is a big place. Some places do well when others are stagnant. Sometimes there is inflation, sometimes not. The returns on investments vary over time and place. The tool of cheap diversification gives you an edge. Careful studies of investment markets over decades have PROVEN that diversification gives superior returns for any given risk level. There are two types of diversification: asset type and time. You can use these tools of the modern investment to give yourself SUPERIOR returns for long term investments for FREE.

Be a smart investor - it's easy. My dog, Krypto, can do it.

Here's what to do.

Don't worry about those thousands of stocks or mutual funds. Just pay attention to SEVEN asset classes (really NINE as one has three parts). NINE asset classes are easy to follow; you can do it once a week on Saturday morning. A baseball team has as many players. Don't pay attention to all the details and the blather of the pundits. Watch those NINE.

Invest in them in the lowest cost manner possible: index funds. The cheapest index funds are from The Vanguard Group. You don't even pay a management fee, since the management company is owned by the funds themselves. Those funds are huge, some of the largest in the world. Your economies of scale are fabulous. You can get the free ride.

And you have to construct your investments so you can maintain your diversification cheaply. You must be able to cheaply allocate your money among those important asset classes. You can do that at The Vanguard Group. I've used them for 30 years now. They provide excellent service and quality and cater to the common man and woman.

This post is #0 on my list given Friday, explaining why I do what what I do. Krypto Fund has beaten almost all big mouth investment advisors for years at low risk. Krypto Fund has ridden the 2000 tech bubble and the Panic of 2008. Even though the stock market is about 20% off its all-time highs of 2007, Krypto Fund is well over its all time high.

Krypto Fund follows the rules I listed in Friday's post. On Friday I listed the seven / nine important asset classes. Tomorrow I will tell you how to invest in them with specificity. All for free.

Ride the elephant, don't get trampled or stomped.

PS: Use this method for most of your long term investment money. If you want to make a small investment in some stock or company or whatever, go ahead (after good research). But keep it small at first. Maybe you'll get lucky. But if you keep it small at first, you won't be hurt if it craters.

Word of the Day

"Apotropaic" - adjective [$10]
Apotropaic means supposedly having the power to avert an evil influence or bad luck.
Sentence: The Krypto Fund method of long term investing needs no apotropaic charms. The free tools of the modern investment world give it all the edge it needs: diversification and cheap index funds.


Bud said...

oil green.....silver green.....wheat green..........rice green............cotton green..........pork bellies green..........spoos green..........yup ....QE2 is workin alright...........SPX 2k comin soon

dollar tankaroooooooooooooo

Bud said...

interesting............middle east in flames..........portugal and greece debt downgrades.............and the dollar at 4 month lows ???? huh ???

thanks dr bernanke..........even with the streets of northern africa burning...........greenback no longer the safe haven..............they would rather own the Euro..........s severely flawed currency

let it fall my ass

Bunkerman said...

wow, Bud ... 4 month lows.

such a long term perspective.

Bunkerman said...

I wrote this to a fiend over teh weekend:

From Barron's this week. The monetary base for the latest week is $2.232 trillion. A year ago it was $2.141 trillion. That growth is $91 billion, just 4.25%, rather appropriate for now in the cycle.

Big deal.

All QE2 is doing is offsetting other programs that are expiring; they are doing it do avoid de-facto tightening.

Spin-em said...

Bunks do Electric utes interest you at all??....down towards the bottom of IBD industry list...PPL 5.7% DIV last week

Spin-em said...

turns on Romulan cloaking it thanks.....

what a bunch of thumping tosh....


Bunkerman said...

sorry, on phone all day ... dealing with the "places".

Interesting dividend. Haven't looked at them specifically. I let Mrs. B handle that part of the Krypto Fund.