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May 25, 2005
Where should you invest your money?
Let's take a little quiz to check your investor IQ. Imagine the following:
You are 35 years old. You have accumulated $100K in retirement funds. I tell you that over the next twenty years, the S&P 500 will move 20%. I don't know which way it will move. I just know at the end of twenty years it will either be up 20% from current levels or down 20% from current levels and there is a 50/50 chance of each. No other outcomes are possible.
You must pick one investment strategy in advance and live with it for the entire twenty year period. You will be locked in once you choose and you can't mix and match. 100% of the $100K must go in one investment. Given that knowledge, which investment would you choose?
A. Buy and hold a market basket of stocks and hope that it goes up 20% instead of down 20%
B. Try to time the market - get in when it is going up and out when it is going down
C. Try to pick stocks using historical data, company fundamentals, technical analysis, sector analysis or some other stock-picking methodology
D. Put your money in bonds which will return on average about 5% but have a small risk of loss
E. Put your money in a principle protected cash equivalent like CDs paying 2%
F. Put your money in an investment that will lose significant value if the market declines but will generate a consistent cash flow of approximately $1000 per month over the twenty year period.
Now imagine you have the same six choices but you are 55 years old. Which would you choose? Would it be the same choice, or different, given your age?
Please give me your answers in the comments below. I'll give it a few days and them give you a post on what my answer would be.
Kim Snider, Kim Snider Financial Communications, Chronim Investments and/or Snider Advisors make no representation that the information and opinions expressed are accurate, complete or current. The opinions expressed should not be construed as financial, legal, tax, or other advice and are provided for informational purposes only. Call 866-952-0100 to request the Snider Investment Method™ Owner's Manual, which includes a description of the Snider Investment Method, investment objectives, risks, suitability and other information. Please read and consider carefully before investing. All investments are subject to risk including possible loss of principal.
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Focus of This Blog
Kim Snider is an author, speaker and host of Financial Success Coaching, Saturdays at noon, on KRLD Newsradio 1080, Dallas - Fort Worth. This blog is primarily devoted to empowering individual investors with information to help them be good stewards of their money. Above all, it is about achieving true financial success. Kim's book, How To Be the Family CFO: Four Simple Steps to Put Your Financial House in Order is in bookstores now. Order yours from Amazon or other fine booksellers today.
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