I've decided that 2011 will be the year that I begin index investing. This wasn't an overnight decision by any means, but one that I've pondered and wrestled over for most of 2010. Cutting out the amount of time spent on charts, blogs, timers, gurus, message boards will allow for more time to be spent with things I love: family, fitness, reading; and also allowing me focus on my career when I'm at my career. Also, I think that in 27+ years or so when I can begin to draw off the TSP and Roth, things will be just fine, even from the doom and gloom demographic perspective.
Can you outperform the markets year over year? Sure you can. You also can play professional baseball. If you do beat the market over the course of 20+ years, will all that time spent studying the markets be worth it for an extra couple percent? So, maybe I'll end up with a lot of money or maybe I won't. Maybe I'll end up somewhere in between, like at the 'market average'. Some questions I've asked myself are, "How much is enough? For me, is money the means or the end?" For some, money is the end, just as the whale was the end for Captain Ahab.
Here is a quote from a "market guru" that I was fortunate to get through to and discuss some issues over email a few years ago:
Whether you decide to swing trade will depend on your lifestyle and how "in tune" you are with the financial markets both at your work and outside of work. (He advised that unless you have a job in finance, you're on the outside.) Keeping track of the evolution of the financial markets and the global economy can be a very interesting endeavor. Swing trading (and the stress that comes with it) is another matter, especially once you start having kids. Unless you can mechanically follow a system's signals, swing trading could be a horrible way to live your life!
However, that system had better be right because even if do you follow a system, it can cost you! Example, this above guru ended up riding the biggest crash in recent history during 2008 as he remained fully invested throughout. So much for his system.
So here is my allocation starting in 2011 which will be rebalanced when it gets slightly out of whack. I don't expect this to be an easy plan to stick to.....
25 G
10 F
25 C
20 S
20 I
I still maintain my account at T Rowe Price which has largely been a buy and hold account over the past few years. I will maintain a small amount of money in my Roth to make those occasional swing trades from time to time.
One more quote that has really stuck: A friend of mine who will retire soon told me recently, "Life is short. You cannot buy back time lost with all the money you may make. Time with your family is the most important thing in your life."