Which Scenario Do You Prefer?

Greetings everyone. If this is your first visit PLEASE take the time to read through my first two posts. These lay the groundwork for everything I'm trying to accomplish here. You'll gain maximum benefit if you do. Just a few enhancements I want to inform you about before I get into the weekly update. First...as you know I'll be updating the blog before 5pm each Saturday. But it's also important for you to know that I will be updating the blog the day after the last day of each month. Don't worry. I'll remind you in my weekly update of the day I'll be doing the monthly update. Second...in addition to the weekly/monthly updates from time to time I will include an educational article. When I do include an educational article the post will be segmented into "WEEKLY UPDATE" and "FOR YOUR EDUCATION". The subject of any article will be reflected in the title of my post.

WEEKLY UPDATE: Below is an updated chart of the S&P Index (please click on image to enlarge). As you can see the green arrow is still in effect. This market continues to amaze me. There are really very few fundamental reasons why this market should continue to rise but that doesn't matter. All that matters is the market has been rising and my analysis currently supports staying in mutual funds.












FOR YOUR EDUCATION: The subject of today's article is really an extension of the title of last week's post "Why Market Timing Is Important". Today I'm going to show you three different scenarios....

Scenario 1 assumes that in April, 2003 you opened a $10,000 account fully invested in index mutual funds. If you followed the advice of most brokers/plan advisers they would have you simply hold your position. If you had done so then today your account would be worth approximately $13,000 which equates to a 30% increase over a 7 year period. This translates to an average annual return of 4%. Mmmm, a little better than sticking your money in a bank but barely keeping ahead of inflation.

Scenario 2 assumes that you in November, 2007 you opened a $10,000 account fully invested in index mutual funds. Again, if you followed the advice of most brokers/advisers you would have held your position through one of the most precipitous market declines in history. Today your account would be worth approximately $5,387 which equates to a 46% decrease over a time period of about 1.5 years. This translates to an average annual decrease of 18%. OUCH!

Scenario 3 assumes that instead of taking the advice of the so called experts you had decided to go fully into mutual funds on the green arrows and parked your money in a safe money market fund on the red arrows. If you had opened a $10,000 account in April, 2003 your account today would be worth approximately $24,135 which equates to a 141% increase over a 7 year period. This translates to an average annual return of 20%. Ahhh...that's more like it.

Stay tuned. In the weeks to come I'll be sharing more information with you which I believe may help you reach your financial goals quicker than you may have thought. Please feel free to post comments if you have any questions or suggestions for future articles. Have a blessed week!