The S&P 500 index ETF is one of the safest bets in stock investing, and over time has an increasing likelihood of making money.
However, even over a ten year period it could have a negative return. At 16 years the probability goes to zero according to Fisher Investments
The NightShares ETF invests at the close of trading hours and sells in the morning, this only capturing the off-hours gains.
NSPY and NIWM are listed on NYSE Arca and each have an expense ratio of 0.55 percent.
When Apple Computer went public in 1980, the state of Massachusetts, using the arcane Blue Sky laws, prohibited small investors from buying any shares. The idea was that Apple was such a risky venture that only professionals should participate. This ranks just behind the Boston Red Sox's decision to sell Babe Ruth as the worst ever made in my state.
- Peter Lynch
A guest on Barry Ritholz’ Masters in Business podcast started an emerging markets ETF that weights stock according to the freedom index of a country. The index avoids authoritarian regimes like Russia, China, and Saudi Arabia. This is the first time investing in international stocks actually made some sense. Stock ticker: FRDM
The Volitility Index (VIX) measures the volatility in the S&P 500 index, and is a useful measure of the risk and uncertainty in the market. The CBOE lays out the formula and background of the VIX in this whitepaper.
Peter Lynch is famous for the quote “Selling your winners and holding your losers is like cutting the flowers and watering the weeds.” This captures the problem with rebalancing into stocks that have fallen to maintain stocks with a certain percentage of a portfolio. However the S&P 500 is market cap weighted so it doesn’t need to rebalance based on price changes; it only needs to rebalance based on adding (winners) and removing (losers) stocks and changes in share count. The success of the S&P 500 is a great example of the value of that quote.
The TerraUSD, or UST, stablecoin broke a $1 peg and fell to under $0.30. UST is an algorithmic stablecoin that maintains its value by increasing and decreasing the supply of another coin, Terra Luna. The Terra Luna quickly dropped from over $100 to fractions of a penny as its value collapsed with a supply increase from 340M to 6.5T. The Terra anchor protocol paid 20% APY on UST, and drove demand for the UST. Ultimately the peg couldn’t be maintained as UST size grew.
Link: WSJ
Five months into 2022, the Nasdaq-100 index is down over 25%. Tech stocks have been hit the hardest, which should lead to mergers and acquisitions by big tech. Elon Musk may take Twitter private and the CEO of FTX bought a big chunk of HOOD.
J. David Stein divides financial opportunities into three categories based on the likelihood of the financial outcome: investing, speculating, gambling. Investing has a high likelihood of a positive return, speculating has a very uncertain return, and gambling has a high likelihood of negative return. Another common aspect distinguishing investment and speculation is that an investment often yields a positive cash flow and a speculation does not.
Link: Money for the Rest of Us
Benjamin Graham in The Intelligent Investor describes an investment as having a reasonable return over a long period of time, while a speculation is a hope for a large return over a short period of time.
HBO is showing a two hour documentary on Carl Icahn and his history as an activist investor. It chronicles his take over of TWA and subsequent failure along with his many successes. It’s a fascinating tale of his investing career including getting into tech stocks like Netflix and Apple.
Link: Documentary
Ark Invest just announced their big ideas for investing in disruptive technologies. Link It’s interesting to see they deemphasized cloud technology to focus on AI and Robotics. Robotics has the highest estimated CAGR of their picks with 51% and AI the lowest at 26%. Although AI seems to have the largest estimated market at $108T in 2030.
Public US companies each quarter produce a 10Q quarterly report with unaudited financial statements, and they yearly produce a 10K annual report with audited financial statements. These reports contain the summary of the company’s revenues, costs, profits, equity, debt, and cash flows.
Barry Ritholz presents this philosophy from Jack Bogle
https://ritholtz.com/2022/01/jack-bogles-rules-for-investing/
Investing Versus Speculation
1. Remember Reversion to the Mean
The Callan Periodic Table of investment returns ranks the returns of different stock investment sectors for each year going back 20 years. It’s interesting to see how different sectors outperform and underperform in different years and over the last 20 years. Callan ranks 9 different sectors including stocks, bonds, real estate, and cash equivalents.
The 4% safe withdrawal rate (SWR) is based on stock and bond market simulations that back test retirement portfolios. An interesting example is this site FI Calc. It includes different withdrawal rates.
The biggest threat to building wealth is lifestyle inflation, where as your income increases the cost of your lifestyle increases. This is how even high earners end up living paycheck-to-paycheck. Wealth is built by investing the difference between income and expenses, and letting it grow exponentially over many years.
The S&P 500 index ETF is one of the safest bets in stock investing, and over time has an increasing likelihood of making money. However...
