The gist of this article from San Francisco Magazine – invest in index funds and over the long run you’ll outperform almost all your neighbors – will be old hat to those of you who’ve read my investment guide.
But the article is well worth reading anyway to reinforce your resolve, or simply because it provides such interesting context.
But wait – if you should do your stock market investing via index funds, why do I occasionally suggest crazy things like BOREF and ALBAW and NTMD puts (and not so crazy things like oil stocks, DD and AXP*)?
Because I can’t help myself?
Because a lot of people just need more ‘action’ and like to play the game? So if they’re going to do that, maybe I can help them do less badly than they otherwise would – or even win?
Because it draws in fair-minded Republicans who, over time, come to see that ‘liberals,’ like Bill Clinton and Al Gore, may actually do a better job of balancing budgets, conducting foreign policy, and staying out of our personal lives, than ‘conservatives’ like George Bush, Dick Cheney, Trent Lott and Tom DeLay? (Not to mention a better job of running government agencies, like FEMA?)
The other reason I occasionally mention specific stocks – as long-time readers know – is tax control. If your assets are of sufficient size, it can make sense to do most of your stock market investing through index funds, but to play with perhaps $10,000 or $25,000 or $100,000 intending to take considerable (prudent) risk. That way, you can sell your losers for a tax loss (lowering your taxable income by up to $3,000 each year, with any excess carried over to the following year) . . . and use your winners, held at least a year and a day, to fund your charitable giving (ideally, through the ‘charitable gift fund’ you’ve set up at Fidelity or Vanguard), for a further tax advantage.
The punchline is that even if you just breakeven with this strategy before tax, after tax you will have come out nicely ahead.
(See past columns or read my book if you need this fleshed out in more detail. I’m pushing my book so hard today because I try to plug it only once a year or so. So my entire year’s income from this column rests on how many people you can think of to give it to today. Think, dear reader! Think!)
Anyway, I recommend the article from San Francisco Magazine and thank Jeff Bauer for sending me the link. Have a great weekend.
*Hey! When you add in the fifth of a share of AMP that AXP spun off, AXP is up 38% in a year and a half, DD up 25% in a year. (Sorry about those Google puts and ARC. What was I thinking?)