The best stock market investment

That should be an interesting enough title to allow me to do one of my “background” items on my evolved investment ideas over the last couple decades. Very early in my consideration of how to invest I got advice similar to the following (thank you to someone who commented on my last post):

For most people, the smartest investment would be an S&P500 index fund with no load. Vanguard has excellent funds with very low fees. Reason being is that 80% of professional money managers cannot beat the S&P500. Do you really think you are smarter than 80% of money mangers? So you’re already in the top 20% of investors by parking your money there for the long term and not fooling with it.

This guy is right. For most people that would be the smartest investment. Here’s the reason why most people have a hard time sticking with it:


So there’s two “enormous” drops in that time span, but even the “corrections” of ’98, 2011, and 2015/16 feel “horrible” if you’re watching something drop. This is when people get upset and “get out” locking in their losses.

I actually got this interest in avoiding the major drops as a secondary thing to my primary interest: I want to invest in a way that makes fiscal sense. I don’t want to speculate, I want to be “repaid” for providing my money for use. So:

  1. I tried index things like the S&P 500. It was fine. I could handle the drops.
  2. When the “target” retirement funds came out, I tried them, but the impression I got was that I was muddying things — not getting as much upside in exchange for little avoidance of downside.
  3. I finally decided I’m a “value income” investor — wanting to get peices of solid companies that are managed in a fiscally sound way but are undervalued at the present time.

Trying to figure out how to pursue that I encountered a strategy that along with its other facets that I liked also asserted it was good at avoiding drops in the market. Trying to keep these entries short (so I can just do them and move on), I’ll leave that as a question: Do the 20%+ drops in the market (still very much a “thing” with an S&P 500 index fund/EFT) bug people? How do you cope with that?

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