Choosing Wealth
Spending a dollar today precludes its investment and growth over time. The essence of wealth management is wealth creation.
--
A few months ago, when I started writing for Making of a Millionaire, I started working on a very, very small website that would allow me to present my ideas for very long term investing: investing on a time scale of at least twenty-five years — maybe longer.
My goal was simple: cherry-pick the S&P 500 to beat that index (and four other indexes as well) over very long periods of time in tax-advantaged accounts so that Millennials’, Gen Y’ers, Gen X’ers etc. could walk away with meaningful amounts of money tomorrow by investing a reasonable amount of money today.
Six months later, we (that is, me and my one and only colleague) have just published a new version of our website — ThinkingLonger — on which our readers will have access to twenty-five years of data and results to back up our conclusion: long-term investing in price-performing stocks reliably beats the S&P500 over time.
Other ways to beat the S&P500
Of course, we’re not the only ones thinking about beating the S&P500. Our friends over at Insider Monkey have been doing some thinking of their own — albeit in a shorter time frame. Insider Monkey cherry-picks the stocks that are preferred by hedge fund managers and announces those selections every 90 days. Why pay a 2% management fee and 20% of the profits when those same firms have to disclose their positions every 90 days? It’s a clever idea and, to their credit, they have concluded that their system works better with small cap target companies. We haven’t read their proprietary newsletters but we can imagine that they too think that DIY investors can do well in the market by using an aggregating approach to stock selection. In the IM case, they are selecting successful selectors — a kind of derivative approach to stock selection — and relying on their results to justify stock choices. In our case, our sole interest is in the long-term price performance of S&P500 stocks and selling them when price increases do not equal or exceed our mandated thresholds.
