Unexpectedly Intriguing!
20 April 2009

This morning, we bet our entire retirement portfolio on the S&P 500.

Or rather, after looking over the stock market and thinking about it for less than a minute, we shifted all the cash we had sitting on the sidelines in our IRAs around so that it's now fully invested in an index fund that closely tracks the S&P 500. We did that at a point in the morning at which the Dow Jones Industrials had plunged below 8,000, dropping by more than 2.5%, the Nasdaq had dropped over 3.0% and the S&P 500 itself had dropped nearly 3.0% from its Friday close of 869.60, or roughly 25 points, to 844.

And that's not even all the bad news that might take place in the market today! Since we're investing in a traditional index fund, rather than an ETF, wherever the market closes today will be our buy point.

That's not as bold as it sounds, given how much time we have between now and when we retire, as we've designed our retirement investment strategy to accommodate the worst possible scenarios. What's more, given what we know about how stock prices work, we have not yet seen a change in what investors should expect for the future rate of growth of dividends per share in the stock market. Since that change is the signal that we've seen drive stock prices, without observing such a change, we view today's drop in stock prices as being the result of noise.

Which for us means today's stock market is presenting us with a noisy opportunity.

It's certainly not an investing strategy for geting rich quick, but hopefully is one for getting where we want to go sooner than we might have otherwise with a bit less risk. That's really all we're after!

Post Market Close Update: At least we're not the only ones seeing a lot of nothing out there! For the record, the major indexes had the following closes:

Major Index Closing Values, 19 April 2009
Index Closing Value Percentage Change
from Previous Close
DJI 7841.73 -3.56%
S&P 500 832.39 -4.28%
Nasdaq 1608.21 -3.88%

If we're right, thanks for the extra money, Wall Street!


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