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Is it better to invest in the Dow or mutual funds for a 30+ year horizon?

Posted in Horizon Funding
Aug
10

Or, what is better and why? Please be as quantitative as you can.

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One Response to “Is it better to invest in the Dow or mutual funds for a 30+ year horizon?”

  1. jpocia03 says:
    August 10, 2010 at 11:26 am

    When investing in mutual funds you are automatically buying roughly around 100 stocks. Some listed within the DOW, some listed in the NASDAQ and some from the S&P.

    Now the bigger question is are you properly allocating and diversifying your portfolio? It’s not as simple to just buy something in the DOW and forget about it. Management, economic conditions and currency issues all play a small role in the performance of a stock. Not to mention interest rates, and the other variables.

    It is a fact that bonds move opposite of the stock market. So years when the stock market is underperforming, the bond market is over performing. So is said about the different types of capitalizations of these companies (i.e, large, medium, small or perhaps emerging markets and international), and the strategy (Growth, Value, Balanced, Income). So it is vital that you hold a balance, determined by your investment strategy, goals and risk within these different types of areas. And make sure to not dillute your investment dollar (for example holding 6 different large cap growth funds), this is not helping your investment, and could potentially be hurting it.

    But, if your like most people. You’ll buy in the market when it is high, and sell when it is low. Or you’ll wait until the bond market starts doing well before buying into it.

    Mutual Funds are only one type of investment vehicle. The reasons that people start with mutual funds is to obtain the allocation with the mutual fund. Because mutual funds automatically invest your monies for you, into approx. 100 different stocks. To do this on your own would potentially cost you hundreds of thousands.

    Stocks are to be considered when one has enough cash to properly allocate and diversify. This is somewhere around 150,000+ in my opinion. Otherwise, you are exposing yourself to much higher risk.

    People do get lucky in the stock market. It’s legalized gambling for gods sake. But, even most player invloved gambling games if studied properly, and researched stand to be beaten.

    Hope this answers your question. Let me know if you have any others.