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Layman's Guide to Investing in the S&P 500

This book explains in simple terms all the relevant aspects of investing in the S&P 500 stock-market index, including analysis of its historical returns, the causes of those returns, and comparison to inflation and US government bonds. The book explains the advantages of adding to your investment in the S&P 500 on a monthly basis. It also shows how to allocate your portfolio between the S&P 500 and US government bonds, and the advantages and disadvantages of doing this. Other topics include the importance of low expense ratios and tax-deferred accounts, and how to invest an inheritance in the S&P 500 and save for your child's education. There is also a section for foreigners on how to reduce the currency risk when investing in the S&P 500 from other countries.

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Comparison of U.S. Stock Indices

This paper compares stock indices for USA: Large-Cap stocks (S&P 500), Mid-Cap stocks (S&P 400), and Small-Cap stocks (S&P 600). Between 1981 and 2015 the Large-Cap stocks returned about 11.3% per year on average, while the Mid-Cap stocks returned 14.0% per year. Between 1992 and 2015, the Small-Cap stocks returned 11.2% per year. But there were periods where each of these stock indices performed either best or worst. This paper studies more detailed performance statistics, including the average, best and worst investment periods, the correlation of returns, the historical probabilities of loss and performing worse than inflation and US government bonds, and the recovery times for these stock indices. The earnings and dividend growth is also studied and used to forecast the future returns on the stock indices.
  • Paper (PDF File, 2.1 MB)

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Strategies for Investing in the S&P 500

This book presents different investment strategies for the S&P 500 stock-market index. Some of the strategies use fixed rebalancing in which a predetermined part of the portfolio is invested in the S&P 500 while the remainder is invested in government bonds. Other strategies adapt the rebalancing using the P/Book of the S&P 500 and the yield on government bonds. Stop-loss strategies are also presented. The strategies are tested for all starting days and investment periods up to ten years during 1978-2013, which gives a total of more than 75,000 test periods. Extensive performance statistics and comparisons show the advantages and disadvantages of the different investment strategies.

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