13. How Soon Should You Invest? Flashcards
(46 cards)
What was Jeff Seder’s unique approach to predicting horse racing outcomes?
Seder focused on data and measured various physical attributes of horses, particularly heart size, rather than pedigree.
What did Seder discover was the most important predictor of a horse’s racing success?
The size of the heart, especially the left ventricle.
What does Hans Rosling emphasize as a key indicator of a country’s development?
The child mortality rate.
What does a low child mortality rate indicate about a society?
It suggests good access to food, healthcare, and education, indicating overall societal quality.
What is the main takeaway regarding investing timing?
Most stock markets go up most of the time.
What historical events did Warren Buffett mention to illustrate market resilience?
Two world wars, the Depression, multiple recessions, oil shocks, and a flu epidemic.
What is the best strategy for investing money according to the text?
Invest as soon as possible.
Fill in the blank: The best time to start investing was _______.
yesterday.
What is a significant risk of waiting to invest?
Higher prices in the future due to market trends.
What were the two investment strategies compared in the text?
Buy Now and Average-In.
Define ‘Buy Now’ in the context of investing.
Investing all available money at once.
Define ‘Average-In’ in the context of investing.
Investing all available money over time, typically in equal payments.
What was the historical average underperformance of Average-In compared to Buy Now?
Average-In underperforms Buy Now by approximately 4% in each rolling 12-month period.
What percentage of rolling 12-month periods from 1997-2020 did Average-In underperform Buy Now?
76%.
What was a notable example of Buy Now performing poorly versus Average-In?
Investing in the S&P 500 at the end of August 2008 resulted in an 18.25% loss by the end of August 2009.
What percentage of the time did Average-In outperform Buy Now according to the data?
Only at market peaks before major crashes.
What does a higher standard deviation indicate about an investment strategy?
It corresponds with a riskier investment.
What is one way to mitigate risk while using the Buy Now strategy?
Invest in a more conservative portfolio, such as a 60/40 U.S. stock/bond portfolio.
What is the significance of investing sooner rather than later in the context of inflation?
Waiting means buying at higher future prices while uninvested cash loses value.
True or False: Most markets have shown a long-term positive trend.
True.
What is the median time an investor would wait to see a lower price after buying the Dow?
Two trading days.
What is the average time an investor would wait to see a lower price after buying the Dow?
31 trading days (1.5 months).
What does the data suggest about the likelihood of lower prices appearing after an investment?
There is a 95% chance that a lower price will occur at some point in the future.
What is the Buy Now strategy in investing?
Investing all available funds immediately into a chosen portfolio
