Retirement Investing


Aggressive meta-strategies that use sell signals and defensive periods to reduce risk are likely to outperform conservative retirement investing strategies.


This website evolved until the 2017 June update was posted on July 4, 2017. There will be no further changes.

Meta-strategies

A conservative retirement investing strategy typically entails a portfolio with securitized assets and with asset classes balanced appropriately for the investor's age. A meta-strategy has a separate strategy for each asset class, the assets are not necessarily securitized, and there is no consideration of age.

A meta-strategy might create enough wealth for a comfortable retirement. If this happens, the investor can decide to become more conservative or to keep using the meta-strategy to create more wealth for pet projects or for heirs.

The principal goals for a meta-strategy are outperformance and risk reduction. It would be a boon if it also provided means to raise cash and means to reduce taxes.

Some investors have limited time, aptitude, or investment choices. There should be simple meta-strategies for these investors.

Other investors have considerable time, aptitude, and investment choices. There should be more advanced meta-strategies for these investors.

Reducing risk

You should diversify, use tranche investing, and avoid asset bubbles. These methods to reduce risk are widely accepted and are used in the meta-strategies.

The meta-strategies go further to reduce risk. They use sell signals based on trend reversals and they define defensive periods based on the January Barometer. These methods are not widely accepted, but have been proven effective.

Diversification reduces risk by spreading purchases among investments. This ameliorates the effect of badly performing investments.

Tranche investing reduces risk by spreading purchases across time. This ameliorates the effect of badly performing periods.

Tranche investing works best if diversification increases when purchasing a tranche. If diversification is already adequate, it is acceptable to purchase a tranche that does not increase diversification.

Asset bubbles should be avoided because they can burst at any time. There might be a bubble if for several years inflation in an asset class has exceeded its long-term rate.

Aggressive investing

Aggressive investing means investing in only the most promising asset classes. This reduces diversification and increases the importance of using safeguards to reduce risk. The asset classes, investing strategies, and safeguarding methods can be determined by respecting successful investors, analyzing historical data, and running real-time tests.

Most financial advisors suggest broad diversification. However, asset classes with a history of underperformance are likely to degrade overall performance.

Most financial advisors suggest investing conservatively. However, without investing aggressively you probably will not create enough wealth for a comfortable retirement:

annuity

Most financial advisors suggest targeting a specific amount of retirement income. However, you cannot know how much income you will need or how successful your investing strategies will be. Instead of targeting a retirement income, target a retirement investing plan.

Treat saving for retirement as a monthly budget item. Invest the savings aggressively. You won't know what your situation will be when you retire, but you will be confident you have done your best to create wealth.

Account choices

You can buy securities through an individual retirement account (IRA) such as a Traditional, Roth, 401k, or Roth 401k, or through a Regular brokerage account. This table summarizes 2017 account characteristics:

accounts

Do not dismiss a Regular just because it is not an IRA. A Regular has tax breaks on capital gains and dividends, but an IRA does not. There are no limits on earned income or contributions. Furthermore, money can be withdrawn for any purpose without tax or penalty.

Do not favor a 401k or a Traditional just because taxes are deferred. Your taxes will be high if you create so much wealth that your minimum required distributions are large. Furthermore, a 401k typically offers few investment choices.

With matching contributions, a 401k is acceptable but a Roth 401k is preferable. Without matching contributions, a Roth 401k is acceptable if your earned income or contributions will exceed the Roth limit. Consider a Traditional only when termination of employment requires rolling over an account, and then seek professional advice.

Use a Roth or a Regular if your employer does not offer an acceptable IRA, if you have contributed the maximum amount the employer will match in a 401k, or if you have reached the contribution limit in a Roth 401k. Use a Roth if your earned income and contributions are below the limits, otherwise use a Regular.

Gains and trend lengths

Unless otherwise specified, gains and trend lengths on this site are measured in boxes and are based on daily closing prices. One box is a change of 0.01 in the natural logarithm of the price. If the number of boxes is small, it is almost the same as percent:

boxes

Reversing a change in boxes restores the original price. Reversing a change in percent does not.

Links

Links below are to other pages on this website. On other pages links at the top are to other pages on this website, links below the top are to spreadsheets or computer programs, and words prefixed with # refer to links at the top.

Respect, analysis, and tests

Real estate and the stock market are the best asset class  choices. For diversification, you should invest in both.

Risk can be reduced by responding to The January Barometer. Do not respond to market trends, market P/E ratio, or the Volatility Index.

Performance can be improved by  timing trades for the Turn of Month Effect and the Santa Claus Rally.

Tests show price trends persist, low-priced stocks are treacherous, some options are underpriced, and stock ratings cannot be trusted.

Trend reversals can be construed as selling and buying  signals. Trendlines and moving averages generate inferior signals.

Real estate strategies

You can invest in real estate with the Tangible Real Estate Strategy or with the Real Estate Fund Strategy.

Use the Tangible Real Estate Strategy if you can raise enough cash to purchase a shabby house and make it livable, if you can afford the mortgage payment and other ownership expenses, and if you can find one at a reasonable price. Otherwise, use the Real Estate Fund Strategy.

Stock market strategies

With the Easy Strategy you can trade an S&P 500 Index fund. With the Comprehensive Strategy you can invest in and hedge with individual stocks. Use the Comprehensive Strategy if you have the time and aptitude and if your account allows it, otherwise use the Easy strategy.

The Easy Strategy

There is an Easy Strategy for trading an S&P 500 Index fund that is likely to outperform the Buy&Hold strategy for the fund.

The Comprehensive Strategy

Buy stocks and stock call options in a way that honors momentum investing, diversification, and tranche investing.

Sell stocks and stock call options to reduce risk, exit acquisitions, prevent delivery, raise cash, reduce taxes, or rebalance.

Use selection lists to find the best choices for investing in call options or stocks, or for hedging with put options or short sales.

Updates

An update showing results for strategy implementations was posted each month. Each update featured portfolios and summaries of capital gains. All transactions are real.

The tranche size for all portfolios started at $20,000. It was increased to $30,000 on the 2014 June update, $50,000 on the 2015 January update, $70,000 on the 2016 July update, and $100,000 on the 2017 February update.

Separate portfolios for call options and stocks were created in the Comprehensive Strategy on the 2012 August update. The Comprehensive Strategy call option and stock portfolios were recombined on the 2015 October update.

Comprehensive Strategy stock buying ended on the 2015 August update. However, it has performed well and is still recommended for accounts that do not allow buying call options and put options.

The Real Estate Fund Strategy began on the 2012 October update. The Easy Strategy began on the 2013 January update. The Treasury bond Strategy began on the 2016 October update.

The Irregular Strategy began on the 2014 August update. This strategy allowed buying into asset classes other than real estate and the stock market, but was discontinued on the 2016 July update due to a dearth of candidates.

2010:  Jan  Feb  Mar  Apr  May  Jun  Jul  Aug  Sep  Oct  Nov  Dec

2011:  Jan  Feb  Mar  Apr  May  Jun  Jul  Aug  Sep  Oct  Nov  Dec

2012:  Jan  Feb  Mar  Apr  May  Jun  Jul  Aug  Sep  Oct  Nov  Dec

2013:  Jan  Feb  Mar  Apr  May  Jun  Jul  Aug  Sep  Oct  Nov  Dec

2014:  Jan  Feb  Mar  Apr  May  Jun  Jul  Aug  Sep  Oct  Nov  Dec

2015:  Jan  Feb  Mar  Apr  May  Jun  Jul  Aug  Sep  Oct  Nov  Dec

2016:  Jan  Feb  Mar  Apr  May  Jun  Jul  Aug  Sep  Oct  Nov  Dec

2017:  Jan  Feb  Mar  Apr  May  Jun  Jul  Aug  Sep  Oct  Nov  Dec

Leonard Azar