Step 1: Choose a diversified equity index based on your time horizon and risk tolerance. You can also choose a mix of indices.
- underlying principles: Diversification, reduction of exposure to idiosyncratic risk (as opposed to systematic risk), Modern Portfolio Theory
Step 2: Invest $8,653.85 a week for the next year in your indices of choice.
- underlying strategy: dollar cost averaging
Step 3: If the market tanks in September because school re-openings ravage the country, invest the rest of your money at an accelerated rate.
Step 4: Continue to reinvest income steadily for the rest of your life. Never liquidate a diversified index because of a recession (this ruins the whole investing strategy).
Step 5: Gradually readjust your portfolio into lower risk indices before/during retirement based on your risk tolerance. Warning: Even if you have low risk tolerance, you must have a strategy to live off your earnings for the rest of your projected life span. Generally speaking, the lower your risk tolerance, the longer you have to wait before retiring (because bonds are guaranteed to provide low returns) or the larger your portfolio needs to be upon retirement.
- underlying principles: Diversification, reduction of exposure to idiosyncratic risk (as opposed to systematic risk), Modern Portfolio Theory
Step 2: Invest $8,653.85 a week for the next year in your indices of choice.
- underlying strategy: dollar cost averaging
Step 3: If the market tanks in September because school re-openings ravage the country, invest the rest of your money at an accelerated rate.
Step 4: Continue to reinvest income steadily for the rest of your life. Never liquidate a diversified index because of a recession (this ruins the whole investing strategy).
Step 5: Gradually readjust your portfolio into lower risk indices before/during retirement based on your risk tolerance. Warning: Even if you have low risk tolerance, you must have a strategy to live off your earnings for the rest of your projected life span. Generally speaking, the lower your risk tolerance, the longer you have to wait before retiring (because bonds are guaranteed to provide low returns) or the larger your portfolio needs to be upon retirement.