This site spends a bit of time talking about index funds, here and here. As well as the blog, the Slack Investor site hosts pages following the ASX Index, US Index and UK Index. This is because Slack Investor likes, and is invested in, these type of funds. Each page is dedicated to a rules-based method of following these type of funds in a (mostly!) profitable manner … and, in the Slack Investor tradition, a minimal amount of energy needs to be spent on these investments.
The astute reader will peruse my portfolio page and ask the question
Why does Slack Investor keep going on about these funds when only ~4% of his portfolio is invested in them?
The explanation is that Slack Investor started out 100% in Index funds … and, with some experience started trading in individual shares. I currently have a mixture of both. Index funds are a great place to start your journey into share investment.
There are some eloquent arguments against using the broad index funds as an investment tool. Montgomery maintains the theme “why fill the saddlebags with bad companies!” in this article.
However, despite these funds labelled as “dumb investing” by some, Index funds become more popular each year and have some solid support in the investing community. Slack Investor has developed a simple rules-based method for (usually!) profitable trading in index funds that only requires monthly monitoring. At the end of each month, I will look at the monthly chart of each followed index on Incredible Charts and make one of three decisions – buy, sell, or move my stop loss.
The simplicity of this approach is appealing for its slackness!
Details of this method will be eventually posted on the index pages – Not because I’m secretive, … just because I’m a little slack … and I think it will make an interesting future post … but for now, monthly decision points will be posted as soon as they are made.
This “index trading” method is different to how individual companies are traded by Slack Investor. There are greater risks involved in trading just a few individual companies … but the potential rewards are also much greater! One of the few advantages of being in the investment game a long time is having enough capital to have positions in at least 20 companies … this limits “individual company” risk as each company is just a small fraction of my total portfolio.
Slack Investor is currently enjoying the decisions associated with trading individual companies … even though a bit of effort goes into researching the companies – and they require more monitoring (work!). I am rational enough to know that there will be a time where this extra work will lose its appeal … and then I will revert back to index investing … “dumb” perhaps … but hopefully still profitable.