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Strategies & Market Trends : Index funds - The ultimate wisdom ???
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To: capitalistbeatnik who wrote (7)5/15/1997 5:09:00 PM
From: Oliver Ruppert   of 21
 
Hi folks,

thanks for two interesting links.
I thought as well in the last few weeks about a strategy to move into small caps. What I would consider (if i haf a futures trading account :-) ) is to short the SP index and go long the Russell. So I would be trading only the spread, which is at historical high (well, not quite sure about it, but fact is that SP outperformed the russel 25 to 30% over the last years). That way, I would not need to put too much capital upfront and the risks are quite limited in my opinion.
About index funds: i've done a lot more reading about the subject:
I have come to a provisional conclusion:
1) Index funds are usefull for the investor who has no 'real' information about the market or those who are just not interested in the market but still want to profit from it.
2) Index funds are usefull for large stocks, which are liquid and widely followed by WallStreet because the liklihood for mispricing is reduced.
3) Index funds do not work with small-cap stock (liquidity problems)
4) If you as a individual private investor think that you have some knowledge/insight in a company or a market, than go for it and do not invest under any circumstances in an index funds. This sounds very extreme and I really mean it. Or you know 'something' or you don't !! In the latter case, just invest everything in index funds and don't choose individual stocks. But if you want to be a real winner, than do some work, analyse small companies and you will find opportunities. The thing is that if you want to beat the market, you have to prepare yourself accordingly.
Regards
oliver
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