To: James F. Hopkins who wrote (2842 ) 1/16/1998 10:35:00 AM From: Kirk © Read Replies (2) | Respond to
If I'm buying only S&P stocks, I have to sell the roll out ( at a loss ) and use the money to buy the new one. Every roll out causes me a loss, that then has to be made up for by gains in the S&P. When ever you have a loss, say even 5% it takes a gain of 5.26 % to get back even , these add up ! Over the years if you ( and it does happen suffer 20% losses, the gains have to be 25% to stay even with the S&P. BUT the S&P does not itself factor that in, on paper it just marches ahead and does not allow for the ( loss% takes more gain% ) whenever it dumps a stock out of it's index; this makes it look better than it is if you had real money in the stocks. before they reach the fallout point on the index. Maybe do a personal "Kirk475 Index" or something to avoid it.about to be added to the S&P500index? Since stocks going into the index are usually on a roll and get an extra kick when they are added to the index, it would seem this would be an interesting idea for a fund: Buy stocks in companies that are about to be added to the S&P500 . Maybe call it Kirk_600 for the top 600 companies less the S&P500! 8) I'd think the few percentage point kick these stocks get would be a real advantage when we return to more normal returns in the stock market (much lower annual returns). Be interesting to have the time to do the research and see if this would work for the past.suite101.com
