For those who wanted to follow along, this will be the first execution of my refined, structured Market-Based Buying Strategy for investing well with minimal effort: https://brighterdayslifecoaching.com/a-structured-market-based-buying-strategy-for-investing-well-with-minimal-effort/.
If you are a Very High Risk (VHR) investor, this post is for you – investors of all other risk categories can wait and do nothing if you want. If you aren’t sure what your investment risk category is, scroll down to the bottom of this post.
VHR Investors: The S&P 500 index has dropped about 4.6% from its all-time high (a 3-5% drop in the S&P 500 index generally happens about three times a year) – so if it remains at its present level (~583 for the SPY ETF or ~5862 for the S&P 500 index – whichever you prefer to track) or drops further, you might consider buying up to 50% of your overall investment account (or up to 50% of the cash you have available to invest) into one of the major market index Exchange Traded Funds (ETFs) (or you can split that across multiple major market indexes if you prefer). I anticipate there will be a more substantial decline in the overall S&P 500 index, but I could be wrong – and the longer and the deeper the drop you wait for, the greater the likelihood you’ll miss the rebound. So, VHR investors might want to go ahead and buy – other investors might be more inclined to take their chances by waiting for a deeper drop. It’s your financial future so do what you think is best for you.
I currently track five major market index ETFs: S&P 500 index (e.g., SPY ETF), the Nasdaq (e.g., QQQ ETF), a Mid-Cap Stock Index ETF (e.g., IJH ETF), Russell 2000 index (e.g., IWM ETF), and the EFA ETF (or something similar). The first four are major US-based indexes, while the last one tracks international stocks of developed countries outside the U.S. and Canada.
Of the above five major market index ETFs, the most attractive right now appears to be: EFA based on my analysis (it has fallen only 3.6% from its all-time high though so it hasn’t fallen by much – and the calculated EIRY (8.84%) is the highest across the 5 indexes I track. This is primarily due to the 3.09% dividend which is much higher than the other indexes). However, the EFA (or IEFA which is the one I like since the fees are lower) has currency exchange risk since it is not US-based, can be impacted by the current administration’s trade policy, and this index ETF has tended to lag the U.S. market indexes in recent years. So, there is risk although it looks attractive in my present opinion. If you prefer investing in a US-based index ETF, or prefer to split your investment between the EFA/IEFA and these other index ETFs, the most attractive US-based index ETF right now appears to be: IWM which tracks the Russell 2000 index (I actually prefer the SPSM which is similar but only includes the profitable small businesses contained in the Russell 2000 index). The IWM has dropped 12.4% and the calculated EIRY is the highest across the 4 U.S. index ETFs I track – at 7.1%.
IMPORTANT 28 FEB UPDATE: I updated my formulas to place much more weight on the percentage drop and combining that with the EIRY. Based on making this change the IWM ETF (or the SPSM which is my preference) is the best option overall – not the EFA ETF.
So, feel free to start buying in one or more of the aforementioned major market index ETFs if you are a VHR investor. You can use the ones specifically above or use a different one that is similar. Just ensure the fees are at least as low as the ones identified above when buying.
You can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing: https://brighterdayslifecoaching.com/published-books-and-life-coaching-services/.
Also, you can read all about my stock market activities here: https://brighterdayslifecoaching.com/stock-market-activities
I wish you much investing success for 2025 (and beyond!).
selfimprovement #selfhelp #selfdevelopment #success #finance #stocks #investing #stockmarket #bonds #bondmarket
==== INVESTMENT RISK CATEGORIES ====
Important Note: When adding up what you have across your investment accounts, I recommend making the following adjustment for pre-tax type investment accounts (e.g., 401Ks and IRAs without the word “Roth” attached): reduce the total amount by 24% for a conservative overall estimate. We have to pay taxes when withdrawing from these kinds of accounts so this will help to account for that. Feel free to use a different percentage reduction depending on what tax bracket you believe you will fall into when withdrawing money from these accounts.
VERY HIGH-RISK INVESTOR (your investment goal is 8+ times what you presently have in total across your investment accounts – after making adjustments in accordance with the note above). For example, if your investment goal is $2M and you presently have $250k or less in total across your investment accounts then you would be a very high-risk investor.
HIGH-RISK INVESTOR (your investment goal is roughly 4-8 times what you presently have in total across your investment accounts – after making adjustments in accordance with the note above). For example, if your investment goal is $2M and you presently have $250k-$500k in total across your investment accounts then you would be a high-risk investor.
MEDIUM-RISK INVESTOR (your investment goal is roughly 2-4 times what you presently have in total across your investment accounts – after making adjustments in accordance with the note above). For example, if your investment goal is $2M and you presently have $500k-$1M in total across your investment accounts then you would be a medium-risk investor.
LOW-RISK INVESTOR (your investment goal is roughly 1-2 times what you presently have in total across your investment accounts – after making adjustments in accordance with the note above). For example, if your investment goal is $2M and you presently have $1M-$2M in total across your investment accounts then you would be a low-risk investor.
VERY LOW-RISK INVESTOR (what you presently have in total across your investment accounts equals or exceeds your investment goal – after making adjustments in accordance with the note above). For example, if your investment goal is $2M and you presently have $2M or more in total across your investment accounts then you would be a very low-risk investor.