Indices

Investing into indices is straight forward but not preferred approach for me.

Pros:

• Well diversified
• Research does not take long time
• Maintenance (monitoring) is easy

Cons:

• Average results
• Risky in "high markets"

Typically indices deliver averages results. However There are 2 ways to get an over average result:

• Market timing
• Investing into smallcaps

Ability to time market, according to the most successful investors, is an illusion. Thus must not be taken seriously.

Investing into smallcaps to beat DJIA and SP500 however can be a vital idea.

Rules🔗

Since I aim to get results better than averages, indices is not a preferred investment. However in some cases it can be justified:

• Market dropped more than 30%
• Due to personal circumstances I am not able take time to perform analysis to identify good individual stocks.

When to buy indices?🔗

After significant market drop (at least 30%).

P/E or Shiller P/E is recommended to be not higher than 15.

Which indices to buy?🔗

Small cap:

• SP600
• SDAX

Mid cap:

• SP400
• MDAX

Large cap:

• SP500

Indices like DJIA and DAX must be avoided for being less profitable and at the same time not that well diversified.

Averaging down🔗

After opening initial position some cash must be left to ensure I'll be able to average down if necessary.