[Updated July 2016]
I've been an active equity and options trader since the late 90s and I really enjoy watching the market and researching trades. I realize that not everyone wants to spend as much time thinking about the markets as I do. So this is my really simple trading methodology.
In order to track to the market return, invest in the market. It's really that simple. From 1928 to 2014, the S&P 500 has returned 10% annually (with dividends reinvested). If you could achieve that rate, you would double your capital every 7 years! Put another way, if you add $3,500 to a stock account on every birthday from your 30th to 64th and that money compounds annually at 10%, you will wind up with just over $1 million dollars on your 65th birthday! That is the goal of the Retire on Rewards system.
So how do you track the market? There are a couple of free, low-cost ETFs that broadly track the market: SCHW for Schwab, IVV for Fidelity and VTI for Ameritrade. Buy these ETFs in your IRA account and then turn on dividend reinvestment. You can then basically forget about it.
Two other great ETFs that aren't free, but have a various advantages versus the broad market:
I personally find this approach to be way too passive for my liking. So I prefer to buy ETFs like SPY or QQQQ that have an active options market. I then sell cash secured puts to initiate positions and sell covered calls when I already have a position. I use the cash premiums obtained from these trades to buy more shares in these ETFs. The options benefit from time decay and the net effect is that my returns get smoothed out. At some point I'll go into more detail on this strategy.
Boom! That's it. Next step: Retire with $1 million dollars at age 65!
Questions? Comments? Tweet me @RetireOnRewards.
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Retire on Rewards