Examples: Strategies at Work

The previous chapter discussed several of the details and strategy twists you might want to consider in tailoring and using your own investment strategy for accumulating wealth. To really apply the seemingly basic accumulation strategies, you must determine your goal, choose an investment, estimate market return and investment growth figures, establish a value path (for VA), and then implement your plan to achieve your goal. Throughout the process, you must deal with the changes and realities of the marketplace—you should reevaluate your goal (as inflation changes), your progress toward that goal (as your investment returns vary), and the risk you are willing to bear (as you get closer to your goal). This chapter shows you how to put all this together and how to keep it together over time.

While I hope each of many previous hints and tips made sense in isolation, I suspect they are easier to digest if actually seen in action. How would a real investor put the DCA or VA strategies to work in real life, facing the real taxes, uncertainties, and other complications that we invariably must deal with over time?

We'll look at thorough examples of putting the DCA and VA strategies to work. We'll follow a mutual fund investor through a 10-year period (ending in 1991) of accumulation in a real investment, the Vanguard Index Trust 500 mutual fund. We'll see how to deal with realities like inflation, taxes, and market variability, and how to keep our investment ...

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