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to make yourslef a capital allocation line
3-4% isn't hard.
invest in an index fund
Ha, hang around WSO enough and you may pick up some good ideas. I did that and invested in citi 3 weeks ago when it was $3.40, my portfolio has gone up 23% in 3 weeks, Now that is baller.
you didn't need a WSO acct to know it was time to get on the Citi bandwagon
True, but even though the fundementals looked good to get into Citi, I knew Citi was a good bet 3 months ago, I did not have the balls to put all of my savings ($5k) into it; until I read on WSO that all of the hedge fund guys were doing it. That was the icing on the cake.
Wow, this actually is an awesome question. But it would be excruciatingly difficult to answer it properly.
First of all inflation is not a constant, plus the official measurments of inflation are a bit shady (why only consumer prices, excluding asset prices? why all the arbitrary adjustments, like hedonics and substitutions? how do we choose the apropriate basket of goods?). But this is just the beginning.
Assuming we know the nominal rate we want, how do we define risk? As volatility of returns? A probability of bankruptcy in a given timeframe? Maybe some sort of qualitative description?
Lets say we settle for volatility. So how do we translate returns into risk? We don't really have a fundamental model for doing this, the only thing finance came up with is to look at how the market is pricing risk and derive one out of the other using, say, CAPM or APT (and even still - Roll argues that CAPM is untestable in principle, so there is no certainty that it is valid).
So I guess this doesn't really answer your question. But I think it's nice to know that there are still so many things to figure out.
I would say that it's easy to achieve that target until it is not. By that, I mean everyone could do it in the last decade, but how many people did it in 2008? 2008 wiped out most investors returns for a decade. So, the key is to mitigate risk. I would caution against an index fund unless you have a very low amount to invest, you don't want trade commissions to eat up your account.
Look at consumer staple names that have solid business models and pay good dividends. Stocks like PM and KMB aren't going anywhere and they pay almost 5% in dividends, so if you get any appreciation in the stock, you have hit your target. Best of luck.
I was also in the C trade @ 3.40. I just got out yesterday. I may not get top tick, but who can complain about 20% in a few short weeks.
Now the real question is how hard is it to earn 3-4% net of inflation with ZERO RISK (or virtually risk-free)?
I'm pretty damn close now with a 3 year Discover Bank CD at 2.5% (with deflation these days).
If you want to make tons of money and you don't give a fig about risk, this stock fluctuates by 10 percent or so a few times each day. If you time it just right you can make a killing. It's ticker symbol is: VSTNQ
I know it is basically day trading, but hey, if you are good at it, this stock can help you make bank.
http://www.google.com/finance?q=OTC:VSTNQ
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