Base Camp: #2 Market Exposure

Depending on the market certain sectors have either direct or indirect effects on the currency, equity, etf, or commodity. In example the DXY or the dollar currency index runs in direct correlation to any pair with USD in its name. FXY for the Yen FXE for the EUR 40% of a stocks price fluctuations are due to the market, 30% to the sector and 30% to the stock itself

beta is the amount of exposure a stock has to the market, this is why the DJI is horrible compared to the S&P, the S&P has much more variety with equities ranging from high to low beta’s=better view of the market

Johnson and Johnson(JNJ) moved heavily correlated to the S&P 500, each time the market(red Line) pulled back the stock either fell or stayed stagnant this is why it has been so incredibly easy to make money in the market in recent years. This price action can be seen in similar stocks and ETF’s such as BA, HD, BLUE, FB along with others.

Historically the S&P has yielded about 10.9% a year(this isn’t counting falls after bear markets which average about 27% each fall), investors are able to simply hold and wait for years on end turning a solid return at the end of their run-up.

If you need a great reference book to focus for retirement I would recommend: “Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns Book by John C. Bogle” You can download it and read it for free here