I do want to make sure we’re clear that the budget deficit has no effect on interest rates currently. It could if there were no buyers of our debt and if it continues upward it could get so high that we couldn’t do much about it but raise rates. So it is a concern.
I think that it’s difficult to keep them separate as the politicians want to take too much credit for their input into the economy and that goes double in a Presidential Election year.
If you believe that you can’t beat the market, you would buy an index. There are basically three major indexes in the US. The Dow, the S&P 500 and the NASDAQ. There are 100 more ETF’s and minor indexes, such as biotech, semiconductor, energy, etc., but those aren’t major indexes and not really what index investing is all about.
If you just buy an index and hold it, the taxes and fee’s are lower, you don’t have to spend any time doing research and staying informed, and you get the same return. If the market is efficient and you can’t beat it, why bother trying? And if you do try, don’t forget to take the cost of your time off your return before comparing it to the averages.
Dr. Douglas Rice 