Paul is a 25-year-old man who graduated college a few years ago, has started the career for which he trained and is happy with the company for which he works. With his future looking stable, Paul wisely decides it is time to create a plan to save for retirement.

Paul knows that starting saving as early as possible is essential to achieving his long-term wealth-accumulation goals. He has learned that retirement experts recommend saving 15% of salary each year, taken out of compensation and transferred directly into his retirement account (so that he doesn't have to write a check each month and continuously debate his spending/saving choices, which inevitably results in regrets).

With these recommendations in mind, Paul does some calculations and estimates that, based on industry-average figures for his position, his salary will average about $65,000 over the next 5-8 years. So, Paul decides to budget to set aside $10,000 each year (15.4%) and will adjust his calculations each time he gets a raise. He commits to saving more if he has underestimated his annual compensation and wisely puts this plan in writing.


Next, Paul does some research on investment returns and learns that the stock market, commonly represented by the S&P 500 (considered the 'premier' stock-market index with America's most well-known large companies), has a long-term average return of about 7.5% per year. He decides that number will be his benchmark as he plans for the future.

Paul knows that his employer sponsors several mutual fund options for retirement. However, he also learns that the average mutual fund investor makes classic behavioral mistakes, occasionally moving money from mutual funds that have performed poorly (thereby locking in the losses) to funds that have recently performed better than the market. However, the investors in winning funds soon discover that mutual fund outperformance consistently reverts to the mean and in subsequent years, those recent winners inevitably underperform the market.

One statistic stands out in Paul's mind: over a ten-year period, on average, 93% of mutual fund managers underperform the S&P 500 and over 20 years, 98% underperform! Plus, expensive mutual funds fees eat into a significant portion of any returns earned. As a result, the average mutual fund investor receives only 2.6% per year – less than one-third of the performance of the S&P 500 index that is Paul's benchmark!


 Based on these figures, Paul calculates that if he goes the mutual fund route in saving for his retirement, he can expect to have only $735,000 set aside at age 65. That's probably not enough upon which to retire, and unquestionably not if he lives to be his father's age of 95. He also knows he will have to set aside a substantial amount of money for medical bills that Medicare will not cover, and what's left over after setting that money aside would force him to live in poverty.

Very disappointed by these cold, hard facts, Paul decides there's got to be a better way, and he rolls up his sleeves and digs into learn more.

One striking fact Paul comes across during his investigation intrigues him: in recent years, active mutual funds have experienced massive withdrawals with almost half-a-trillion-dollars taken out last year, while passive, index-based ETFs are growing by more than $1 trillion per year and the pace of that growth is accelerating. Hmmm...  Paul decides he needs to look into what's behind this massive transfer of money. There must be some reason that so many investors are now choosing passive investments over traditional, discretionary investments.


Paul realizes that the disappointing historical track record of mutual funds is a significant part of the reason for the dramatic movement of investor money into index-based ETFs. So, rather than put his money in a mutual fund, where investors historically underperform the market by nearly -5% per year, Paul instead considers investing his $10,000/yr savings into shares of the S&P 500-based ETF (SPY) each year.

After being disappointed by what he learned about mutual funds, Paul is considering joining the millions of investors who are giving up on mutual funds or active stock-picking and are instead investing in passive, index-based ETFs that track the returns of many different indices.

With the S&P 500 historically growing at an average of about 7.5% per year, and with incredibly low fees for ETF investing when compared to mutual funds, Paul would have a much more comfortable $2.3 million upon which to retire in 40 years. That amount is far more workable than $735k, but Paul soon discovers he can do even better.


One of the worst things Paul would have to face if using a passive investment in the S&P 500 index or another index-based ETF for his retirement savings are the dreadful market downturns that consistently, but unpredictably, occur in the stock market. For example, in the last 20 years, investors watched US stocks plummet downward and lose half their value not once - but twice - before taking five long years to plod back higher and slowly recover the ground they so quickly lost.

Those severe market declines can quickly cut an investor's principle in half (or more) and require many years from which to recover. The problem for investors is that they don't know which downturn is a minor correction and which ones will become a financial catastrophe. For this reason, many investors are whipsawed continuously by the market, buying stocks after they've been doing well for a while and selling shares just before they reverse and turn higher, thereby locking in losses. In fact, the average investor does the reverse of the classic "buy low and sell high" investing success-formula.

Paul is concerned that if he is unlucky, he could be retiring right when one of those -50% (or more) market crashes is taking place. It's hard to plan for life after retirement if you have no idea whether you will have the full amount you expected – or only half as much money when you get there! He imagines how devastating it would be to plan the timing of his retirement and take some irreversible steps such as buying a house in the country, then discover he had to work for another decade to make up for the losses from a market crash!


Paul rolls up his sleeves to do a little more research and learns that significant stock-market declines are related to the regular occurrence of business cycles and recessions. He also discovers that, an established firm serving investors since 1998, has built a line of innovative investment strategies that make profitable use of these regular cycles and rotations in the market.

The ETFOptimize strategies run on sophisticated computer algorithms, which utilize proven economic principles. These innovative formulas monitor macroeconomic indicators and the internals of the equity- and fixed-income markets, then convert these numerical insights into opportunities to profit by recommending the optimum ETF to hold at any given time.

Rather than brace himself for the inevitability of regular huge losses and gamble on there not being a -50% downturn when he's ready to retire, Paul commits to putting those regular rotations inside the market to work for him by subscribing to one of the proven ETFOptimize strategies.


Paul learns that the ETFOptimize strategies, on average, provide an annual return of about 24% per year, and he links to this investment-calculator. He clicks "Compound Interests" and sees that at the end of his 40 working years, after systematically taking advantage of the market's hidden rotations with just a few trades per year as recommended by his ETFOptimize strategy subscription, Paul could have a retirement fund totaling more than $400 million! *

- Calculate the returns you could get using a systematic, ETF-rotation investment strategy

Paul decides that amount of money would give him an incredible degree of freedom and he could comfortably retire before age 65 with that kind of savings. Once his account reached a certain amount, he could retire early – he and his wife traveling the world in luxury while using just a portion of one of those many millions he had earned by consistently rotating into the optimum ETF as market conditions changed. Paul realizes he'll even have the freedom to pass much of his wealth to his children, donate a substantial amount of money to his favorite charity – or really, do practically anything he chooses!

- Review Your ETFOptimize Strategy Choices

* Paul's calculation assumes an investor follows the ETFOptimize strategies precisely and that the hypothetical historical average return for an 'average' strategy continues for 40 years into the future. Unfortunately, ETFOptimize cannot guarantee anyone's future outcome and historical performance is not necessarily indicative of future returns. Please read our Terms and Conditions for disclaimers.

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