Simple way of Index Investing

Lots of experts agree that Investing in Index is better for naive investors but fail to look in to aspects of fine tuning their investment plan. We have earlier discussed  that Dow Jones over a period of 106 years has yielded better return for investors who have invested at lower p/e (Read that post here). I have used the same principle.

This is a rough table for those who do not have time to check markets every day. Since Index Investing is the best way for an Passive Investor. The logic behind this idea is to invest more when price is low but low prices don't come often so using simple mathematics. I have combined both historical chances of level occurred and probability of Higher valuation


// *This system is based on PE Investing theory applied for NSE - NIFTY 50 - Not to be applied on individual stocks or other indices * //

P/E/ Range	Allocation%
10.5-11.5	3.866561
11.5-12.5	12.64531
12.5-13.5	14.16665
13.5-14.5	23.1729
14.5-15.5	14.63966
15.5-16.5	7.574571
16.5-17.5	8.781656
17.5-18.5	7.956251
18.5-19.5	7.196429

Inferences:
The return in Buy and hold on index gave an return of 20.7% with index raising from 890 to 5884 i.e. about 6.6 time in 11 years. but returns in the above method in the above period were 29.71%. it might seem as not a great return because of compounding but the raise was 13.48 times i.e more than twice the buy and hold method another  positive for this method is for example the index has fallen after 6 years i assumed equal halves of money to be invested in 2nd case and i didn't add the bank interest you would earn for six years (atleast 3.5%). So total return would raise by few more % points but let us assume it as transaction costs.

you can check NSE p/e daily

Foot Note:
1)Data calculated for periods 1st January 1999 to 1st September 2010.
2)Changes in table might occur over a long period of time i.e. more than 11 years. The changes in  last 5 year period was observed to be small changes in % due to rise in expectation and higher valuation of Indian stocks
3) Practically a few % point might me shaved of as transaction costs of buying Nifty Bees(Index ETF) and their maintainance charges

Related threads
1) http://www.inditraders.com/beginners-section/3825-index-investing.html
2) http://www.traderji.com/exchange-traded-funds/45009-index-investing.html
3) http://www.theequitydesk.com/forum/forum_posts.asp?TID=2993