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I have a lot of money building up in a savings account stagnating at 1% APY. I need to start putting my excess income in investments. I'd rather have something passive as I don't have to spend much time analyzing it. At work I just put 15% into a lifecycle 401k.
Anyways I've read that >80% of mutual funds fail to beat their respective index so I am leaning on just dumping most of my excess money in a portfolio of low cost index funds similar to this article. The Only 5 Index Funds You Need to Own
Can not access your link as I have add blocker on. ETF's of vanguard would be good. Look at asset allocations to get an idea of what funds. Assuming you are young and not going to bail out when the market goes down skip bond ETF's
Not sure what your question is, and I also am having trouble with your link but I have a good idea what Kiplinger would recommend.
If you want it really simple and you're less than 50 or so, all you need is one index fund - VTI (Vanguard Total Stock Market - US index fund).
If you are over 50, or the stock market makes you nervous, two funds: VTI + BND (Vanguard Total Bond Market index fund). 2:1 ratio of the two.
If you are under 40, I would have these two funds: VTI + VXUS (Vanguard International Stock Market index fund). 4:1 ratio of the two. (80% VTI).
Just buy them and forget about them for oh, 20 years. You will look one day and be very pleasantly surprised.
The key to index funds - and this is very important - is to keep your mitts off of them. If you try to get smart and try to beat the market you will lose. You have to be patient and you will reap the rewards.
i would avoid bnd or any of the vanguard total bond funds -they stink .
fidelity total bond has blown the doors off vanguards every time frame going back the last decade with 2016 being especially horrible for vanguard's versions .
vanguards total bond returned 1.07% for the 1 year , fidelity's over 6% .
over the last five years the VANGUARD TOTAL BOND FUND returned 12 percent FIDELITY TOTAL BOND FUND 18 percent
Over the last 10 years VANGUARD TOTAL BOND FUND returned 45 percent and FIDELITY TOTAL BOND FUND 60 percent.
don't believe for 1 second that the lowest fees are everything . bond funds are one area vanguard's expertise falls short . in fact vanguard has no high yield bond fund at all since they have little expertise in that area and do not really have much in the way of bond analysts .. it reflects that fact in their total bond returns .
Last edited by mathjak107; 02-12-2017 at 03:28 AM..
vanguard says their actively managed equity funds funds overall beat their index funds .Between 1985 and 2014, Vanguard active funds, on an asset-weighted basis, have delivered about 0.45% better .
one reason statistics are flawed is that there are thousands of small mutual funds out there . these small funds can have great stock pickers - but with such little money in these funds the expenses to keep the lights on and pay people are very high . these funds will rarely do well and if they do it is just luck because internally the expenses of running the fund are very high relative to the dollars in the funds .
if you eliminated these small funds i will guess and say most managed funds with substantial assets do have very good long term records .
the majority of funds may not beat their index's but if you follow investor money investors money is what makes these large funds large and investors likely do a lot better than the statistics show . of course bad investor behavior does many in but that is a different issue .
So many try and reach for the stars but most fail to do so- the important thing is to have a proper asset allocation for your individual situation. Once a proper allocation has been established then utilizing index funds is a smart and efficient way to invest the funds. My opinion is that asset allocation is the most important factor then expenses, over the long term you most likely will outperform over 90% of the active managers.
Fidelity & Vanguard are very well respected investment co.s but Fidelity has dedicated a lot of capital to their fixed income division. Vanguard could easily catch up if there is a deficit.
the problem is there are so many other factors involved and the sad truth is not only do most small investors as a group NOT beat 90% of managers but they don't even achieve the fund returns the fund they were in got .
everything from exhibiting good investor behavior (the hardest part ) to your buy in , sell points and rebalance points matter . you then have your tax planning and when you add money in to the funds to deal with , allocations as well as how the funds act as a cohesive portfolio . . in short , thinking most investors beat 90% of the managers is chasing unicorns.
in fact by using managed funds through their sweet spots and then swapping for other funds that fit the big picture better , none of your funds have to beat an index and as a portfolio you will out perform . most newsletters that cater to vanguard or fidelity do that , with very successful long term records.
it is all about the total plan you put together with all the trimmings , not just the fact you buy index funds .
index funds in the hands of those unskilled at planning the tota;l package and unable to exhibit good investor behavior are like putting a fine violin in the hands of someone who can't play .
Last edited by mathjak107; 02-12-2017 at 05:30 AM..
vanguard says their actively managed equity funds funds overall beat their index funds .Between 1985 and 2014, Vanguard active funds, on an asset-weighted basis, have delivered about 0.45% better .
I guess my question is if this is a good idea for a hands off investment stategy and how to I set it up. I am looking to put $2k a month into it.
Also how should I set it up. I guess a low cost online brokerage though my credit union has $6.95 a month unlimited mutual fund trading via Savedaily their selection isn't great.
Last edited by MSchemist80; 02-12-2017 at 06:43 AM..
tin fact by using managed funds through their sweet spots and then swapping for other funds that fit the big picture better.
I love you, man. You bring a wealth of knowledge to the table. But you just described market timing.
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