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I have to laugh when people I know at work or otherwise say they don't have enough time to figure out how to invest their retirement $$. But they somehow have time to watch and discuss American Idol and loads of time for things like fantasy football. I guess it all comes down to what your priorities are.
For anyone who actually wants to invest there is a lot of information out there. For me, Value Line for stocks and Morningstar for mutual funds and stocks have worked very well.
And now we have all these nifty target date retirement funds with relatively low expense ratios. Certainly not sophisticated but definitely an easy autopilot for someone who isn't interested in fretting about rebalancing or what their weight in bonds should be at age 47.
yes and no.....yes they typically beat 80% of the actively manged funds out there long term.
but: you know how if you went to a certain bad part of town you may stand a huge chance of getting mugged?,
but if you never go to those parts of town your chances reduce to next to nothing.
well many funds included in that 80% figure are sector funds and not diversified funds, others are just bad funds historically and no person who does their homework would buy into them because they have long term track records of being bad..when you start to eleminate the stuff you wouldnt own the odds go up alot that managed funds stand a good chance of beating the index.
yes and no.....yes they typically beat 80% of the actively manged funds out there long term.
but: you know how if you went to a certain bad part of town you may stand a huge chance of getting mugged?,
but if you never go to those parts of town your chances reduce to next to nothing.
well many funds included in that 80% figure are sector funds and not diversified funds, others are just bad funds historically and no person who does their homework would buy into them because they have long term track records of being bad..when you start to eleminate the stuff you wouldnt own the odds go up alot that managed funds stand a good chance of beating the index.
ok then, For the "average" person who has very little understaning of finance, then a good, realitively safe investment scheme would be low to no-load index funds...right???
its not just about buying an index fund but its about constructing a diversified portfolio that works for you both in risk level and goals.
buying an index fund of the total market only bets on one particular economic outcome , prosperity. not only that but if you cant tolerate pain what will your brain make you do in a bad drop? sell and run for cover and loose money?
i suggest learning all you can, find a good newsletter while you are learning and follow their portfolios that meet your goals.
you dont need each fund to beat the indexes to beat the indexes.. as an example i follow fidelity insight a news letter geared for fidelity funds.
occasionally we get a exchange recommendation on some of the funds in the portfolio. not to time the markets but like steering a big ship you nudge the portfolio in different directions to fit the big picture of where we are going.
as an example when the dollar was falling we were in a fidelity fund that was weighted to large companies that got lots of business from doing business from overseas... when the dollar bottomed we switched to a fund that bet more on markets recovering and had lots of economicly sensitive holdings.
when that looked like it may faulter we switched to a fund that was more defensive.
these are only 1 of the funds in the portfolio of many funds so even though each one of those funds may not have beat their index that year by using them at the prime time of their holdings overall your total portfolio beat the index...
its the sum of your portfolio's holdings and your tolerance for pain that determine how you did,not just 1 fund or group of funds that have no active management..
while index funds tend to outperform many times in up markets they tend to not do as well in down markets.
...but my arguement for index funds was meant for those too busy, unmotivated, or ??? to learn about markets.
the issue really is just buying an index fund isnt a complete well conceived portfolio..if you dont have the time or desire to learn buying an index fund by itself blindly with no other well thought out asset classes probley wont do you much good.
most of your gains or losses are based more on your asset allocations then the particular fund you buy. an s&p index fund or even its closest kin the total market index fund would now be in its 11th year of almost no gains... on the other hand had you held a mid-cap index you would be up 50%, gold funds up 400% , treasury bond funds had an amazing run up, etc......
if someone had no desire to learn or time they would be foolish not to spend the 100 bucks a year or so and subscribe to a newsletter like fidelity insight or fidelity monitor and let them call the shots and do the ground work .
Last edited by mathjak107; 09-06-2010 at 08:24 AM..
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