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For the long haul index funds and a few select active funds that are low cost can do nicely for you. The problem is that most of them are closed to new investors. The Fidelity newsletter does a good job of helping to guide folks in and out of funds at the right time and has a good track record.
I fear you miss my point. Picking the "few select active funds" is the challenge. Repeated research over decades has shown that there is no way to select superior performing funds over long term. Even Fidelity can't do it. The research has shown that you can identify classes of funds that will do better in certain market conditions. For instance, high beta funds will do better in rising markets, but horribly in declining markets. But out of the group of high beta funds, no one has found a way to pick out the "best".
I agree that stock and fund picking is fun for some people. Go to it. But I also knew folks that day traded themselves out of a fortune when the market turned.
The truth is that these days, the folks that earn superior returns are the high frequency traders, because they use information not available to the rest of us. How? By seeing the order flow, and trading in advance of the execution of those orders, all legally. That's why so many institutional investors are working hard to trade in "hidden" ways.
The research I've seen does not support your "observation" at all. In fact, the research shows the opposite.
Stock-picking and expenses separate issues? That's a new one. The fact is that expenses are a major reason why active trading approaches under-perform. And if by "expenses" you mean account management fees, you are spot on. Actively managed funds underperform the market by the account fee amounts, on average. It's those pesky expenses that kill the performance of these funds.
yes two separate issues . there are excellent stock pickers out there managing funds . so the claim that you can't pick a portfolio of winning stocks is a crock .
the reason they fail to beat their index is not because it is so hard to pick stocks . it is because the expenses of a small fund hurts the fund and can wipe away the alpha .
the two are not the same claim .
claiming most funds don't beast their index can be true . saying no managers can pick winning stocks frequently enough is false.
my record most years for the speculation part of my portfolio generally beats a total market fund .
that is because unlike a fund manager i can go to any asset i like . gold has been a big winner for me , so have long term treasury bonds . most fund managers must stay within the dunds objectives and bylaws ., i don't .
As we were nearing retirement and not yet there. Shiller and his real estate comments motivated me to sell when our market had started to decline or had at least stopped rising. We had some trouble selling and others told us to wait as the market would rebound we listened to Shiller. We sold at 90-95 percent of peak depending on how you decide your house compared to the highest comparable sold. Our neighbor sold a few days later for a bit less and one more house sold in our price and sq footage range the market started crashing. Those on the market at the same time of us took a big hit. Thank you Shiller.
For someone at my age and in a transition stage I am once again listening to him carefully. Transition stages require more decisions than when you are in stable life pattern. At age 70 once again decisions need to be made and suddenly my thirty year plan is ten years in and there is a age related reality. Also being a junior Boglehead I am aware of the market distortions index funds may well be creating. Each week I buy Apple and Exon without any thought to valuations and future performance.
Exxon has done absolutely nothing in the past ten years. For your sake, I hope its next ten years are a lot better. I would put that money into actively managed mutual funds instead.
Exxon has done absolutely nothing in the past ten years. For your sake, I hope its next ten years are a lot better. I would put that money into actively managed mutual funds instead.
You missed my follow up. I agree with you about performance. I am buying them as part of a index fund as are millions of other folks. Perhaps even you? Index funds buy not on performance but market cap size and their ratio of the targeted index
I fear you miss my point. Picking the "few select active funds" is the challenge. Repeated research over decades has shown that there is no way to select superior performing funds over long term. Even Fidelity can't do it. The research has shown that you can identify classes of funds that will do better in certain market conditions. For instance, high beta funds will do better in rising markets, but horribly in declining markets. But out of the group of high beta funds, no one has found a way to pick out the "best".
I agree that stock and fund picking is fun for some people. Go to it. But I also knew folks that day traded themselves out of a fortune when the market turned.
The truth is that these days, the folks that earn superior returns are the high frequency traders, because they use information not available to the rest of us. How? By seeing the order flow, and trading in advance of the execution of those orders, all legally. That's why so many institutional investors are working hard to trade in "hidden" ways.
I didn't miss your point and don't disagree. Successful newsletters do what you say and guide you in and out of funds based on their perception of market conditions
the newsletter i have been using for 30 years now , fidelity insight has a select fund model . the select fund portfolio has blown away a total market fund for 29 years now . in fact so has the growth model .
when i started in 1987 following it, a 100k in the growth model is 2.40 million today , 100k in a total market fund is about 2 million .
but that is not the biggie , the biggie is the select model started 2 years later and is 3.40 million today
the newsletter i have been using for 30 years now , fidelity insight has a select fund model . the select fund portfolio has blown away a total market fund for 29 years now . in fact so has the growth model .
when i started in 1987 following it, a 100k in the growth model is 2.40 million today , 100k in a total market fund is about 2 million .
but that is not the biggie , the biggie is the select model started 2 years later and is 3.40 million today
yep , adjusting to the big picture is really not hard to do . plenty of newsletters have been doing it for decades. it is easier when we are talking portfolio's not just funds locked in to the bylaws and goals governing a particular fund .
fidelity insight has done it ,fidelity monitor did it before insight bought them and jim lowell's fidelity investor has done it for decades .
heck i posted copies of my actual trading record here many times and i have been dodging in and out of sectors like gold and long term treasury bonds just based on when the market spooks and when it doesn't ,strictly seat of my pants .
individual stocks are far harder to predict ,for me anyway . if i buy an exxon or kmi it is a sector play for me .
when i started in 1987 following it, a 100k in the growth model is 2.40 million today , 100k in a total market fund is about 2 million .
And did you invest at that point? And stick with "the growth model" since then? Did you start before or after the 1987 crash? (I was at a financial conference that day. It was interesting to watch my fellow attendees) Makes a difference in returns.
Are you sure of your math? I calculate a CAGR of about 16% annually. That seems really high for a total market fund, or any fund for that matter. Yes, it's easy to get such a rate of return for scattered years, but not consistently.
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