Home Forums Hunting & Shooting Hunter's Campfire Help with Mutual Funds and ETF

Two cents from one of the most unsophisticated investors around.

Everybody and their brother, after they have given their pet formulas for getting rich by constantly moving money around and being lucky, states the following:

- Diversify
- Invest over time and get rich slowly
- Always pay yourself first - i.e., put money aside before buying anything else.

Easy peasy so that what I've been doing for several years now. I put a healthy percentage of each paycheck into our company's 403b fund which they match up to a point, that's done automatically.

I also put a few hundred dollars each month into Vanguard Index funds - their total stock market, international stock market and total bond market funds. That's a line item "expense" on my monthly budget spreadsheet just the same as paying the mortgage and utility bills. That takes advantage of dollar cost averaging. I buy $xxx worth of each fund around the 1st or 2nd of the month, I generally don't even look at the current price.

Took a big hit in 2008 like everyone else but recovered. Took a lesser hit just recently but with the diversification my total investments' net worth didn't dip too much at all. In fact when the market fell so badly that Monday IIRC I put a whole month's extra allotment into the stock fund that night to take advantage of the good prices.

I started really late in life so won't be retiring in my 50's but am on track for a decent amount when I do retire.



I read a book a few years ago called "The Best Investment Advice You Will Ever Get" or something like that. In the preface the author says you can read all twenty something chapters or skip to the very last chapter. The first chapters were all about the ins and out of investing, lots of technical details and historical data. Then in the last chapter he says, "buy broad based indexed funds. Vanguard and Fidelity both have good ones. If you do that and invest long term you will make just as much money as if you followed all of the detailed steps related in the first chapters of this book".

I'm sure there are more sophisticated ways of handling money if one wants to devote the time and energy to following the markets and prognostications. I happen to like the KIS principle in all things and the above seems to be working okay.

Been having a very good year economically and want to invest most of
the money. One broker is telling me to put the money in a no-load
mutual fund. Another broker is talking up Exchange Traded Funds.
I do not understand ETFs at all.

Looking for help with investment choices.

The "secret" to the stock market is there is no secret. The key to making money is being knowledgeable, you need to know how companies are doing, how the future looks for their market and products, etc. If you have the time to do the research and make sound choices, then you'll do well. If you mindlessly follow the advice of experts, expect to loose your shirt.

If you don't have the time, then picking a good investment adviser will be worth it to you. And you'll need to do research into the investment advisers as not all of them are worth a damn.

Just like any other professionals, sometimes you can do a better job than they can, sometimes not. Know your strengths and weaknesses and make your choices accordingly.

Some rules that always seem to work.

During a bull market, invest in large cap
During a declining (bear) market, go small cap & healthcare

Never forget, 89% of all fund managers fail to beat the market (S&P 500). So while they're unpopular because they're always measured against market leaders (and if you know how to always pick the market leading MF, let me know), they are guaranteed to beat 89% of all Mutual Funds, so it makes sense to always keep a significant % of you money into a good index fund.

GG,

Your above post is not exactly correct.

Markets go in cycles. During the early portion of a bull market, value stocks typically out pace growth stocks. In addition small to medium stocks tend to out pace large caps early in the bull market cycle. Late in the cycle, there will typically be a sector rotation toward the larger, high PE growth oriented names.

As for buying small caps during a bear market, that's a poor strategy. Small caps usually head lower first. In addition during a bear market the smaller stocks will have fewer resources to weather the storm and are more likely to end up in bankruptcy. Once the market has bottomed, the small the medium value stocks will typically lead the way out, but you don't want to be in them on the way down. During a bear market yield is your friend, as it will help put a floor under a stock. However you must watch the cash flows to insure the dividends are safe, and be care in a rising rate environment.

As for professional money managers always selling their looser immediately, that just not true. This is a general rule for the short term trade, those trading for days or weeks, but not for the long term money manager. When managing large sums it can be difficult to quickly move in or out of a position because the size of your trades will move the market. In other words, if a large funds wants to take a 3% position is a given security, chances are their purchase will move the stock higher in the process providing them a higher entry price then they would of likes.

As for 89% of all funds failing to beat the S&P, that's from a very old vanguard study done during a late bull market when retail investors where heavily investing in index funds. Other studies done during late bear and early bull markets have yielded vastly different results with the active managers out performing the indexes.

The picture's actually a lot more complex then you painted.

I can see your point on not buying small cap on the way down; kinda hard to make a rational point of buying anything that's heading down. But I agree that small cap is the first to lead the market upward, and that really was my point. I'm an option trader, not a buy and hold kind of guy, so I don't buy or hold anything that is trending down. (hard to explain that strategy on an internet forum)

As for the 89%, my bad the number was 86% and it was a 2014 study.
http://www.washingtonpost.com/news/...utual-funds-ever-beat-the-market-hardly/

Knowing all that to be certain, you guys must be absolutely rolling in dough.


;-{>8

Put your money in Vanguard Wellington or Wellesley and forget about it.

Knowing all that to be certain, you guys must be absolutely rolling in dough.


;-{>8