Down goes the Dow

Sally Vix wrote:

Just to follow up a bit on why younger investors should be focusing on equities and equity funds ... Historically, bonds have returned about 4% annually. The market about 10% and small Caps about 12% - add another 1% to that with dividends reinvested. Your portfolio will double when you take the annual return and divide in into 72. So if you have a portfolio of entirely bonds, your portfolio (this is based on historical returns) will double about every 17 or 18 years. A portfolio of entirely equities (based on historical returns) will double about every 6 years. Quite a difference. And why you plot that out over 40 or 50 years the difference is enormous.

One last thing. A well known study done about 25 years ago determined that one's portfolio performance is based 95% on diversity and only 4% on market-timing and stock-picking. Basically, get in the market, be diversified and don't try to pick stocks. GEt heavily invested in mainly equities (of not old ) and just ride out the market. You don't want to beat the market (you really can't, Peter Lynch aside) you just want to match the market. Do NOT keep selling and buy investments. GEt in and stay in for the long haul. A 40- or 50-year index fund will make you very, very rich down the line.

seattle prattle wrote:

Sally Vix wrote:

Just to follow up a bit on why younger investors should be focusing on equities and equity funds ... Historically, bonds have returned about 4% annually. The market about 10% and small Caps about 12% - add another 1% to that with dividends reinvested. Your portfolio will double when you take the annual return and divide in into 72. So if you have a portfolio of entirely bonds, your portfolio (this is based on historical returns) will double about every 17 or 18 years. A portfolio of entirely equities (based on historical returns) will double about every 6 years. Quite a difference. And why you plot that out over 40 or 50 years the difference is enormous.

One last thing. A well known study done about 25 years ago determined that one's portfolio performance is based 95% on diversity and only 4% on market-timing and stock-picking. Basically, get in the market, be diversified and don't try to pick stocks. GEt heavily invested in mainly equities (of not old ) and just ride out the market. You don't want to beat the market (you really can't, Peter Lynch aside) you just want to match the market. Do NOT keep selling and buy investments. GEt in and stay in for the long haul. A 40- or 50-year index fund will make you very, very rich down the line.

I don't quibble with that but you have to understand that that advice only applies those who would bother to listen in the first place.

Most people don't know what a mutual fund is. Chew on that. Now go tell them to buy certain types of investment vehicles that don't what they are, diversify them, make sure you reinvest this thing called a dividend, and come talk to me about how your life's savings are doing in say, thirty or forty years.

Yeah, right.

So, enter the financial advisor, thank god, and many of them work for very good firms that only offer load funds. So your index advice.... right out the window.

Go ahead, and convince me otherwise. My parents relied on one of these and believe me when i tell you they made out so much better than they would have on their own. In the interest of full disclosure, the broker was a relative, but i believe the case still stands.

Sally Vix wrote:

seattle prattle wrote:

I don't quibble with that but you have to understand that that advice only applies those who would bother to listen in the first place.

Most people don't know what a mutual fund is. Chew on that. Now go tell them to buy certain types of investment vehicles that don't what they are, diversify them, make sure you reinvest this thing called a dividend, and come talk to me about how your life's savings are doing in say, thirty or forty years.

Yeah, right.

So, enter the financial advisor, thank god, and many of them work for very good firms that only offer load funds. So your index advice.... right out the window.

Go ahead, and convince me otherwise. My parents relied on one of these and believe me when i tell you they made out so much better than they would have on their own. In the interest of full disclosure, the broker was a relative, but i believe the case still stands.

If you have a Wells Fargo account, and have a portfolio of $25,000 or more you get 100 free trades a year. A 100!. I think it might have been Racket who suggested only having two funds - Vanguard total stock market and a bond fund. I would suggest just going with the exchange-traded VTI or the Vanguard Total domestic market because emerging markets and overseas funds have performed so poorly for 10 years or so. The financial advisor is taking away so much from one's portfolio ESPECIALLY CONSIDERING that passive funds, aka index funds outperform them 70- to 80 per cent of the time. You can NOT beat the market over an extended period of time. YOu can beat it for a couple or years but that is happenstance - luck. Those having actively managed funds are KILLED by the outrageous fees. They can never measure up to passive index funds over the long haul. They just can not. Each year the index funds is paying maybe -. .03% while the managed fund is paying upward of 1.3% or higher. Over the long hauld that will never hold up.

seattle prattle wrote:

Sally, the financial advisor i was refering to got paid somehow by offering the selection of load funds that her company offered. They usually had a front end load or a sales load. The maint. fees were also higher than what you would see at Vanguard, etc. Like in the 0.8 to 1.4 % range.

That was the cost.

But for that, the client received someone who walked them through the whole process and set them up with a good balance of bonds, mutual funds, fixed assets like CDs, etc., and monitored it, and adjusted it as circumstances arose and changed, and offered basic tax info when appropriate to the investments, and was available at the client's convenience and needs.

So, yeah, the funds weren't anything i would touch with a ten foot pole, but that was the cost of doing business.

It was worth it for them. ANd hell, one could argue that it would be worth it for me. Instead, i avoid stuff like Bonds and CDs and just do what i know, perhaps to my own detriment.

But for them, it was a good match, and they had no right to think they could do that on their own with a couple of index funds.

Sally Vix wrote:

seattle prattle wrote:

Sally, the financial advisor i was refering to got paid somehow by offering the selection of load funds that her company offered. They usually had a front end load or a sales load. The maint. fees were also higher than what you would see at Vanguard, etc. Like in the 0.8 to 1.4 % range.

That was the cost.

But for that, the client received someone who walked them through the whole process and set them up with a good balance of bonds, mutual funds, fixed assets like CDs, etc., and monitored it, and adjusted it as circumstances arose and changed, and offered basic tax info when appropriate to the investments, and was available at the client's convenience and needs.

So, yeah, the funds weren't anything i would touch with a ten foot pole, but that was the cost of doing business.

It was worth it for them. ANd hell, one could argue that it would be worth it for me. Instead, i avoid stuff like Bonds and CDs and just do what i know, perhaps to my own detriment.

But for them, it was a good match, and they had no right to think they could do that on their own with a couple of index funds.

Fair enough, Seattle. I had more to say but have to run off - thanks for your input.