"Proponents of indexing as the best investment strategy seem to take great delight in reporting how the vast majority of professionally managed portfolios (mutual funds, separately managed accounts, hedge funds, ETFs, etc.) fail to outperform the S&P 500. Therefore, they argue, it is best not to even try. Investors should simply invest in index funds and forget about it." "At first glance, this would appear logical because in truth their statistics are true and valid. On a total return basis, the vast majority of investor funds that are professionally managed do in fact underperform the S&P 500 on a total return basis. However, with this article I intend to illustrate that there is a significant flaw with this line of reasoning." Prowling through my Evernote clip file, rereading articles that attracted my attention, I though this piece might be interesting to those currently discussing dividend growth versus speculation. Agree or not with the writer's analysis, it is food for thought. http://seekingalpha.com/article/1752582-trying-to-beat-the-market-is-a-fools-errand HTH. YMMV.
I think professional investors hate index investing and especially the S&P500 for a good reason - it constantly outperforms them by a significant margin and threatens their very industry. Even Warren Buffett suggests that if you do not have the time or knowledge to invest your own money, to simply invest in indexes. Not to forget that when investing in the indexes, there is also some disparity in the fees between funds and efts - and still most always better to go for the lower fees.
I do consistently beat the market in my more aggressive taxable account. But I take a fair amount of risk and experience a fair amount of volatility. Of course I also make use of risk-management techniques as well in that account, such as using put options to hedge more volatile long positions.
True. You either have to be like JR Ewing (here). Knowledgeable, history-tied, and far from stupid. I read over the weekend of an investor and I am sorry I do not recall who, but his advice timely. "First he lost money, then he lost more money, then he began to gain money, then more, now he has an income which supports his family." This is where we all want to be as investors, at the end and not the beginning. I heard it said a few months ago, "if you study anything for two years, at the end of that time it would be to you as to have a Master's degree in your area of study." R. Gonzales. This is me. I like money, I am not in love with it,like Mr. Wonderful is (Kevin O'Leary), but it does do many things for me that an empty pocket does not. So I read, and I study and I watch (CNBC) daily. I am new at investing, so I am still in the research mode, but soon I won't be. I will use a Broker for my S&P investments then branch out on my own. to take what I am learning, put it to task, fail, fail, and fail some more before I succeed, succeed and succeed some more. Key Point: I am not investing for me but for my kids. What I make, I'll leave for them.
It's hard to go wrong over the long term with either an index fund or perhaps a few bucks invested with a handful of the most successful fund managers... who have proven they really know what they're doing over at least one or more decades of ups and downs. Otherwise, you can begin the long journey to picking your own investments. It's really not that complicated (or shouldn't be), but it is time consuming and can be a pretty volatile learning experience.
There are also many virtual trading accounts around nowadays - a great way to learn while keeping the actual money in an index fund. The advice about losing money, then losing some more etc, I am afraid has burned too many people and their family savings. Las Vegas is a better place to gamble. I have an issue with the "proven" fund managers - all they have proven year after year is not being worth of their fees. John Bogle is my kind of fund manager
I've got a handful of the better funds in my retirement account - Yacktman, Bruce, Templeton Global Bond Fund, FPA Crescent, First Eagle Global Allocation an High Yield funds, etc. These guys know what they're doing. Investing is not without risk, but it's not accurate to say that investing in an index fund or doing your homework and buying a number of solid companies is anywhere near as risky as a roulette wheel, sports betting, or slot machines. Just not the same thing at all.
JR - I meant investing with real money as a way to learn is risky as a LV game. I completely agree that either an index fund or doing your own research can bring good returns. What are the returns on your better funds ? How long have you held them?
Quite a few years. Have owned most of these for a good 10-15 years or so. Just another tool in the ol' investment toolbox. 12-15% average returns on some of these. I think it's better in general to buy institutional / investor class shares of no-load funds in a managed money account. I don't fool with any "front loaded" or rear-loaded funds like "A" or "B" shares that charge a big upfront fee or a big fee on the back end once you sell shares.
