happened to my friend. took it at like 35 or something. 6 figures for the rest of his life.
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Personal Finance Advice and Education! (1 Viewer)
- Thread starter No. 16
- Start date
Steve Tasker
Footballguy
stubby
Footballguy
You can set a stop/loss on VOO, or any other ETF, if your ROTH is in a brokerage account (but not VFIAX).
Dentist
***Official FBG Dentist***
At the risk of sounding like a jerk, there's nothing that chunk of money would allow me to do that I couldn't already do if I wanted. So no, I'd just throw it on top of the pile and move my retirement date up a year and be thrilled about it.
Doctor Detroit
Please remove your headgear
Kiplingers had a good article on actively managed funds, and how they have a place in every portfolio.
I have them in my Roth IRA since my 401k options are very limited to indexing. I believe in finding sector funds you like that also diversify your holdings. I've always been an indexing investor, but at the same time completely disregarding individual stocks and managed funds is a mistake IMO. Kiplingers makes the case that with interest rates being a market worry, indexing may be problematic over the next few years.
I have them in my Roth IRA since my 401k options are very limited to indexing. I believe in finding sector funds you like that also diversify your holdings. I've always been an indexing investor, but at the same time completely disregarding individual stocks and managed funds is a mistake IMO. Kiplingers makes the case that with interest rates being a market worry, indexing may be problematic over the next few years.
Our coverage is $27/month. I'd have to look up what it gets us but if I remember correctly, it's something like 3 years of assisted living. It doesn't sound like much but I think my wife said the average stay for someone in that type of facility is < 2 years.
It really helps to start the coverage when you're younger because the rates go up a lot when you're older.
Vincesanity
Footballguy
I find the indexing debate interesting since most investors focus entirely on cost. I don't understand not trying to seek managed funds that consistently beat their benchmark, net of fees and with lower violatility. I understand a higher % of index funds out perform managed funds but that data is a little skewed.
FUBAR
Footballguy
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No. 16
Footballguy
I think it's that if you use index funds...you usually believe in the efficient market theory and that picking actively managed funds that beat index funds is luck of the draw.
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NutterButter
Footballguy
You saying that once you check into assisted living, it's typically 2 years before you die? What age did you start your coverage?
IvanKaramazov
Footballguy
Well, of course. If there was some way to identify funds that consistently out-produced their respective index net of fees, you'd be a fool not to invest in them. The problem is that very few funds do so, and those that do are probably just lucky and there's no reason to think that their success will continue. There are lots of funds out there -- some of them are statistically guaranteed to perform extremely well. If you flip a coin enough times, it's going to eventually come up heads ten times in a row. The next toss is still 50-50 though.
FUBAR
Footballguy
and the statement "...since most investors focus entirely on cost" is incorrect. If that were the case, most investors would be entirely in cash. Or a mixture of:
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matttyl
Footballguy
Long term care insurance? New life insurance products can allow you to use the death benefit for nursing home care (which would reduce the death benefit).
matttyl
Footballguy
You pick the benefit. The more benefit, the higher the premium (like life insurance, $4m costs more than $2m). The 4 biggest factors of the premium are:
Once you qualify for the benefit...
1) how long before the benefit kicks in? immediately or after 60,90 or 180 days? The longer the wait, the lower the premium.
2) how big of a daily or monthly benefit would you like?
3) how long would you like the benefit to continue once it starts? 2 years, 4 years, 6 years, longer?
4) do you want the benefit amount to grow with inflation? (years ago $100 a day bought a nice level of care....not so much today)
matttyl
Footballguy
Doubt it. Disability insurance stops typically at age 65. Some at age 67. It's meant to replace "earned income", and most don't have that after retirement age.
Measure for Measure, Index Funds Rule
By JEFF SOMMER
Nearly anyone with money in the stock market since 2009 has benefited from the great bull market run. But compared with the overall market, most actively managed stock mutual funds haven’t performed very well or very consistently.
Exactly how the funds stack up will depend on the precise measurements you use. If you use the definitions and updated results of a study that I reported on last month, actively managed stock funds as a group look quite weak. In fact, in the six years through March, they did worse than you would have expected if their managers had flipped coins instead of picking stocks.
That study, “Does Past Performance Matter? The Persistence Scorecard,” by S.&P. Dow Jones Indices, asked whether good performance in one year persisted in the years that followed. It generally didn’t. Not a single actively managed fund finished in the top quarter in each of the six years through March.
Does Past Performance Matter? The Persistence Scorecard http://www.spindices.com/documents/spiva/persistence-scorecard-june-2014.pdf
But, as many readers pointed out, there are other ways of evaluating mutual funds.
Perhaps the most basic is to run a bake-off between actively managed funds and benchmark indexes to see which funds win. As it happens, S.&P. Dow Jones Indices, which ran the other study, has also run these contests regularly since 2002.
In these matchups, actively managed domestic stock funds as a group often looked better than they did in the probability-based study in which they performed so miserably. But even in these contests with benchmark indexes, the overall picture isn’t pretty.
Most of the actively managed funds performed erratically. In some years, a majority beat their benchmarks, but they failed to do so over extended periods. Like the other studies, these contests seem to strengthen the case for investing in broad, low-cost index funds that don’t try to beat the market, but merely try to match it.
The S.&P. Dow Jones group calls its semiannual contest “The Spiva Scorecard.” (Spiva is an abbreviation for S.&P. Indices Versus Active.) The latest report, released last month, showed that in six of 15 years since 2000, most actively managed mutual funds beat a broad benchmark, the Standard & Poor’s 1,500-stock index, which serves as a proxy for the overall stock market in the United States. (The S.&P. 1,500 includes all the stocks in the S.&P. 500, S.&P. MidCap 400 and S.&P. SmallCap 600 indexes, representing companies of all types and sizes.)
The actively managed funds came out on top as recently as 2013 and lost to the broad index in 2014. Based on the recent calendar-year returns alone, you might conclude that the actively managed funds have been holding their own.
But the longer-term results are telling: Over the three years through December, the index beat 76.8 percent of the actively managed domestic stock funds. Over five years, it outdid 80.8 percent of them. Over 10 years, it beat 76.5 percent. Put simply, at least three-quarters of those actively managed mutual funds regularly failed to beat the broad market index over three, five and 10 years. This underperformance has persisted year after year.
“We’ve consistently found those kinds of results, “ said Aye M. Soe, senior director of index research and design for S.&P. Dow Jones Indices, who has been conducting the study since 2002. What’s more, at my request, the researchers reran the entire study, eliminating the effects of expenses, as captured by the funds’ expense ratios. Even without expenses, they found, nearly all actively managed domestic stock funds trailed the benchmarks over three, five and 10 years. Large-cap funds were the single exception, and only over 10 years.
Using a database developed at the University of Chicago, known as C.R.S.P., for the Center for Research in Security Prices, the study avoided what is known as “survivorship bias,” Ms. Soe said. For example, the latest Spiva Scorecard examined the performance and characteristics of 2,080 actively managed mutual funds in existence 10 years ago. But it found that only 58.1 percent of them had survived in the 10 years through December. The remainder closed or merged, generally because their performance was weak.
If only the surviving funds — which tend to have better numbers — had been included in the overall fund statistics, the total picture would have been unrealistically bright. It would have been like running a horse race in which only 58 percent of those that started crossed the finish line. If you merely tracked the speed of the finishers, you would be giving an exaggerated picture of the prowess of all those that started the race.
In this case, the researchers tracked the performance of all the original 2,080 funds over one, three, five and 10 years. If a fund didn’t finish, it didn’t beat the market.
The researchers also found that most mutual funds didn’t maintain “style consistency” over 10 years — meaning they changed the investing style that they had used when the study began. In fact, only 33.7 percent of the original funds retained their style, an enormous shift that ought to concern investors, Ms. Soe said.
“For investors, style drift can be a very big unexpected risk,” she said.
Why is this significant? Consider a fund that buys stocks like Facebook, those with a high market capitalization and rapid growth. Such a fund has a large-cap growth style, and investors who hold it might think that they have bought a stake in large-cap growth stocks. But then, say, the manager shifts the fund’s holdings to small-cap value stocks. That may make sense to the manager, who presumably thinks the new stocks will perform better than the old ones, but it can cause a big headache for investors who have built diversified portfolios including this fund. If they know of the shift, they can adjust their holdings, adding cost and possible tax liability. Many people will do nothing and live with unintended risks from a skewed portfolio.
These problems — long-term underperformance, the demise of many lackluster funds and style drift — showed up in all categories of actively managed domestic stock mutual funds over extended periods. Most of the stock funds in each category underperformed narrow benchmarks over three, five or 10 years. For example, as a group, most small-cap value funds underperformed the S.&P. SmallCap 600 Value index.
Taken together, the two sets of studies — the tests for performance persistency and the bake-offs — suggest that while it’s possible for fund managers to beat the market, it’s very difficult for them do it consistently, especially if their funds have high costs, which drag down returns.
Keith Loggie, the senior director of global research and design at S.&P. Dow Jones, said: “Fund cost is the most important single factor predicting performance. It makes it harder to beat index funds, which tend to be cheaper.”
Some funds do beat the indexes each year. But, costs aside, it’s exceedingly difficult to pick the funds that will outperform in the future. Whether investors should even try remains an open question.
By JEFF SOMMER
Nearly anyone with money in the stock market since 2009 has benefited from the great bull market run. But compared with the overall market, most actively managed stock mutual funds haven’t performed very well or very consistently.
Exactly how the funds stack up will depend on the precise measurements you use. If you use the definitions and updated results of a study that I reported on last month, actively managed stock funds as a group look quite weak. In fact, in the six years through March, they did worse than you would have expected if their managers had flipped coins instead of picking stocks.
That study, “Does Past Performance Matter? The Persistence Scorecard,” by S.&P. Dow Jones Indices, asked whether good performance in one year persisted in the years that followed. It generally didn’t. Not a single actively managed fund finished in the top quarter in each of the six years through March.
Does Past Performance Matter? The Persistence Scorecard http://www.spindices.com/documents/spiva/persistence-scorecard-june-2014.pdf
But, as many readers pointed out, there are other ways of evaluating mutual funds.
Perhaps the most basic is to run a bake-off between actively managed funds and benchmark indexes to see which funds win. As it happens, S.&P. Dow Jones Indices, which ran the other study, has also run these contests regularly since 2002.
In these matchups, actively managed domestic stock funds as a group often looked better than they did in the probability-based study in which they performed so miserably. But even in these contests with benchmark indexes, the overall picture isn’t pretty.
Most of the actively managed funds performed erratically. In some years, a majority beat their benchmarks, but they failed to do so over extended periods. Like the other studies, these contests seem to strengthen the case for investing in broad, low-cost index funds that don’t try to beat the market, but merely try to match it.
The S.&P. Dow Jones group calls its semiannual contest “The Spiva Scorecard.” (Spiva is an abbreviation for S.&P. Indices Versus Active.) The latest report, released last month, showed that in six of 15 years since 2000, most actively managed mutual funds beat a broad benchmark, the Standard & Poor’s 1,500-stock index, which serves as a proxy for the overall stock market in the United States. (The S.&P. 1,500 includes all the stocks in the S.&P. 500, S.&P. MidCap 400 and S.&P. SmallCap 600 indexes, representing companies of all types and sizes.)
The actively managed funds came out on top as recently as 2013 and lost to the broad index in 2014. Based on the recent calendar-year returns alone, you might conclude that the actively managed funds have been holding their own.
But the longer-term results are telling: Over the three years through December, the index beat 76.8 percent of the actively managed domestic stock funds. Over five years, it outdid 80.8 percent of them. Over 10 years, it beat 76.5 percent. Put simply, at least three-quarters of those actively managed mutual funds regularly failed to beat the broad market index over three, five and 10 years. This underperformance has persisted year after year.
“We’ve consistently found those kinds of results, “ said Aye M. Soe, senior director of index research and design for S.&P. Dow Jones Indices, who has been conducting the study since 2002. What’s more, at my request, the researchers reran the entire study, eliminating the effects of expenses, as captured by the funds’ expense ratios. Even without expenses, they found, nearly all actively managed domestic stock funds trailed the benchmarks over three, five and 10 years. Large-cap funds were the single exception, and only over 10 years.
Using a database developed at the University of Chicago, known as C.R.S.P., for the Center for Research in Security Prices, the study avoided what is known as “survivorship bias,” Ms. Soe said. For example, the latest Spiva Scorecard examined the performance and characteristics of 2,080 actively managed mutual funds in existence 10 years ago. But it found that only 58.1 percent of them had survived in the 10 years through December. The remainder closed or merged, generally because their performance was weak.
If only the surviving funds — which tend to have better numbers — had been included in the overall fund statistics, the total picture would have been unrealistically bright. It would have been like running a horse race in which only 58 percent of those that started crossed the finish line. If you merely tracked the speed of the finishers, you would be giving an exaggerated picture of the prowess of all those that started the race.
In this case, the researchers tracked the performance of all the original 2,080 funds over one, three, five and 10 years. If a fund didn’t finish, it didn’t beat the market.
The researchers also found that most mutual funds didn’t maintain “style consistency” over 10 years — meaning they changed the investing style that they had used when the study began. In fact, only 33.7 percent of the original funds retained their style, an enormous shift that ought to concern investors, Ms. Soe said.
“For investors, style drift can be a very big unexpected risk,” she said.
Why is this significant? Consider a fund that buys stocks like Facebook, those with a high market capitalization and rapid growth. Such a fund has a large-cap growth style, and investors who hold it might think that they have bought a stake in large-cap growth stocks. But then, say, the manager shifts the fund’s holdings to small-cap value stocks. That may make sense to the manager, who presumably thinks the new stocks will perform better than the old ones, but it can cause a big headache for investors who have built diversified portfolios including this fund. If they know of the shift, they can adjust their holdings, adding cost and possible tax liability. Many people will do nothing and live with unintended risks from a skewed portfolio.
These problems — long-term underperformance, the demise of many lackluster funds and style drift — showed up in all categories of actively managed domestic stock mutual funds over extended periods. Most of the stock funds in each category underperformed narrow benchmarks over three, five or 10 years. For example, as a group, most small-cap value funds underperformed the S.&P. SmallCap 600 Value index.
Taken together, the two sets of studies — the tests for performance persistency and the bake-offs — suggest that while it’s possible for fund managers to beat the market, it’s very difficult for them do it consistently, especially if their funds have high costs, which drag down returns.
Keith Loggie, the senior director of global research and design at S.&P. Dow Jones, said: “Fund cost is the most important single factor predicting performance. It makes it harder to beat index funds, which tend to be cheaper.”
Some funds do beat the indexes each year. But, costs aside, it’s exceedingly difficult to pick the funds that will outperform in the future. Whether investors should even try remains an open question.
NutterButter
Footballguy
What I'm thinking is that at some point I'm going to need some assisted living; I get to the point where I can no longer take care of myself whether that be partially or entirely for whatever reason. I obviously don't want to be a burden to my children. From what I've briefly read, those facilities easily start high 5 figures and can just skyrocket depending on the facility. So to answer your questions:matttyl said:
1) I really have no idea b/c I don't know when I'd need such a facility. Say its when I hit 80, I'd have no problem paying starting when I'm 60 for instance if not earlier if that's when you can lock in really low rates.
2) Would something like 100k/yr seem reasonable or is that excessive for what this type of insurance covers? I'm thinking that would be more for a full blown nursing home with assisted living be less.
3) I'd imagine until I die. I'd assume that once you go into a facility like this, you're never coming out. From what Zen said above, its typically for less than 2 years but maybe we're talking about different things. If its just assisted living and not full blown nursing home, I'd imagine it would be a lot longer.
4) Absolutely
TIA
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wilked
Footballguy
Here's what one of the most famous fund managers advises to whoever manages his trust (Buffett)
My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguards.) I believe the trusts long-term results from this policy will be superior to those attained by most investors .
My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguards.) I believe the trusts long-term results from this policy will be superior to those attained by most investors .
matttyl
Footballguy
That's like $275 a day, which is considerably more than most policies sold today - but a policy of that size can be purchased (you might not like the premium for it, though). On point 3, you don't know how long that will be - it's how much risk you're willing to take. For instance, would you be ok spending $3k a year in premium for a benefit that lasts 2 years and stops, or would you rather spend $4k a year for a benefit that would last 4 years and stops?
Remember two key things when thinking about LTC - and these are generalities. First, no carrier will guarantee their rates - meaning they could increase them in 10 years on an in force policy (and many have). So would you be ok, and would you continue your policy if your $3k a year premium jumped to $4,500 when you turned 75? Secondly, you aren't acquiring any equity. What I mean by that is lets assume you're paying $3k a year (and the premium doesn't go up) and you pay that from age 50 to age 90 where you "gracefully expire" having never needed any care. That's $120k in total premiums (40 years of 3k a year). You don't get a penny of that back if you never had a claim. If premium go up a few times over that 40 years, you could be out closer to $200k in premiums. A married couple could have depleted their estate by $400k or more.
NutterButter
Footballguy
What I need to wrap my head around is what is a conservative estimate for the costs and duration of assisted/full care living. In my retirement projections I plan on living to 100 (realize it will probably be less than) with the last 20 years being some form of assisted living with an annual cost of 90k in todays dollar. Now I don't want to short change the years prior to that by overestimating the costs, but at the same time, I don't want to run out of money where I'm left in some home that medicaid will cover. So there's the dilemma. So even if the benefit was half of my projected costs, 200k in premiums is a lot less than 900k+ in benefits (45k/yr x20) if i did make it to 100.
matttyl
Footballguy
NutterButter
Footballguy
Am I way off base in thinking you could need care for 20 years if you did live until 100? I know that 100 is a long shot, but i posted above asking about what age people were planning for and everyone that replied seemed to be in that vicinity. So if you start receiving benefits for 6 yrs at 80 and now you're 86, what's the play? Re-up for another 6 at a much higher rate? I'm really just asking b/c I've never seen this discussed before and I'm pretty much in the dark on this subject.
RUSF18
Footballguy
I have no actual knowledge of this but that seems really, really long. I'd think if you're planning on living until 100, you will likely be relatively healthy enough until you're at least 90 to live on your own or with a minimal amount of help. Just the idea of spending 20% of your life in even the most relaxed facility seems excessive - that's the equivalent of a person who today is living until 85 being unable to live on his own at 70.
ghostguy123
Footballguy
The percentage of people who need assisted living homes for 20 years is super, super small. I wouldn't ever consider planning for that (referring to NON disabled people). That seems like buying insurance for in case you get struck by lightning.
There are many other inexpensive ways to get assistance while still living in your own home. Hell my grandma who is like 92 can barely see and barely move around still lives at home and has some home health aides come to the house daily to get her food, clean, shop, help with her meds, and whatever else might come up.
At about $10-12 an hour for maybe 8 hours total per day, this approaches about 25k a year, and this is at 92 and damn near blind, on oxygen, with limited mobility.
There is some family involvement also, so obviously factor some more if you family wants nothing to do with you. Depending on your cognitive level around that time, your family will have to at least help in setting things up for you, otherwise I could see a lot of money bled from you by #######s.
GG's old age advice of the day...........when you get older, buy a ranch style home.
There are many other inexpensive ways to get assistance while still living in your own home. Hell my grandma who is like 92 can barely see and barely move around still lives at home and has some home health aides come to the house daily to get her food, clean, shop, help with her meds, and whatever else might come up.
At about $10-12 an hour for maybe 8 hours total per day, this approaches about 25k a year, and this is at 92 and damn near blind, on oxygen, with limited mobility.
There is some family involvement also, so obviously factor some more if you family wants nothing to do with you. Depending on your cognitive level around that time, your family will have to at least help in setting things up for you, otherwise I could see a lot of money bled from you by #######s.
GG's old age advice of the day...........when you get older, buy a ranch style home.
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NutterButter
Footballguy
You're probably right. My problem is that I don't have much of a frame of reference. Come to think of it, my dad is 67 right now, he's pretty banged up physically with terrible knees and a terrible back and I don't envision him living past 85, but I also don't see him needing any assisted living any time soon.
matttyl
Footballguy
These are underwritten insurance plans. If you're receiving benefit, no way will you be able to obtain another policy. It's like being declined for life insurance due to a history of heart attacks. Years ago carriers would offer a "lifetime benefit", but they lost their shirts when the 1 in a 100 situation came up of a person needing care for 20 years and they were out $150 a day (and growing with inflation). So they said the maximum benefit period is 6 or maybe even 10 years (and even that is hard to find). The odds of needing care of this level for more than 6 years is extremely, extremely low. Look up the insurance definition of "activities of daily living" (feeding yourself, getting out of a chair, bathing....or severe cognitive impairment) - your benefit is triggered when you're unable to do 2 of them, or have the latter.
Random
Footballguy
I've documented (as have others) our property by property acquisitions in the Real Estate thread. I think I have a pretty good summary in the last few pages somewhere. I'm not handy at all, so I partnered up with my brother who is (was?) a contractor/handyman type. There are times when I would say I wouldn't do it again, but truth be told, I absolutely would. We bought the majority of our properties at rock bottom prices. If I really wanted out, I could sell the properties and make a good amount of money. Reading the financial threads here makes me grateful we bought what we did when we bought them. I honestly shouldn't ever need my 401K/IRAs.
https://forums.footballguys.com/forum/index.php?/topic/223924-official-real-estate-forum/page-63
Doctor Detroit
Please remove your headgear
Entering a period of much more volatility where markets may stagnate, but certain stocks will excel.
FUBAR
Footballguy
I'm 40 and my wife is 44. We started our coverage a few years ago. She works in the insurance industry and strongly recommended we get long-term care insurance.
I'll find out the details/coverage from her because I can't remember them offhand.
wilked
Footballguy
For anyone thinking about going with an actively managed fund, there are 'mountains' of papers out there demonstrating very convincingly that most actively managed funds are 'losers' compared to index, and that no one can predict ahead of time which will be the winners. If you still want to support these fund managers' yachts, and high-rise condos then so be it, but at least do so with your eyes fully opened.
Here is a quick and visual one based on "morningstar" ratings (which are worth less than the equivalent size toilet paper you used this morning)
http://www.fplcapital.com/wp-content/uploads/2014/06/Is-There-Predictive-Power-in-Morningstar-Ratings.pdf
Here is a quick and visual one based on "morningstar" ratings (which are worth less than the equivalent size toilet paper you used this morning)
http://www.fplcapital.com/wp-content/uploads/2014/06/Is-There-Predictive-Power-in-Morningstar-Ratings.pdf
Doctor Detroit
Please remove your headgear
Yeah, all Mexicans eat beans for lunch and Michael Jordan never had an off night. All target date funds are terrible, all actively managed funds are ripoffs, and gold coins are the way to go. Some actively managed funds do quite well, I have two of them. If you have no time, no feel, no acumen and feel like you can properly diversify then index to 100%.
But everyone is different, and some people in these financial threads seem to think they have all the answers and those answers apply to everyone. If everyone just piled into index funds and never gave it a second thought, there really would be no use for these threads.
Mods please delete, Wilked has all the answers.
Doctor Detroit
Please remove your headgear
One of my actively managed funds vs its index
1 year
My fund 29%
Index 20%
3 year
My fund 29%
Index 24%
5 year
My fund 22%
Index 18%
Since inception
My fund 17.6%
Index 11.6%
Expense ratio .35
That guy deserves a nice condo imo
1 year
My fund 29%
Index 20%
3 year
My fund 29%
Index 24%
5 year
My fund 22%
Index 18%
Since inception
My fund 17.6%
Index 11.6%
Expense ratio .35
That guy deserves a nice condo imo
Doctor Detroit
Please remove your headgear
Actively managed or Index funds? Why not both?
http://www.wsj.com/articles/SB10001424052702304888404579378760242767496
http://www.wsj.com/articles/SB10001424052702304888404579378760242767496
General Malaise
Footballguy
Well, let's hope he's renting the condo and not buying because buying a condo would be foolish.
mquinnjr
Footballguy
That's really, really good for actively managed. What's the tax exposure on this? I assume you have this in a tax-effected account and not a taxable one, right?
Is this private, or can we check out a ticker on this one?
Random
Footballguy
But for every one of "your" guys, there's one that loses vs the market. He's had a good run, for sure.
I remember reading an analogy in a poker book years ago about 100 monkeys having a coin flipping contest. One of them is going to win. One of them must win. There is just no way of knowing which one its going to be.
Mystery Achiever
Footballguy
I have a couple similar, but they are, unfortunately currently closed to new investors: VPMAX (.35% e/r, beat all periods),VHCAX (.4% e/r and did miss the index by a tad on the 5 yr comparison, beat others). Both have very low turnover
Doctor Detroit
Please remove your headgear
If you say so. Ask those who have invested in a fund like Wellington what they think of their actively managed returns. Sounds like some of you are buying funds off the shelf like you'd buy peanut butter, not all these investments taste the same.
Dentist
***Official FBG Dentist***
There's no question some guys beat the market. Your guy has, and at an unbelievable price. Congrats to you for finding that.
Even if 1/2 of the active managers beat the market long term, the problem would be figuring out which ones would and by the time you figured out they were beating the market would they still be able to continue doing it.
I have one active fund in my portfolio - it's a small cap fund that has beaten the russell 2000 for a 20 year stretch now - i've been with them for 10 of those years... and that's just lucky to me.
So it becomes a variable just like timing the market.... can i pick when to get in and when to get out successfully?
I mean i wish i'd picked Warren Buffet and Brk.b 5 years ago instead of the Vanguard Total World ETF... but I'll have to live with my choice.
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wilked
Footballguy
DD, you seemed to take my comment on active vs passive personally - you shouldn't. I am sure you are aware of all of the studies showing that active does not beat passive, and that management fees will eat you alive. I have no doubt you can show me funds that have beaten their respective index for the last 5 years, as Dentist says there will always be these funds.
The analogy is the people who bought Apple years ago and will talk your ear off at dinner about how it is the best investment you can ever make, pointing to their returns for the last 5 years. Obviously there is no argument that Apple has killed it, but that doesn't mean it will continue to kill it.
The morningstar link I provided essentially is that - funds are graded largely on their recent performance. The data shows that those who have succeeded, are no more likely to succeed going forward than those who have stunk it up - there is no correlation between past performance and future.
I can't read the journal link you provided but am interested to hear the argument, can you post some relevant parts from it? I have an open mind about it, but all the data I have seen makes an extremely compelling case against active funds
The analogy is the people who bought Apple years ago and will talk your ear off at dinner about how it is the best investment you can ever make, pointing to their returns for the last 5 years. Obviously there is no argument that Apple has killed it, but that doesn't mean it will continue to kill it.
The morningstar link I provided essentially is that - funds are graded largely on their recent performance. The data shows that those who have succeeded, are no more likely to succeed going forward than those who have stunk it up - there is no correlation between past performance and future.
I can't read the journal link you provided but am interested to hear the argument, can you post some relevant parts from it? I have an open mind about it, but all the data I have seen makes an extremely compelling case against active funds
Doctor Detroit
Please remove your headgear
The fund that I quoted has an inception date of 1984. The fund is the Vanguard Health Care fund, I didn't link it because I was waiting for your response, which I have here in front of me.wilked said:
Here are things I think investors shouldn't do:
Invest in closed REITs
Buy variable annuities or tie investing and insurance together
Be afraid of investing and keep a bunch of cash lying around
Everything else is up for debate and actively managed funds are something that people should not be afraid to invest in. It's short-sighted to look at big picture numbers like index vs actively managed funds, because I don't care about 99% of the actively managed funds out there. I care about those funds that I research that meet my specific investment style and allow me to diversify since I am pretty much stuck with 70% of my retirement assets in broad market index funds (TSP).
Now if you are looking for actively managed funds that's goal is to outperform the S&P, I'm not going for that either. History tells us generally what this asset class will produce over time, and that actively managed funds may struggle to replicate and consistently beat it. International funds are similar, I think area funds like Eastern Europe or Africa for example could work for high risk investors because many of these markets are not represented in most international funds. If you have some knowledge of a certain country or group of countries, it may also be in your best interest to look at some actively managed funds that hold companies you like. Otherwise follow the heard that holds Japan, Europe and maybe some growth companies in places like Brazil or Mexico.
Mid caps and small caps are a different story, researching great funds in this area that beat the indexes is fun because there is a great deal of variance. Tons of companies, tons of innovation, tons of research done by managers to find the next big thing. I'm not going to know anything about these companies, a good manager will.
Dividend producing funds. You can't really index these and there are a lot of good funds with long track records. Same goes with balanced funds like the aforementioned Vanguard Wellington or Fidelity Puritan. A mix of investments for those interested in diversifying within one investment vehicle, and there are a lot of actively managed funds that have decades not five years of sustained success.
For me though I use actively managed funds for sectors. At the moment Health Care (which I've had for ten years) and Energy (which I just bought). I like these sectors over the next 20 years and they offer me a great deal of diversity to my holdings while also balancing my risk. Both sectors can and often due move in opposite directions of the broader market (although both sectors can positively or negatively impact broader markets on any given day). Financial, Precious metals, technology, media and telecom, real estate, utilities, really anything you like and feel comfortable investing in. The ETFs and index funds covering these sectors are too slow to react and often don't have an investment mix which I find appropriate for the sector.
As the WSJ article notes, actively managed funds offer balance in times of broad market uncertainty while also allowing investors to find specific instruments to diversify. I don't care who here or anywhere invests in actively manged funds, or ETFs, or index funds or REITs, or whatever. You do what you think is best for you. But you can't paint broad markets with such broad strokes, these are living and breathing entities that ebb and flow based on tens of thousands of variables. I have 80% of my money in index funds, so I definitely like that part of the marketplace, but I also definitely think there is a place for other vehicles and actively managed funds is one of them.
That's enough writing,
This is what my wife said regarding our long-term care insurance. It provides 36 months of coverage, $3000/month with simple inflation protection. We qualify if/when we lose two ADLs (Activities of Daily Living - dressing, eating, going to the bathroom, etc.). The money is paid regardless of how much the care costs. This includes things like home health so it wouldn't necessarily have to be in a nursing home or assisted living facility.
She said we signed up back in 2003/2004 when I was in my late 20s and she was in her early 30s. She said the insurance companies typically have policies that provide 2-4 years of coverage.
KCitons
Footballguy
DD I take a lot of interest in your investing approach, partly because you are invested in TSP the way we are. Doesn't the bolded part protect an investor like myself. I don't have to watch the markets daily (or even weekly). I've never been successful at timing the market anyway and it gives me more time to adjust.
Now, if they don't have the mix you are looking for, that's a better reason to own.
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Doctor Detroit
Please remove your headgear
My point there is that when you have an actual person/team running a fund and not a bot, they can react quicker to changing market seas. Now many managers don't necessarily do this all that well, but in sector funds I have more faith in a human than I do the 1's and 0's if that makes sense.
Dentist
***Official FBG Dentist***
KCitons
Footballguy
Is the reaction time necessary for the upswing or the downturn? If it's the upswing, then it becomes a market timing issue. If it's the downswing, then I would think more time to react is better.
Again, I'm probably over thinking the process. I will go back to watching the hockey game.
ghostguy123
Footballguy
Say you want to just invest in ONLY the index funds. What do you recommend a good split would be between them, and which ones?
