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Message
re: Funds vs Individual Stocks
Posted on 3/6/14 at 3:34 pm to austiger
Posted on 3/6/14 at 3:34 pm to austiger
quote:
Most of the time, when you buy an individual equity you are buying it from someone who is more informed than you are about the stock.
I don't understand why this would matter. For every buyer there must be a seller.
Posted on 3/6/14 at 3:41 pm to Overbrook
quote:
But it's sort of a moot point, because employer 401Ks and 403Bs dont' let you do that (at least mine never have). And they don't let you short stocks, which really makes things unfair (and which some crooked hedge funds have taken huge advantage of as they've looted retirement funds).
My 401k plan (via Fidelity) allows you to sign up for BrokerageLink where you are free to invest your money in stocks, ETFs, mutual funds, and bonds outside of the plan offerings.
Posted on 3/6/14 at 4:17 pm to Lsut81
quote:
So if I'm purchasing and sitting for 20+yrs, just pick vanguard funds and let it ride?
No reason to pick the vanguard ETF's unless I am going to watch and try to make moves on them based on market swings and the likes?
Correct in thinking?
Not necessarily. ETF's are constructed to track a particular index, and for the most part will reflect that index as far as performance. The difference being that it can be actively traded, therefore it will show a little more volatility. But over the long term it should perform similar to the index. You wouldn't be advised to actively trade in and out of ETF's, just a you wouldn't be advised to time the market, although obviously some people do. They are a long term hold.
Also, many ETF's have required minimum holding times, such as 1 month, or an extra fee is charged.
Posted on 3/6/14 at 4:22 pm to Overbrook
quote:
If you learn the market, you can do better buying individual stocks.
Oh really? Who knows the market this well?
There are periods of time where you can outperform the market, but historically there are very few fund managers that have a great history beating the market. I'm not sure why an individual investor would think they are more in-tune with the market than top fund managers.
I'd recommend people read this article, even for the Money Talk savvy investors:
Why smart people fail to beat the market
Posted on 3/6/14 at 4:32 pm to rintintin
quote:
The difference being that it can be actively traded, therefore it will show a little more volatility. But over the long term it should perform similar to the index. You wouldn't be advised to actively trade in and out of ETF's, just a you wouldn't be advised to time the market, although obviously some people do. They are a long term hold.
I see... Well the reason that came into my head is the other day when the dow tanked, I was within a week of investing another lump sum in the market and pulled the trigger... But it took the Fund a day to actually make the purchase and the market recovered in that time. Had it been an ETF, I could have bought in on the dip.
Posted on 3/6/14 at 4:49 pm to Lsut81
quote:
I see... Well the reason that came into my head is the other day when the dow tanked, I was within a week of investing another lump sum in the market and pulled the trigger... But it took the Fund a day to actually make the purchase and the market recovered in that time. Had it been an ETF, I could have bought in on the dip.
Well, one benefit of ETFs for the beginning investor is the lower cost of entry. I can buy the ETF version of a developing market fund for $40, but would probably need $3,000 just to get into the fund. If I want to choose the five funds individually to make up my portfolio, I'd have to have $15,000. If I want to have 5 ETFs mirroring the same thing, I could probably do it with less than $500.
Yes, I know there are funds that group the underlying index, but that is too fricking boring.
This post was edited on 3/6/14 at 4:50 pm
Posted on 3/6/14 at 5:19 pm to slackster
What do y'all think about whole life insurance as another vehicle to build retirement?
A buddy of mine at Northwestern Mutual is trying to sell me on it. Seems too good to be true, is there some hidden catch?
Most well off people, I'd imagine, are self insured and don't throw unneccessary money at insurance.
A buddy of mine at Northwestern Mutual is trying to sell me on it. Seems too good to be true, is there some hidden catch?
Most well off people, I'd imagine, are self insured and don't throw unneccessary money at insurance.
This post was edited on 3/6/14 at 10:29 pm
Posted on 3/6/14 at 5:24 pm to Boudin
What's his selling point? I'm unfamiliar with that.
Posted on 3/6/14 at 5:50 pm to Lsut81
All I can tell you is that I have 4 blue chip stocks that I bought 20 years ago..DRIPS
I have mutual funds that I bought 20 years ago.
The individual stocks have outperformed the mutuals by a factor of 7.
I have mutual funds that I bought 20 years ago.
The individual stocks have outperformed the mutuals by a factor of 7.
Posted on 3/6/14 at 6:13 pm to Boudin
quote:
Boudin
Depends on what you are looking to do with the WL insurance. It can be a good part of your overall portfolio, but should not be the only part. That line of thinking is about as silly as the one that says it should never be considered as an option.
I'll try and find some of the threads that it has been talked about.
quote:
is there some hidden catch?
What has he told you about it?
quote:
Most well off people, I'd imagine, are self insured and don't throw unneccessary money at insurance.
Just because they are well off does not mean the insurance is unnecessary. There are many reasons to look at the stuff, regardless of financial position, but as a short answer, many "well off" people have it, including many very successful corporations and banks. They are buying the stuff by the truck load right now.
As I said, I'll try and link some old threads, so we don't have to hijack this one.
ETA: Here you go. This thread went into a bunch of insurance questions, but I highlighted mine that was a specific question about WL.
This post was edited on 3/6/14 at 6:25 pm
Posted on 3/6/14 at 7:34 pm to Boudin
I think whole term life insurance is a suitable life insurance, but I don't see any valid argument for it as a retirement vehicle.
Posted on 3/6/14 at 7:35 pm to TigeRoots
quote:
What's his selling point? I'm unfamiliar with that.
Basically they're offering 10,15 and 20 year plans, instead of having to make payments until your 65.
That money then grows exponentially by the time you'd need it, and 90% can be withdrawn without penalty.
quote:
It can be a good part of your overall portfolio
That's how I feel, but still apprehensive about the figures he's showing me.
quote:
but should not be the only part
O no, I have a Roth and mutual fund that I contribute to biweekly. Just curious about how common it is, when used as another vehicle for retirement
quote:
so we don't have to hijack this one
Yea, my bad
Eta: by "catch", I meant the figures that he's showing me being exaggerated and it doesn't perform as well as I expected
This post was edited on 3/6/14 at 7:42 pm
Posted on 3/6/14 at 7:58 pm to Boudin
How long has the guy been there? What I know of NML, they won't be able to illustrate some unattainable ror. They are very limited in that regard. If you are still cautious, feel free to ask him what rate he is illustrating.
What I can tell you is they have a very solid product. One of the best in the market.
Again, without seeing exactly what he is showing you, it is hard to say, but what I do know of NML, it is not likely he is illustrating something not realistic.
Common depends on who you talk to. I know many who use it. I know many companies that use it for executive comp. it can have many uses beyond just the life insurance, however that should be the first consideration. I know Dave Ramsey hates it, but much of his argument is based out of ignorance and who he is selling to.
Think of it as a base to your portfolio that allows continual positive compounding to give you a guaranteed return that allows your inested portfolio to be more aggressive for longer.
ETA: also, feel free to ask him to show you what he is doing. I doubt he will have an issue showing you. If has had a policy for a while, should give you the ability to see what a policy actually looks like over the long term with actual results, not just future projections.
What I can tell you is they have a very solid product. One of the best in the market.
quote:
Eta: by "catch", I meant the figures that he's showing me being exaggerated and it doesn't perform as well as I expected
Again, without seeing exactly what he is showing you, it is hard to say, but what I do know of NML, it is not likely he is illustrating something not realistic.
quote:
O no, I have a Roth and mutual fund that I contribute to biweekly. Just curious about how common it is, when used as another vehicle for retirement
Common depends on who you talk to. I know many who use it. I know many companies that use it for executive comp. it can have many uses beyond just the life insurance, however that should be the first consideration. I know Dave Ramsey hates it, but much of his argument is based out of ignorance and who he is selling to.
Think of it as a base to your portfolio that allows continual positive compounding to give you a guaranteed return that allows your inested portfolio to be more aggressive for longer.
ETA: also, feel free to ask him to show you what he is doing. I doubt he will have an issue showing you. If has had a policy for a while, should give you the ability to see what a policy actually looks like over the long term with actual results, not just future projections.
This post was edited on 3/6/14 at 8:09 pm
Posted on 3/6/14 at 8:18 pm to Lsut81
quote:
Stocks: Great if they are high dividend or if you plan on selling off of big news (Not long term in my mind)
not all stocks are created equal. blue chip stocks offer low risk, lower volatility but less short term growth and can be treated similar to etf's and are great long term plays.
high dividends can be a trap, you want to focus on dividend growth for retirement/long term savings.
Posted on 3/6/14 at 9:10 pm to Zach
quote:
All I can tell you is that I have 4 blue chip stocks that I bought 20 years ago..DRIPS
I have mutual funds that I bought 20 years ago.
The individual stocks have outperformed the mutuals by a factor of 7.
Posted on 3/7/14 at 12:35 am to Boudin
Term life is what you want.
Are you a young age? Then purchase a $2 million policy for 15 years
Then, 10-12 years from now, with the same premium, buy a $1 million for 15 years,
Then . . . $700k . . .
Are you a young age? Then purchase a $2 million policy for 15 years
Then, 10-12 years from now, with the same premium, buy a $1 million for 15 years,
Then . . . $700k . . .
Posted on 3/7/14 at 8:54 am to matthew25
As far as individual securities vs funds vs index ETFs, I've long believed the following:
1) For the money you need to retire, it is best to pay a professional. Not just any professional, do your research. This leads to investments in mutual funds, or, if you have enough bank, an advisor. If you don't have the time to do the research for a good professional, then just get a low-cost index fund or two, and some sort of bond exposure.
2) For the money that you are not depending upon to retire, if you have the time and energy and dilligence and intelligence, consider investing in a FEW stocks. Maybe no more than 3-4 to start. You have to be willing to commit the time to reading the research reports, the annual financials, etc. For some people, this is a hobby that can easily take a few hours a month.
For both of the above scenerios, strongly consider reinvesting all dividends, and in the case of mutual funds, capital gain distributions.
3) As far as life insurance, whole life is quite expensive. The benefit is, unlike term, it will live on as long as you do, provided that you make any required premium payments. The "investment" vehicle inside a whole life policy is probably better than just parking your cash somewhere, but not as good as a good investment portfolio. However, you are also getting life insurance protection. An alternative is the "buy term and invest the difference" stragegy, which requires you to actually invest the difference and to do it in a way that makes money. If you do decide to go with whole life insurance, you won't find a better company out there for that product than Northwestern Mutual.
1) For the money you need to retire, it is best to pay a professional. Not just any professional, do your research. This leads to investments in mutual funds, or, if you have enough bank, an advisor. If you don't have the time to do the research for a good professional, then just get a low-cost index fund or two, and some sort of bond exposure.
2) For the money that you are not depending upon to retire, if you have the time and energy and dilligence and intelligence, consider investing in a FEW stocks. Maybe no more than 3-4 to start. You have to be willing to commit the time to reading the research reports, the annual financials, etc. For some people, this is a hobby that can easily take a few hours a month.
For both of the above scenerios, strongly consider reinvesting all dividends, and in the case of mutual funds, capital gain distributions.
3) As far as life insurance, whole life is quite expensive. The benefit is, unlike term, it will live on as long as you do, provided that you make any required premium payments. The "investment" vehicle inside a whole life policy is probably better than just parking your cash somewhere, but not as good as a good investment portfolio. However, you are also getting life insurance protection. An alternative is the "buy term and invest the difference" stragegy, which requires you to actually invest the difference and to do it in a way that makes money. If you do decide to go with whole life insurance, you won't find a better company out there for that product than Northwestern Mutual.
Posted on 3/7/14 at 10:27 am to LSUFanHouston
quote:
1) For the money you need to retire, it is best to pay a professional. Not just any professional, do your research. This leads to investments in mutual funds, or, if you have enough bank, an advisor. If you don't have the time to do the research for a good professional, then just get a low-cost index fund or two, and some sort of bond exposure.
I would have to disagree with the bold part in your statement. It is well documented that very few if any fund managers consistently beat the market over an extended time period that would equate to a retirement time span. Peter Lynch is the only one to do it over the course of his career, and he is long retired.
Putting money in an index fund will most likely perform as well or better than any mutual fund, but with the advantage of much lower fees. I really see no reason to pay a fund manager to copy the market.
Posted on 3/7/14 at 10:38 am to rintintin
^^This.
Now, when you're 40-50, I'd highly recommend sitting down with a financial advisor to begin developing a plan for retirement income and wealth management. IMO, you're free to do as you see fit until your forties, but at that point, it is probably a good idea to figure out a plan for unlocking as much value in your investments as possible. That is the problem I see on a daily basis - people accumulate valuable investments while working, but have little to no idea of how to use them in retirement. I think it is worth having a professional help at that point.
Now, when you're 40-50, I'd highly recommend sitting down with a financial advisor to begin developing a plan for retirement income and wealth management. IMO, you're free to do as you see fit until your forties, but at that point, it is probably a good idea to figure out a plan for unlocking as much value in your investments as possible. That is the problem I see on a daily basis - people accumulate valuable investments while working, but have little to no idea of how to use them in retirement. I think it is worth having a professional help at that point.
Posted on 3/7/14 at 10:52 am to Lsut81
I've got three teams of mutual fund managers who work full-time analyzing the world markets. All three teams combined have beat the S&P by an annualized 6.45% over the last nine years. They charge me a total of .82% of the funds they're managing annually. I can't compete with that on my own even if I were to work 60 hours a week on nothing else. Beating the market over the long-term is elusive even for the guys doing it full-time. I say, find the folks with a solid track record and let them do their thing. Your thing should be earning more money so that you can give it to them to run. If you're itching to pick stocks on your own I would limit it to 10% of your portfolio at the most.
Don't want to deal with mutual fund research? Do yourself a favor and buy cheap index funds monthly and never sell them. In 30-40 years you'll be fine.
Don't want to deal with mutual fund research? Do yourself a favor and buy cheap index funds monthly and never sell them. In 30-40 years you'll be fine.
This post was edited on 3/7/14 at 11:05 am
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