I like the comment someone made about walking into an IT meeting for the first time. . . Ok, there are some huge mutual funds out there, that seem to be very popular and successful. Let's take American Funds Growth Funds of America. I have a fair amount in this massive fund. It has a strong track record of beating the S&P 500. Why not invest in it rather than an Index fund that tracks the S&P 500.
I used to trade Options using different strategies, and also co-managed the 5MM student mutual fund at UH. I've not been following that industry much the last year or so while I immerse in a couple of entrepreneurial ventures. This thread might help me keep up to date in the finance industry.
Thanks for the suggestion. The reason I'd put cash into the thing would be to increase the policy later on. 100k isn't that much protection, and though I wouldn't need it now, it'd cover my ass (in terms of not paying for a policy) when I start feeling the pinch of larger expenses such as family and/or house.
American Funds is absolutely huge and is the de facto choice of broker sold funds. One reason for its popularity (in addition to performance) is the very low expense ratio. Yes, it's a load fund but it's been a winner. Interesting Side note: The investment industry sales people (wholesalers) considers any financial advisor who does $500,000 and above in trades a good client and those over $1 million, a great client. The American Funds wholesalers, because of their popularity, would usually not visit anyone doing less than $3 million.
Yes (assuming you're under 50 which allows a catch up provision of $1,000). Also don't forget the income phaseouts.
and so doesn't this then crap on the EFT or index fund theory? I'm noexpert but i can find a few of these type of funds and feel good about my chances of beating index. Rebuttal? I am seriously wanting to address this issue because i have read plenty that say folks are dumb if you don't go with index or ETF; but that's directly counter to these American type funds.
regarding this side note, how does this impact joe investor? How does it impact me if my fin investor is in the 1mm range as opposed to 3MM?
Depends - over the last 5 years or so, one of the major American Fund Growth funds has beaten the Dow and S&P, but trailed the Nasdaq: http://finance.yahoo.com/q/ta?s=AGTHX&t=5y&l=on&z=m&q=l&p=&a=&c=^GSPC,^IXIC,^DJI It has a mix of stocks from the various indexes, so that makes sense that it would be somewhere between them all. Over a longer period, it's actually trailed all three: http://finance.yahoo.com/q/ta?s=AGTHX&t=my&l=on&z=m&q=l&p=&a=&c=^GSPC,^IXIC,^DJI If your goal is to match the market, the index thing is the easy way to do that. If you're looking to consistently beat the indexes, then obviously going with an index fund is a bad idea because you'll never beat the index. So you would certainly want to look at other options.
Because strong records of past performance are no guarantee of future performance? (just pointing out the obvious fact that all mutual fund ad reps would like you to be blind to) That's about all I know about the market. Personally, I'm looking to move about $30K out of 2 ex-company 401K plans into something else, preferably the Vanguardesque index-fund type thingy that other people have mentioned. Any advice on my options? The financial guy running our company's Simple IRA plan is offering to "help" me out. I think this falls under the high-cost option...
LOL. Look, we all want to do stuff for nothing, right? I am still amazed that every other advisor in any other field is respected, including plumbers and mechanics. And yet people in the financial field are all idiots and you shouldn't pay them a dime for their advice.
It's 5 year beta is .96 and 10 year is 1.04. You should be comparing it to the S&P 500 not Nasdaq. Also look at the 10 year performance: http://quicktake.morningstar.com/FundNet/TotalReturns.aspx?Country=USA&Symbol=AGTHX It is in the Top 2% of all funds in its category and has almost doubled the S&P 500 (the comparable index). Performance comparisons beyond 10 years is somewhat unreliable.
It doesn't. It was just a side bar noting the popularity of the funds and why its sales people have to work less hard than everyone in the industry because the funds sell themselves. American Funds is considered one of the best fund families in the business (also hailed by Barrons awhile back) and its sales have gone gangbusters. The reason it became so popular was back in the stock market boom, certain fund families (like Janus and AIM) were very aggressive. Even their so-called value funds were not real value funds but GARP type funds (growth at a reasonable price) and they had massive overlap (many funds owning the same stock). When the dot.com crashed, so did many of those funds. American Funds has a relatively conservative style and has produced above average returns at average or below average risk. Consistent returns, relatively low expenses (for managed funds), and a conservative approach. Among advisor sold funds (load funds), American Funds get about 60 cents of every dollar (followed by Franklin, Oppenheimer, etc.).
you aren't dumb if you don't go with an ETF. it is just most people choose the wrong funds. you seem like you have done good enough research so this doesn't apply. the main reason why people just go with a simple ETF is because it is just that....simple. the one thing i would keep an eye on with your fund is just the management. certain fund managers are simply better than others. if they have significant management changes then that would probably be the only reason to re-evaluate your investment. other than that it looks fine.
anyone who wants you to give them money for their picks is crazy. you can do just as much research by simply picking up a barron's.
Salient points, particularly about mgmt. I happen to like the task of keeping up with funds, looking at the market etc. But for folks that dont, the prospect of possibly beating index is not worth the burden. And frankly, the prospect of beating index gets worse and worse if you don't have the time/enthusiasm to put in the minimum amount of time to dig around and find the somewhat obvious funds to invest in. I've going around on this issue a few times with others, and that's basically how it is resolved -- folks with little interest and time go with index funds or ETF's. Others pick funds, recognizing the limitations and odds and go accordingly. The key difference is recognizing limitations and odds of beating index funds. I think a lot of folks make decisions (whether good or bad) without thinking it through.
RIET: When mutual funds state their % of returns for the year, or over the course of multiple years, do those %'s include the management fees and expenses? I would assume that the returns are net of all mutual fund expenses etc, but want to make sure. Naturally, they don't include or reflect any load you paid. Thanks.
