In article <fed77941.0402201039.76727bec[at]posting.google.com> ,
LovingPerson <saylo1234[at]aol.com> wrote:

- quote -

I don't have an issue with your plan, but I do have an issue with
your assumptions. There is no garantee that a bear market will
ever trend back up. For a case in point, consult with folks who
have invested in the Nikki in Japan, especially all the Japanese
workers and housewives who stashed their life savings into that
puppy in the 1980's. There is always risk in everything, and to
ignore that risk is very dangerous. That is why most of the
reputable planners (including a few that post in this group)
suggest having a balanced and deversified portfolio. Finding
the right balance for you is a science called asset allocation,
and that is one of the key tools in the bag of tricks that the
folks with the letters behind their name carry with them.

-john-

--
================================================== ==================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
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LovingPerson wrote:
- quote -

The FP seems to simply be saying that you shouldn't judge an account's
performance solely by comparison to the level of an index on the date
you open the account, because along the way you'll be adding money and
investing it. This is valid; in fact Bogle (see below) points out that
some of the real "star" funds actually lost money for most of the people
who invested in them - the high numbers were for the early years when
few people owned the fund. You see some mutual funds today with
"mountain charts" going back to a point well before most of the
shareholders were even alive (with good performance back then
contributing to the altitude of the mountain today). That's nice, but
what about the investors other than the 17 who invested $50 in 1948?

Hopefully you'd still look at the performance of the fund though, right?
Like, you should be interested in whether the fund in question
outperformed the same, periodic investments directed to a comparable
index fund. If not, why bother?


- quote -

The first thing to keep in mind that the thing that brings wealth over
time is saving money, regularly. The specific choice of investments
amounts to tweaking; the biggest concern is "don't blow it!"

Over a period like 30 years, expenses will have a very large effect on
your long-term performance. So you're right to consider lower-cost
alternatives.

A single-fund investment in an S&P 500 fund, though, assumes that
large-US stocks are the best place to be invested. Maybe, but of course
that might not be the case. A "Total Market" fund would add some smaller
companies. A balanced fund would add bonds. Within Vanguard, some of the
"LifeStrategy" funds combine international stocks and are feasible
"single decision" alternatives. If you really want to buy a
single-decision fund, spend some time on picking it!

As a start you might want to read one of Vanguard-founder Jack Bogle's
books on this topic (Bogle on Mutual Funds, Common Sense on Mutual
Funds). People will poke a lot of holes in it but at the end of the day,
regular investments in an S&P 500 fund will put you way ahead of a lot
of people attempting much more elaborate things. Regular investments in
a balanced index fund should put you among some of the top pension fund
managers. The temptation to tweak further, though, is ususally
irresistable. Will you keep plugging away in year 17?

-Tad

Dear all:

My wife and I met with a financial planner (FP) today and I
learned a very interesting concept: there is a huge difference
between performance vs. profitability:

Performance looks at a lump sum invested in a fund and tracks the
return of it in a certain amount of time (say 5 years). The annual
average return could be 10%, let's say.

The FP then showed us a volatile market. You use a dollar cost
averaging method of buying shares (ie put a set amount of $ per month
into buying shares). Now, because of voatility's ups and downs, a
fund that doesn't even have a positive performance ends up having a
better return than the fund with 10% annual return. The example he
used had a fund performance of -16% year to date performance, but
because the fund had dropped so low during the five years (and the
climbed back up, though still down 16%), many shares were able to be
bought for such a bargain that the total money made in the volatile
fund exceeded the money made on the steady fund. ie, this volatile
fund showed more profitability despite poor "performance"

I hope I am explainining this clearly. (let me know if I am not
and I will try to clarify more).

So here is what I want to do: I want to start a Vanguard Index
500 fund, which is a no-load 0.23% annual service fee fund. I want to
put $1000/month into it for 30 years. Here are some of my reasons
(please comment and educate me if I am off base at any time): 1. the
s+p 500 is a safe place to be with my money. 2. The s+p 500 has
decent volatility with almost assured bulls and bears. 3. No matter
what, the bear trend back up, eventually--a nuclear bomb couldn't keep
it from coming back up.

Is my understanding and assessment correct? What do you think of
this approach? I am not fond of researching the stock market (no
time/interest). Thus Vanguard is a no-brainer kind of fund, yet it is
a very sound fund because it picks the best 500 companies.
Traditionally, the s+p 500 beats out 50% of the mutual funds in terms
of performance (Where as profitability is a much harder thing to track
comparing between the s+p500 vs. the average mutual fund).


Please educate me and give me more pointers. [I hope this
message gets passed the moderators. If I need to refine my question,
please let me know]

Sincerely. Thx in Advance.

Dr. Moser.