Originally posted by raleighherdfan:
Originally posted by -CarlHungus-:
It's my understanding (please correct me if I'm wrong though), that about 75% of mutual funds under perform against index funds. If the people managing these funds , presumably educate professionals at picking stocks, fail the majority of the time versus index funds ...then it just seems like a bad idea for someone to try to pick stocks.
However, if one feels strongly about a few individual stocks, them I do think it's reasonable to have a small amount of your portfolio (?maybe 10%) allocated to individual stocks you select.
Disclaimer: I know I'm out of my league here with regard to finance/investing knowledge. I have no degree in this stuff and have simply read books on my own and dealt with enough shady "financial advisers" to know a little.
IMO you need to put the "under performing" and "management" within the correct context when determining this. One needs to ask, are the stocks selected by the professionals within the mutual funds actually "under performing"; is the individual who purchases the mutual fund as an investment "under performing" the overall market simply because of the fees and charges associated with owning such a "managed" asset class diluting the returns (while also failing to receive the benefits of collecting a dividend); or all of above? I think the answer varies depending on which mutual fund you look at and could take days to discuss. Thus the reason for my personal dislike of mutual funds vs. the relative ease at selecting and researching an individual stock without emotional feeling.
As you know, this is
the main selling point for index funds. They are not "actively managed", simply stated.......fees, charges, loads, collected by those "managing" are not diluting the returns which contributes to the actual underperformance to those buying them. I have no disagreements with choosing an index fund over mutual funds. But I also know that my strategy picking a diversified basket of individual dividend paying stocks as a core % of my long term portfolio of assets and purchasing more of those specific stocks can be much more effective at building a larger nest egg
over time than simply buying an index fund (which just so happens to make Jack Bogle another $billion
) and waiting for the overall market to appreciate.
Editorial note: The financial industry has made $Trillions telling individuals that they "cant" invest the way Buffett, Bogle, Barron, etc do. Just 1 bad reason for poor investment options offered to the masses like Mutual Funds. Generally I think this idea of "cant" has allowed too many people the excuse to not take an active interest in their financial future (not suggesting this is you by any means Carl). I do agree, not every strategy they (B,B & B) have followed in accumulating their wealth is available to the avg guy. But the core activity of their investment plan and wealth creation (individual stock purchases), can indeed be duplicated with mind boggling success with todays access to information on these public companies. I believe in the end, if one works to mirror what a small successful group of people (like B,B,&B) do regularly, the financial outcomes for making such an effort can far outweigh anything else.
*disclaimer* This is no way constitutes investment advice. I endorse no specific stock or security and all the above are my opinions. Search out your own evil-mischievous advisor in order to come to your own conclusions as to what is best for your investment portfolio.