Glad you’re here! You’re starting in a great place. Most amateur investors don’t do a lick of research on their investments or even on what it means to be an investor. They use the hope & pray method. Unfortunately for them, God stays neutral in two areas: sports (sorry unnamed star quarterback…) and stocks.
You’re already ahead of the game just by improving your knowledge level here. Now let’s get you off and running with some investment basics you should know before you ever start investing…
Actively managed funds are one of the most safe and predictable investment options available. It’s true!
Oh, not for the investor. Uh oh, you thought I actually was referring to the value of your investment.
You must be a virgin in experiencing my unique brand of opinionatos. That’s okay, you’ll get the hang of it soon enough. (either that or they’ll invent a cool way for me to indicate sarcasm in writing…suggestion: “Insult Comic” font)
Actually, I hate mutual funds.
You see, the only thing safe and predictable about mutual funds is that you WILL pay the companies some handsome fees. The real safety is in being the fund manager.
The general idea behind mutual funds is not entirely crazy, though, nor evil. There are some concepts that made logical sense when mutual funds were first conceived:
Could it be? In some ways it feels like mutual fund management fees are equally as complex, but can do more damage to your portfolio.
Why? Well, taxes are only charged on actual profits you make as an investor. While most mutual fund fees are charged to you regardless. A lot of these fees are just there, eating away at your capital; even if your investments actually lose money.
There’s so many fees. I’m just going to list them now. If I miss some, it’s either because a) I forgot some because there are SO MANY, b) they made up some new ones recently (totally possible), or c) I got depressed writing them down and decided to go nap in the fetal position.
Here are the various management fees for Mutual Funds:
Continue reading “Mutual Fund Management Fees: Worse than Taxes?” »
Wait…paying for “expert” active management means you’re getting the best, right?
Wrong.
On the whole, mutual fund managers are no better than Joe Random. Mutual fund performance history shows, when you take into account all of the fees they charge, they under-perform the market. What? Yes!
A study by Eugene Fama and Kenneth French looked at the combined performance of actively managed US mutual funds between 1984-2006. The results:
Continue reading “What Every Investor Ought to Know About Mutual Fund Performance History” »
Ahhh, mutual fund manager. What a great gig. I would hazard a guess that few mutual fund managers go to sleep concerned about their clients’ money. And why should they – they have virtually no incentive to care if their investment choices fail their current clients. Why?
Continue reading “Why Mutual Fund Manager Incentives Stink” »
You heard me!
And if you consider yourself a market timer – then YOU are a loser. You may not have lost yet…but trust me you will eventually.
What is market timing? It generally is defined as moving a large % of your portfolio in/out of the market based on a belief that the broad market is ready to go up/down. This is sometimes done more narrowly, for example trying to time certain sectors; don’t be fooled, it is still market timing.
Here’s why I believe market timing is for losers:
I once wanted to be a stock broker.
Growing up, it seemed like an exciting job; a great opportunity to put my intelligence to work and help make clients money. The movie Wall Street was enchanting – looking back I probably had a man-crush on Bud Fox (purely platonic, of course). Coming out of university, I even shortly looked into working at a brokerage. Until I realized the truth…
The job of a stock broker is not to make you (the client) money – it is to make them and their brokerage money.
Now, it is not that all stock brokers are self-interested or bad people. Nor is it that they are even bad at their jobs. But, they ultimately do not work in your best interests. The only person that does is you – which is why it is essential to learn how to invest online. Here are 3 reasons motivating brokers away from smart investing:
Continue reading “Why Smart Investing and Your Broker are on Opposite Sides” »
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