2013.08.08 Personal Finance Overview

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4 thoughts on “2013.08.08 Personal Finance Overview

  1. When did you start producing information on wealth management? The question I would have for you and your strategy of buy and hold. Who have you meet in your life that has bought an index and held it for 10 years? Held it during times of turmoil and never sold old. I love the idea of the returns of a passive only strategy, but I have yet to meet one person who did not let their emotions dictate there investment decisions when things start to go bad.

    • A client of mine, GW from Vancouver, has followed my buy and hold advice ignoring market swings. I myself follow the strategy having a percentage of my paycheck (pre-tax dollars) automatically withdrawn and invested in a passive index fund. So, those are two examples. Whether or not others choose to follow is their decision. However, one can not choose the action and the consequence.

      Action: try to time the market, Consequence: more than likely will underperform the market by a wide margin.

      Action: buy and hold, Consequence: will see some ups and downs but will not outperform the market.

      Now, what action leads to consequence of consistently outperforming the market on a risk adjusted basis? If you know the action, don’t tell anyone. Strategies tend to lose their efficacy once published. 🙂

  2. I read John C Bogle’s book The Little Book of Common Sense Investing and it convinced me to invest in index funds. However, a compelling point I’ve heard people make is during bear markets a mutual fund manger can shift the money into areas that are less volatile and decrease losses where index funds you’ll take the full loss of the market. So, I’m not sure if I should invest in index funds, mutual funds, or both. What do you think? Is having investments in mutual funds to decrease losses during a bear market simply just another fancier version of timing the markets?
    Oh, and where is video two for personal finance overview? I only see links for videos one and three. I couldn’t find it on YouTube either.

    • Either you move money out of index funds into something else or you pay an active fund manger to do the same thing. You pay the active fund manager via higher expense ratios with the hope that their timing is better than your timing. Either way it is market timing.

      There are countless studies that show missing out on a few of the highest gain days in the market will cause you to seriously underperform the market. For example:

      http://www.businessinsider.com/cost-of-missing-10-best-days-in-sp-500-2014-3

      I don’t know what is best for you, but I can tell you what I do for myself. When I think the market is “high” I don’t completely go to cash. I remain invested in the market but not as much. I still invest monthly but my stock/blond split adjusts to market conditions.

      Regarding video two, I need to redo it. Given the busy semester I don’t anticipate the update until this summer.

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