Keep in mind that an extra 1 or 2% 'load' or fees on your mutual funds will kill return by more than $250,000 out of a million dollars over a 20-30 year period!...that is a heck of a price to pay for a managed fund.Last year's hot fund is usually NOT the next years best performing fund. After you read BErnstein, you'll understand that sectors change, and no one has a clue as to which sector will do better this year or next.If your money is in taxable accounts, the last thing you want to do is churn stocks , which is what most actively managed funds do!...you wind up paying cap gains taxes on your 'gains', either long or short term, and give Uncle Sam 15-34% of your gains..if you make 10%, and give away 2 or 3%, that is money down the drain forever, and it does not compound.For taxable accounts, stick to tax efficient funds (and index funds are this by nature) that generate next to zero cap gains by churning. I like the Vanguard Total Stock Market Index better than SP500, although it is good. YOu should be thinking about international exposure....and Vanguard has several good funds, some of them tax efficient. In tax deferred accounts, you should hold your bonds and if you have TIPS, only keep them in a deferred account!...they pay imputed interest each year you have to pay tax on, even though you don't get it!....and, of course, it is at regular income tax rates, plus any state tax, so you give up 1/3rd to the gov't right off the top.....After you finish Bernstein, I would suggest Malkiel's excellent book, latest edition (after 2000) called A Random Walk Down Wall STreet. AFter reading that, you won't be buying any managed funds, because you'll know how bad most are....if I remember right, even with 'survivor bias' (meaning the poor funds are dissolved or merged into something else so they don't show up on fund company averages any more), 90% of all managed funds fail to meet the indexes (after loads and taxes) over five years.....and 95% fail to meet the indexes over 10 years. Once you buy into a fund, and reap gains, deciding to switch out because the fund has changed managers and the 'hot shot' has gone elsewhere, if in taxable account, it can cost you a bundle to 'sell', pay the taxes, and re-invest elsewhere. That is money lost forever! It does not compound, cutting your return by a big percent over 30 years (like nearly 25% or 30%) if you did ALL your funds once every few years. Chasing hot funds is a recipe for disaster.Some folks dedicate 5% or 10% of their money to 'speculating' - buying selling individual stocks......or particular funds. The rest is in index funds (stock market indexes, international indexes, and bond funds, or GNMA or REITS). They limit it to that, and can 'play' around with that part of their nest egg. As you get older, you might wish to transition to higher percent in bonds....you don't want to arrive at retirement age with 100% stock portfolio...that date could be just before 1929, 1937 (worse) or 1966 (even worse)...... but if you were half in bonds, half in stocks in 1929, you wouldn't have been too unhappy!t
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