UnThreaded | Threaded | Whole Thread (34) | Ignore Thread Prev | Next
Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75384  
Subject: Re: IRA capital gains convert to ordinary income Date: 4/17/1998 3:03 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
TiggerToo,

<< You have hit on the one major item that bothers me about the gung ho Motley Fool contributors. They make people feel demeaned and debased because they choose to use index funds. Its like "you all are just so stupid, why can't you be smart like me and make all kinds of money by choosing individual stocks."

Some people just don't want to do it, and that does not make them bad, stupid, ignorant, chicken...you get the point.

The Motley Fool has great value to all readers, not just those that want to get into individual stocks. Give us a break?

Everyone talks about the home runs, but you never hear about the duds.>>

Goodness gracious me! Didn't we get up on the wrong side of the bed this morning. How about giving me a break instead? I think thou doth protest too much. Where in the world did you gather such an impression? Let's do a quick review of this thread.

PSUEngineerFool said:

"TMFPixy says

<<For a 401k to be better beyond the maximum match, the plan must offer some halfway decent options. Too many don't, thus making it fairly easy to outperform them in a taxable investment.>>

I have concerns with this statement. From my observations, most companies offer an index mutual fund. The taxable account needed to try to outperform the index would probably be several stocks (in essence creating your own mutual fund).

You make the assumption that most people will have the time and ability to be able to pick their own stocks and beat the S&P 500 when most professionals of managed mutual funds can't.

I think alot of people are blinded by the high flying tech stocks of this bull market. Today's darlings are Compaq and Dell. If you remember from the 1980's, Zeos and Wang were top computer companies. Zeos was bought out at a low price by Micron and Wang struggled until converting to a computer services company. Of course you can say the computer market is more mature today.

How about investing in established companies instead. You would lose to the S&P 500 with Sears and McDonalds. Everybody bought a Zenith TV when I grew up in the 70's. But I wouldn't want their stock.

Maybe everyone thought Borland would be like Microsoft since they dominated database software in the beginning. Poor choice there."

TMF Pixy responded:

"Greetings, PSUEngineerFool, and welcome.

<< From my observations, most companies offer an index mutual fund. The taxable account needed to try to outperform the index would probably be several stocks (in essence creating your own mutual fund).>>

Not really. I'm willing to wager at least 40% of 401k plans do NOT offer an S&P 500 index fund as an option. If you doubt that, just look at the numerous posts in this folder where folks complain about not having that option. In my own firm it wasn't until two years ago we were finally able to browbeat our investment committee into adding one. As I said, far too many have a poor selection. Over the long term, most managed funds come out woefully behind the vanilla index fund.

<<You make the assumption that most people will have the time and ability to be able to pick their own stocks and beat the S&P 500 when most professionals of managed mutual funds can't.>>

No, I don't. Only those who are interested in how their portfolios will do will venture beyond the 401k options or mutual fund environment. Sad ,that, but true. Fortunately, that doesn't pertain to the majority of the readers of this or other folders within Fooldom. It is NOT rocket science, and with but a modicum of knowledge virtually anyone can outperform the vast majority of stock funds out there. We aren't pressured to churn our portfolios chasing the "hot" idea of the moment. In stead, we use a buy and hold strategy that produces much better results. Ever look at the turnover ratio of stock funds? Of the roughly 3540 stock funds started in 1995 or earlier, the median turnover rate is 67%. The highest is 1,378.1%!! It's no wonder they have a hard time performing.

<<To beat an S&P 500 index fund in a 401(k), you must
1) do thorough research on each stock
2) constantly keep track of stock and company performance
3) always buy low and sell high
4) hope something unforeseen in the market doesn't screw up the first 3 steps.>>

Or you could probably just use one the various Dow strategies discussed elsewhere and still fare better than with a fund. Regardless, it's a personal issue. Each of us have to examine what we are willing and able to do. If we are Fools, we'll make the comparisons and go with the one we think will give us the biggest bang for our buck."

From that exchange you got the message I said, "…you all are just so stupid, why can't you be smart like me and make all kinds of money by choosing individual stocks." Personally, I think you have read far more into my remarks than is either there or than what was intended. Indeed, I'm quite distressed you think that's what I was trying to impart.

I have and will continue to maintain that investing is an intensely personal issue. Everyone must resolve it individually. If investing in index funds is your bag, great! In fact, double great because chances are you will do far better doing that than trying to pick any managed stock fund that will exceed the market over the long term. Can you do better than the market? Sure, by buying individual stocks. Do you have to take scads of time and do reams of analysis to do so? Not unless you want to do so. Just try using one of the Dow strategies. If history is any guide, over the long term you will better the S&P 500 index by doing so. Rocket science? Hardly. Time consuming? Ya gotta be kidding! Are you stupid if you don't do that? Nope. If you're content with lower returns, that's fine by me.

And BTW, just so no one forgets: 40% of 401k plans do NOT have an index fund as an option. They then become quite easy to beat for money beyond an employer's match. For instance, try an index fund in a Roth. Or try a self-directed account. But don't do the latter unless you can tear yourself away from other aspects of your life for at least 30 minutes a year every 12 to 18 months. Stick with the index fund instead. Both should do better than the 401k.

Regards….Pixy


Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (34) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Post of the Day:
Berkshire Hathaway

Starting a Small Business
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement