Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
As you point out most index funds have a very low 'expense ratio'- so there is little differentiation between them based on fees each charge. My personal performance benchmark is the S&P Index Fund (1yr & 2yr periods). I would limit my investing to S&P Index Fund if I did not have a better performing option available. The real benefit of a 'stock window' as part of a 401K plan is that it affords employee access to individual stocks rather than funds.

As for actively-managed mutual funds, (also ETFs and Target Date Funds) my criteria is that any option I would consider must have recently (i.e., 1yr & 2yr periods) outperformed the S&P 500 Index in terms of GROWTH in 'unit price'. My primary concern is amount of profit (or CAGR - compound annual growth rate) the fund returns to me - fees charged by fund's management is of secondary importance. Incidentally, this one criteria eliminates perhaps 90% of actively-managed mutual funds from consideration.

I apply two criteria as I 'cherry-pick' a few (i.e., 3-5 while still working) individual growth stocks for investment each year. (1) Business must be a 'great business' as espoused by the MF - many of my stocks were recommended by MF newsletters. and (2) My analysis indicates that stock price will likely double in value within 5 years (i.e., CAGR = 14%). Am not boasting but my portfolio has actually outperformed that growth rate over the past seven years since my retirement in 2013.

Final comment. (1) I would not invest in an annuity because I cannot determine what its payout might be say 20 years in the future. In effect, the soon-to-be retiree will likely be at the mercy of the insurance company in determining payout amount. (2) I would not invest in Target Date Funds - if you look at performance among its underlying funds there will be several low-performing 'dogs' among them. Again, I am not interested in any asset which has not recently outperformed the S&P 500 Index.
Print the post  

Announcements

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.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! 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.