I'm 51 years old and hope to retire at 62. Besides my 401K, I have two roll-over IRAs - a traditional IRA ($265K) and a Roth IRA ($52K). These IRAs are currently professionally managed at Fidelity (Fidelity Portfolio Advisory Service) for a fee of a little over 1%. The reason I chose to put this money in a managed fund was that I don't have a lot of expertise at investing and I don't care to spend a great deal of time managing the money myself. However, I feel that if the managed fund is not able to beat the market (which it's not), then it's not worth the high fees I'm paying. Though I tend to think that some managed funds may be worth the fees if they can consistently beat the market over an extended period.I've been considering moving my money into a family of low-cost index funds (with some allocation between domestic stocks, international stocks and bonds). Specifically, I was thinking of Fidelity Spartan funds (to keep the money at the same place as the 401K money) or possibly moving to some of the low-cost Vanguard index funds. However, I was also considering ETFs, but I don't really know the pros/cons of that approach.I was also toying with the idea of just moving the $265K into index funds (or ETFs?), and moving the $52K into another actively managed fund, if I can find one with reasonable fees and a good track record. Then I could leave them alone for a while to see how things are going.I would appreciate any advice on managed funds vs. index funds vs. ETFs for roll-over IRAs.
I tend to think that some managed funds may be worth the fees if they can consistently beat the market over an extended period.Yes. But they can't. There have been numerous studies that show that, on average, managed funds underperform the market by the amount of the fees. Googgle it.
Yes. But they can't.Point of Clarification.They can, and some do. It is just that most don't.I've not seen a recent study but I would not be surprised to find out that more (but still far less than half) have beat the indexes recently considering how far the S&P fell.There have also been bond funds (especially with this year) that have done better than the Barcley's Bond Ag.IMO, index funds work best in normal and expanding (appreciating) economic conditions and managed funds work better when markets are contracting or losing value. Having some in both is not a bad thing.
I recommend you read this book:http://www.amazon.com/Investment-Answer-Protect-Financial-eb...It's short and gives you a general understanding on how the market works. Also, chances are that an active manager who consistently beats the market won't manage your Roth. In fact, you may need to have $1+ million, just to get in the door.
In fact, you may need to have $1+ million, just to get in the door. I think you are confusing passive index funds vs. normal actively managed funds with a "managed account" which is different.Managed Accounts can be found for a lot less than $1 million these days but the goal of such is not typically to beat an index, it is to better protect against losses by exercising descretionary authority over the underlying investments (the manager has the authority to buy and sell any holdings without first consulting the client).
I think you are confusing passive index funds vs. normal actively managed funds with a "managed account" which is different.You're right. I initially read it as an actively managed account and not a fund.
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