S&P downgrade Monday 8/8/11 US market poll

[Greg Bernhardt]

Individual company stocks may not return, but the overall market will.
This is why mutual funds are an important investment for many people.

I will do what Warren believes, and if I cannot do it in the fashion that he does, I will do it with mutual funds, where I can get fractional shares of hundreds of companies for little cash.

These are some pretty pathetic 5 year returns. Many barely meeting inflation rates.
http://money.cnn.com/magazines/moneymag/bestfunds/index.html

Conversely, invest in Apple or GE two years ago and you double and triple your money.

 

[AlephZero]

We just keep buying our mutual funds. IMO, either you make investing a full time job and become an expert, or you leave it to the experts.

That's fine, so long as you remember two basic facts about mutual funds.

1. The typical "fund investment analyst" probably has a lot less "real life" experience than you do, assuming your age is greater than about 25.
2. Fund managers are not in the business of making you money. They are in the business of taking your commissions, and not losing you more money than other fund managers. If the market goes down 50%, your fund goes down 90%, but most similar funds go down 95%, your fund manager will count that as big-time win.

That said, the best time to learn to make your own decisions is in a bull market, where mistakes don't cost so much. But the best time to make money (IMO) is always in a bear market or at the end of a bubble, unless you suffer from chronic optimism (which is a very common disease).

 

[Insanity]

These are some pretty pathetic 5 year returns. Many barely meeting inflation rates.
http://money.cnn.com/magazines/moneymag/bestfunds/index.html

Compared to what?

The article doesn't state for what 5 year period those returns are for, there's no date on the article either far as I saw, other then the title being "The Investor's Guide for 2011". Looking at returns on other sources, I'd say its recent, but not the most current info.

If you click on the first fund, American Funds Mutual Fund AMRMX, and select to show the 5 year return ending on 8/5/2011, it looks to have a different value then what was in the article.

If you select to compare to the S&P 500, this fund outperformed it during that 5 year period. It looks like that fund returned a total of 16.58% (giving an average of 3.3% each year, which is close to the 3.12% in the article) while the S&P 500 somwhere in the negatives, it doesn't show the value. Google Finances does show a total return for the S&P of -12.5% ending 8/8/2011. In this case here, being in this fund would have been better then in a S&P 500 index fund.

The fund's detail from the article, also shows that since the fund's inception, it has returned 11.54% average each year. This is for at least 40 years as the current manager, according to that source, has been managing it for that time.

In fact if you click on each fund in the Large Cap category, changed the graph to show last 5 years, and add the S&P 500 for comparison, each one outperforms the S&P. The end dates vary a bit from fund to fund (some show 8/5/2001, others 8/8/2011), but comparing each fund to the S&P 500 for the same dates, they all do outperform it. Which they should, if a managed fund cannot outperformed the unmanaged market index, don't invest in it.

Conversely, invest in Apple or GE two years ago and you double and triple your money.

According to Google Finances;
GE's total returns:
5 year (ending on 8/8/2011): -52.96%
3 year (8/8/2008 to 8/8/2011): -45.3%
2 year (8/14/2009 to 8/8/2011): 4.97%

Comparison to the AMRMX fund, total returns:
5 year (ending on 8/8/2011): -15.52%
3 year (same dates): -8.27%
2 year (same dates): 9.8%

I'd say choosing the fund over GE would be better, twice the return.

Apple, of course, is outperforming the entire country practically financially.

 

[Ivan Seeking]

That's fine, so long as you remember two basic facts about mutual funds.

1. The typical "fund investment analyst" probably has a lot less "real life" experience than you do, assuming your age is greater than about 25.
2. Fund managers are not in the business of making you money. They are in the business of taking your commissions, and not losing you more money than other fund managers. If the market goes down 50%, your fund goes down 90%, but most similar funds go down 95%, your fund manager will count that as big-time win.

That said, the best time to learn to make your own decisions is in a bull market, where mistakes don't cost so much. But the best time to make money (IMO) is always in a bear market or at the end of a bubble, unless you suffer from chronic optimism (which is a very common disease).

We invest through my wife's employer with some amount of matching. I'm not talking about day trading. Unless you're an expert in your own right, day trading is just plain silly. The fact is that we have generally seen very good returns on our investments.

Most amateurs lose money when they play. And even worse, most amateurs have no idea that they're beyond their depth. If you want to talk about life experience, there it is in a nutshell. I've known plenty of people who, for a time, thought they knew what they were doing; right up until they lost their shirts.

 

[jtbell]

Oh, sheesh.

After the big drop in the stock market yesterday, I worked out a plan to transfer some money between my non-tax-deferred mutual fund accounts, and make some new purchases from cash on hand, to re-balance the stocks/bonds ratio to where I want it. This was to compensate not only for yesterday's drop, but for the broad decline over the last few weeks.

This morning, the market rose a lot, so I held off on executing my plan. Then in midafternoon, it dropped back almost to the day's starting point, at which point I pulled the trigger. Then it went back up for a net gain of 4-5% depending on which index you look at.

But my mutual fund transfers and purchases don't take effect until the end of the day so now I'm probably a bit overbalanced towards stocks instead of towards bonds. At least I got some practice in doing transfers, which I hadn't done before with these accounts.

 

[falc39]

Did a lot of people miss the obvious?

GOLD

Been a holder since 2007 :)

 

[turbo]

Did a lot of people miss the obvious?

GOLD

Been a holder since 2007 :)

Glad you didn't buy in during the early 1980s. You'd still be underwater.

 

[falc39]

Glad you didn't buy in during the early 1980s. You'd still be underwater.

How? Say I did and held it all the way today...?

and Bernanke just commited to 0% interest rates for another two years

 

[khemist]

Looks kinda like a short term bottom yesterday but I'm betting the market goes down a bit more. Sold a few shares on this recent bounce back. The stock went below the 20 day, bounced off the 50 day back to the 20 day moving average. I am thinking its going to go below the 50 day average again.

 

[mheslep]

Did a lot of people miss the obvious?

GOLD

Been a holder since 2007 :)

ok, under what 'obvious' conditions, different from now, would it be appropriate to sell your gold? What type of gold security is obvious to hold?

 

[turbo]

How? Say I did and held it all the way today...?

and Bernanke just commited to 0% interest rates for another two years

A friend of mine bought and sold gold pursuing market rates in 1980-81. Adjusted for inflation, market price was over $2000 back then, and it's a bit over $1700 now.

 

[Astronuc]

Gold is a commodity/asset bubble. It is considered a safe investment, as was housing, until the bubble burst. I knew a guy who invested heavily in gold and talked it up during the rise in mid-80s. The price then subsided. He lost most of his investment, and apparently he started stealing from the till of his employer.

http://www.finfacts.ie/Private/curency/goldmarketprice.htm

Meanwhile, from an interview with Wilbur Ross, "Stumbling Economy Translates To Stock Volatility" - http://www.npr.org/2011/08/10/139345529/stumbling-economy-translates-to-stock-volatility

 

[turbo]

My friend was not investing in gold. He was exploiting the bubble. He'd take out ads in newspapers, and then camp out in a motel room for a day or two buying gold. He'd unload the gold every day, if possible, to a middleman to refresh his cash-box for the next foray. As soon as gold started dropping, the price that he was willing to pay kept dropping, but some "investors" kept chasing the bubble, hoping that the price would spike again. It didn't, and they got burned.

 

[turbo]

BTW, I am friends with his middleman and he never held onto any of the gold, either. He did skim off some of the very nice pieces, but those were pieces that were antique and had value beyond the intrinsic value of the gold.

He took the very nicest pieces and put them in his antique shop. When the bubble started swelling, he bought a nice antique German 3-color gold sculpted (floral) band from my friend who bought at motels. That band is now my wife's wedding band. When we got married, we didn't have money for such frivolities, and I wanted to get her a nice heavy antique wedding band when I saw the opportunity. Luckily, Greg was very nice to us and sold us that beautiful ring at spot-gold price. A few months later, he would have given us a very tidy profit on that ring had we been willing to sell.

That 1980 peak looked like a needle, not a bubble.

 

[falc39]

Gold is a commodity/asset bubble. It is considered a safe investment, as was housing, until the bubble burst. I knew a guy who invested heavily in gold and talked it up during the rise in mid-80s. The price then subsided. He lost most of his investment, and apparently he started stealing from the till of his employer.

http://www.finfacts.ie/Private/curency/goldmarketprice.htm

Meanwhile, from an interview with Wilbur Ross, "Stumbling Economy Translates To Stock Volatility" - http://www.npr.org/2011/08/10/139345529/stumbling-economy-translates-to-stock-volatility

Kind of, I mean that is partially true. Gold is a bit different though, you have to see it from the perspective of a currency too, which it is. Especially today, it is very easy to go in and out of currencies and gold electronically. There are even gold debit cards (e-gold) and gold vending machines now! Kind of ironic when you think about how technology is making gold more viable. So I think it's not accurate to pair it with stuff like houses in the housing market or strict commodities like oil and rice. Central banks and nations are increasing their reserves and buying gold which adds to gold's legitimacy. Do central banks buy rice? or houses? Gold is in a category of its own. Its outlook is improving especially if everyone is going to keep devaluing their currencies.

A friend of mine bought and sold gold pursuing market rates in 1980-81. Adjusted for inflation, market price was over $2000 back then, and it's a bit over $1700 now.

Ok, I see, that is true if you did buy at the peak. But it is getting very close to breaking even and probably already has if you are one of those who didn't buy at peak and held. I wouldn't be surprised if it broke even within the next two years and possibly exceed because of Bernanke's commitment to 0% interest rates and leaving the door open for QE3.