Buy index funds, not mutual funds. In nearly every case, an index fund will outperform a mutual fund.
Can I improve my 401k and IRA by tracking the performance of the funds and switching to better funds periodically?
What criteria do some of you use? If the 3mo average is negative? 6mo?
One obvious move that worked well for me a few years ago was to move a large portion of my IRA into a Real Estate Fund. It has had awesome returns as the real estate market has picked back up.
It seems that if you make decisions on recent past performance and move to another fund, you might miss the rebound or you might move into a high performer at its peak and lose more money that if you stayed put.
It's like the opening scene of Office Space when he is switching lanes in a traffic jam.
Some of you are saying to play stocks hard when the going is good, then switch to bonds when the market appears to be going bad for stocks. That seems way too difficult to predict.
And that's the secret to get rich... timing. I like to keep myself diversified in terms of geography, company size, sectors, and growth/value. I'll overweight in areas where I believe the money/returns are at and be underweight the slow areas. I'll be risk-on during the start (or prior to start) of good times and buy more. I'll start selling a bit if things look toppy or slow down. I'll be risk-off and move out of stocks during down times.
Buy and hold, however, does not mean choose blindly and forget. You have to understand that a broad based total market index fund will lag, and lag very badly, when a particular sector is hot and some active mutual funds can really overweight that sector and the domestic total stock market fund can't (it always holds a representative of the total U. S. domestic stock market in a market-capitalization weighted way). The total market index fund has not suddenly gone bad, you just have to step back and look at the investment from a long time horizon (retirement decades away) perspective and understand what will drive that outperformance (instead of trying to beat the market at any given point in time, it just takes what the market gives, minimizing the inevitable drag from high expense ratios, high hidden transaction costs from heavy portfolio turnover, taxes, and asset gatherer mutual funds who are only looking for relative performance to attract and keep billions of dollars undermanagement so they get rich even if the fund itself ends up basically imploding performancewise over time because it has too many billions of dollars of assets to deploy in a high turnover, momentum type portfolio strategy)."the average stock fund delivered an average annual return of 8.8% per year from
1990 to 2009, the average stock fund investor received an average annualized return of
only 3.2% per year."
Most 401k and IRA funds are not segmented to allow changing by geography, company size, sectors, etc.
You are pretty much stuck with a mostly Index funds and a few mutual funds or stable growth funds.
Buy and hold, however, does not mean choose blindly and forget.
the one thing i remember from college was my business teacher telling me that if you maxed out your roth ira from the age of 18-28 (for 10 years) you would have more $$$ in there by the time you retire if you maxed it out from 30 - 60.
this is of course, if you got the average historical gains of like 10%.
i wish i started mine earlier. i'm 29 now and started mine a few years ago. i'm putting $400/mo into it now, and hopefully forever. this is on top of doing the max possible in my 401k that my company matches.
if u have the $, its better to dump all $5k on the 1st trading day of the year instead of dollar cost avg over the yeaR
So there seems to be a lot of good advice in this thread, but no one has really suggested any good sources for research so that we can make timely decisions. For someone who just graduated last year and wants to start looking into long term investments where's a good place to start doing research?
Kind of. If the market goes up, yes. If it goes down, no.
Dollar cost averaging is a more defensive investing idea to reduce risk and preserve capital that works great if that's your investing mentality. If it were my money, I'd put in the first day, but dollar cost averaging serves a purpose for the more risk-averse investors.
1) Start by starting. That is, open an account and get money into it. If you are confident, put a lot in. If not, put in a little each month. Start with your employer's retirement plans. If you can get a company match, then that is free money, so take it. Plus, employer accounts tend not to have minimum investment limits nor do they give things that are overly risky. After that try a Roth IRA if you qualify. Note: many IRA accounts have minimums, so you'll likely have to put in at least a few thousand dollars. I often suggest Vanguard as a starting point since you have good selections at low fees.So there seems to be a lot of good advice in this thread, but no one has really suggested any good sources for research so that we can make timely decisions. For someone who just graduated last year and wants to start looking into long term investments where's a good place to start doing research?
Assuming you qualify (there are income limits), then yes you should do it. The sooner you save, the more time you'll have for it to grow. With a Roth IRA, all growth is completely tax free (unless there is some major, major change to tax laws in the future).
Think of it this way. If you put the maximum in now ($5000 is allowed each year), and assuming the stock market behaves about the same as it has for decades, and invest nothing else in the rest of your life, then you'll have a quarter million dollars when you retire. Do this for four years when you are young, and you'll retire a millionaire (completely tax free).
There are some risks. You could make a bad investment decision. The stock market could tank and you lose some money. But, the stock market has never done poorly for an extended period. You'll have to have a very big financial disaster to not retire with lots of money if you invest at your age.
I'd personally suggest a simple start. Open a Vanguard Roth IRA, deposit $5000, and buy either VFINX or VFFVX mutual funds. Either fund one is diverse (meaning if a company goes bad you don't own much and meaning if a company does really really well then you get a piece of it). Either fund has low fees and is likely to do pretty well in the future. In a few years, you can look back and adjust to different mutual funds if you want. Where you start investing usually has no measurable impact on how well you do in the long term (unless you do really stupid risky things).
Meh, considering that 2008-2009 was horrible you probably didn't loose out too much compared to starting just 4years ago. Now if you had started 1 or 2 years ago...
My 3year return on VFIFX (vanguard 2050 retirement) is less than 2%.
Anyone?Are there any "what if" calculators out there?
Like, what if I had $X in X_Stock on X_Date and sold on this date?
There has to be a website that keeps track of ending prices of all stocks for each day.