6 ms·

To me this is depressing as my future pension is invested in funds. Given the rest of the comments: how best to invest it for long-term grown above the rate it'

by porker 12y ago

To me this is depressing as my future pension is invested in funds. Given the rest of the comments: how best to invest it for long-term grown above the rate it'd have in a savings account?

im2w1l 12y ago
Invest directly in stock and bonds. And if that is not available, than invest in low fee funds.
- kasey_junk 12y ago
  "Invest directly in stock and bonds." That is pretty much the opposite advice you should take from those findings. In general, investors now have the widest array of low cost, diversified instruments available at any point in history. Most advisors who know what they are talking about, will tell you to take one of these options (a non-managed index fund, a highly diversified etf) and invest in that. Rebalance once a year and don't worry about beating the market.
  - porker 12y ago
    > Most advisors who know what they are talking about, will tell you to take one of these options (a non-managed index fund, a highly diversified etf) and invest in that. Thanks, do you have any references for this, or more details on such options?
    - kasey_junk 12y ago
      http://www.bogleheads.org/ http://www.bogleheads.org/ Also "A Random Walk Down Wall Street" is a central book in this genre. I will say, you can't generally control how your pension is run (and they run the gamut from wonderful to nearly criminal). It's one of the reasons I highly discount pension funds as a benefit.
      - porker 12y ago
        In the UK the latest hot thing is Self-Invested Pension Plans (SIPPs) and being self-employed all of mine is in that. Hopefully better performance in the long run, but a lot more faff/stress making good decisions :)
      - n72 12y ago
        A Random Walk is great, as is Bill Bernstein's the 4 Pillars of Investment.
  - im2w1l 12y ago
    Well I do not advocate stock picking to beat the market. Just to construct the index tracker yourself instead of paying a fee for someone else to do it.
    - kasey_junk 12y ago
      That is still phenomenally bad advice. You aren't paying index funds or etfs for their stock picking, heck most of that is in publicly available documents. What you are paying them for is their operational capabilities and economies of scale. I would be amazed if a retail consumer could put together a balanced, diversified portfolio with the same cost as an actively managed fund. To try and compete with an etf or non-managed index fund is crazy.
    - n72 12y ago
      The expense ratio of VTSAX is .05%. It's ludicrous at that price to do it yourself.
cmdkeen 12y ago
Go with fund managers who genuinely invest over the long term, there are surprisingly few, and over 10+ years it is possible to generate better returns. Picking companies you think will beat the market over 10+ years is about fundamentals and research, not "playing the market". Too many fund managers aim for consistent shorter term performance, which is getting into dice rolling territory. Have a look at the fund managers that big pension schemes use. Some of them do genuinely perform well over the long run by not being distracted by short term issues.
joshuahedlund 12y ago
I've done some recent reading from financial independence evangelists (ex. Mr. Money Mustache, etc[0]) who advocate low-fee index funds like Vanguard's. The idea (which generally makes sense to me) is that the overall stock market has historically significantly beat inflation over basically any period over 10 (20?) years, so an investment that has that overall profile is fairly low-risk. There are various things you can do with 'target retirement' funds or other methods of allocating more towards bonds as you age to reduce your short-term volatility risk as you near the age you want to use the funds. [0]http://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/ http://www.mrmoneymustache.com/2011/05/18/how-to-make-money-...
n72 12y ago
1. Minimize fees a. This means staying far away from advisors. Either do it yourself somewhere like Vanguard or let something like betterment.com do it for you. 2. Minimize taxes a. Max out your 401K, make sure you're using your IRA to full advantage 3. Diversify a. Own a domestic and international index and that's it. Don't focus on market sectors. 4. Set it and forget it — namely don't let your emotions make you do stupid things 5. Rebalance every year or so 6. Consider tax loss harvesting each year 7. Perhaps add two types of funds which have a low correlation to stocks - REITS and precious metals. Each should be under 5% of your portfolio, though. It's all quite easy, actually. For pretty much all you need to know in condensed form read Allan Roth's "How a Second Grader Beats Wallstreet" or Bill Bernstein's "If You Can."

by porker 12y ago

To me this is depressing as my future pension is invested in funds. Given the rest of the comments: how best to invest it for long-term grown above the rate it'd have in a savings account?

im2w1l 12y ago

Invest directly in stock and bonds. And if that is not available, than invest in low fee funds.

kasey_junk 12y ago
"Invest directly in stock and bonds." That is pretty much the opposite advice you should take from those findings. In general, investors now have the widest array of low cost, diversified instruments available at any point in history. Most advisors who know what they are talking about, will tell you to take one of these options (a non-managed index fund, a highly diversified etf) and invest in that. Rebalance once a year and don't worry about beating the market.
- porker 12y ago
  > Most advisors who know what they are talking about, will tell you to take one of these options (a non-managed index fund, a highly diversified etf) and invest in that. Thanks, do you have any references for this, or more details on such options?
  - kasey_junk 12y ago
    http://www.bogleheads.org/ http://www.bogleheads.org/ Also "A Random Walk Down Wall Street" is a central book in this genre. I will say, you can't generally control how your pension is run (and they run the gamut from wonderful to nearly criminal). It's one of the reasons I highly discount pension funds as a benefit.
    - porker 12y ago
      In the UK the latest hot thing is Self-Invested Pension Plans (SIPPs) and being self-employed all of mine is in that. Hopefully better performance in the long run, but a lot more faff/stress making good decisions :)
    - n72 12y ago
      A Random Walk is great, as is Bill Bernstein's the 4 Pillars of Investment.
- im2w1l 12y ago
  Well I do not advocate stock picking to beat the market. Just to construct the index tracker yourself instead of paying a fee for someone else to do it.
  - kasey_junk 12y ago
    That is still phenomenally bad advice. You aren't paying index funds or etfs for their stock picking, heck most of that is in publicly available documents. What you are paying them for is their operational capabilities and economies of scale. I would be amazed if a retail consumer could put together a balanced, diversified portfolio with the same cost as an actively managed fund. To try and compete with an etf or non-managed index fund is crazy.
  - n72 12y ago
    The expense ratio of VTSAX is .05%. It's ludicrous at that price to do it yourself.

cmdkeen 12y ago

Go with fund managers who genuinely invest over the long term, there are surprisingly few, and over 10+ years it is possible to generate better returns. Picking companies you think will beat the market over 10+ years is about fundamentals and research, not "playing the market". Too many fund managers aim for consistent shorter term performance, which is getting into dice rolling territory. Have a look at the fund managers that big pension schemes use. Some of them do genuinely perform well over the long run by not being distracted by short term issues.

joshuahedlund 12y ago

I've done some recent reading from financial independence evangelists (ex. Mr. Money Mustache, etc[0]) who advocate low-fee index funds like Vanguard's. The idea (which generally makes sense to me) is that the overall stock market has historically significantly beat inflation over basically any period over 10 (20?) years, so an investment that has that overall profile is fairly low-risk. There are various things you can do with 'target retirement' funds or other methods of allocating more towards bonds as you age to reduce your short-term volatility risk as you near the age you want to use the funds. [0]http://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/ http://www.mrmoneymustache.com/2011/05/18/how-to-make-money-...

n72 12y ago

1. Minimize fees a. This means staying far away from advisors. Either do it yourself somewhere like Vanguard or let something like betterment.com do it for you. 2. Minimize taxes a. Max out your 401K, make sure you're using your IRA to full advantage 3. Diversify a. Own a domestic and international index and that's it. Don't focus on market sectors. 4. Set it and forget it — namely don't let your emotions make you do stupid things 5. Rebalance every year or so 6. Consider tax loss harvesting each year 7. Perhaps add two types of funds which have a low correlation to stocks - REITS and precious metals. Each should be under 5% of your portfolio, though. It's all quite easy, actually. For pretty much all you need to know in condensed form read Allan Roth's "How a Second Grader Beats Wallstreet" or Bill Bernstein's "If You Can."