Portfolio 101

[lookout123]

Let me give this a try. unlike tw i do this for a living so i will not make any recommendations on here. (proper recommendations are on an individual basis.)

Those who invest in mutal funds always underperform the market. This is fact well proven based upon market history. In short, the so called professionals are some of the worst market investors.

buzzzzzz, guess again. of the 4 fund families currently sitting on my desk, 3 have outperformed the market over the last year and all 4 over the last 10. here is a quick exercise. imagine that you can travel back 70 years ago and invest $10k in each of 5 stocks (or predecessors) from this list: Alcoa, Altria grp, Am Espress, At&T, Boeing,Caterpillar,Citigroup,Coca-cola,Disney,Dupont,Kodak,Exxon,GE,GM,HP, Home depot,Honeywell,IBM,INTEL,Int'l Paper, J&J,JPMorgan Chase, MCD's,Merck,Microsoft, Proctor&Gamble, SBC Communications,3M, United Technologies, WalMart

If you had picked the top 5 performers you would hold $18.3Million. If the same $50k had been invested in my favorite conservative fund you would now hold $28.5 million.

This is not an unusual story. A properly managed fund has the ability to throw out stocks that underperform and pick up stronger ones - thus keeping only the best players in the game. that means better returns for you -tw.

Again, mutual funds average less than the market. Obviously. You are paying a few percentage points every year to an 'expert' who really knows nothing more about the products than anyone else but must earn enough money to make his (industry average) $150,000 to $200,000 per year. Their profits - not yours - are their most important objective.

quite simply - if you are paying "a few points" then you are picking really bad funds. industry averages are around 1.4% my favorite funds are well under 1%. And believe it or not - the fund managers do know more about the market than you. They live,eat, breathe the market. do you have an entire team of people to break down a company to figure out which way the stock should go? nobody is correct 100% of the time. someone good is right @75% of the time. as far as their (our) profits being more important than the client's - if you aren't aware, we make less money from selling funds than from individual stocks. (breakpoints, longer holding period, less overall turnover) so who's needs are being met by recommending funds?

MSNBC (I think it was) put a famous investor up against the monkey. Monkey selected based upon darts to a board. He outperformed the market specialist.

over what time period? investing is not a windsprint but a marathon.

That is what you must do. First put most money in index mutual funds that have the smallest annual fees (penalty costs). Invest in a few hundred shares of one stock.

index funds are not bad, but not the best long term performers. they hold every stock, so that means they hold all of the losers too. i would rather pay 5% (before breakpoints) to get into my favorite fund - because i will more than recover that in gains. again - a well managed fund...

Brokers don't like me. I don't make them big bucks. No one really makes big bucks by playing the market. Brokers should only make money when you buy and sell. Period. That means stocks - not mutual funds.

you're right - you don't make big money by "playing the market" - buy and hold is the philosophy that most brokers subscribe to. brokers probably don't like you because you are not a good client to have. my guess is you argue, insult, and ignore professional advice. out of curiosity - if your doctor tells you that _____ is what you need to do, do you assume you know better than they, and ignore them? BTW, do brokers dislike you in a greater numbers than the general public as a whole?

You don't need a full service broker. Their advise, based upon historical averages, is inferior to the average investor.

what averages would those be?

Invest only in what you understand.

that is the fastest way to lose your ass. that is the exact opposite of a diversified portfolio. of course, that is what you may have to do if you think you are more qualified than any full service broker.

In reality, the full service broker is a fancy, shined-up salesman whose job is to get you to do what is in his best interest. He is the poor student in school whose only objective in life was the $150,000+ per year salary. Yes, whores make that much. Uses a Discount broker

wow - you sure pegged me and my peers. we were lazy ass scheisters, who didn't bust our ass to jump through all of the hoops to qualify for licensing. S7 exam - only 66% of the people who take it pass. most companies only allow one shot. this is serious stuff, and the vast majority of us take the responsibity given to us VERY seriously.

For those others - your first stock investment should have been by the time your were 25.

yes that is ideal - but when it comes to investing it really is better late than never. be realistic about your goals and ask professional advice about what may be the best way to get there.
i recommend that most people stick primarily with quality funds until they have put together around $50K then start branching out a little more aggressively into individual stocks and bonds.

the most important thing i can say(again) is that investing is not for the undisciplined or the weak willed. wise investing will chew your guts up sometimes because the best thing to do is generally the opposite of what your instincts tell you. it is a scary feeling buying into something when you see it has been going down. but you don't wait until a shoe sale is over to make your purchase do you? a full service broker allows a barricade between your emotional instincts and your investments.