Author Topic: Pro or Anti: Index Funds for Retirement Investing?  (Read 5863 times)

moneyhair

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Pro or Anti: Index Funds for Retirement Investing?
« on: December 21, 2014, 12:47:24 PM »
I have newly joined this forum, I am 33 years old and married and we have recently started to invest as well as cut down our daily living expense about 2 years ago.  I have read some quality books that focus on low cost investments, passive index fund investing, and rebalancing the equity to fixed income percentages every year or two.

It would be great to hear what the minds on this forum have to say about such an investment plan - either being For or Against such an idea and explaining a bit about their reasoning or sharing personal philosophies. 

Thank you in advance for your posts.

gimp

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #1 on: December 21, 2014, 01:24:46 PM »
As a disclaimer, I am a lot younger than you, unmarried and unattached.

For myself, my strategy is and I think most likely will be an all-stocks (total market index fund) strategy.

This is because I expect to work as long as possible (no interest in retirement, I love my field). As I continue to save, I will have far more money than I know what to do with. Stocks will therefore give me better long-term returns (30, 40, 50, maybe 60 years) and I won't care about the volatility. (If things drop so much that the investments become worthless, I'll have bigger issues to care about.)

RyeWhiskey

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #2 on: December 21, 2014, 01:29:27 PM »
For, absolutely. Check out the bogleheads wiki for all the information you will need to get started.

matchewed

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #3 on: December 21, 2014, 03:09:40 PM »
Just glance through some of the topics. Arguably there is a great deal of "for" in these forums.

wtjbatman

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #4 on: December 21, 2014, 03:40:08 PM »
I can not think of a single legitimate poster on these forums who wouldn't recommend low-cost and diversified index funds for the vast majority of people.

moneyhair

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #5 on: December 21, 2014, 05:25:13 PM »
this is great news.  i think i will fit in on this forum quite well.

matchewed

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #6 on: December 21, 2014, 05:32:06 PM »
I can not think of a single legitimate poster on these forums who wouldn't recommend low-cost and diversified index funds for the vast majority of people.

Obviously picking individual stocks out of a hat is the most superior method of wealth generation and preservation.

arebelspy

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #7 on: December 21, 2014, 05:45:55 PM »

I can not think of a single legitimate poster on these forums who wouldn't recommend low-cost and diversified index funds for the vast majority of people.

Let's hope no one thinks of anyone, or we'll have to No True Mustachian them. ;)

I thought think that's safe to say though. Most people are bad at investing, and minimizing fees and taking themselves out of the equation is the best thing to do.
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iamlindoro

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #8 on: December 21, 2014, 05:46:12 PM »
I can not think of a single legitimate poster on these forums who wouldn't recommend low-cost and diversified index funds for the vast majority of people.

Obviously picking individual stocks out of a hat is the most superior method of wealth generation and preservation.

Rubles, you buffoons!  Rubles!

bigchrisb

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #9 on: December 21, 2014, 05:55:37 PM »
I'm for the index approach.  I hedge my bets with a few active investments that I play with, as I enjoy it.  But the bulk of my portfolio is low cost broad products (index ETFs and Australian LICs), or direct large cap stocks (buy, reinvest dividends, hold forever).

One of the most valuable aspects of having a large part of my portfolio in these structures is that it protects a large part of my portfolio from myself!

sirdoug007

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #10 on: December 22, 2014, 08:15:49 PM »

I can not think of a single legitimate poster on these forums who wouldn't recommend low-cost and diversified index funds for the vast majority of people.

Obviously picking individual stocks out of a hat is the most superior method of wealth generation and preservation.

Rubles, you buffoons!  Rubles!

That literally made me laugh out loud!


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LordSquidworth

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #11 on: December 22, 2014, 08:40:16 PM »
I have newly joined this forum, I am 33 years old and married and we have recently started to invest as well as cut down our daily living expense about 2 years ago.  I have read some quality books that focus on low cost investments, passive index fund investing, and rebalancing the equity to fixed income percentages every year or two.

It would be great to hear what the minds on this forum have to say about such an investment plan - either being For or Against such an idea and explaining a bit about their reasoning or sharing personal philosophies. 

Thank you in advance for your posts.

Pro most people indexing. The majority of people cannot control their emotions, nor have the knowledge to pick their own basket of equities.

I am also pro managed mutual funds for those people, depending on the funds. Boggle advocates the same, though many Boggleheads forget that. When picking a managed fund ignore the funds returns, and focus on the manager. Managers come and go, the fund name stays the same.

Anti blanket rebalancing into fixed income. I personally believe fixed income will be garbage compared to equities for awhile. Rebalancing is also about risk tolerance. I myself will likely always be 100% equities, as the returns of bonds are not attractive, and I can stomach a fall in equities.

** I personally hold no index or mutual funds outside of my Roth 401k, which I cannot personally manage. Aside from that I hold roughly a dozen different stocks at a given time. I check my account maybe once a week these days. I can sleep easy at night with this. **

EarlyStart

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #12 on: December 22, 2014, 11:23:28 PM »
I'm all for index funds. The best part, in my view, is that I can follow the market as closely as I want or not at all. I'm very, very busy and I really don't have time to read the quarterly statements of 30 or so companies or keep up with every recent development.


The statistics about beating the market indexes are not kind to professional fund managers or individual investors. Undoubtedly there are people who beat indexes, but they're certainly a minority. Reading and engaging on the Bogleheads forum is a great way to become more acclimated with this strategy.

LordSquidworth

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #13 on: December 23, 2014, 07:49:32 AM »
I'm all for index funds. The best part, in my view, is that I can follow the market as closely as I want or not at all. I'm very, very busy and I really don't have time to read the quarterly statements of 30 or so companies or keep up with every recent development.


The statistics about beating the market indexes are not kind to professional fund managers or individual investors. Undoubtedly there are people who beat indexes, but they're certainly a minority. Reading and engaging on the Bogleheads forum is a great way to become more acclimated with this strategy.

They may be a minority but they're not so small a minority of the number of people who should actually be included in the statistics.

If you look at the active funds, you'll find a lot of them contain next to nothing in them. Many fund "managers" out there managing funds shouldn't be managing funds.

Your average person looks at the returns of a fund, which is likely a large reasoning for any poor returns. Fund managers change, funds names do not. Good performance of a fund is likely going to go with the manager when he changes to another fund, which they do do.

neo von retorch

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #14 on: December 23, 2014, 09:09:35 AM »
I want to clarify something with you geniuses.

Do you expect a 100% stocks portfolio to outperform a 90% stocks, 10% bonds portfolio over say 30 years, given that with the split, you could rebalance when stocks dive by selling off bonds (assuming they did not dive)?

matchewed

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #15 on: December 23, 2014, 09:22:13 AM »
I want to clarify something with you geniuses.

Do you expect a 100% stocks portfolio to outperform a 90% stocks, 10% bonds portfolio over say 30 years, given that with the split, you could rebalance when stocks dive by selling off bonds (assuming they did not dive)?

In theory it has the potential to. That is the closest to an answer you will get.

https://personal.vanguard.com/us/insights/investingtruths/investing-truth-about-risk

Take a peek at that article.

LordSquidworth

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #16 on: December 23, 2014, 09:24:30 AM »
I want to clarify something with you geniuses.

Do you expect a 100% stocks portfolio to outperform a 90% stocks, 10% bonds portfolio over say 30 years, given that with the split, you could rebalance when stocks dive by selling off bonds (assuming they did not dive)?

Yes, depending on your holdings.

Radagast

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #17 on: December 23, 2014, 11:05:33 AM »
I want to clarify something with you geniuses.

Do you expect a 100% stocks portfolio to outperform a 90% stocks, 10% bonds portfolio over say 30 years, given that with the split, you could rebalance when stocks dive by selling off bonds (assuming they did not dive)?

Over the last ten years 10% long term US treasuries would have improved the performance of probably any combination of stock index funds.

cjottawa

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #18 on: December 28, 2014, 09:33:37 PM »
I want to clarify something with you geniuses.

Do you expect a 100% stocks portfolio to outperform a 90% stocks, 10% bonds portfolio over say 30 years, given that with the split, you could rebalance when stocks dive by selling off bonds (assuming they did not dive)?

Over the last ten years 10% long term US treasuries would have improved the performance of probably any combination of stock index funds.

^^^ This.

The problem with 100% stocks/0% bonds is the potential to severely UNDER-perform.

"Risk-adjusted return" is better with at least 10% bonds injected into the mix.

Want further reading?
http://www.financialwisdomforum.org/forum/viewtopic.php?f=29&t=115906&sid=ce256fea796c400de8d8f590bd2e45c6
http://www.bogleheads.org/forum/viewtopic.php?f=10&t=116038
« Last Edit: December 28, 2014, 09:35:25 PM by cjottawa »

rmendpara

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #19 on: December 28, 2014, 10:10:45 PM »
I want to clarify something with you geniuses.

Do you expect a 100% stocks portfolio to outperform a 90% stocks, 10% bonds portfolio over say 30 years, given that with the split, you could rebalance when stocks dive by selling off bonds (assuming they did not dive)?

If by "outperform" you mean end up at a higher value, then probably yes; however, adding other types of assets (bonds, REITs, etc) will greatly reduce the volatility in those returns. The more optimal risk adjusted returns is likely in a more balanced portfolio than 100% stocks.

If you can stomach the volatility, then you can do fine with just stocks.

innerscorecard

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Re: Pro or Anti: Index Funds for Retirement Investing?
« Reply #20 on: December 28, 2014, 10:25:50 PM »
Everyone's (including me - I personally recommend the 1/3 US stocks, 1/3 international stocks, 1/3 bonds lazy portfolio)  obviously for it. Some take it to the extreme and say that indexing is literally the only way to go for everyone.