MMM-038: Unreal Money
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I’M GIVING AWAY ANOTHER COPY OF THIS BOOK…
Write a COMMENT (register here) in the shownotes to answer this question:
Name an investment you own and explain to me why that money is NOT in an index fund.
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Hi, Paul,
I’ve some money not in index funds, primarily closed end income funds, or some individual, though dividend paying stocks. I tend to buy closed-end funds when they’re at a discount to their inherent NAV as reverting to the mean of their NAV can yield a nice return alone. I particularly favor holding dividend paying items as they provide some value compensation for the time of holding the investment. Dividends are reinvested, though not necessarily into the same stock or fund that provided them. I’ve found dividends, especially with their more tax favored treatment now a useful adjunct to the amount I put away each month. I’d like to get to the point where my dividend income exceeds my savings rate – I’m about 50% or so there to matching it.
Which is not to say that I have no index funds – I do, but I don’t think that one has to be exclusively in one or the other, together they can be complementary and offer the possibilty of greater returns than the market itself might offer. Of course, the opposite is true too, though in the long term I think it may well even out. As for the greater expense issue, I use FOLIOfn for my brokerage, FOLIOfn and they offer pricing membership plans where one pays a flat rate and then there are so many window trades per month at no per-trade cost. They offer a variety of stocks, closed-end and ETF funds for potential investment, with some 500 new ones added lately, though these trade at additional fee from the normal package.
Thanks again for another great show. Fun and informative as always!
“Name an investment you own and explain to me why that money is NOT in an index fund”
My answer is simple. Gold and Silver. Not gold stocks, not precious metal ETFs….but real actual gold and silver. It makes up about 15% of my net worth. I don’t want to sound apocalyptic, but when it comes right down to it, we live in uncertain times. Gold and silver are about as certain to retain their value through difficult times than any other investment, including index funds.
“Name an investment you own and explain to me why that money is NOT in an index fundâ€
AAPL
One of the only stocks I own. I’m a techie and have owned this stock for about a year and a half. Sold off some so I’m playing with the house’s money now. I just like the company and can’t see myself ever selling the rest. I do use index funds for most of my other investments, much to the chagrin of Jimmy C.
Re: Non-index fund investment book giveaway.
I have been purchasing gold bullion bars ready to sell it to eBay once the speculators decide to overvalue it.
It is not in an index fund because it is a way that the wife and I hedge against the rising (recently declining) prices of commodities. This is a relatively small investment for us.
Even if the price of gold drops below our purchase price, we don’t mind because we are still young and are not in any hurry to sell it until we get at least 25% or greater profit.
We understand that index funds are a very stable and potentially (highly) profitable investment class. We strongly feel that when the baby boomers pull out of the equity markt and the correlating U.S. economy plunges, it will drive up the cost of so-called hard commodities.
We believe in physical assets (metals & real estate) first, then equity funds (employer matched), then perhaps index funds or ETFs , and finally foreign currency markets.
We might even do individual speculative stocks. But, the difference between us and other so-called stock pickers; is that we have very firm money management rules. Like the 3 point rule & maintaining volume support levels.
This is how we plan our financial fortification.
Keep up the good work on the podcast. It is better everytime I listen to it.
Check out my stock picks for this week @ hookshow.blogspot.com
Thanks.
I own CHS in a trading account that is separate from my retirement accounts. I have held one or two stocks at a time in my trading account. I only risk a small amount of money in this account and I do it more for fun and bragging rights–however, I have not had much to brag about yet.
In my retirement accounts I own ETF’s, Mutual funds, and individual stocks. I have s something called folio’s on foliofn.com. I can hold fractional positions in up to 50 stocks and trade twice a day on those if I need to. I have held more or less the same 40 stocks in each of two folios for about 4 years and I dollar cost average into those positions over time. However, my ETFs have done better than my folio baskets in every case over time. When I started with the folios I figured I would stick with it for 5 years and see if I could beat some typical index EFT’s.
I can say from personal experience I have tried and could not beat a diversified portfolio of simple ETF index funds over a period of 5 years. I think the ETF’s will continue to outperform my folio’s over the long term.
GE
I have a small amount that I have not moved into an index fund. I guess I was waiting to move it one (yes I’m saying this) once it went up a little more. Guess you need to bring me home.
I don’t have much money to invest, but I do keep all of my 401(k) money in an index fund, and my father was gracious enough to gift me a few shares of GE, where he worked for over 50 years! I don’t have the heart to sell the stock, so it will stay in GE until my own children are old enough to know better and convince me to sell it, and put it in an index fund.
RE: non-index funds.
I do own a small amount of sector ETFs in deferred accounts. The reason? I do think you can use momentum to make above market gains with these. They are low cost, liquid, and have no tax implications in a deferred account.
.
pigiron,
Your comment on gold and silver may come true even though many people want to avoid the issue. You may enjoy an article called Irrelevance of the Current Gold Price.