How the heck do YOU pick your mutual funds?

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TheNinja

Lifer
Jan 22, 2003
12,207
1
0
I hear a lot about the Vanguard Funds and they seem to have a low expense ratio. But other then reading a huge prospectus on stuff I probably won't understand, do you just sort of look at the graph related to the S&P Index and choose how much deviation/risk you want from it? I'd probably just grab a fund comprised of large US companies, one with small cap growth, and then one from overseas, then leave my final 25% in cash @ 5% return.

I know this is similar to my previous one about how to invest $70k, but this one is specially related to picking a couple of good funds.
 
dullard

dullard

Elite Member
May 21, 2001
25,913
4,504
126
You can't pick good funds with any certainty. But you can get rid of the bad ones as they are easy to spot. When shopping for fruit, you usually can't tell which fruit is perfectly ripe but you can tell which fruit is bruised, moldy, or otherwise bad.

1) Diversify. It seems you are on the way to doing that by mentioning several different categories. Now just find several possible funds in each of the categories you want to invest in.

2) Weed out the high fee funds. You can't tell which will have good returns, but you can tell for certain which will eat up those returns in fees. Toss the high fee funds.

3) No fund will be consistantly good (and even if there were such a fund, you can't predict which of the many funds that will be that one good fund unless you have a perfect crystal ball). But a fund can be consistantly bad. Toss out any of the funds that have done worse over and over again compared to their brethern in that category.

Bingo, you are done. If you have a toss-up between two funds with low fees, in the right category, and that has not been a long term dog after all of that, buy whichever one took a recent dive so you get in cheaper.
 
iversonyin

iversonyin

Diamond Member
Aug 12, 2004
3,303
0
76
www.ifa.com

As dullard said, low expense fee is definitely good. I prefer market tracking index fund that track stock index by market cap and maybe some emerging market.
 
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VTHodge

Golden Member
Aug 3, 2001
1,575
0
0
I invest with Schwab. They have a "Select List" of low-fee, no-load funds with good histories. I just get a few of those to cover the various markets.
 
TallBill

TallBill

Lifer
Apr 29, 2001
46,017
62
91
I guess I'm lucky with USAA as a bank. There are no fees whatsoever with mutual fund accounts, and quite a bit of info about each individual fund.
 
E

Elbryn

Golden Member
Sep 30, 2000
1,213
0
0
pick up the four pillars of investing by william bernstein or the bogleheads guide to investing. put your money into a money market until you understand what you're doing and why you shouldnt attempt to beat the market, and why indexing (low expense ratios) is good. then move on to the asset class question based on your own risk tendency's. four pillars gives quite a few reasons on why active managing is usually just luck based with a few exceptions in a buffet or lynch.

that said: easiest route, figure out how much you want in equities, split it into two sections, 50% for total stock market index and 50% for total international stock index. in one fell swoop you're now tracking the entire market with rock bottom expense. take the rest and put it into the total bond market. rebalance yearly.

 
dullard

dullard

Elite Member
May 21, 2001
25,913
4,504
126
Originally posted by: Elbryn
pick up the four pillars of investing by william bernstein or the bogleheads guide to investing. put your money into a money market until you understand what you're doing and why you shouldnt attempt to beat the market, and why indexing (low expense ratios) is good. then move on to the asset class question based on your own risk tendency's. four pillars gives quite a few reasons on why active managing is usually just luck based with a few exceptions in a buffet or lynch.

that said: easiest route, figure out how much you want in equities, split it into two sections, 50% for total stock market index and 50% for total international stock index. in one fell swoop you're now tracking the entire market with rock bottom expense. take the rest and put it into the total bond market. rebalance yearly.
Click to expand...
Bernstein is a great author, and an interesting read. I've suggested his books to many people. Elbryn's summary of Bernstein's advice is good. Put that all in my #1 item, diversify.

 
iversonyin

iversonyin

Diamond Member
Aug 12, 2004
3,303
0
76
Originally posted by: Elbryn
pick up the four pillars of investing by william bernstein or the bogleheads guide to investing. put your money into a money market until you understand what you're doing and why you shouldnt attempt to beat the market, and why indexing (low expense ratios) is good. then move on to the asset class question based on your own risk tendency's. four pillars gives quite a few reasons on why active managing is usually just luck based with a few exceptions in a buffet or lynch.

that said: easiest route, figure out how much you want in equities, split it into two sections, 50% for total stock market index and 50% for total international stock index. in one fell swoop you're now tracking the entire market with rock bottom expense. take the rest and put it into the total bond market. rebalance yearly.
Click to expand...

www.ifa.com- take the risk survey and see how risk tolerance you are. And Elbryn is right on the money here.
 
L

LS20

Banned
Jan 22, 2002
5,858
0
0
theyre all categorized by risk level. pick your risk level, choose the cheapest one, voila. the other stuff is just reiterative algebra those people do to make pretty charts and to make themselves seem smart
 
J

joecool

Platinum Member
Apr 2, 2001
2,934
2
81
three words - broad market portfolios. don't waste your time on fund that pick stocks - over time they are guaranteed to trail the overall market, because nobody can predict the market accurately over a long period of time. i have seen so many "gurus" do great for a few years, and then royally suck. so save yourself a lot of hassle and skip the actively managed funds. go for the indexes, etc.
 
FoBoT

FoBoT

No Lifer
Apr 30, 2001
63,084
15
81
fobot.com
i write the name of the funds on crackers and spread the crackers out in the living room
then i release our pet rat and which funds the rats doesn't eat, i avoid those
 
edro

edro

Lifer
Apr 5, 2002
24,326
68
91
Originally posted by: SoulAssassin
Originally posted by: edro
Fidelity 20X0 Funds FTW!
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I was just looking at those. YTD returns of ~2%. :confused:
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They have been in the double digits for the last few years though.

Maybe it's time to switch them up.
 
A

Ameesh

Lifer
Apr 3, 2001
23,686
1
0
i love china and the far east for growth so i picked a small-mid cap east asian fun which heavily invests in Chinese, Tawianese, and Japanese companies.
 
E

erub

Diamond Member
Jun 21, 2000
5,481
0
0
Originally posted by: TheNinja
Is it really smart to get into anything with the market the way it is now though?
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if you have a 2006 Roth IRA contribution to make, of course it is..over the long term the market will be up and you'll get those earnings tax free

quote:

--------------------------------------------------------------------------------
Originally posted by: SoulAssassin

quote:

--------------------------------------------------------------------------------
Originally posted by: TheNinja
Is there any truth to what this article has to Say?

Lazy Man's Fund Selection
--------------------------------------------------------------------------------



Anyone have an equiv for Fidelity funds?

Why not go with Vanguard?
 
A

alrocky

Golden Member
Jan 22, 2001
1,771
0
0
Originally posted by: LordSnailz
Originally posted by: SoulAssassin
Originally posted by: TheNinja
Is there any truth to what this article has to Say?

Lazy Man's Fund Selection
Click to expand...
Anyone have an equiv for Fidelity funds?
Click to expand...
bumpity! for the same request
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Here's a few:
Expense Ratio:
0.10% - Spartan 500 Index Investor - FSMKX
0.10% - Spartan Extended Mkt Index Inv - FSEMX
0.10% - Spartan Total Market Index Inv - FSTMX
0.10% - Spartan International Index Inv - FSIIX

500 Index + Extended Market = Total Market, so top 2 or FSTMX. Then the International Index. Perhaps a bond fund. But the ones I listed could represent the core / majority holdings of your 401(k) portfolio. Costs matter in investing so look for low Expense Ratios.
Click to expand...
Reading list
more sample portfolios
2 Vanguard Diehards forums

 
P

PAB

Banned
Dec 4, 2002
1,719
1
0
Originally posted by: TheNinja
I hear a lot about the Vanguard Funds and they seem to have a low expense ratio. But other then reading a huge prospectus on stuff I probably won't understand, do you just sort of look at the graph related to the S&P Index and choose how much deviation/risk you want from it? I'd probably just grab a fund comprised of large US companies, one with small cap growth, and then one from overseas, then leave my final 25% in cash @ 5% return.

I know this is similar to my previous one about how to invest $70k, but this one is specially related to picking a couple of good funds.
Click to expand...

My wonderful broker has a very good analysis of performance measured to peer groups rather than the total returns.

http://pics.apartment808.com/users/dukeofurl/TradingAcct.JPG

The top 3% is all my trading, so even if you discount that his picks of money managers have done well.

Outperforming the benchmark should be the norm, not the exception.
 
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