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March 09, 2006


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I sure hope this is worthwhile ;-)

Could you use Yahoo finance (or something like that) to get historical quotes? You could then see how many share you would have had in the index funds at the start. You'd also have to do that for each purchase of new shares. It shouldn't be too hard to create dummy monthly statements for your dummy index portfolio.

Personally, I use an index fund (sort of) and American Funds. They have pretty low expenses and I've been happy with them. I will tell you that my American Funds holdings have outperformed my TIAA-CREF Equity Index Annuity in my 403(b) over the past 12-18 months. But off the top of my head I couldn't give you longer term numbers.

The difficult part of this question is that it's possible that they *wouldn't* have made more with the index fund than they did have with American for the last two years. But, to me, the point of an index fund isn't that you'll beat any given fund in any given 1-2 year period. There will definitely be times that the index fund will get slaughtered vs. American, and vice versa. Index funds are for getting better returns over the long haul.

Index funds are pretty good, if you want to just do average. The downside is what if the year you need to start withdrawing the market is down big're going to be hurting. But that's the case with any investment I guess. As long as you're not only using index funds.

You'd have to look back more than 2.5 years to really get a good idea of which investment would work better. And looking back at past performance doesn't guarantee good future performance. Good luck! Happy investing!

I actually did quick spreadsheet comparing the Vangard Index 500 to American Funds Investment Company of America a couple months ago if you'd care to look it over. I can tell you for the long term, this fund has been around over 70 years, and has averaged about 12.8% which I prefer to the 11.5% for the S&P 500. I looked up my data on Morningstar and at the time they had 8 years of data so I used all of that. The Vangard Fund was ahead for the first 3 years, then actually went negative from the initial investment. Eight years out Vangard had returned 42.5% (5.3% annually) to AF-ICA's 62.8% (7.9% annually). This includes the maximum sales load for A shares, and I have deducted the corresponding management fees along the way (not sure if the morningstar return percentages include this adjustment or not). In summation, I'm pretty comfortable recommending American Funds.

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