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« Free Money Finance Guest Blogger, Fred Kobrick, Author of The Big Money, Post #1 | Main | Six Steps to Buying a Long-Term Care Insurance Policy »

May 08, 2006


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I was just discussing ETFs with a friend this morning. I'm nervous that my initial forays into the stock market have been through direct stock purchases. My pick (GM) is doing well, and I'd like to sell now while I have a 20% profit and move into an ETF index fund, but don't know where to start looking, really. I'm hoping that this article helps to clarify some things!

Hi, FMF, this is Fred:

EFT’s are a great vehicle and I do like them, but like stocks and mutual funds, one has to have a process for buying and holding and selling. The real question I come up with is if you do not want to pick amongst great mutual funds and only want index funds, why would you pick EFT’s that could be harder to buy and sell then some of the world’s best mutual funds?

I realize that I was one of only a handful of managers that beast the market when my 15 year results were far, far above the market and other funds, but I knew that many people found my fund and others in that top 5 and bought and held. I wish more people would learn to do this with mutual funds and stocks instead of copping-out, and that is why I wrote The Big money—I hate to see so many people stuck with retirement problems, including lots of my friends.

If you look at the S&P 500 for this decade, so far, since December 31, 1999, that index is down by almost 10% even after a big rally in recent months. That’s almost 5 ½ years of negative returns for the INDEX FUNDS.

This is in a period when the best stocks and funds have made people some really great money—plenty of people who know just a reasonable amount have far more than doubled their money, and that means regular people like teachers and other non-financial types.

So, I do like EFTs, but like anything else it depends on how one invests in them---as investors and not gamblers I would hope.

I want people to learn some easy basic things about investing and then they will have a far easier time moving from bank accounts and index funds to great mutual funds, EFTs if they wish, and the kind of stocks that make people wealthy for life.

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