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« Box of Books #10 | Main | Why You May Want to Spread Out 401k Contributions »

March 01, 2011

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Too true.

Why then is the myth promoted that every worker can easily save for retirement using a 401K?

You'll hear all kinds of people saying this, about all workers (including public workers in the current controversy). Some people even say we should also eliminate social security and just let people keep their own money and invest it.

Some people will do fine with a 401K, sure. But the rest? They'll reach retirement age without any support. And you really can't just say "you were foolish--no support in retirement for you!" It's not like retiring is optional after a certain age.

Do we really want our roads lined with begging senior citizens? Do we really want all of them on welfare instead?

Unfortunately, it seems to be true that you can't expect most people to be sensible and save appropriately for retirement, using 401Ks, IRAs or any other savings/investing vehicle you come up with.

It shows that the way to go is to use minimum fee funds and ETFs and to index. The odds are that active management will be harmful over the long term. Have a well thought out asset allocation. Understand that markets go up and down. Take at least 80% of your retirement money and participate in the progress of the overall U.S. and global economy. At least that's my view.

I recently re-read Market Wizards. Not because I am not a passive investor, but rather I simply find it fascinating. One take away I had from it is that over the years various successful investors, rather extremely successful investors, had some special method for achieving these amazing results.... Until Everyone else caught on to how they were trading and reaching those results and thus, began to replicate thier trading strategies. It seems to me that traders and abnormal results that continually beat the market are not only rare, but also a thing of the past. Sure, one may beat the market for a year or two nowadays, but it will not take long for another to figure out how it is done and before you know it, others will be attempting to replicate those strategies, reducing the likelihood of beating the overall market. Most active trading is now down by computers using the same technical indicators that once provided very few investors with amazing results.

Beating the market is a thing of the past for most..... It is ashame that so many investors get pulled in by the allure of any excreta 1 or 2 percent, failing to take into account the risk that comes along with the very rare reward....

LMVTX has lost quite a few of its followers as evidenced by the fact that it is now a $4B fund and peaked at a $20B fund.
My own performance only goes back to 12/28/92 about 8 years less than Bill Miller's fund.
Over that 18 year period my performance as a very small investor managing just over $10M if I include my children's money that I also manage for them has been an APR of 18.06% without a single losing year.
The $20B fund over that same period managed am APR of 8.85%.

It's easy to underestimate the fact that when you are moving a few million dollars worth of diversified mutual funds, that only trade once/day, in and out of the market on occasion, you can fly under the radar but when you see the need to move twenty billion out of the market completely it's a whole different story since you drive the market when you place such gigantic orders of common stocks.

A good reason not to buy gigantic multi billion dollar stock funds.

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