"Steven L." <sdlitvin@earthlinkNOSPAM.net> wrote in message
news:ZDnmi.7290$rR.6033@newsread2.news.pas.earthlink.net...

Sure, one can still get burned, but you need far less knowledge and
research to avoid getting burned. Because the research and
diversification has been done for you.

That's why index funds are so popular. It's nearly impossible to get
burned in an S&P 500 index fund; the only way that could happen is if the
entire stock market crashes and stays down permanently. And the only
events that could cause something like that are so catastrophic (like
nuclear war or the end of America as a superpower) that the stock market
would be the least of your worries in that case.

And you don't even have to know the names of the stocks in the S&P 500
index fund's portfolio, in order to invest in it and profit from it.

Theoretically, even before index funds, any investor could have bought
those same stocks individually himself, and made his own basket of stocks
mirroring the index. But very few Americans had enough money to invest in
500 different stocks, nor did they want to manage such a huge portfolio
with adding machines.

All true. But I suspect diversification is overrated. Granted that with 500
stocks you would be protected from market fluctuations, but by owning 50 you
might be "95%" protected" And by owning 8 or 10 you might be "60% as well
protected," etc. (The mean becomes more stable as sample size increases, but
the degree of improvement becomes less and less with larger sample sizes.)



I know one elderly lady who has owned a single stock, General Motors, for 50
years or so. She knows nothing about stocks or mutual funds and doesn't want
to learn. But over that period she has collected handsome dividends year
after year. She also owns some real estate, so it would not be the end of
the world if General Motors collapsed, but those dividends have
substantially contributed to her life style. I have heard of other people
who depend upon dividend income from three or four electric utilities and
get along just fine. Granted that few people get rich in the first place
from owning individual stocks (or mutual funds). But I still believe that
having dividend reinvestment plans (DRIPS) in 8 or 10 companies and holding
on to them can be a very good wealth building strategy. The savings in
brokerage costs and annual fund expenses offset, at least to some degree,
the risk from lack of diversification.


You can have brokerage costs of $0 - See zecco.com

Don wrote:
"Steven L." <sdlitvin@earthlinkNOSPAM.net> wrote in message
news:vHdmi.7718$Od7.7156@newsread1.news.pas.earthlink.net...

Yep, most of them.
Way back when, the vast majority of average investors got burned at
one point or another.

In my dad's time, the stock market was practically a rigged market.
Those very few investors with real savvy to pick companies with high
potential, by due diligence (studying balance sheets, business plans,
talking with the CEO, etc.), built dynasties for themselves. Like
Warren Buffett.

Interesting, but I wonder if things are all that different nowadays.
The advent of mutual funds certainly made stock investing more
accessible to average investors, but I doubt if any more get rich in
mutual funds than in the old days in individual stocks. A lot of
average investors still get burned.

Sure, one can still get burned, but you need far less knowledge and
research to avoid getting burned. Because the research and
diversification has been done for you.

That's why index funds are so popular. It's nearly impossible to get
burned in an S&P 500 index fund; the only way that could happen is if
the entire stock market crashes and stays down permanently. And the
only events that could cause something like that are so catastrophic
(like nuclear war or the end of America as a superpower) that the stock
market would be the least of your worries in that case.

And you don't even have to know the names of the stocks in the S&P 500
index fund's portfolio, in order to invest in it and profit from it.

Theoretically, even before index funds, any investor could have bought
those same stocks individually himself, and made his own basket of
stocks mirroring the index. But very few Americans had enough money to
invest in 500 different stocks, nor did they want to manage such a huge
portfolio with adding machines.

On Jul 14, 8:53 pm, "Don" <dwz...@telus.net> wrote:
Interesting, but I wonder if things are all that different nowadays. The
advent of mutual funds certainly made stock investing more accessible to
average investors, but I doubt if any more get rich in mutual funds than in
the old days in individual stocks. A lot of average investors still get
burned.


Vastly different. I don't follow stock picking investment techniques
well, and couldn't specifically say how different that aspect is.
But, with information provided indices through web financial
institutions and private investment interests, its bloody well a
slaughterfest of get-rich potentials. I can't imagine having a seat
in the library, a couple times a week, (provided tax cuts don't close
it), to peruse expensive subscriptions to Investors Daily, the WSJ, or
Barron's, 20 years ago, and averaging any where near the harvest of
good investment ideas daily presented in investment newsfeeds, search
engines, or dedicated investment strategy sites. With all that
advice, what burns investors ought be no more judiciously applied,
than any subsequent excuse for not making them all the more a stronger
investor.

I've got maybe 20-23 yrs of time to begin and maintain some
investments in various types of funds. I am not going with individual
stocks, that's been said kinda silly even for an 18 yr old starting
out.

Anyway, I obviously want the highest return just like anyone else but
with this much time I am fast approaching the 'protective' investment
area.

Or am I wrong about this time? Is 20-23 yrs considered 'too late' or
'getting close to too late' to invest in an aggressive manner?

I also wanted some advice on those index/mutual funds to avoid like
the plague? Those super-risky funds that could kill me even in the
20-23 yr time frames?

I have read many faq's on this thing about age but they all seem to
deal with categories such as "50 and older" or annuity strategies.
Their doesn't seem to be a way to calculate one's risk willingness
with my particular time window.

Am I right or just not looking hard enough?

And could someone explain some of my questions?

Also:Big Point:> I do not have the ability to invest in those funds
wanting more than say $500 for min initial investment. It seems the
vast majority of fund want $5K and up for initial investment, with
future investments of nearly $1K. That is WAY too much money for me.
I could only slave out perhaps $3K in a whole year.

I could consult a broker on this but he'd get a new bmw and I'd still
be confused.

thanks if you can help me out and yes I know I'm not making a lot of
sense but I just haven't dealt with this before.

Flasherly wrote:
On Jul 14, 8:53 pm, "Don" <dwz...@telus.net> wrote:
Interesting, but I wonder if things are all that different nowadays. The
advent of mutual funds certainly made stock investing more accessible to
average investors, but I doubt if any more get rich in mutual funds than in
the old days in individual stocks. A lot of average investors still get
burned.

Vastly different. I don't follow stock picking investment techniques
well, and couldn't specifically say how different that aspect is.
But, with information provided indices through web financial
institutions and private investment interests, its bloody well a
slaughterfest of get-rich potentials. I can't imagine having a seat
in the library, a couple times a week, (provided tax cuts don't close
it), to peruse expensive subscriptions to Investors Daily, the WSJ, or
Barron's, 20 years ago, and averaging any where near the harvest of
good investment ideas daily presented in investment newsfeeds, search
engines, or dedicated investment strategy sites. With all that
advice, what burns investors ought be no more judiciously applied,
than any subsequent excuse for not making them all the more a stronger
investor.

What Americans could do, versus what they are likely to do, are two
entirely separate things.

And all the proof you need is in the manias that occur periodically.
Even with mutual funds, let's remember 1998-1999 when Internet funds
were exploding. For millions of Americans, all they saw was a steadily
rising NASDAQ and the Internet technological revolution, and they wanted
to get in on "a piece of the action." The result was day-trading and
other wild speculation by newbies.

Even a tiny amount of research could have shown anyone who cared to look
that 95% of these new high-tech Internet companies were fly-by-night
operations with a horrible balance sheet and no earnings. They could
also have easily discovered that stock market booms don't go on forever.
But they didn't.

If you want even more proof, just remember how many newbies have come to
this NG with naive questions like "I want to invest some money. What
fund should I buy?"--without details on goals, lifestyle, etc.

Everybody wants to strike it rich without working hard for it--hence the
popularity of state lotteries. A savvy minority knows that is nearly
impossible for 99.9% of the population.

State lotteries are successful for the same reason that stock market
manias occur--people are betting on a dream.

On Jul 14, 3:32 pm, Crackles McFarly <Ireland...@ireland.sux> wrote:
I've got maybe 20-23 yrs of time to begin and maintain some
investments in various types of funds. I am not going with individual
stocks, that's been said kinda silly even for an 18 yr old starting
out.

Anyway, I obviously want the highest return just like anyone else but
with this much time I am fast approaching the 'protective' investment
area.

Or am I wrong about this time? Is 20-23 yrs considered 'too late' or
'getting close to too late' to invest in an aggressive manner?

I also wanted some advice on those index/mutual funds to avoid like
the plague? Those super-risky funds that could kill me even in the
20-23 yr time frames?

I have read many faq's on this thing about age but they all seem to
deal with categories such as "50 and older" or annuity strategies.
Their doesn't seem to be a way to calculate one's risk willingness
with my particular time window.

Am I right or just not looking hard enough?

And could someone explain some of my questions?

Also:Big Point:> I do not have the ability to invest in those funds
wanting more than say $500 for min initial investment. It seems the
vast majority of fund want $5K and up for initial investment, with
future investments of nearly $1K. That is WAY too much money for me.
I could only slave out perhaps $3K in a whole year.

I could consult a broker on this but he'd get a new bmw and I'd still
be confused.

thanks if you can help me out and yes I know I'm not making a lot of
sense but I just haven't dealt with this before.

IMO, anything with more than 10 years is "far away", once you got
within 10 yars, I would suggesting taking some moderate steps (to get
more conservative) and within 5 years, taking even more conservative
measures.

Look at T Rowe Price for low fund minimums and low fees. I started
sending them $100/month and now send them over $600 month for me, plus
even more for my wife.

Consider 401k plans if possible as well, as these usually waive fund
minimums as well. I have used 401ks to get into closed funds as well.

With a 23 year timeframe, I would look to do the following:

1) find a core investment fund. Core meaning you would be confident
putting new money in this fund every year for next 20+ years. My core
fund is PRFDX. Plain, diversified large cap value fund. Others might
suggest an S&P 500 index fund or total market index fund. Provided
you are confident in putting any new money to this fund, it's a good
choice.

2) find funds in small cap, mid cap and foreign markets to suit. In
my case I have a small cap, mid cap, foreign large cap and foreign
small cap fund. These compliment my core fund.

3) consider going for broad funds/ diversified funds for #1 and #2.
Take 3-7 years to build those up. Then once you get around 150k
invested, consider more aggressive funds. We have close to 150k
(after 10 years) and I plan on a 5% position in more aggressive
(concentrated) funds over next 3 years.

4) most of this is asset allocation. read about it and learn about
it. For example my allocation is:

44% large cap domestic (PRFDX, PRWCX)
15% mid cap domestic (RPMGX)
15% small cap domestic (PRNHX)
15% large cap foreign (TRIGX)
10% small cap foreign (PRIDX)
1% bonds (domestic+foreign) (PREMX)

I am looking to open a 5% position in a bull fund which is 2X
leveraged to S&P 500, another 5% position in a concentrated mid cap
fund and another 5% position in a concentrated small cap fund. These
5% positions will be highly volatile relative to what I have now, but
should also boost returns some. So 10% diversified mid cap+5%
aggressive mid cap is the allocation I am shooting for by time I have
200k in market and around 20 years to go to retirement.